Flash consumer confidence indicator for EU and euro area – Oct 2014
“In October 2014, after four months of decline, the DG ECFIN flash estimate of the consumer confidence indicator increased slightly in the EU (by 0.6 points to -7.4) and remained broadly stable in the euro area (+0.3 points to -11.1) compared to September.”
Consumer confidence indicators for EU and Eurozone (Source: EC DGFIN)
European Commission – DG Economic and Financial Affairs “Flash Consumer Confidence Indicator Oct 2014“, 23 Oct 2014 More
Markit Flash Eurozone PMI
“Stable PMI masks steepest fall in output prices since global crisis and renewed job losses
- Flash Eurozone PMI Composite Output Index(1) at 52.2 (52.0 in September). 2-month high.
- Flash Eurozone Services PMI Activity Index(2) at 52.4 (52.4 in September). Unchanged.
- Flash Eurozone Manufacturing PMI(3) at 50.7 (50.3 in September). 2-month high.
- Flash Eurozone Manufacturing PMI Output Index(4) at 51.9 (51.0 in September). 3-month high.
The Eurozone saw a marginal upturn in growth of business activity in October, according to the flash PMI results. The headline Markit PMI rose from September’s ten-month low of 52.0 to 52.2, signalling the first upturn in the pace of expansion for three months. However, the index remained below the average seen in the third quarter, and was the second-weakest reading seen so far this year.
Manufacturing output expanded at the fastest rate for three months, while growth of service sector activity was unchanged on the six-month low seen in September. In both cases, rates of growth remained historically weak and below the averages seen in the year to date.
Furthermore, although output rose at a slightly faster rate, new orders barely rose in October, registering the smallest monthly improvement since orders began rising in August of last year. Manufacturers reported a second consecutive monthly drop in new orders, albeit again only modest, while inflows of new business in the service sector showed the smallest rise since January.
Backlogs of work fell at the fastest rate since June of last year, dropping in both services and, to a lesser extent, manufacturing.
Subdued demand prompted firms to cut staffing evels. Although only marginal, the reduction in headcounts was notable in being the first since November of last year. Service providers reported the first cut in payroll numbers since March, though manufacturers reported a slight upturn in employment.
Prices were increasingly being cut in order to help boost sales. Average prices charged for goods and services showed the largest monthly fall since February 2010, having now fallen almost continually for just over two-and-a-half years.
Charges for services fell at the steepest rate since January 2010 while a more modest decline was seen in the manufacturing sector, where prices fell only marginally and to a lesser extent than in September.
Price cuts occurred despite overall input costs rising in October, pointing to a further squeeze on operating margins. That said, manufacturing input prices fell for the second month running.
Finally, business optimism about the year ahead in the service sector fell to the lowest since June of last year. The outlook is perhaps a little brighter in manufacturing, where the amount of goods purchased for use in production rose for the first time in three months.
By country, France saw business activity fall for a sixth successive month, deteriorating at the fastest rate since February. More Rates of decline accelerated slightly in both manufacturing and services. New business and employment suffered the largest falls since June and April of last year respectively. French selling prices dropped at the fastest rate since October 2009.
There was better news out of Germany, where the PMI rose to its highest for three months More. While services saw the slowest pace of expansion since June, growth of manufacturing output rebounded to a three-month high. However, German companies also reported that new business rose at the slowest pace since September of last year, while employment growth slowed and prices charged were cut to the greatest extent since September 2012.
Elsewhere across the region, output growth partially recovered from the slide to a ten-month low in September. But new business growth was the weakest for 11 months, employment barely rose and prices charged fell at the steepest pace since July of last year.”
Markit Economics, “Markit Flash Eurozone PMI“, 23 Oct 2014 More
“The rough patch is not over, with many details in the PMI survey warranting caution.”
Christian Schulz, Economist, Berenberg Bank More
Markit/JMMA Flash Japan Manufacturing PMI
“New order growth surges to highest in eight months
- Flash Japan Manufacturing PMI at 52.8 (51.7 in September). Modest improvement in business conditions in September.
- Flash Japan Manufacturing Output Index at 52.3 (53.4 in September). Moderate growth for third successive month.“
Markit Economics, “Markit/JMMA Flash Japan Manufacturing PMI“, 23 Oct 2014 More
HSBC Flash China Manufacturing PMI
“Slowest expansion of output in five months
- Flash China Manufacturing PMI at 50.4 in October (50.2 in September). Three-month high.
