Markets in an Edgy Mood

February 12, 2010

The U.S. dollar rallied 1.4% against the Australian dollar, 1.1% against the Swiss franc, 1.0% against the euro, 0.8% against the kiwi, 0.7% versus sterling, 0.6% relative to the Canadian dollar and even 0.2% against the yen, which also tends to be bid when risk aversion spikes.

Stocks are comparatively resilient, advancing 1.0% in China, 1.3% in Japan, and 1.1% in Indonesia, while showing losses of just 0.5% in Britain and 0.4% in France.

Bund, gilt, and Treasury yields are softer.  The 10-year JGB is steady at 1.34%.

Commodities got whacked.  Oil fell 2.1% to $73.73 per barrel.  Gold is down 1.3% at $1080.20 per troy ounce.

Investors feel uneasiness for several reasons:

  • Lack of details in the EU promise to help Greece work out a debt service plan.
  • An unexpected second hike in Chinese reserve requirements announced just before the Lunar New Year.
  • Weaker-than-expected European data covering GDP in the euro area, Italian GDP, German GDP, Dutch GDP, and Euroland industrial production.  Czech and Hungarian fourth-quarter GDP results were also below expectations.

The Peoples Bank of China lifted reserve requirements to 16.5% from 16.0%, effective February 25.  An earlier hike to 16% from 15.5% was announced on January 13.  A government official observed today that foreign exchange inflows had accelerated in the early months of 2010.

A German-led aid plan for Greece continues to draw heavy political opposition within Germany.  More market analysts are starting to contemplate the possibility of a Euroland breakup, which also would produce dire consequences.

Euroland industrial production plunged 1.7% in December, led by Germany’s 2.6% drop.  Intermediate goods and capital goods fell 2.4% and 1.6% in the 16-nation bloc.  December output was 0.7% lower than the 4Q average level and 5.0% weaker than a year earlier.

Euroland GDP increased just 0.1% last quarter, a third as much as forecast, and was 2.1% weaker than in the final quarter of 2008.  Non-annualized comparisons from the third quarter and the fourth quarter of 2008 were as follows:

4Q09 versus 3Q09 4Q08
Germany 0.0% -2.4%
France +0.6% -0.3%
Italy -0.2% -2.8%
Spain -0.1% -3.1%
Netherlands +0.3% -2.2%
Portugal 0.0% -0.8%
Greece -0.8% -2.6%
Austria +0.4% -1.5%


Czech real GDP fell 0.6% last quarter and by 4.2% from a year earlier.  Romanian GDP fell 1.5% from 3Q and 6.6% from the fourth quarter of 2008.  Hungarian GDP firmed 0.3% in 4Q but dropped 2.2% in on-year terms.  Hungary’s CPI advanced 1.4% in January and 6.4% from a year before. French jobs dropped 0.4% last quarter, while wages firmed 0.2%.  Finnish retail sales were 1.3% greater than a year earlier in volume terms in December. Spanish Consumer prices dropped 1.0% in January but were 1.1% higher than a year earlier.  Core inflation was just 0.1% on-year.  The Finnish GDP indicator posted an on-year drop of 5.3% in December after a decline of 6.4% in November.

Britain’s index of leading economic indicators showed a smaller 0.4% rise in December according to the Conference Board.

Japanese consumer confidence improved to 39.0 in January, breaking a slide from 40.5 in September and October to 37.6 by December.  The low-point of 26.2 was seen in December 2008.

New Zealand retail sales were unchanged in December, well below an expected 0.6% rise.  Non-auto retail sales tumbled 1.8% from November.  However, retail sales volume still managed to advance 1.0% last quarter.

Retail sales in Singapore fell 0.9% in December and 5.0% from a year earlier.  Those results were unexpectedly poor.

India’s industrial production was 16.8% greater than a year earlier in December, compared to a consensus forecast rise of 12.4%.

Canada releases auto sales data later today.

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


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