More Stimulus in China and Japan but a Political Turn for the Worse in Greece

December 29, 2014

Japanese Prime Minister Abe has approved a 3.5 trillion fiscal stimulus (roughly $29 billion) as part of a supplementary fiscal 2014 budget.  The extra spending will help small businesses among other things.

To provide more liquidity into China’s money market, the central bank there loosened rules governing the bank loan-to-deposit ratios of non-deposit-taking financial institutions.

In the Pacific Rim, share prices fell 1.0% in South Korea and 0.5% in Japan but advanced by 1.8% in Hong Kong, 1.5% in Australia, 0.7% in Taiwan, 0.6% in India and New Zealand, 0.4% in Singapore and 0.3% in China.

Financial market sentiment turned gloomy after the third and final parliamentary vote failed to garner enough support for Prime Minister Samaras’ presidential choice of Steavras Dimas. At an ensuing emergency cabinet meeting, snap general parliamentary elections were set for January 25.  A government more hostile to imposed austerity and euro membership is likely to win that contest.  Dimas got 168 of 300 votes but needed 180 votes.  This development has ominous implications for the future of the common currency experiment.  Equities in Greece, Italy and Spain have tumbled 8.4%, 2.4% and 1.7%, and share prices are down by 0.9% in Germany and 0.5% in France.  The British Ftse, by contrast, has edged 0.1% higher.

The dollar declined overnight by 0.4% against the kiwi and Australian dollar and 0.1% relative to the euro and Swiss franc.  The U.S. currency is unchanged vis-a-vis the yen and loonie but up 0.2% versus the yuan and 0.1% against sterling. 

The Russian ruble slumped more than 6%.  Earlier today, Russia’s state-controlled news agency, TASS, said the ruble crisis is over, but then came news that GDP in November posted the first on-year decline (0.5%) since October 2009.

WTI oil recovered 1.2% to $55.39 per barrel.  Comex gold dipped 0.1% to $1,193.80 per ounce.

The 10-year British gilt yield is 5 basis points lower than the pre-holiday close.  The 10-year Japanese JGB edged up a basis point to 0.32%, and Germany’s bund yield is steady.  Bundesbank President and a member of the ECB Governing Council Weidmann said lower oil prices, if sustained, had positive implications for growth but also pointed to lower inflation than otherwise.

Italian consumer confidence printed at 99.7 in December, a half-point below November’s reading 5.9 points below its level six months earlier and the lowest score since last February.

The Swiss consumption indicator compiled by UBS fell to a 3-month low of 1.29 in November from readings of 1.32 in October, 1.39 in September and 1.40 in November 2013.

Consumer confidence in Finland improved to a reading of 4.4 this month from 2.6 in November and 0.4 in September.

Czech consumer sentiment in December was the strongest since March 2007, and business confidence hit a 46-month high.

Chinese industrial profits recorded an on-year drop of 4.2% last month, the greatest 12-month decline in 27 months.  Profits were 5.3% greater in January-November than in the first eleven months of 2013.

Hong Kong’s trade deficit of HKD 52.2 billion last month was 17% wider than a year earlier.

India’s central bank Governor Rajan expressed confidence in strengthening growth within two years.

Vietnamese GDP expanded 6.0% in 2014, up from real growth of 5.4% in 2013.  Growth accelerated in the final quarter of this year.

Singaporean producer prices fell 1.2% on month and 6.4% on year in November.

The Dallas manufacturing index is the only scheduled U.S. data release today.

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

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