- Flash China Manufacturing Output Index at 50.7 in October (51.3 in September). Five-month low.“
Markit Economics, “HSBC Flash China Manufacturing PMI“, 23 Oct 2014 More
Unemployment Insurance Weekly Claims Report: Week to 18 Oct 2014
“In the week ending October 18, the advance figure for seasonally adjusted initial claims was 283,000, an increase of 17,000 from the previous week’s revised level. The previous week’s level was revised up by 2,000 from 264,000 to 266,000. The 4-week moving average was 281,000, a decrease of 3,000 from the previous week’s revised average. This is the lowest level for this average since May 6, 2000 when it was 279,250. The previous week’s average was revised up by 500 from 283,500 to 284,000.
The advance seasonally adjusted insured unemployment rate was 1.8 percent for the week ending October 11, unchanged from the previous week’s unrevised rate. The advance number for seasonally adjusted insured unemployment during the week ending October 11 was 2,351,000, a decrease of 38,000 from the previous week’s unrevised level of 2,389,000. This is the lowest level for insured unemployment since December 23, 2000 when it was 2,340,000. The 4-week moving average was 2,381,000, a decrease of 22,750 from the previous week’s unrevised average of 2,403,750. This is the lowest level for this average since May 20, 2006 when it was 2,377,750.”
U.S. Employment and Training Administration, “Unemployment Insurance Weekly Claims Report – Week to 18 Oct 2014“, 23 Oct 2014 (08:30am) More
“The labor market is continuing to get better. We’re going to get another solid number for payrolls in October. Companies are very reluctant to lay off the workers they already have on the payroll. They expect demand to pick up and they expect more of what we call plow-horse economic growth – slow and steady.”
Robert Stein, Deputy Chief Economist, First Trust Portfolios LP More
“There’s no let-up in the labor-market improvement. There’s no sign of any spillover from the turmoil in the markets and the global slowdown. The U.S. economy is chugging along despite the global turmoil.”
Jim O’Sullivan, Chief U.S. Economist, High Frequency Economics More
“A lot of this latest uptick in confidence is also associated with the decline in gasoline prices, which has heavy influence on consumer psychology. The decline in gas prices leaves them in a better position heading into the holiday-shopping season.”
Michelle Girard, Chief U.S. Economist, RBS Securities Inc. More
Markit Flash U.S. Manufacturing PMI
“U.S. Manufacturing PMI hits three-month low in October amid weakest pace of new business growth since January
At 56.2 in October, down from 57.5 in September, the seasonally adjusted Markit Flash U.S. Manufacturing Purchasing Managers’ IndexTM (PMI) indicated a slower improvement in overall business conditions across the manufacturing sector. Although still comfortably above the neutral 50.0 value, the index was the lowest since July and notably weaker than the average seen during the third quarter as a whole (57.1).
Softer new business growth was the main negative influence on the headline PMI in October, as the latest rise in new orders was much weaker than in September and the slowest for nine months. A number of survey respondents commented on more cautious spending patterns among clients, especially in relation to export sales. October data pointed to only a moderate expansion of new orders from abroad, with the pace of growth easing sharply to a three-month low.
In line with softer new business gains, manufacturing output growth also slowed in October. The latest increase in production volumes was the weakest since March. Moreover, the rate of output growth has now moderated for two months in a row, which represents the first back-to-back slowdown since May 2013.
October data pointed to resilient manufacturing payrolls trends, despite a continued moderation in both output and new business growth. The rate of job creation was little-changed from September’s two-and-a-half year high and much sharper than the average seen since the survey began in May 2007. Survey respondents generally pointed to increasing backlogs of work at their plants and positive sentiment towards the long-run business outlook.”
Markit Economics, “Markit Flash U.S. Manufacturing PMI“, 23 Oct 2014 (09:45am) More
Mortgage interest rates
“ Freddie Mac (OTCQB: FMCC) today released the results of its Primary Mortgage Market Survey® (PMMS®), showing average fixed mortgage rates hitting fresh lows for the year for the second consecutive week amid declining bond yields. At 3.92 percent the average 30-year fixed rate is at its lowest level since the week of June 6, 2013.
