Japanese Finance Minister Fujii Resigns

January 6, 2010

The yen weakened following news that FM Fujii resigned because of his ill health.  Fujii had favored a strong exchange rate.  Deputy Prime Minister Kan will assume the duties of finance minister.

Aside from a 0.8% increase against the yen, the dollar is up 0.3% against the kiwi and 0.1% relative to the euro, unchanged versus the Swiss franc and sterling, and down 0.2% against the Canadian and Australian dollars.

Equity movements have been shallow.  The Nikkei closed up 0.5%, and stocks rose by 0.4% in Singapore, the Philippines, Malaysia and Vietnam.  Stocks also rose 0.6% in Hong Kong and 0.9% in South Korea.  The British Ftse is off 0.2%, and Australia’s bourse edged down 0.1%.  The German Dax and Paris Cac are steady.

Commodities remain firm.  Oil slid 0.1% to $81.65/barrel as cold weather continues to plague much of the United States.  Gold at $1124.70/ounce is 0.5% higher.

Ten-year gilt yields slid 2 basis points to 4.00%.  Treasury and bund yields firmed a basis point, and the 10-year JGB was steady at 1.34%.

Released British data were mixed.  The Nationwide consumer confidence index recorded its steepest monthly deterioration in 13 months during December, a five-point decline to 69, which constitutes a four-month low.  But the U.K. service-sector PMI rose further above 50 to 56.8 from 56.6 in November.  Orders had their best reading since September 2007, but a 14-month high in input prices creates a worry.  British job placements rose to a two-plus year high.  Shop price inflation accelerated sharply to 2.2% in the year to December from an on-year uptick of 0.2% in November.

Many other service-sector PMI readings were announced.

  • Euroland’s 53.6 was a tenth less than the flash indication but above November’s 53.0 and at a 25-month high.  Such had been lower than 50 until August.  The Euroland composite PMI of 54.2 versus 53.7 in November and 47.0 in July.
  • Germany posted readings of 54.3 on its composite PMI and 52.7 on the service-sector PMI.  Both were less than preliminary indications but above November readings.
  • The French indices were in the high 50s at 59.2 on the composite index and 58.7 for services after November readings in the low 60s.  France and Germany are leading Euroland’s revival.
  • Italy had a service-sector PMI score of 53.9.  Such had dipped under 50 to 49.8 in November from 52.2 in October.  December’s score was the best since October 2007.
  • Spain, on the other hand, has moved into deeper recession with a service reading of 45.0, a five month low, to along with a manufacturing PMI of 45.2 reported this past Monday.
  • The Irish service-sector reading was also below 50 at 48.3 in December, but that was the highest score since February 2008 and up from 42.4 in July.  Export orders have posted a reading above 50 for the past four months.
  • Australia’s PSI-services unexpectedly settled back to 50.0 from 52.5 in November and 54.8 in October in a sign that higher interest rates in that economy have crimped activity.
  • Japan’s PMI-services remained low at 42.7 after 42.3 in November.
  • The Hong Kong index of 55.2 was down from 55.9 but still a sound reading.
  • China’s service-PMI hit a three-month high of 57.7 after 57.4.
  • India’s PMI-services index of 57.4 was also very robust and its best reading since September 2008.  Such has recovered over 17 points since February.
  • The Russian index of 53.4 was near November’s 53.3 but below an historical mean score of 56.8.

Producer prices in Euroland edged 0.1% higher in November, trimming their on-year decline to 4.4% from 6.6% in the year to October.  Energy producer prices advanced 0.8% in December, while all other producer prices slid 0.1%.

Industrial orders in Euroland fell more than twice as much as forecast, a drop of 2.2% from October and 14.5% from November 2008.  Orders tumbled by 9.2% on month in France and by 2.6% in Germany.

ECB Council member Stark, a German, complained that Greek deficit spending is too high and warned there will be no bailout of that government by the rest of the EU.  Greek officials rebutted him, saying no bailout will be necessary.

Remarks from China’s central bank warned about a property market bubble but stuck to the party line on the yuan.  A stable exchange rate will continue.

Australian auto sales increased 3.2% in December and by 15.9% from a year earlier.  New building approvals in that economy jumped 5.9% in November, twice as much as anticipated, and by 33.3% from a year earlier.

Bank Indonesia retained a steady policy interest rate of 6.5% as had been expected.  Indonesian consumer confidence slid 2.3 points or 2.1% in December.

November unemployment in Hungary was at 10.5%.

Scheduled U.S. data today include the ADP estimate of private employment and the service-sector PMI.  Minutes from the FOMC’s December 15 meeting will be released at 19:00 GMT.

Copyright Larry Greenberg 2010.  All rights reserved.  No secondary distribution without express permission.



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