Equity Plunge Continued in Asia and Europe

February 5, 2010

On continuing worry over budget deficits in Europe and the fragility of the global recovery, stocks fell 3.3% in Hong Kong, 2.9% in Indonesia, 2.7% in India, 3.2% in Taiwan, 2.3% in Australia, 2.9% in Japan and 2.0% in China.  In Europe, the Paris Cac got whacked 2.2%, and the British Ftse and German Dax show losses of 1.7% and 1.3%.

Ten-year bund and gilt yields fell four basis points.  Their JGB counterpart dipped one basis point.

On the spike in risk aversion, the dollar advanced 0.6% against the yen, 0.5% relative to the Swiss franc, 0.3% against sterling and the Canadian dollar and 0.1% against the euro.  The Australian dollar is steady, and the kiwi recovered 0.3%.

Commodity prices are lower.  Gold fell 0.8% to $1054.90 per ounce, and oil dropped 0.4% to $72.86 per barrel.

Traders await U.S. and Canadian monthly labor market reports.  The U.S. figures will include substantial downward benchmark revisions to the number of jobs.

The Reserve Bank of Australia released its quarterly Monetary Policy Statement, which includes slight upward revisions to projected growth and inflation and implies a few interest rate increases during 2010.  GDP is now expected to advance 3.25 – 3.5% this year and next.  Core inflation is seen bottoming in the second half of this year at 2.5%, somewhat sooner and higher than thought before.

Like the report on industrial orders yesterday, German industrial production in December contained a negative shocker, as such plummeted 2.6% instead of rising some 0.4% as analysts assumed.  Production of producer goods and capital goods declined by 4.3% and 3.4% on the month.  Total output was 7.1% lower than a year earlier and 1.5% less than the 4Q09 average level.

Japan’s index of leading economic indicators printed above expectations at 94.0 in December, best in two years.  The coincident index was at a 15-month high, and the lagging index hit an 8-month peak.

More goofy comments were made by the Greek prime minister, who said no more deficit-cutting measures would be needed.  Nobody believes that.

British producer output prices rose 0.4% and accelerated further to a 12-month 3.8% rate of climb.  Core PPI-O rose 2.5% on year.  Producer input prices advanced 2.0% on the month and 8.4% on the year.  All these results exceeded expectations.  With inflation higher than anticipated, the Bank of England decided yesterday not to extend quantitative easing further.

The Swiss National Bank reportedly purchased euros against francs at 1.4620 in intervention to counter upward pressure on the exchange rate.

Filipino consumer prices rose 0.2% on month and 4.3% on the year to January.  Russian consumer prices increased 1.6% in January and 8.0% from a year earlier.  Italian consumer prices dropped 1.4% last month and posted a 12-month rise of 1.4%.  Taiwanese consumer prices edged up 0.% in January and 0.3% from a year before.

Norwegian industrial production fell 0.5% in December and 6.5% from a year earlier.  Such recorded a 3.6% decline for 2009 as a whole.  Hungarian industrial production fell 5.7% in December, the biggest monthly loss in twelve months, and 1.4% from a year earlier.

Malaysia’s trade surplus narrowed 16.6% in 2009.

G-7 finance ministers and central bankers gather in very northern Canada later today for the first of three scheduled meetings in 2010.

Besides nonfarm payroll employment and the unemployment rate, the United States releases data on hourly earnings and consumer credit.

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



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