Sterling Exhibited a Heavy Tone

March 12, 2013

Sterling sank to a low of $1.4832, its weakest dollar level in about 2-1/2 years.  The trigger for today’s decline was the announced 1.2% plunge of British industrial production in January that erased December’s 1.1% advance and left production in November-January 0.9% below the August-October level.  Production in January was 2.9% weaker than a year before.  Factory output dropped 1.5% in January and posted a 3.0% 12-month decline.

The dollar otherwise has fallen 0.5% against the Australian dollar and 0.2% relative to the yen, euro, yuan and Swiss franc.  The Canadian and New Zealand dollars are 0.5% and 0.3% weaker against their U.S. counterpart.

Commodities and bond prices are stronger. 

  • Gold is up 0.9% at $1592.90 per ounce, and oil has firmed 1.1% to $93.09 per barrel of WTI.
  • Ten-year British gilt and German bund yields fell by five and four basis points.  Ten-year Japanese JGBs and U.S. Treasuries are two bps lower.

In the Pacific Rim, equities dropped 1.4% in China, 0.9% in Hong Kong, 0.6% in Australia, 0.5% in South Korea, 0.4% in the Philippines, Indonesia, and India and 0.3% in Japan.  European bourses and U.S. share prices are only marginally changed.

Japan’s Ministry of Finance reported improved business sentiment this quarter.  The index for all large firms printed 6.5 points higher at +1.0.  Large manufacturing sentiment was at negative 4.6 after minus 10.3 in the fourth quarter of 2012.  Large non-manufacturers had sentiment of 4.0 versus minus 2.9 in the prior quarter.

Minutes from the BOJ meeting last month indicated greater readiness to purchase assets with a longer maturity and a riskier nature.  Deputy Governor nominee Iwata made very dovish remarks, but it isn’t assured that he will be confirmed by the upper house of parliament.

Japan’s tertiary index of service sector activity slumped 1.1% in January after rising that much in December.  The index was only 0.3% higher than in January 2012.

Japanese domestic corporate goods prices firmed 0.4% on month in February but posted the lowest 12-month change (minus 0.1%) since March of last year.  Export and import prices were each 0.8% lower than in February 2012.

Japanese consumer confidence improved a full point to 44.3 in February, its best level since June 2007.

German wholesale prices edged 0.1% higher on month in February but showed the smallest 12-month increase (1.4%) since June 2012.  On-year WPI inflation was down from 2.3% in January and 4.6% in October. 

Although German consumer prices rose 0.6% in February, the 12-month rate of increase, 1.5%, was the lowest since December 2010.  Non-energy consumer prices were just 1.3% above their year-earlier level.

Britain’s goods and services trade deficit printed lower in January at GBP 2.362 billion after GBP 2.811 billion in December.  The GBP 8.195 billion merchandise trade deficit was smaller than assumed because of a big decline in the oil commerce deficit to GBP 434 million from a deficit in December of GBP 1.4 billion.

The French current account deficit widened to EUR 5.0 billion in January from EUR 3.8 billion in December.  South Africa’s current account deficit narrowed to 6.5% of GDP last quarter from a 4-year high of 6.8% of GDP in 3Q12.  Turkey had a $5.6 billion current account deficit in January.  Portugal’s trade deficit narrowed to EUR 2.22 billion in January from EUR 2.58 billion in the prior month. 

Italian consumer prices rose 0.1% on month and 1.9% on year in February.  Swedish consumer prices posted a 0.2% 12-month dip in February after showing no change in the 12 months to January.  Portuguese consumer prices were unchanged from a year before in February.  Indian CPI inflation accelerated to 10.9% last month from 10.6% in January.

Indian industrial production surpassed its year-earlier level by 2.4% in January.  Greek industrial production sank by 4.8% over that span, however.

Small U.S. business sentiment improved according to the NIFB measure, printing at 90.8 last month after 88.9 in January.

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

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