30-year fixed-rate mortgage (FRM) averaged 3.92 percent with an average 0.5 point for the week ending October 23, 2014, down from last week when it averaged 3.97 percent. A year ago at this time, the 30-year FRM averaged 4.13 percent.
15-year FRM this week averaged 3.08 percent with an average 0.5 point, down from last week when it averaged 3.18 percent. A year ago at this time, the 15-year FRM averaged 3.24 percent.
5-year Treasury-indexed hybrid adjustable-rate mortgage (ARM) averaged 2.91 percent this week with an average 0.5 point, down from last week when it averaged 2.92 percent. A year ago, the 5-year ARM averaged 3.00 percent.
1-year Treasury-indexed ARM averaged 2.41 percent this week with an average 0.4 point, up from last week when it averaged 2.38 percent. At this time last year, the 1-year ARM averaged 2.60 percent.”
Federal Home Loan Mortgage Corporation (FHLMC) (Freddie Mac), “Mortgage Rates Decline Further“, 23 Oct 2014 More
“The dip in rates here are for people who were looking at the numbers throughout the summer and saying ‘It’s pretty close’. And now you have a place where that refinance might make sense.”
Keith Gumbinger, Vice President, HSH.com (mortgage-data company) More
Stock market indices
Caterpillar Inc (CAT.N) and 3M Co (MMM.N) led the market up today after reporting their earnings. Caterpillar, which also raised its full-year profit view, was up 5.2 percent at $99.52 while 3M added 6 percent to $147.34.
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The shape of the day
Market indices today (Chart: Yahoo)
Nightly Business Report: 23 Oct 2014 Watch Read
“It’s good to see good numbers in any company, but if we’re looking at headwinds like currency and slowing global growth, seeing multinationals like Caterpillar and 3M post solid beats gives us confidence that economic growth is holding on and probably better than the market is currently expecting.”
Phil Orlando, Chief Equity Market Strategist, Federated Investors More
“We’re seeing some peace here in earnings and better macro data, which is helping to fuel investor confidence. That trend in jobless claims suggests we are going to see another good job increase for October.”
Alan Gayle, Director of Asset Allocation, RidgeWorth Investments ($45bn) More
“The fundamental focus is on earnings. The bigger picture fear of global growth slowdown is going to remain with us. That’s going to prevent any meaningful market appreciation. Investors should be prepared for a choppy ride.”
Leo Grohowski, Chief Investment Officer, BNY Mellon Wealth Management ($187bn) More
Our AUD-denominated index closed above 1.9 today for the first time.
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USD and AUD denominated indices over the last 52 weeks (Chart: Bunting)
Stock price movements
Portfolio stocks and market indices: price changes today (%) (Chart: Bunting)
Portfolio stock news
Investors dump Amazon after Q3 earnings miss
In after-hours trading AMZN was down 10.6% (to $279.80) after reporting a Q3 2014 net loss of $437m or $0.95 per share compared with a loss of $41 million or $0.09 per share in Q3 2013. This was Amazon’s largest quarterly loss in 14 years. More Investors have long complained about Bezos’ disregard for investors’ calls for positive earnings, and have trashed the stock. However some funds, e.g. Hennessy Technology Fund, maintain a significant holding (about 4.5% of the portfolio). The Bunting Technology Portfolio has 5.1% allocated to Amazon, and – yes – we’re as unimpressed as Hennessy’s Co-Portfolio Manager Skip Aylesworth about Amazon’s performance in 2014: down 20% (probably 28% tomorrow) so far this calendar year.
We look at Amazon in terms of online retail, media (movie) delivery, and cloud services. Google considers Amazon as its main competitor (outside of search). It is a good investment – but we just wish it wouldn’t reinvest every cent (and more) of profit into “future growth”. But then it was Bezos who said, so long ago, “Get Big Fast”, and he hasn’t stopped.
“The biggest component is the expense side of the equation. They’ve got a big checkbook they keep writing upon, which all results in a top line that is less robust than thought.”
Scott Tilghman, Analyst, B. Riley & Co. More
Portfolio stock prices
New record closing prices for Apple and Facebook. Apple peaked at $105.05 before closing at $104.83. Facebook peaked at $80.63 before closing at $80.04.
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The USD strengthened against the AUD today (Chart: xe.com)