Fed Taper Speculation

December 11, 2013

The first reduction of quantitative easing appears more likely because Democrat and Republican congressional leaders reached a 2-year tentative budget deal that President Obama is said to support.  The legislation still must get approved by the full senate and house of representatives and, if so done, would avert a government shutdown next month.  The risk of another fiscal crisis had been a reason for Fed caution.

The dollar has not reacted strongly, showing drops of 0.3% against the yen and 0.1% versus the loonie, no change relative to the euro, Swissie and yuan, and advances of 0.7% against the kiwi, 0.4% vis-a-vis the Aussie dollar and 0.3% against sterling.

Stocks lost ground in the Pacific in initial reaction to the budget accord but are higher in Europe.  Share prices fell by 1.7% in China and Hong Kong, 0.8% in South Korea and Australia, 0.7% in Singapore and 0.6% in Japan.  The Paris Cac and Spanish IBEX are up 0.7% and 0.5%, while the British Ftse, and German Dax show smaller gains of 0.3% and 0.2%. 

The ten-year German bund yield is unchanged, while the 10-year Japanese JGB and British gilt have edged a basis point lower.

The price of gold rose 0.6% to $1,255.40 per ounce, and WTI crude oil is up 0.1%.

The Bank of Iceland did not raise its seven-day collateralized lending rate as forecast but instead left such at 6.0%.  Prior increases have buoyed the krona and helped inflation to settle back closer to target.

Japanese core private machinery orders rebounded just 0.6% in October from a 2.1% September drop.  Government and foreign orders for machinery respectively fell by 26.2% and 16.0% in the latest reported month.  The Conference Board’s index of Japanese leading economic indicators posted a much smaller 0.2% uptick in October than its 1.3% advance in September.

Japanese domestic corporate goods prices ticked up 0.1% last month and posted a 12-month advance of 2.7% versus a 1.1% drop in the previous twelve months to November 2012.  Export and import prices edged down 0.1% and 0.2% between October and November. 

The sequential monthly rise in German consumer prices last month was confirmed at 0.2%.  On-year inflation of 1.3% was a tenth percentage point higher than in October. 

Romanian CPI inflation slowed to 1.8% in November from 1.9% in October.  Hungarian CPI inflation remained steady at 0.9%.  And Portugal recorded a 0.2% on-year drop in consumer prices, the same decline as registered in the year to October.

The French current account deficit narrowed 42% on month to EUR 2.1 billion in October.  French non-farm employment slid 0.1% in the third quarter.

Australian consumer confidence slumped 4.8% in October, its biggest drop since March.

South African CPI inflation slipped to 5.3% in November from 5.5% in October, while retail sales in October were 0.4% less than in September but 1.3% greater than in October 2012.

China released mixed money and bank lending growth figures.  Loans grew 625 billion yuan in November, a 2-month high and 23% more than in October.  M0 and M2 money growth slowed to 7.7% and 14.2%, respectively, while M1 expanded 9.4% on year, up from 8.9% in the years to September and October.

South Korean unemployment dipped a tenth percentage point to 2.9% last month.  Malaysian industrial production went up 1.9% on month and 1.7% on year in October. 

Today will be a light day for U.S. data, just weekly mortgage applications and oil inventories.

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

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