Month-end Data Deluge and Better Market Tone

January 31, 2012

Riskier assets were better bid on the final day of January. Stocks are mostly higher.  The dollar is down.  Commodities and bond yields rose.

The dollar has fallen 1.2% against the kiwi, 0.7% relative to the Aussie dollar, 0.5% against sterling, the euro, yuan and Swiss franc, and 0.6% versus the loonie.

The euro touched a high of $1.3216 overnight, and dollar/yen hit a 2012 low of 76.18 but is currently unchanged on balance.

The Paris Cac has gained 1.4% so far, and the German Dax and British Ftse each show advances of 1.0%.  In the Pacific Rim, share prices climbed 2.0% in India, 1.5% in Taiwan, 0.9% in Thailand, 1.1% in Hong Kong, and 0.8% in Vietnam, The Philippines and South Korea.  Stocks in Japan and China, however, only ticked 0.1% higher.

Oil prices rose back above $100 with a gain of 1.6% to $100.39 per barrel.  Gold prices increased 0.5% to $1742.5 per ounce and are $176.70 higher than at the end of December.

The yields on ten-year German bunds and British gilts are four and three basis points higher.  The Japanese JGB is up a single basis point but remains under 1%.

European news really wasn’t encouraging, but for today investors were content with reports that progress toward a fiscal agreement continues to be made.  There’s been no accord on Greek private sector involvement, and it doesn’t look like we’ll know if a disorderly default around March 20 is to be avoided until around that time.  Some attention has shifted to other peripherals.

Japanese data were mixed.

  • The best news was a larger-than-predicted 4.0% increase of industrial production last month.  But output still fell 0.4% in the fourth quarter and 2.7% between 4Q10 and 4Q11.  Officials anticipate production rises in January of 2.5% and February of 1.2% but continue to characterize the trend as "flat."
  • Real household spending (0.5%) posted the first on-year increase in December in 16 months.  However, such dropped 1.0% on month on top of a 1.3% monthly decline in November.
  • Housing starts were 7.3% lower in December than a year earlier.  Analysts were anticipating just a 1-2% decline.
  • Construction orders were 1.5% greater than in December 2010.  That matches the on-year increase in September-November.
  • The unemployment rate edged a tenth percentage point higher last month to a 5-month peak of 4.6%.  Jobs were 0.2% less than at the end of 2010, but the job offers-to-seekers ratio rose to 0.71 from 0.69 in November and 0.67 in October.
  • Japan’s manufacturing purchasing managers index rose 0.5 points but remain near the 50 stagnation line with a reading of 50.7.
  • Motor vehicle production in December was a healthy 13.4% greater than a year earlier.

Japan’s finance minister asserted that yen policy hasn’t changed.  Officials remain concerned about the potential drag of the currency’s elevated level.  The last large intervention operation happened three months ago.

The South Korean president voiced a commitment to ensuring contained inflation.  The remark lifted the won.  South Korean industrial production fell for a third consecutive month, drooping 0.9% in December and to a 2.8% 12-month rate of increase.

Singaporean unemployment averaged 2.0% in 2011, lowest in fourteen years.  The 4Q11 mean was also at 2.0%.

Governor Alan Bollard of the Reserve Bank of New Zealand, whose term ends in September, will not stay in that post beyond then.  New Zealand building permits fell 12.4% in 2011.  M3 money grew 6.0% in the year to December down from 6.5% on year in November.

Australian M3 money accelerated to a 12-month expansion of 8.1% last month from 7.8% in November.  According to National Australia Bank compilations, business confidence hit a six-month high of +3 in December after readings of 2 in each of the previous two months, while business conditions had an unchanged score of +1 in December versus a long-term average of somewhat more than 3.  Australian private sector credit grew 3.5% in the year to December.

Bank Negara Malaysia again left its overnight policy rate at 3.0%.  The last change was a 25-bp rate hike on May 5, 2011, which was the fourth such move of a tightening cycle begun in March 2010.  Malaysian PPI inflation slowed to a still hefty 8.0% in December from 9.1% in November.

Thai business sentiment improved significantly last month, but the reading of 48.5 nonetheless remained below 50.  Thailand is recovering from the floods of a century.

Considerable data have also been released in Europe.

In the U.K., consumer confidence improved four points in January to negative 29, a seven-month high.  M4 money recorded the greatest on-month decline (1.4%) in December and was 2.5% lower than at the end of 2010.  There were 52.9K mortgage approvals last month, but net consumer credit slipped 0.4 billion pounds instead of rising modestly as predicted. 

Germany had mixed reports.

  • Retail sales volume fell by 1.4% in December instead of reversing part of November’s 1.0% drop.  Sales were 0.9% smaller than a year earlier.  Sales declined 0.7% in 4Q and grew just 0.9% in 2011.
  • Unemployment decreased 34K in January, more than three times as much as predicted, following drops of 25K in December and 24K in November.  The jobless rate eased to 6.7% from 6.8% in December and 6.9% in September-November.  Jobs firmed 0.3% last quarter and were 1.4% higher than in 4Q10.
  • In ILO terms for comparative purposes with other European economies, the German seasonally adjusted unemployment rate dipped a tenth point to 5.5% in December. 

The jobless rate for the whole euro area remained at a 13-year high of 10.4% in December versus 10.0% in December 2010.  In contrast to Germany’s 5.5%, unemployment ended 2011 at 22.9% in Spain, 13.6% in Portugal, 9.9% in France, 8.9% in Italy, 7.6% in Finland and 7.2% in Belgium.  Youth unemployment rose from 20.6% in December 2010 to 21.3% in December 2011.

French consumer spending fell 0.7% last month and by a greater-than-forecast 3.1% from the end of 2010.  French domestic producer prices dipped 0.1% last month but were 4.7% higher than a year earlier.  The total PPI was unchanged on month and up 4.0% on year.

Italian producer prices edged up 0.1% in December but decelerated to a 3.8% 12-month increase from 4.4% in the year to November.   

Spanish CPI inflation slowed to 2.0% in January from 2.4% in December and 2.9% in November.  Hungarian producer prices fell 0.5% last month and to a 7.5% on-year advance from 8.0% in the year to November.  Greek retail sales fell 8.9% in the year to November.  Portuguese retail sales dropped 10.3% on year in December, while that economy’s industrial output was 8.7% lower than in December 2010.  The volume of Norwegian retail sales slipped 0.3% last month, defying an expected moderate advance.  Spain’s current account deficit widened 18.7% to EUR 1.5 billion in November.

The UBS Swiss consumption indicator improved 0.11 points to 0.92 in December, reversing a deterioration seen between October and November.

South African M3 and domestic credit expanded by 8.2% and 6.1%, respectively, between December 2010 and December 2011.  Money had risen 7.2% in the year to November.  Turkey posted an $8.1 billion trade deficit in December, wider than November’s shortfall of $7.5 billion but smaller than the deficit a year earlier.

Scheduled U.S. data today include Midwestern regional purchasing manager survey results, the Case-Shiller house price index, consumer confidence, and the employee cost index.  Canada will be releasing producer prices, raw material price figures, and monthly GDP.

Opinion polls suggest that Mitt Romney will beat Newt Gingrich in today’s Florida Republican primary by a comfortable margin.

Copyright 2012, Larry Greenberg.  All rights reserved.  No secondary distribution without express permission.

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