Confidence Continuing to Build into the New Year

December 19, 2012

An optimistic mood surrounds the fiscal cliff talks.

The German IFO business climate index rose to a 5-month high in December despite a softer reading on current conditions.

Peripheral sovereign debt yields slipped further in the euro area.  S&P removed the “Selective Default” designation on Greek debt.

Japan’s Nikkei soared 2.4%, its best single session of 2012, and closed at 10,160, an 8-month high.  Analysts are hopeful that the BOJ decision to be announced on Thursday will expand quantitative easing.  A two-day BOJ Policy Board meeting began Wednesday.

The World Bank upped projected Chinese growth in 2013 by 0.3 percentage points to 8.4%.

The dollar has risen 0.6% against the kiwi, 0.3% versus the yen and 0.2% relative to the Australian dollar but eased by 0.4% against the euro and Swiss franc, 0.3% versus sterling, and 0.1% vis-a-vis the yuan.  The loonie is unchanged.

In the Pacific Rim despite the 2.4% rise of the Japanese Nikkei-225, share prices gained 2.1% in the Philippines, 1.1% in New Zealand, 0.6% in Hong Kong and India, 0.5% in South Korea and Australia, 0.4% in Taiwan, and 0.1% in Singapore and China.  Equities have climbed 1.3% in Spain, 0.8% in Italy, 0.5% in France and Britain and 0.2% in Germany.

The price of gold is steady at $1670.80.  Oil prices firmed 0.5% to $88.40 per barrel.

10-year German bund and Japanese JGB yields rose by two basis points, while the 10-year British gilt yield is up a single basis point.

South Korea’s presidential election today appears close.

Silvio Berlusconi, now age 76, said he will run in Italy’s upcoming election and that he also plans to marry again.

Japan reported a JPY 868 billion customs clearance trade deficit in November on a seasonally adjusted basis, up sharply from October’s JPY 619 billion shortfall.  Exports slid 0.1% on month, and imports climbed 4.3%.  In unadjusted terms, the deficit widened to JPY 953 billion, some 38% larger than in November 2011, reflecting a 4.1% drop in exports and a 0.8% uptick in imports.  Exports to China plunged 14.5% on year, while those to the EU dropped 19.9%.

Japan’s all-industry index, a monthly proxy of GDP calculated from the supply side, recovered 0.2% in October after posting a 0.5% drop in the third quarter.  A 1.6% rise in industrial production paced the gain.  Public administration went up 0.7%, but construction and services recorded drops of 2.3% and 0.1% from September levels.  October’s all-industry index was 0.1% higher than a year earlier.

Japan’s index of leading economic indicators rose a point to 92.8 in October, but the index of coincident indicators fell by 0.6 points to 90.7, prompting officials to assess its trend as “worsening.”

Construction output in the euro area sank 1.6% in October on top of September’s slide of 1.3%.  The index was 4.1% lower than in October 2011.

Euroland’s seasonally adjusted current account surplus widened to a two-month high of EUR 3.9 billion in October from EUR 2.4 billion in September, but it still fell short of analyst expectations.  The unadjusted surplus in the twelve months to October was EUR 79.4 billion versus a deficit of EUR 8.2 billion in the year to October 2011. 

Business climate in Germany according to the IFO Institute monthly survey ended 2012 at 102.4, the best reading since 103.2 in July and up from 101.4 in November and 100.0 in October.  Expectations improved 2.7 points to 97.9.  Current conditions fell one full point to 107.1.  IFO officials said businesses became more confident regarding the future as the year drew to a close.  The improvement was concentrated in manufacturing and construction.  The IFO survey of the service sector improved even more dramatically, printing in December at 14.1, up from 8.5 in November.

Sweden reported mixed results.  Consumer confidence weakened 5.1 points to a minus 12.2 reading in December, but manufacturing confidence of minus 15 was better than forecast.  Also, the economic tendency index rose by 3.6 points to 89.9.

Italian industrial orders were unchanged on month and off 0.1% on year in October.

The Confederation of British Industries reported its December survey of distributive trade trends, which showed a relapse to +19 from +33 in November and +30 in October after +6 in September.

Minutes from the Bank of England’s policy committee meeting earlier this month showed little change from the thinking at the November meeting.  Once again, there was a single dissent cast by Miles, who wanted to expanded quantitative easing.  But the majority expects inflation to exceed the 2% target next year and felt that the U.K. had not yet reaped the full benefit of the last round of quantitative easing. 

Taiwan’s central bank did not change its policy stance, keeping the benchmark interest rate at 1.875%.

As expected, policymakers at the Czech National Bank retained a two-week repo rate of 0.05%.

Norway’s Norges Bank left its benchmark interest rate unchanged at 1.5% as analysts were expecting.

Malaysian consumer prices firmed 0.1% last month and retained a 12-month 1.3% rate of increase.

Australia’s index of leading economic indicators edged only 0.1% higher in October, an 8-month low.

New Zealand’s seasonally adjusted current account deficit narrowed a bit to NZD 2.5 billion last quarter.  The twelve-month deficit total of NZD 9.9 billion equaled 4.7% of GDP. 

South Africa’s index of leading economic indicators rose 0.6% in October to a reading of 130.1.

The U.S. reports housing starts and building permits and weekly oil inventories today, while Canadian wholesale turnover data arrive.

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

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