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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