Mixed Signals
A series of manufacturing PMIs were released with mixed results There were minor revisions to preliminary estimates but the French numbers (42.7) were confirmed as falling significantly from August, while German numbers (47.4) rebounded. The composite unemployment rate increased marginally to 10.4% from 10.3% in July, in line with expectations. The PMIs were quite soft in the Nordic region, with the Swedish headline number dropping to 44.7 and the Norwegian print to 48.9. Data in the UK was generally disappointing. Manufacturing PMI fell to 48.4 instead of 49.0 expected. UBS economics notes a small improvement in the total orders balance, but a falling exports orders balance. August mortgage approvals were below consensus at 47.7k instead of 49k expected. Net mortgage lending fell -GBP 0.3 bn, the largest monthly decline since December 2010. The impact of QE on the monetary aggregates did show up in the M4 data however, with M4 ex. OFC, increasing by 4.1% y/y – the highest since Q1 2009. CHF sight deposits held at the SNB (for the week ending Sept. 28) declined marginally to CHF373.4 bn (the first weekly fall since May). Further indications of limited pressure on the EURCHF floor. China’s official manufacturing PMI was marginally stronger than previous, but with both Australia and China on holiday the market reaction was muted. Japan’s quarterly Tankan showed a marked deterioration over the Q2 report, but it still managed to beat depressed expectations. Even that was not enough to move USDJPY though. Late on Friday night, Spain’s bank stress tests results showed a capital shortfall at close to EUR60 bn. Details showed that 7 of the 14 banks tested do not have additional capital needs even under a “highly unfavorable macroeconomic scenario”. Under the baseline scenario, the aggregate capital needs were estimated to be about EUR25 bn. The results were largely in line with expectations and the impact on euro was fairly muted. Moody’s decision on Spain’s sovereign rating is still due and we expect a verdict quite imminently given previous guidance which suggested the outcome of the rating review would likely be released in September. We note that a possible downgrade, even by a single-notch, would push Spain’s rating into junk territory. On Friday night, the IMF released the results of its quarterly survey on the composition of global FX reserves. The snapshot was taken on June 30 and it showed very little adjustment over the quarter: the share of reserves denominated in USD fell slightly to 61.9.
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UBS Investment Bank