Australian Central Bank Tightens

March 2, 2010

Lessening risk aversion is reflected in firmer yen and higher stocks.  The dollar firmed 0.2% against the euro, Swiss franc and sterling even though aid for Greece from Germany and France appears to be an increasing possibility.  The dollar has fallen 0.6% against the Canadian dollar as investors await a Bank of Canada policy announcement at 14:00 GMT that is expected to leave its key rate at 0.25% but solidify the likelihood of an increase at midyear.  The dollar slid 0.1% against the yen but firmed 0.4% against the New Zealand dollar.

Stocks climbed 2.1% in India, 1.6% in Thailand, 1.3% in South Korea, 0.9% in Indonesia, 0.6% in New Zealand and 0.5% in Japan and 0.3% in Australia and Taiwan.  In Europe, the Ftse is 0.5% higher, and the Dax and Cac40 are up 0.4%.

The Reserve Bank of Australia, which did not change policy in February because of European fiscal concerns, implemented a fourth 25-basis point rise of its cash rate to 4.0%, calling this latest move a “further step in the process” of lifting rates to a more average level.  This is needed because growth appears close to trend already and inflation in 2010 is seen hovering near target.  The rate hike was generally expected.

Ten-year JGB and gilt yields slid two basis points.  German bunds are steady.

Oil and gold prices edged up 0.2% and 0.1% to $78.85 per barrel and $1118.90 per troy ounce.

Australian retail sales rose 1.2% in January, more than twice as fast as forecast, reversing a 0.9% drop in December.  But building approvals fell 7.0% unexpectedly in the same month, showing the effect of rising interest rates.

Japan reported a surprisingly large drop in the jobless rate to a ten-month low of 4.9% in January from 5.2% in December and 5.6% last July.  Analysts had forecast 5.2%.  Jobs were 1.3% less than in January 2009, a smaller on-year drop than 1.7% posted in December or 2.0% in the year to November.  The job offers-to-seekers ratio of 0.46 remained historically very low but above November’s print of 0.43.  Japanese real household spending slid 1.3% on month in January but was 1.7% greater than in January 2009.  Real disposable income recorded an on-year drop of 0.4%.  A weak income situation continues to discourage consumption.

Growth in Japan’s monetary base decelerated sharply to 2.2% on year in February from 4.9% in January and 4.4% in the final quarter of 2009.  Balances at the central bank were just 15.3% greater than a year earlier, down from a 43.4% advance between January 2009 and January 2010.

According to preliminary data, CPI inflation in the euro area settled back to 0.9% in February from 1.0% in January.  Analysts thought such would have remained steady.  Producer prices in Euroland shot up 0.7% in January, more than expected because of a 2.0% jump in energy.  Intermediate goods prices were also a little frothy, rising 0.5%.  However, non-energy consumer prices firmed 0.2% and fell 1.7% from a year earlier.  The total PPI was 1.0% lower than a year earlier. 

Britain’s construction purchasing managers index remained below the 50 reading that separates expansion from contraction.  It printed at 48.5 in February, one-tenth less than in January.

European fiscal watchers are eying a meeting this Friday between German Chancellor Merkel and Greek Prime Minister Papandreau.

Swiss GDP growth of 0.4% last quarter and 0.6% from 4Q08 were better than the third-quarter results and exceeded analyst expectations.

Italian consumer prices rose 0.1% on month and 1.2% on year in February, each a tenth less than forecast.  In harmonized terms, the inflation rate was 1.1%.

Polish GDP growth accelerated to an on-year pace of 3.1% in the fourth quarter from 1.7% in 3Q09, prompting one central bank policymaker to suggest that interest rates may have to start rising sooner than previously thought.

South African motor vehicle sales growth accelerated to a 12-month rate of 16.2% in February from 12.0% in January.

Indian exports were 11.5% greater in January than a year before.  Imports soared 35.5%.  The $10.3 billion trade deficit was marginally bigger than in December.

South Korean consumer price inflation slowed to 2.7% on year in February from 3.1% in December.  Core inflation was at 1.9%, down from 2.1%.  Korea’s trade surplus of $2.33 billion in February reflected a 31% on-year rise in exports.

Monthly U.S. auto sales get reported later.

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



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