Equities Higher on Low Interest Rate Expectations

January 14, 2010

The ECB is expected to signal no rate hike for quite some time.  Rate announcement arrives at 12:45 GMT.  Press Conference begins at 13:30 GMT.

The Nikkei rose 1.6%.  Stocks also gained 1.4% in China, 1.1% in Taiwan, 0.9% in South Korea, 0.7% in Singapore, 0.5% in Indonesia, and 0.4% in Thailand, Malaysia and India.  The German Dax and British Ftse ae 0.6% higher, and the Paris Cac has traded up 0.5%.  Trading volume on the Shanghai bourse now exceeds that of Tokyo’s stock market.

The 10-year bund yield is 3 basis points firmer, while comparable JGB and gilt yields are unchanged.

The dollar fell 0.6% and 0.2% against the Australian and New Zealand dollars in response to strong data announced in those countries.  The dollar is up 0.5% against the yen as Japan reported a 11.3% monthly plunge in machinery orders.  The dollar has also firmed 0.2% against the Swiss franc and 0.1% relative to the euro and sterling.  The greenback is steady against its Canadian counterpart.

Japan’s new finance minister, Kan, hopes to raise the matter of Chinese yuan policy when G-7 central bankers and finance ministers next meet in Canada on February 5-6.

Oil and gold prices have firmed 0.2% and 0.1% to $79.83 per barrel and $1137.60 per troy ounce.

Japanese core domestic private machinery orders sank 11.3% in November following a 4.5% drop in October and were 3.7% lower in those two months than the 3Q level.  They showed a decreased of 20.5% between November 2008 and November 2009, twice as much as assumed.  Orders for manufactured goods plunged 18.2% on the month.  Foreign orders were down 7.3% but 0.7% greater than a year earlier.

Japanese domestic corporate goods prices firmed 0.1% last month, trimming the on-year rate of decline to 3.9% from 5.0% in November and 8.5% last August. Petroleum product prices at the wholesale level climbed 0.8% and returned to a positive on-year pace of 0.5% from minus 13.5% in the year to November.

Australia’s unemployment rate in December was 5.5%, not 5.8% as forecast.  Jobs climbed 35.2K, 3.5 times more than expected after an increase of 31.4% in November.  Job growth was concentrated in part-time workers, however.

New Zealand building permits increased 1.2% in November, their fifth straight monthly advance.

Euroland reported a bigger 1.0% jump in industrial production in November compared to a forecast rise of 0.6%.  Output was 7.1% lower than in November 2008 but 0.7% higher in October-November than in the third quarter.  Monthly increases of 1.2% in France, 2.6% in Finland, 0.8% in Holland, and 0.7% in Germany outweighed disappointing gains of 0.2% in Italy and Greece and 0.1% in Spain, as well as drops of 3.7% in Portugal and 8.0% in Ireland.

Britain‘s NIESR institute estimates that GDP returned to positive growth in the fourth quarter of 0.2% but that such will have contracted 4.8% in 2009 as a whole.

German consumer prices increased 0.8% in December and 0.9% from a year earlier because of upward pressure on energy and food.  But consumer price inflation averaged only 0.4% in 2009 compared to an average annual rate of 1.5% since the euro was launched in 1999.

On-year Spanish CPI inflation accelerated to 0.8% in December from 0.3% in November, but the core rate was only 0.3%.  Finnish consumer prices edged up 0.1% last month but were 0.5% lower than a year earlier.  Hungarian consumer prices were steady in December but accelerated in on-year terms to a 15-month high of 5.6%.  Core was at 4.8% after 5.0% in November.  Irish consumer prices fell 0.5% on month and by 5.0% from a year before in December.

Brazilian retail sales increased 1.1% in November and by 8.7% from a year earlier.

South African mining production in November was 1.6% less than a year earlier.

Indian wholesale prices firmed 0.4% last month and by 7.3% from a year earlier compared to an on-year increase of 6.2% in December 2008.

Consumer confidence in Thailand improved to 70.4 in December from 69.1 in November.

A huge humanitarian aid effort is underway after Haiti’s horrific earthquake, where the death toll is likely to surpass 100,000.

U.S. jobless insurance claims, import prices, and business inventories will be reported today, but the main event will be the ECB press conference.

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



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