Collateral Damage from Prospect of More Fed Tapering

January 24, 2014

Share prices have slumped 3.4% in Spain, 1.9% (and 304 points) in Japan, 1.8% in Italy, 1.4% in France, 1.3% in Hong Kong and Indonesia, 1.1% in India and Germany, 1.0% in Britain, 0.8% in New Zealand and Singapore, and 0.4% in Australia.

Ten-year sovereign debt yields are down 8 basis points in Britain, 3 bps in Japan, and 2 bps in Germany.  Treasury futures indicate another five-basis point drop in 10-year notes.

Many emerging market currencies are being sucked into a bloodbath of selling pressure.  Targets include the Argentine peso, Chilean peso, Brazilian real, South African rand, Turkish lira and Ukraine Hryvnia.

WTI crude oil fell by 0.5% overnight to $96.86 per barrel.  Gold is 0.1% firmer at $1,263.10 per ounce.

The U.S. dollar has advanced by 0.8% against the Australian dollar and 0.6% relative to the kiwi but is down 1.0% versus the yen and 0.6% vis-a-vis the Swiss franc.  The euro is 0.2% stronger against the greenback and sporting a 1.37 handle.  Sterling settled back 0.2%, and China’s yuan is steady.

The Kansas City Fed manufacturing index rose 8 points to +5 in January, reversing most of December’s ten-point decline.

Bucking the downward trend in most stock markets this Friday, Chinese share prices continued to respond positively to the PBoC’s money market relief and climbed 0.6% today.

A member of the Reserve Bank of Australia’s policy Board, Ridout, indicated a desire to see the Aussie dollar drop to 80 U.S. cents, calling such a move a “fair deal” for the local economy.

Finnish producer prices dropped by 0.8% between end-2012 and end-2013, marking their fifth straight month with an on-year decline.  Spanish producer prices, in contrast, posted a 1.1% monthly increase in December, swinging the 12-month rate of change to +0.6% from -0.5% seen in November.

Italian retail sales posted no growth in December and edged up just 0.1% between end-2012 and end-2013.

According to the British Bankers Association, U.K. mortgage loan approvals advanced 2.5% from November to 46.5K in December.

A rise in Czech consumer confidence to -5.3 this month offset a drop in business sentiment to 8.2, leaving overall sentiment unchanged with a +5.5 reading.

Dutch consumer spending in November recorded on-year growth for the first time in nearly two and a half years, but the gain was only 0.2%.

Poland reported a 0.2 percentage point uptick in the jobless rate to 13.4% and a 5.8% December-over-December increase in retail sales.  Each result was worse than forecast.

In Singapore, industrial production growth last month of 5.2% from November and 6.2% on year both exceeded expectations.

Greece recorded a larger EUR 744 million current account deficit in November after a shortfall of EUR 351 million in October.

Canadian consumer prices and Mexican retail sales will be reported today.

Copyright 2014, Larry Greenberg.  All rights reserved.  No secondary distribution without express permission.

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