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NIKKO MARKET COMMENTS
Prepared by
The Nikko Securities Co. International,Inc.
Economic News
The September trade and service deficit surged to $11 bln. from a downward revised $9.4 bln. last month. With the revision this leaves the quarter right where we had projected it would be. But it occurred with a drop in exports and a surge in imports. Thus, concerns about the deflationary effects from the Pac-Rim are now squarely front and center. Import prices from Japan are already down 5% yr/yr and down 45 yr/yr from the Pac-Rim NICs. The first look ahead to Nov. came in the form of the Philadelphia Fed survey, a purchasers type “up-minus down” diffusion index. That report showed the economy in that region is carrying essentially the same momentum as before. The diffusion reading for Nov. was +10.1 compared to Oct.'s +11.5. The much feared prices-paid index jumped to 17.8 from 15.55–and the prices-received index jumped to +7.7 from +1.2–but the bond market did not react to those readings at all. The supplier delivery index suggested less bottleneck pressure as it fell to —2.4 in Nov. from —4.9 in Oct. Thus pressure on delivery speeds is easing. The employment index improved to a —2.4 in Nov. from —4.9 in Oct. The job market for manufacturing in that region has been a bit weak. All in all the economy's momentum seems to be maintained in Nov. and some inflation warning signals are beginning to flash, but are being ignored. Jobless claims rose sharply to 333,000 in the latest week, bringing the four-week average to 315,000. Claimants receiving benefits totaled 2.263 mln., up by 31 thousand from last week, compared to a four-week average of 2.230 mln. The insured unemployment rate remains at 1.9%. Consumer comforts seems unaffected by recent market fluctuations. The ABC/Money index rose this week to 9, the highest level in eight weeks.
Robert A. Brusca, Chief Economist
The Nikko Securities Co. International, Inc.
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