Swissy Ending a Strong Year on a Strong Note

December 30, 2010

Most markets will be shut tomorrow in observance of the new year.

The dollar lost another 0.7% against the Swiss franc and set a new record high of CHF 0.9372.  The franc is 19.1% stronger than its end-2009 level against the euro.

The Chinese yuan advanced 0.3% against the dollar, bringing its cumulative appreciation in 2010 to only 3.4%.

The Aussie dollar touched a 28-1/2 year peak against its U.S. counterpart of USD 1.0201 but slid 0.3% on balance after profit-taking.  The AUD is 12.8% stronger than its end-2009 level.

The U.S. dollar otherwise shows overnight gains of 0.5% against sterling and 0.1% versus the Canadian dollar but has lost 0.2% against the yen and kiwi and 0.1% relative to the euro.  Japanese exporters are said to be hedging their dollar exposures.

Equities closed up 1.2% in Pakistan, 0.7% in India, 0.5% in Taiwan, and 0.3% higher in South Korea, New Zealand and Australia, but declines have been seen of 1.1% in Japan, 0.5% in Germany and France, and 0.4% in Malaysia.  The British Ftse is unchanged.

Ten-year bond yields fell eight, five, and four basis points in Britain, Germany, and Japan.  Treasury yields fell sharply yesterday after a solid seven-year auction.

Copper advanced 1.2% to another all-time high of $9550 per metric ton, culminating a 2010 climb of nearly 30%.  Oil and gold slid 0.2% and 0.1% today to $90.48 per barrel and $1412.60 per troy ounce.

Taiwan’s central bank implemented its third interest rate hike, a 12.5-basis point advance to 1.625%.  The move was anticipated.

A Chinese foreign ministry official denied that political considerations played a role in recently imposed restraints on rare earth exports, attributing the move instead to environmental concerns.

Retail purchasing manager readings for Euroland improved in December.  The common currency’s index rose to 52.9, a 31-month high, from 51.3 in November and 48.0 in October.  Sales were higher than a year earlier for the first time in four months.  The French retail PMI jumped 1.8 points to 54.0, best since May 2008 nine points better than the October level.  The German reading of 54.8 was 0.4 points less than in November but 4.4 points higher than October’s score.  Italy had a sub-50 reading for an eleventh straight time but, at 48.7 after 44.7 in November, showed a diminishing rate of contraction.

Japan’s purchasing managers index in manufacturing rose to a three-month high of 48.3 in December from 47.3 in November.  Export orders touched a 20-month low, however, and and the input price component was at a seven-month peak.

The HSBC PMI-manufacturing reading for China slid to a 3-month low of 54.4 in December from 55.3 in November.  The level still connoted a heated economy with substantial input price pressures.

Austria’s manufacturing PMI advanced to a five-month high of 57.7 from 55.2 in November.

Italian business sentiment advanced to 103.0 in December from 101.7 in November and 100.1 in October.

Portuguese industrial production in November was 0.7% less than a year earlier.  Retail sales posted an on-year decline of 4.8%.  Yearend is finding peripheral bond yield premiums in the euro area to be still painfully elevated.

The most hawkish policymaker at the Bank of England, Andrew Sentance, warned that the central bank’s key interest rate of 0.5% may have to be raised to combat the inflationary impulse of a 2.5 percentage point hike in value added taxation next month.

South Korean industrial production climbed 1.4% on month and 10.4% on year in November.  The results slightly exceeded expectations.  South Korea’s current account surplus narrowed to USD 1.93 billion last month but shows a year-to-date tally of roughly $25 billion.  Factory output in Thailand was 5.6% greater than a year earlier in November.  Thailand also reported a USD 1.0 billion current account surplus for November and a 2.5-point increase in business sentiment to 52.5.

Hong Kong retail sales rose 15.2% on year in volume terms and 17.9% in value terms last month, which was not quite as much as analysts were expecting.  Malaysian M2 growth slowed slightly to a 12-month pace of 8.1% in November.  Wholesale food price inflation in India, a weekly statistic, accelerated to 14.4% in the week of December 18 from 12.1% previously.  The Bank of India has tightened monetary policy several times to contain India’s elevated inflation.

Dutch producer price inflation accelerated to a six-month high of 9.6% in November from 9.1% in October.  Italian PPI inflation also firmed last month but was less than half as much in the Netherlands, with a 12-month increase of just 4.0%.

The Swiss current account surplus of CHF 21.3 billion last quarter was 11.6% wider than the 2Q surplus.  Spain’s current account deficit in October of EUR 2.7 billion was 44.7% lower than a year earlier and below analyst expectations.  Hungary’s current account surplus narrowed much less than forecast to EUR 477 million in the third quarter.  Turkey’s trade deficit 107% wider in November than a year earlier and 21% wider than in October.

Several U.S. data releases are scheduled: weekly energy inventories and jobless insurance claims, the Chicago and Milwaukee PMI readings, pending home sales, and the Kansas City Fed manufacturing index.

Copyright Larry Greenberg 2010.  All rights reserved.  No secondary distribution without express permission.

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