Dollar Higher on Chinese and European Data

January 21, 2010

The dollar strengthened 1.0% against sterling, 0.8% versus the kiwi, 0.6% against the yen and Canadian dollar, 0.4% relative to the Swiss franc and euro, and 0.2% against the Australian dollar.

Stocks in the Pacific Rim rebounded 1.2% in Japan, 0.5% in South Korea and 0.4% in China but slumped 2.4% in India, 2.0% in Hong Kong, 1.8% in Thailand, 1.5% in Singapore, and 0.8% in Australia.  Such weakness did not carry into Europe, where the Dax and Cac40 are 0.1% firmer, and the Ftse has slid just 0.2%.

Whereas 10-year bond yields are down by 5 basis points in Germany and the United States and by 3 bsp in Great Britain, the 10-year JGB edged one basis point higher to 1.35%.

Oil prices eased 0.1% to $77.65/barrel, while gold dropped 0.9% to $1102.60 per troy ounce.

Chinese GDP growth accelerated to an on-year pace of 10.7% in the fourth quarter of 2009, marginally better than street estimates of 10.5%, from 9.1% in 3Q.  GDP rose 9.9% on year in the second half of last year versus 7.1% in the first half.  Risk aversion from concerns about tighter Chinese policy have buoyed the dollar and yen.  Among monthly Chinese data released overnight,

  • Consumer and producer price on-year inflation rose to 1.9% and 1.7% in December from 0.6% and minus 2.1% in November and minus 0.5% and minus 5.8% in October.  Analysts had predicted smaller increases.
  • Industrial production rose 18.5% in the year to December, less than a forecast of 19.6% and November’s on-year increase of 19.2% but more than October’s 16.2%.
  • Retail sales growth of 17.5% surpassed forecasts of a 16.3% increase and November’s 15.8% on-year advance.
  • Business investment increased 30.5% last year, somewhat less than an expected 31.5% increase and also less than the 32.1% on-year climb in January-November.

Euroland, French, and German preliminary PMI readings for January were not as high as projected.

  • The composite euro area PMI settled back to 53.6 from 54.2 in December and 53.7 in November, but the rate of job losses slowed.  The manufacturing index was at a 22-month high of 52.0 after 51.6 in December, but services eased to 52.3 from 53.6.  These scores signal continuing expansion especially since adverse weather may have exaggerated the moves from the month before.
  • The Germany composite index eased a tenth to 54.2 as a 0.5-point drop in services to 51.2 outweighed a 0.7-point rise in manufacturing to 53.4.
  • France’s composite PMI fell to 58.1 from 59.2 in December and 60.2 in November.  The services index dropped to 57.0 from 58.7 in December and 60.9 in November, while the manufacturing component was steady at 54.7.

British M4 contracted 1.1% in January, slashing its on-year advance to 6.4% from 9.2% in the year to December.  Bank of England Governor King asserted yesterday that inflation is higher only temporarily because money growth has been undesirably weak.

British public finances in December were poor but not quite as ugly as expected.  Public sector borrowing of Gbp 15.7 billion was less than November’s 18.7 billion pounds but the April-December deficit of Gbp 119.9 billion was 88.5% bigger than a year earlier.  The public sector net cash requirement increased to Gbp 23.6, bringing the cumulative deficit so far this fiscal year to Gbp 120.0 billion, 133.5% greater than a year earlier.  Debt equaled 61.7% at end-2009, up from 51.7% at end-2008.

Also from Britain, the CBI industrial trends survey produced only a 3 point improvement to minus 39 in the orders component, which remains a very weak figure.

Japan’s leading index of economic indicators was revised downward to 90.7.  Expressed as a diffusion index of 63.6, such was the lowest since last May.  Sotck and bond transactions generated a Y 594 billion inflow last week, down from Y 987 billion the week before.

Retail sales in New Zealand increased 0.8% in November, their fourth rise in a row and a bigger advance than had been assumed.  Australian car sales rose 3.3% last month.

Hong Kong consumer prices inflation accelerated to a higher-than-forecast 1.3% in December from 0.5% in November but was less than October’s 2.2%.  Officials in China again engineered a small uptick in 3-month bill rates.

Swiss on-year M3 growth slowed to 6.5% in December from 7.9% in November.  The Swiss ZEW index improved to 56.2 in January from 54.0 in December.

Irish producer prices rose 0.5% in December and posted a smaller 3.8% on-year drop after a 12-month decline of 6.5% in November.  Ireland posted a EUR 2.6 billion trade surplus in November.  Dutch consumer confidence improved marginally to minus 10 in January from minus 11 the month before.  Personal spending in the Netherlands rose 2.7% between November 2008 and November 2009.

Scheduled U.S. data today include the Philly Fed index, the index of leading economic indicators, and weekly jobless claims.  Canadian wholesale turnover figures and the Bank of Canada’s quarterly monetary policy report are due as well.

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

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