2010 09 30

What a stark contrast between Korea and Japan. Here is what I had written back on Aug 31:

Korea – Japan – Germany : all major exporters.
• Korean Won is still about 20% weaker now than before the financial crisis.
• Euro is at the lowest level since mid-2006
• Yen is about 30% stronger now than back in mid-2007 when it was over 120.
Guess which economy and stock market is underperforming.

Can anything go wrong with Germany? They continue to crank along and defy the gravity pulling down everyone else in Europe. I think we won’t see the first signs of slowdown until end of Oct.

Chicago PMI surprised to the upside and market rallied initially, but stock market ended the day slightly down. On Sep 1 the massive September to Remember rally was fueled by upside surprise in ISM manufacturing report (September ISM to be released tomorrow). Is the juice out on manufacturing? If so, this might be a bad time to be long. However, it gives me some confidence in our view that US is not as bad as people think. But that might already be baked into stock prices already after a 9% run in SP500 this month.

Another huge day in energy. Perhaps on short squeeze. I feel better on copper vs crude at this level.

Tomorrow is all about ISM and PMI. My guess though is that we won’t see a big pop like we saw on Sep 1.





Korea’s manufacturing activities continue to power ahead in August but signs of slowdown loom
• Korea’s industrial output grew for a 14th consecutive month in August, underscoring the country’s ongoing economic recovery from the global financial crisis.
• However, we are seeing some signs of slowdown here as well as August saw a small decline from July – first monthly decline since October 2009.
• Officials attributed the dip to the summer vacation period and companies upgrading their assembly lines.
• Statistics Korea said the leading economic composite index edged down 0.8 percentage points from July, the eighth straight month of contraction. The index is used to predict economic performance eight to 15 months ahead.
• Statistics Korea, however, added that while the leading economic composite index continued to fall, the trend does not automatically signify that the economy will cool in the near future.

Meanwhile, Japan’s industrial production looks UGLY
• Japan's industrial production fell a seasonally adjusted 0.3% during August, the Ministry of Economy, Trade and Industry said Thursday, with the result way below analysts' forecasts.
• A survey of economists reported by Dow Jones Newswires had tipped a rise of 1.1%. The drop in output marked the third straight month of declines, the ministry said.

Australian job market looks strong
• The total number of job vacancies in Australia in August 2010 was 181,300, which was an increase of 9.8 per cent from the previous quarterly survey, conducted in May 2010.
• The number of job vacancies in the private sector was 163,800 in August, a rise of 9.5 per cent from May.
• We have been seeing a very strong job market in Australia lately which is a source of RBA concerns over inflation and a motivation for them to hike rates.

German unemployment drops sharply
• Is there anything the Germans can do wrong?
• German unemployment decreased sharply in September, and total jobless is expected to fall below the politically sensitive 3 million in October, underscoring the country's strong economic recovery over the summer months.
• The good performance contrasts starkly with other euro-zone states, where unemployment rose markedly during the crisis and is not expected to fall, because of sluggish economic growth and a dire fiscal outlook.
• The German economy is booming, with gross domestic product expected to grow well over 3% this year. Italy, by comparison, will hardly muster 1% growth and the Spanish economy is widely forecast to contract this year and next.

Chicago PMI – STRONGER than expected
• Chicago PMI, generally believed to forecast the ISM because the Chicago area is the manufacturing hub of US, came in stronger than expected for September bucking a series of weak Fed regional reports (somewhat like back in Aug).
• Particularly encouraging was a big jump in New Orders which is believed to the best leading indicator among PMI data.
• This eases concern that ISM to be released on Oct 1 would dip below the 50 mark.

Jobless claims continue to edge lower but still WAY TOO HIGH
• The number of Americans filing for first-time unemployment benefits declined last week but continued to drift in the same range they have been since November.
• There were 453,000 initial jobless claims filed in the week ended Sept.18, down 16,000 from an upwardly revised 469,000 the previous week, according to the Labor Department's weekly report.