Quiet Start to Pre-Xmas Week

December 21, 2009

Trading volume has been restrained by snow storm in Eastern U.S. and approaching yearend holidays.  Federal snow day in D.C.  European weather also severe.

The dollar is unchanged against the euro and Swiss franc.  The Swissy remains stronger than 1.50 per euro (latest quote = 1.4955) despite released Swiss National Bank quarterly report that reiterates promise to “act aggressively to prevent any excessive appreciation of the franc against the euro.”  But the report also said expansionary monetary policy cannot be maintained indefinitely without compromising medium- and long-term price stability.

The dollar is 0.6% firmer against the Australian dollar, up 0.4% against the Canadian dollar, and 0.3% higher relative to sterling and the kiwi.  USD/YEN edged 0.1% higher.

Several Asian stock markets, but not Japan’s Nikkei, lost ground.  Equities fell 3.1% in Indonesia, 1.1% in Hong Kong, 0.9% in Malaysia, 0.7% in India, 0.3% in Australia and 0.2% in South Korea.  In addition to a 0.4% rise of the Nikkei-225, stocks are up 0.8% in Britain and by 0.6% in Germany and France.

Ten-year gilt and JGB yields are 7 and 2 basis points lower.  Bunds are steady.

Oil rose another 0.3% to $73.60 per barrel ahead of tomorrow’s OPEC meeting in Angola.  The cartel is not expected to change policy.  Gold edged up 0.2% to $1114.20 per troy ounce.

It looks like the Democrats will muster 60 senate votes needed to pass a health care reform bill this week.  Following step would be for the House and Senate to hammer out differences in their bills.  Final result is likely to be closer to the Senate’s version than the House’s.

The Bank of Japan’s December monthly overall assessment was the same as November’s: “picking up mainly due to various policy measures taken at home and abroad, although there is not yet sufficient momentum to support a self-sustaining recovery in domestic private demand. …conditions likely to continue improving, although the pace of improvement is likely to remain moderate for the time being.”  The assessment of public investment was downgraded, however.  Previously, the BOJ had upgraded its view from “stopped worsening” in August to “showing signs of recovery” in September, “starting to pick up” in October and “picking up” in November.

Japan’s customs trade surplus of Y 374 billion in November was larger than anticipated and a Y 602 billion improvement on a deficit of Y 228 billion a year earlier.  Exports fell 6.2% on year, least in 14 months, whole imports fell by 16.2%.  Export volumes posted an on-year decline of just 1.5%, down from 12-month decreases of 13.0% in October and 21.8% in September.  The seasonally adjusted trade surplus widened 6.9% to Y 492 billion from Y 461 billion in October.

Japan’s all industry index bounced back 1.2% in October from a 0.7% drop in September and exceeded the 3Q mean level by 1.0%.  The all-industry index was still 6.4% lower than a year before.  Analysts were predicting a 1.0% monthly rise.  Japanese convenience store sales fell 6.3% in the year to November, which was a sharper loss than posted in October.

On-year consumer price inflation in Hong Kong fell back to 0.5% in November from 2.2% in October.  Such had been below zero prior to September.

The British industry group, CBI, projects GDP growth of 1.2% next year followed by 2.5% in 2011.  PM Brown’s government has predicted expansion of 1-1.5% next year and 3.5% in 2011.

Hungary’s central bank is expected to cut its key interest rate today.  Real GDP contracted sharply in the summer quarter and was still shrinking in 4Q09.  Today, retail sales in October were reported as down 7.5% from a year earlier, a deeper drop than anticipated and the 33rd negative on-year change in a row.  Hungary’s economic sentiment index improved 2.1 points to minus 25.4 in December.  Both business and consumer confidence improved a little.

The ten-year German minus Greek bond yield differential widened to 269 basis points today.  Germany’s Chamber of Commerce expects GDP growth of 0.7% in Germany this quarter and 2.0% next year.

Thailand’s $1.1 billion trade surplus in November was not quite as big as forecast.

China’s Industry Ministry projects GDP growth of 8% next year, with industrial output gaining 11%.  These are conservative estimates that barring the unexpected will be surpassed easily.

Canadian and Mexican retail sales data are to be released today.  There are no significant U.S. economic releases.  The huge snowfall in the Eastern Seaboard corridor of the United States could not have come at a worse time from the standpoint of pre-holiday store sales.  Hopefully, E-commerce will make up some of the difference.

Copyright Larry Greenberg 2009.  All rights reserved.  No secondary distribution without express permission.

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