Awaiting U.S. Jobs Data, Events in Egypt, and EU Summit Results

February 4, 2011

Currencies barely moved overnight, continuing the flat performance in U.S. trading on Thursday.  The dollar is up by 0.2% against the Swiss franc and 0.1% versus sterling, unchanged against the yen, euro, kiwi and yuan, down 0.1% relative to the Canadian dollar, and off 0.2% against the Australian dollar.

Many Asian markets remain closed for the Lunar New Year.  The Nikkei rose 1.1%, and stocks climbed 0.9% in Australia and 0.4% in Thailand, Pakistan and Indonesia.  India’s market plunged 2.4%.  The Paris Cac and German Dax are 0.3% higher, and the British Ftse has so far risen 1.0%.

The yield on 10-year JGBs rose four basis points, while that on German bunds slid three basis points.  Investors seem relieved at Fed Chairman Bernanke’s harsh warning against using the U.S. debt ceiling as a bargaining chip in the fiscal wars.

Oil has edged 0.1% higher to $90.59 per barrel, while gold is 0.2% lower at $1350 per ounce.

Bank Indonesia surprise analysts with its first interest rate hike, a 25-basis point increase to 6.75%.  Rates had been reduced by 300 basis points over eight consecutive monthly meetings and steady at 6.5% since August 2009.

The Reserve Bank of Australia released a new quarterly Monetary Policy Statement that anticipates very strong growth in the second quarter of this year, offsetting the current lull caused in part by heavy floods.  Projected end-2011 inflation was revised slightly lower.  GDP is forecast to rise 4.25% this year and in a 3.75-4.0% range thereafter.  Core CPI is seen edging up to 3% by late 2012, its target ceiling, implying more rate increases in the future, but officials observed that most loan rates in Australia are now a little above their 10-year averages.  This suggests no immediate urgency to lift rates.

Tensions in Egypt have escalated.  Protesters demand that Mubarak abdicate today.  Iran’s supreme leader is urging Egypt to become an Islamic state.

The United States releases its January jobs report at 13:30 GMT, with expectations centered around a gain of 150K but many hoping for an increase of at least 200K.  Unemployment probably edged up.

Canada’s labor market report was considerably better than anticipated.  Jobs jumped 69K versus a forecast rise of 22K, and they were 1.9% greater than in January 2010.  Last month’s jobless rate was 7.8%, up 0.2 percentage points as many more people were encouraged to look for work.

Rumors from the EU Summit in Brussels point to a progress toward a strengthened rescue fund conforming largely to German wishes.

Brazil’s service-sector purchasing managers index improved to a 10-month high of 52.7.  The composite PMI also reached a 10-month peak, indicating that Brazil entered 2011 with stronger momentum than expected.

The global PMI index calculated by J.P. Morgan reached its strongest level since April 2006, a reading of 58.3 on the composite index in January after 57.0 in December and a services score of 58.2 following 56.9.  The services figure is the best since June 2007.

The German construction PMI rebounded 19.5 points to a 47-month high of 55.5 in January.  Bad weather had caused the index to plunge in December.

Australia reported a PSI-services index of 45.5, down from 46.4 in December.  Such was the third straight sub-50 reading and the eighth in the past nine months.

Britain’s Halifax house price index unexpectedly rose 0.8% on month after a 1.3% drop in December, but the 12-month rate of decline increased to 2.4% from 1.6%.  Also from the U.K. came news of an 11.5% on-year drop in new car sales last month.

A former Japanese official, Hirano, predicted intervention if the yen keeps rising.  At 81.60, such is less than two yen from its record high of 79.85 hit on April 19, 1995.

Filipino consumer price inflation accelerated more than anticipated to 3.5% in January from 3.0% in December.  The central bank has targeted a 3-5% range.  Core CPI is at 3.4%.  Producer prices advanced 1.0% on month but fell 6.2% on year.

Italian consumer prices rose 0.4% in January and accelerated to a 12-month 2.1% rate of increase from 1.9% in December.

The Spanish industrial production dipped 0.1% on month in December, which was weaker than forecast.  Output rose 0.9% in 2010.  According to the Bank of Spain, Spanish GDP rose 0.2% last quarter after stagnating in the third quarter. Iceland’s trade surplus widened 31.3% last year to ISK 118.6 billion, as export growth of 15.7% outflanked import gains of 11.3%.  Sweden’s service-sector output slid 0.4% in December and posted a smaller on-year rise of 4.9%.

Besides the U.S. Department of Labor jobs report, investors today will learn the results of Canada’s IVEY-PMI report and this month’s Bank of Mexico interest rate policy meeting.

Copyright Larry Greenberg 2011.  All rights reserved.  No secondary distribution without express permission.

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