January Purchasing Manager Indices Released

February 3, 2010

The dollar has lost 0.4% against the Australian dollar, 0.3% relative to the kiwi, euro and Swiss franc, and 0.1% against sterling and the Canadian dollar.  A 0.1% uptick against the yen further signifies a slight return to a risk play.  Canada’s finance minister said that currencies will be on the agenda when G-7 finance ministers and central bankers meet this weekend in Igaluit.

Asian stocks rose in continuing reaction to the U.S. pending home sales release, with bourse advancing by 2.7% in China, 2.2% in Hong Kong, 1.6% in Taiwan, 2.1% in India, and 1.3% in South Korea.  Japan’s Nikkei edged up just 0.3%, however, and gains in Europe thus far have been limited to 0.3% in France, 0.2% in Great Britain and 0.1% in Germany.

Ten-year bund and gilt yields firmed three basis points, while the 10-year JGB is steady.

Oil rose 0.7% to $77.77 per barrel. Gold ticked 0.1% higher to $1119.60 per troy ounce.

European service-sector PMI readings in January were depressed more than the manufacturing scores by unseasonably wintry weather in the month.

  • Britain’s PMI-services fell 2.3 points to 54.5, above 50 for a ninth straight time (meaning expansion) but the lowest score since 54.1 last August.
  • The euro area services PMI printed at 52.5, two-tenths better than the preliminary reading but down 1.1 points from December.  Euroland’s composite index (manufacturing and services) was at 53.7 after a 26-month high of 54.2 in December.
  • Within Euroland, the German services PMI was 52.2 after 52.7 in December and 51.4 in November.  The French service-sector index was 56.3, still leading the region but down from 58.7 in December, 60.9 in November, and 57.7 in October.  The German and French composite scores were 54.6 and 58.0.
  • Italy’s services PMI fell three points to 50.9, but the orders and sales components surpassed 50 for a second consecutive time.  Spain’s score of 48.8 was 3.8 points higher than December’s, but Ireland’s sank to a six-month low of 44.4 from 48.3.

Euro zone retail sales were unchanged on a volume basis in December despite gains of 0.8%, 1.2%, and 0.9% in the German, French and Spanish components.  Sales were 1.6% lower than in December 2008 and 0.1% less than the 4Q09 average level.  Sales had contracted at annualized rates of 0.9% between 3Q and 4Q and 1.1% between 2Q and 3Q.

The central bank in Romania cut its benchmark interest rate by 50 basis points to 7.0%.  A cut had been anticipated.

Norway’s central bank will be announcing an interest rate decision also today.  Opinion is split over whether the Norges Bank will implement a third 25-bp hike or keep its key rate steady at 1.75%.

Japan’s service-sector PMI rose to 43.4 in January from 42.7 in December and 42.3 in November.  Higher demand accounted for the rise, but its level still signifies a solid pace of contraction.

Australia’s service PMI dropped to 47.4 from 50.0 in December, 52.5 in November and 54.8 in October, making the central bank’s decision not to hike rates further in February look more reasonable.  The Aussie trade deficit in December of A$ 2.25 billion was 30.3% wider than November’s deficit.  Analysts had forecast a jump to A$ 2.4 billion.

Among other reported PMI indices, Hong Kong’s rebounded to 55.8 from 55.2 and was almost as high as the cyclical peak of 55.9 in November.  China’s service PMI slid back four-tenths to 56.8, but its composite index rose 1.3 points to 59.0, the strongest rate of expansion since August 2009.  Russia’s service index fell 1.5 points to 51.9, a six-month low.  India’s index climbed further above 50.

The Nationwide index of British consumer confidence bounced back to 73 in January from 70 in December and 74 in November.

Turkish consumer and producer prices rose by 1.9% and 0.6% between December and January and were respectively 8.2% and 6.3% above year-earlier levels.

Spain’s government projects a deficit to GDP ratio of 9.8% in fiscal 2010, 7.5% in fiscal 2011, and 5.3% in fiscal 2012.  Next to Greece, Spain is considered the common currency bloc’s weakest fiscal link.  Meanwhile the EU Commission accepted the Greek deficit-reduction plan, but private investors are more skeptical.

U.S. data releases today feature the ADP private employment report and the January purchasing managers index.  Warsh of the Fed speaks publicly.

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



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