After the Taper and Before the GDP Release

January 30, 2014

The Federal Reserve reduced its QE3 stimulus for a second time on Wednesday, and now investors await today’s release of 4Q U.S. GDP data as well as weekly jobless insurance claims and monthly pending home sales. Many overseas economic statistics were also released. 

China’s five-day-long Lunar New Year celebration begins tonight.  Several other Asian markets celebrate this holiday as well.  China’s central bank did not add extra liquidity in open market operations today as it had at the four previous sessions.

Markets in Asia and Europe remain risk averse.  Share prices slumped 2.5% in Japan, 1.6% in Taiwan, 1.3% in China, 0.7% in Singapore and Indonesia and 0.5% in Hong Kong.  Equities fell 0.8% in Australia and 0.7% in New Zealand. 

The Reserve Bank of New Zealand retained its 2.5% official cash rate but indicated such is likely to be raised soon.

In Europe, stocks are down 0.3% in Switzerland, 0.2% in Germany and Britain and 0.1% in France, but Italian share prices are a bit higher.

Ten-year sovereign debt yields slipped by two basis points in Britain and a basis point each in Japan and Germany.

Gold is 0.6% softer at $1,254.10 per ounce, while WTI crude oil has risen 0.4% to $97.74 pr barrel.

Much attention has been directed at the dollar/yen relationship as a barometer of risk on/risk off trading.  Yen depreciation was a hallmark of Abenomics during 2013 but tends to go up when global investors flee risky assets.  The dollar edged up 0.1% against the yen overnight but has lost 2.2% since the close in 2013. 

Against other major currencies today, the dollar is up by 0.5% relative to the Swiss franc, 0.4% versus the euro, kiwi and sterling, and 0.1% relative to the yuan.  The dollar has lost 0.5% against the Australian dollar, however, and is flat against the loonie.

Euroland sentiment indices were release.  The currency union’s overall economic sentiment index improved a half-point to 100.9 in January, which also compares favorably with scores of 92.9 six months earlier, 89.2 in January 2013 and 85.2 in October 2012.  consumer confidence printed at -11.7, same as the preliminary indication and 1.8 points better than in December.  Industrial sentiment, however, worsened by a half point to -3.9 but was ten points higher than in January 2013.  Sentiment rose on month by 1.9 points in services and 1.6 points in retail but fell 3.7 points to minus 30.1 in construction.  Euroland’s business climate index printed at 0.19 after 0.20 in December and 0.18 in November.

Germany reported consumer price and labor statistics. 

  • All five reporting states thus far saw the CPI in January drop by between 0.4% and 0.7%.  Much of this was seasonal.  On-year inflation fell slightly in three cases and was unchanged in the other two instances, ranging between 1.1% in Bavaria and 1.7% in North Rhine Westphalia.
  • Unemployment dropped 28K in January, almost six times greater than analyst expectations.  Such was the second large decline in a row and kept the jobless rate steady at 6.8% (5.1% on the harmonized ILO basis).  Jobs grew 0.6% on year both in December and 4Q.

The HSBC measure of China’s manufacturing purchasing managers index for January was revised down a tenth point to 49.5.  This compares with 50.5 in December and is the first sub-50 reading since 48.0 last July.  Sub-50 scores mean that activity is contracting.  Fed tapering and worries about Chinese growth being too low are the prime causes of the turmoil that has enveloped a number of emerging markets such as Argentina, Turkey, India, Indonesia, and Brazil.

Japanese retail sales growth slowed from a 4.1% 12-month increase in November to 2.6% in December and averaged 3.0% in 4Q.  That’s still well above the 1.0% rise in 2013 as a whole.  Large store retail sales edged up just 0.1% between December 2012 and December 2013 and fell by 0.4% in 2013 as a whole.

Japanese stock and bond transactions generated a very small net capital outflow of JPY 41 billion last week, some 85% less than in the prior week.

Australian export and import prices, which gained strongly in 3Q13, respectively posted quarter-on-quarter declines of 0.5% and 0.6% in 4Q.  The drop in import prices was the greatest slide since 3Q12.  New home prices in Australia advanced 14.3% in 2013 but closed the year with a 0.4% dip in December.

Building permits in New Zealand rose 7.6% in December and 26% for the whole calendar year versus 2012.

A Turkish government officials denied plans to impose capital controls imminently.

South African M3 money and private credit recorded December-over-December increases of 6.2% and 6.1%.  Each was lower than gains in November.

Filipino GDP recorded on-year growth of 6.5% last quarter and 6.7% in the second half of 2013. 

Polish GDP growth slowed to 1.6% in 2013 from 1.9% in 2002.  Spanish GDP grew 0.3% last quarter, trimming the on-year drop to just 0.1%.

Swedish economic sentiment printed at 107.8 this month, best since mid-2011.  Danish industrial sentiment jumped ten points to +13 in January, the highest score since 2007.  Portuguese consumer confidence improved 3.7 points to -36.7 in January, while business sentiment in Portugal ticked 0.2 points higher to -0.8. 

On-year British M4 money growth held steady in December at 2.7%.  Central bank data showed 71.6K of mortgage approvals, slightly less than forecast, but better-than-predicted net mortgage lending of GBP 1.7 billion.

Greek producer prices dipped 0.2% between December 2012 and December 2013.  In the same span, Cypriot producer prices plunged 4.9%, Dutch producer prices fell by 1.6%, Austrian producer prices declined 1.0%, but producer prices in Malaysia and South Africa advanced by 4.3% and 6.5%.

In the twelve months to December, Portuguese industrial production and retail sales respectively rose 7.2% but fell 0.8%.  Austria’s manufacturing PMI remained at a robust reading of 54.1 in January.

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

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