Focus Shifts to China

March 12, 2012

Now that aid to Greece from the EU/ECB/IMF seems assured, attention has fixed on the extent of a slowdown in China.

  • China’s government reduced its growth forecast to 7.5%.  The projection for several years had been 8%, but actual GDP growth perennially surpassed that yardstick.
  • Data last week showed lower-than-expected Chinese CPI and PPI inflation.
  • Chinese trade figures over the weekend for February revealed the largest monthly deficit ($31.4 billion) since 1989 with on-year export growth of 18.4% compared to a forecast increase of slightly more than 30%.  Imports jumped 39.6% on year, more than expected.  The year-to-date trade deficit of $4.1 billion still less than $5.7 billion in January-February 2011.
  • At an impromptu press conference, China’s central bank Governor Zhou hinted that more reserve requirement cuts and a softer yuan are tools that may be used to sustain growth.  The dollar rose 0.3% against the yuan today.

The dollar also advanced 0.5% and 0.4% against the Australian and New Zealand dollars but fell by 0.2% against the yen and 0.1% relative to the euro.  The greenback is unchanged against sterling and the Canadian dollar.

Stocks in the Pacific Rim mostly fell, with drops of 1.1% in Taiwan, 1.0% in Vietnam, 0.9% in Malaysia, 0.8% in South Korea, 0.7% in Thailand, and 0.4% in Japan, China, and Australian.  Equities rose, in contrast, by 0.5% in Pakistan, New Zealand and India.  The German Dax and Paris Cac have traded 0.4% and 0.1% higher in Europe, and the British Ftse is steady.

Ten-year sovereign debt yields have slipped 3 basis points in Britain and one bp each in Germany and Japan.

Oil and gold prices dropped 0.8% and 0.3% in $106.58 per barrel and $1706.50 per ounce.

Core domestic machinery orders in Japan increased 3.4% in January following declines of 7.1% in December and 2.6% last quarter.  Foreign machinery orders soared 20.1% in the latest month. Domestic corporate goods prices increased 0.2% in February, the first rise in seven months, and were 0.6% higher than in February 2011.  Petroleum product prices climbed 1.1% on month and 5.7% on year.  Export prices fell 3.5% on year, whereas import prices were 7.3% higher.  Japanese consumer confidence settled back 0.5 points to 39.1 in February.  The elusive 40.0 level hasn’t been seen in a year since before the Sendai earthquake.

Malaysian industrial production fell 3.1% in January, surpassing expectations.  Indian industrial output was 6.8% greater than a year before in January.

The Vietnamese central bank cut its refinancing rate by 100 basis points to 14% in an anticipated move.

Over the weekend, Romney won the Wyoming Caucus, but Santorum took the Kansas caucus by a wide margin.  The next contests are in the South (Alabama and Mississippi) where Romney has not done well. 

The Taliban is promising revenge in Afghanistan after a U.S. GI killed over 15 civilians at random.

German wholesale prices increased 1.0% last month, but WPI inflation in on-year terms eased to 2.6% from 3.0% in January and 10.8% in February 2011.

Revised Italian fourth-quarter GDP figures showed an unchanged 0.7% quarterly decline and a marginally smaller on-year drop of 0.4%.  GDP dipped 0.2% between 2Q11 and 3Q11.  Greek industrial production was 5% higher than a year before in January following an 11.3% plunge between December 2010 and December 2011. 

Portuguese CPI inflation ticked up to 3.6% in February from 3.5% in January.  Danish CPI inflation held at 2.8% last month, while Romanian CPI inflation dipped a tenth percentage point to 2.6%.  Romania’s trade deficit narrowed 55% on month to EUR 0.5 billion in January, while Denmark’s current account surplus slid 24% to DKK 5.86 billion in the same month. 

Turkey’s current account deficit was 8.8% smaller in January at $5.99 billion than in December.

ECOFIN officials continue to meet in Brussels to sign off on the aid to Greece from the Troika later than month.  Credit default swaps have been activated.

Monthly budget deficit figures are the only U.S. data release today.

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

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