A Substantial Downward Break in Share Prices

February 27, 2012

Equities dropped by 2.7% in India, 1.9% in The Philippines, 1.6% in Sri Lanka, 1.4% in South Korea, 1.1% in Singapore, 1.0% in Thailand, and 0.9% in Australia, Indonesia and Hong Kong.  In Europe, the British Ftse has so far lost 1.5%, and the German Dax and Paris Cac show declines of 1.2%.

Japan’s Nikkei was mostly unscathed with a dip of only 0.1%.

The newly fearful investor mood reflects concern over elevated oil prices and an unproductive G20 meeting over the weekend.  While this will be a busy week for data releases, it started slowly in that respect, and data are not to blame for the revival of risk aversion.

Typical of risk off trading, the yen and dollar are stronger.  The yen gained 0.6% against the U.S. currency, which otherwise shows gains of 0.4% against the euro, loonie and Swiss franc, 0.3% versus the Australian dollar, 0.2 relative to the kiwi, and 0.1% against the yuan and sterling.

WTI Oil prices settled back 1.3% to $108.36 from Friday’s close of nearly $110, and gold prices are 0.6% softer at $1766.40 per ounce.

Ten-year British gilt and German bund yields fell by four and three basis points.  Japanese JGBs held steady.

G20 central bankers and finance ministers, meeting in Mexico City, did not agree to European requests to enlarge IMF resources.  The Europeans were told instead that they must act first.  Germany’s parliament will be debating a Greek bailout today.  Eventual passage is expected even though German voters are on balance opposed to providing such support given the wasteful use of the first Greek bailout.  Other European parliaments also will be deciding whether to back the second bailout in advance on an EU summit planned for March 1-2.

Prior to that summit, the ECB will conduct its second 36-month long-term refinancing operation (LTRO) this Wednesday.  It’s amount is projected to run around EUR 500 billion, similar to the first such operation done in December. 

Euro area M3 growth accelerated in January to 2.5% on year from 1.5% in December.  The three-month on-year pace remained unchanged at 2.0%.  Marketable instruments, that is the difference between M3 and M2, were 4.3% greater than in January 2011 after a 0.5% dip in the year to December.  M1 growth picked up to 2.0% from 1.6% in December.  Private loans were only 1.1% greater than a year earlier.  Lending to firms slowed to 0.7% from 1.1%, while those to households dipped to 1.3% from 1.5%.

Euroland’s index of leading economic indicators rose strongly in January, advancing 1.0% after a 0.4% increase in December.  The index of coincident indicators was unchanged on month.

Italian business sentiment fell for a third straight time to 91.5 in February from a reading of 92.1 in January, 92.5 in December and 94.0 in November.  February’s reading constituted a 23-month low.

In Finland, by contrast, both consumer sentiment and business confidence improved in February and surpassed expectations.

French producer prices rose 0.6% in January but decelerated to a 3.5% 12-month increase from 4.0% in December.  Domestic producer prices also posted a 0.6% monthly increase and were 4.2% higher than a year before.  Import prices were 5.3% greater than in January 2011.

The British Hometrack house price index was unchanged on month in February.  A 1.4% on-year decline constituted a 15-month high.  British fiscal authorities said they have no options for lending further support to the ailing economy.

The World Bank unsurprisingly urged Beijing officials to promote the role of market pricing in the Chinese economy.

South Korean business sentiment improved three points to 84 among manufacturers and by a single point to a score of 80 for non-manufacturing.

Thai industrial production recorded a smaller 15.2% on-year drop in January following December’s flood-plagued plunge of 25.3%.

A planned assassination plot targeting Putin in Russia has been foiled.  Putin is attempting to be elected president in elections scheduled for March 4.

Australia’s Prime Minister Gillard won a vote to remain leader of the Labor Party.

In the United States, the Republican primary sweepstakes resume tomorrow in Michigan.

Scheduled U.S. data today are pending home sales and the Dallas Fed manufacturing index.  The Bank of Israel will announce its latest interest rate decision, which is not expected to entail a change.  The Artist won the 2011 Oscar for best picture.

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

Tags: , ,


Comments are closed.