European government finance data confirms that deficit levels fell last year. Markets await the delayed NFP figures.

Oct 22 • Morning Roll Call • 1944 Views • Comments Off on European government finance data confirms that deficit levels fell last year. Markets await the delayed NFP figures.

graffiti-euro-flagIt’s hard to commend the ECB, the Eurogroup and the dreaded troika for its effective management of the Eurozone crisis given the punishing austerity measures that many of the PIIGS have had to endure as a consequence of investment bank failure. Some of the dire consequences of the austerity measures unleashed in Greece, Spain, Ireland and Portugal have been catastrophic. And yet begrudgingly you do wonder if they, the powers that be who are administering the medicine, are finally getting ahead of the curve. What state certain countries will be in once the final dose of medicine is administered is anyone’s guess and how slowly they’ll recover likewise, however, the latest batch of data from Eurostat does point to a muted recovery.

That data is irrelevant to the tens of thousands who rioted versus the austerity measures in Rome over the weekend and into Monday. A 40% level of youth unemployment and fresh austerity measures containing none of the breaks expected for the lowest paid did little to encourage a cordial relationship between the govt. and its people.


Eurostat reveal that EU deficits are falling

Eurostat reported on Monday that total national debt of eurozone countries rose from 87.3% of GDP in 2011 to 90.6% of GDP in 2012. However, the region’s annual deficit dropped from 4.2% to 3.7%. Across the wider EU, national debts rose in 2012, from 82.3% to 85.1% of GDP. The updated data also found that Greece’s deficit in 2012 was 9%. Ireland’s, though, was 0.6% higher at -8.2% of GDP.

In 2012 the lowest government deficits in percentage of GDP were recorded in Estonia and Sweden (both -0.2%), Luxembourg (-0.6%) and Bulgaria (-0.8%), while Germany (+0.1%) registered a government surplus. Seventeen Member States had deficits higher than 3% of GDP, with the largest registered in Spain (-10.6%), Greece (-9.0%), Ireland (-8.2%), Portugal and Cyprus (both -6.4%). In all, fifteen Member States recorded an improvement in their government balance relative to GDP in 2012 compared with 2011, twelve a worsening and one remained stable.


Is the USA housing sales drop a portent that the economy is all spent up?

There are so many reasons investors could select to suggest that the USA economy has ‘topped out’, despite the debt ceiling issue being underpinned by political wrangling the issue wasn’t solved, simply moved back a few months. Despite certain USA indices now reaching record highs over recent days the investment community knows this rise, that is naturally petering out, is only as good (and for as long) as the continual monetary easing programme is injected into the economy. And now the rise in house sales appears to have petered out as affordability constraints deter new buyers from committing. This reduction in sales comes at a time when USA base interest rates are at 0.25%, therefore affordability can now only improve by a significant fall in prices.

After hitting the highest level in nearly four years, existing-home sales declined in September, but limited inventory conditions continued to pressure home prices in much of the country, according to the National Association of Realtors. Total existing-home sales, which are completed transactions that include single-family homes, townhomes, condominiums and co-ops, declined by 1.9 percent to a seasonally adjusted annual rate of 5.29 million in September from a downwardly revised 5.39 million in August, but are 10.7 percent above the 4.78 million-unit pace in September 2012.


Market overview

The DJIA closed down 0.05%, the SPX closed up 0.01% and the NASDAQ up 0.15%. European equity indices also experienced mixed fortunes; STOXX closed down 0.15%, FTSE up 0.48%, CAC down 0.21%, DAX up 0.02%. The Athens exchange closed up the most by 2.64%.

Commodities also experienced mixed fortunes, ICE WTI oil is down 1.60% on the day, finally breaching the huge psyche barrier of $100 to $99.49 per barrel. NYMEX natural fell by 2.55% on the day to finish at $3.67 per therm. COMEX gold closed up 0.09% at $1315.80, with silver on COMEX up 1.67% at $22.22 per ounce.

Equity index futures at the time of writing (11pm UK time) are mainly positive, the DJIA up 0.04%, SPX up 0.10%, NASDAQ up 0.36%. European equity index futures are also mainly up, FTSE up 0.46%, CAC down 0.27% DAX up 0.19%, and the ISE up sharply, possibly on progressive talks regarding Turkey finally becoming a full member of the expanded Eurozone.


Forex focus

The yen fell 0.5 percent to 98.19 per dollar after gaining 1.1 percent during the previous two days. Japan’s currency declined 0.4 percent to 134.32 per euro and touched 134.38, the weakest level since Sept. 23rd. The dollar was little changed at $1.3681 per euro after gaining 0.3 percent earlier. The U.S. Dollar Index, which monitors the greenback versus a basket of 10 other major currencies, rose 0.2 percent to 1,004.55 late in New York. The gauge fell to 1,000.70 on Oct. 18th, the lowest intraday level since Feb. 13th, extending a weekly loss to 1 percent, the most in a month. The dollar rose from an eight-month low amid speculation the NFP government report will show U.S. employment rose more than forecast, weakening the case for the Federal Reserve to put off reducing stimulus.

The loonie, as the Canadian dollar is known, fell 0.2 percent to C$1.0304 per U.S. dollar at 5 p.m. in Toronto. One loonie buys 97.05 U.S. cents. The Canadian dollar snapped three days of gains on speculation the Bank of Canada will downgrade its economic forecasts after a government shutdown hampered growth in the U.S., Canada’s largest trading partner.



The benchmark 10-year yield rose two basis points, or 0.02 percentage point, to 2.60 percent as of 5 p.m in New York. The price of the 2.5 percent note due in August 2023 fell 6/32, or $1.88 per $1,000 face amount, to 99 1/8. The yield declined to 2.54 percent on Oct. 18th, the lowest since July 24th, down from a 2013 high of 3 percent on Sept. 6th.Treasury 10-year notes snapped a three-day advance before the NFP government report on Tuesday that economists predict will show U.S. employers added the most jobs since April.


High impact news events and policy decisions that could affect sentiment on Tuesday October 22nd

Tuesday sees the publication of the UK’s public sector net borrowing figures which could affect the value of sterling if the figures are much better, or far worse than the expected £10.4 bn month on month. Retail sales for Canada are published which if they come in as expected, 0.2/0.3% month on month, should not impact too much on the value of the loonie.

The big event of the day is the 18 day late publication of the NFP figures. Traders need to exercise caution as the figure might come in far better than predicted, but be subject to significant revisions due to the temporary govt. shutdown. The anticipation is for a print of 182K jobs created with the unemployment rate remaining steady at 7.3%.

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