Chinese Equities Hammered

March 4, 2013

Stocks in China fell 4.6% following the announcement late Friday of new property market curbs there.  Share prices also dropped by 1.5% in Australian and Hong Kong, 1.2% in Taiwan, 1.0% in Indonesia, 0.9% in Singapore and 0.7% in South Korea.  The official CFLP non-manufacturing purchasing managers index weakened to a 5-month low of 54.5 in February from 56.2 in January and 56.1 in December.

Japan’s Nikkei bucked the tide with a 0.4% uptick on remarks by the BOJ governor nominee Kuroda in testimony before parliament’s lower house.  He needs to be confirmed by both legislative branches.  Kuroda said more monetary stimulus would be necessary to achieve the 2% inflation target and favors both an earlier start to unlimited quantitative easing and lengthening the maturity of Japanese sovereign bonds that the central bank purchases.

Japan’s monetary base recorded a 15% advance between February 2012 and February 2013, and accelerating pace of increase from 10.9% in January and 9.2% in the fourth quarter.  The BOJ balance sheet grew to JPY 163.5 trillion at end-February from JPY 159.8 trillion at end-January.

EU finance ministers are meeting in Brussels today to talk about Cyprus among other matters.

U.S. Republicans and Democrats continue to blame each other for the failure to avert sequestration.

The Australian dollar touched overnight lows of USD 1.0115.  The Aussie dollar slipped to an 8-month low after the release of weak Australian building permits figures, which declined 2.4% on month in January on top of a 1.7% decline in December.  In other Australian data, expected inflation ticked down a tenth of a percentage point to 2.4%, job ads rose 3.0% in February, most in a year, and corporate profits recorded a fifth consecutive quarterly decline, dropping 1.0% in 4Q12.  The Aussie dollar is 0.4% softer than its U.S. counterpart at the moment.

After declining below $1.5000 last Friday and touching that level early today, sterling has recovered 0.3% despite a weak British construction sector purchasing managers index, which dropped 1.9 points to 46.8 in February, signifying the greatest pace of contraction since October 2009.  The U.K. Hometrack house price index posted a smaller on-year dip of 0.1% in February, however, after dropping 0.3% in the year to January.

The dollar is unchanged on balance against the yen even though Kuroda conceded that yen depreciation could be promoted by the necessary task of eradicating deflation through aggressive monetary stimulus.  Kuroda’s dovish remarks also sent the 10-year JGB yield down four basis points to  new low for the move of 0.62%.  The 0.11% five-year JGB yield constitutes a record low.

The dollar has risen 0.2% against the euro and kiwi and 0.1% versus the Canadian dollar.  The greenback dipped 0.1% versus the Swiss franc and shows no net change against the Chinese yuan.  There is some speculation that the ECB is getting closer to undertaking more stimulus.

Stocks in Europe have slipped 0.6% in Italy where concern is simmering over the composition of the next government.  Equities also have fallen 0.5% in Britain and 0.4% in Germany, but the Spanish IBEX is up 0.3%, buoyed by a much smaller increase in registered unemployment last month of 59.4K following a132.1K surge the month before that.

U.S. stocks opened slightly lower.  The New York PMI index, known as the NAPM, jumped by 2.1 points to 58.8, its highest reading since 60.5 in March 2012.

The British 10-year gilt yield is three basis points higher.  It’s U.S. and German counterparts are up a basis point.

South Korea’s manufacturing PMI rose a full point to a nine-month high of 50.9.  Export orders had their best reading since July 2011.

The Saudi Arabian non-oil PMI rose 0.4 points to 58.5 in February.

Singapore’s factory PMI crossed over the 50 no-change threshold to 49.4 last month from a January reading of 50.2.

The J.P. Morgan compilation of a global manufacturing PMI printed at 50.8 in February, down from 51.4 in January but above December’s 50.1 score.

Mexico’s manufacturing PMI fell to a 13-month low of 53.4 in February from 55.0 in January and 57.1 in December.

The Sentix measure of investor confidence in the euro area suffered a setback this month, printing at a 3-month low of minus 10.6 after minus 3.9 in February.

Producer prices in the euro area increased 0.6% in January, most since August, and were 1.9% higher than a year earlier.  Energy producer prices jumped 1.6% on month, while all other producer prices posted benign increases of 0.2% from December and 1.4% from January 2012.

Turkish CPI inflation slowed to 7.0% in February from 7.3% in January.  PPI inflation ticked down a tenth percentage point to 1.8%. 

Retail sales in Hong Kong posted a bigger 10.5% 12-month rate of increase in January following on-year gains of 8.8% in December and 9.8% in full-2012.

The Reserve Bank of Australia early Tuesday kicks off a very busy week of central bank policy meetings.

Copyright 2013, Larry Greenberg.  All rights reserved.  No secondary distribution without express permission.

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