Upbeat Market Mood Despite Persistent Uncertainty

February 15, 2012

Share prices jumped 2.3% in Japan, 2.1% in Hong Kong, 2.0% in India, 1.5% in Taiwan, 1.8% in Thailand, 1.1% in China and South Korea, and 0.3% in Australia.  The German Dax is 1.1% higher, and the Paris Cac has climbed 1.0%.  Disappointing results included New Zealand (down 1.1%) and Britain (up only 0.2%).

In this continuing risk-on mood, the dollar fell 0.7% against the kiwi, 0.6% versus the Aussie dollar, 0.4% relative to the loonie, 0.2% against the euro and Swissie, and 0.1% against the yuan sterling.  The yen dropped 0.2% against the dollar.

Oil and gold prices firmed by 0.8% and 0.7% to $101.55 per barrel and $1729.00 per ounce.

The 10-year German bund and British gilt yields are a basis point higher.

Many European fourth-quarter GDP figures have been released.  Euroland as a whole suffered its first contraction since the second quarter of 2009, a non-annualized drop of 0.3%, which was more or less as forecast.  Real GDP rose just 0.7% from 4Q10, down from on-year growth of 2.4% in the first quarter of 2011.

  • German GDP sank 0.2% (0.7% at an annualized rate saar) last quarter following gains of 1.1% saar in 2Q11 and 2.3% in 3Q11.  Real GDP expanded 3.1% in 2011 after a 3.6% advance in 2010.  Fourth-quarter GDP was 2.0% greater than a year earlier, down from 4-quarter gains of 2.7% in 3Q and 4.7% in 1Q11.
  • French GDP unexpectedly increased last quarter, firming 0.2% on quarter and 1.4% on year.  GDP expanded 1.7% in 2011 despite a 0.1 percentage point drag from net exports.  All components of final demand grew in 4Q11, but inventories exerted a 0.8 percentage point drag.
  • Italian GDP slumped 0.7% (not annualized) in 4Q, reflecting an intensifying recession after falling 0.2% in 3Q.  GDP was 0.5% lower than in 4Q10.
  • Spanish GDP slid 0.3% in 4Q following no change in 3Q.  GDP was merely 0.3% greater than in the fourth quarter of 2010.
  • Dutch GDP posted a second straight contraction, sliding 0.7% after a 0.4% drop in 3Q.  GDP was also 0.7% lower than a year earlier.
  • Belgian GDP eased 0.2% in 4Q after a dip of 0.1% in 3Q.  GDP was up 0.9% in on-year terms.
  • Portuguese GDP plunged 1.3% on quarter, the fifth drop in a row, and was 2.7% lower than in the fourth quarter of 2010.
  • Austrian GDP edged 0.1% lower last quarter but posted on-year growth of 1.5%.
  • Finnish GDP was flat last quarter and 1.2% higher than a year before.
  • Romanian GDP fell 0.2% after a string of robust quarters that left on-year growth at a regionally high 2.1%.
  • Hungarian GDP rose 0.3% on quarter and 1.5% on year.
  • Czech GDP dropped 0.3% in 4Q11 and to a 4-quarter increase of 0.5% from 1.2% in the year to 3Q.

The euro area experienced a fourth consecutive seasonally adjusted trade surplus in December and the largest (EUR 7.5 billion) surplus in that sequence.  The common currency bloc had a EUR 7.7 billion trade deficit in 2011 after a EUR 14.7 shortfall in 2010 and experienced similar rates of export growth (12.7%) and import growth (12.2%) last year.

The Eurogroup of finance ministers has decided not to hold a vote later today on recommending approval of aid to Greece.  Doubt persists over Greece’s ability and will to deliver its fiscal promises.

The Bank of England’s quarterly Inflation Report forecasts sub-2.0% inflation for most of the time through 2014 and implies that even more monetary stimulus may be necessary.  Governor King stressed that Britain faces challenging economic times.

British labor statistics showed a 6.9K rise in the jobless claimant count last month, more than seen in December and cumulating to a gain of 146.3K from January 2011.  On a standardized ILO basis, unemployment of 8.4% last quarter was the most since 1995 and up from 7.7% in the first quarter of 2011.  Wage earnings in November-January were only 2.0% higher than a year earlier; that’s considerably less than the rise in consumer prices.

One piece of good news for Europe came from China’s central bank governor, who indicated a readiness now to lend support to European peripherals and to use the EFSF and IMF as conduits for that assistance.

The ZEW expectations index for Switzerland jumped 28.9 points to minus 21.2 in February.

Spanish consumer price inflation slowed to 2.0% in January from 2.4% in December.  Danish PPI inflation declined to 3.4% from 4.1% at end-2011.  Finland recorded a EUR 1.0 billion current account deficit in 2011, 70% narrower than in 2010.  Norway’s NOK 44.1 billion trade surplus in January was 22.6% wider than a year earlier.  Ireland’s trade surplus of EUR 3.5 billion in December was 23.3% smaller than the November surplus.

The Bank of Japan’s February monthly assessment of the economy was the same as in January, characterizing growth as flat and likely to remain so for the time being.  That central bank eased monetary policy yesterday.

Late yesterday came news that the Central Bank of Chile decided to keep its benchmark policy interest rate at 5.0%.  Such had been cut by 25 bps in January.

Australian motor vehicle sales rose 1.3% on moth and 2.7% on year in January.  Aussie consumer confidence advanced by a strong four points to a reading of 101.1 in February.  Non-auto New Zealand retail sales advanced 4.4% last quarter, exceeding expectations.  South African retail sales increased 1.3% in December and posted a greater 12-month 8.7% rate of rise.  Turkish unemployment dipped a tenth to 9.3% in November and was 1.7 percentage points lower than a year earlier. 

South Korean unemployment edged up a tenth to 3.2% last month, and that economy’s trade balance swung to a deficit of $2.0 billion.  In the year to January, export and import prices rose respectively by 4.6% and 7.9% in South Korea.  Retail sales in Singapore posted less on-year growth in December of 4.2% after gaining 6.2% in the year to November.  Malaysian GDP increased 1.2% last quarter but posted less on-year growth of 5.2% after 5.8% in 3Q.  GDP grew 7.2% in 2011 as a whole.  Malaysia’s current account surplus narrowed 18% on quarter.

U.S. mortgage applications fell 1.0% last week.  The 30-year fixed mortgage rate edged up to 4.08% from a record low of 4.05% in the prior week.

Scheduled U.S. data releases today are industrial production, the Treasury TIC figures covering capital flows, the New York Fed Empire State manufacturing index, the National Association of Home Builders index, and weekly oil inventories.  Most importantly, FOMC minutes from the January meeting will be published in the afternoon.

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

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