ECB Holds Key to Thursday Trading

December 2, 2010

The dollar has eased 0.4% against the Canadian dollar, 0.3% against the euro and Swiss franc, and 0.1% relative to the kiwi and yuan.  The greenback is up 0.1% against the yen, Australian dollar, and sterling.

Following yesterday’s rally in U.S. stocks, equities climbed by 2.1% in Indonesia, 2.0% in Australia, 1.8% in Japan where the Nikkei broke above 10K, 1.4% in Thailand, 1.2% in Malaysia, 0.9% in Hong Kong, 0.8% in Taiwan, and 0.6% in China and New Zealand.  The Paris Cac and British Ftse are 0.7% stronger, but the German Dax is up only 0.1%.

Ten-year sovereign debt yields advanced by four basis points each in Germany and Japan and by three bps in Britain.  Spain was able to sell EUR 2.5 billion of three-year sovereign debt but at a rate that was 120 basis points above the prior 3-year auction.

Oil and gold prices edged up 0.1% each to $86.79 per barrel and $1390.20 per troy ounce.

Investors appear to be assuming that ECB President Trichet will unveil tougher steps at today’s press conference (13:30 GMT) to stem the EU debt crisis.  Possibilities include an extension of longer-term unlimited refinancing operations, larger purchases of troubled bonds of individual Euroland members, and the introduction of a pan-Euroland fiscal instrument.  The ECB will announce new growth and price forecasts and is not expected to change its interest rate structure.

Revised Euroland GDP data show third-quarter growth of 0.4% from 2Q and 1.9% from a year earlier.  Personal consumption advanced 0.3% on quarter and 1.0% on year.  Government spending increased 0.4%, enhancing GDP growth by 0.1 percentage point.  Business investment was unchanged.  Net exports augmented GDP by 0.1 percentage point, and inventories had no net impact on the growth rate.

Producer prices in Euroland increased 0.4% in October, mainly reflecting a 0.7% monthly rise in energy.  On-year PPI inflation stands at 4.4% for all items, 8.8% for energy and 2.9% for non-energy items.  The PPI had risen by 0.1% in August and 0.3% in September.

Britain’s construction purchasing managers index printed at 51.8 in November after 51.6 in October.  The 51.7 average reading for those two months compares with mean scores of 53.3 in the third quarter and 58.4 in the second quarter.  Like the United States, British housing activity has stumbled anew.

French unemployment was at 9.7% last quarter, a tenth less than expected.  Mainland unemployment held steady at 9.3%.

Swiss retail sales volume rose 1.4% in October to 3.5% above the year-earlier level.  Swiss real GDP increased 0.7% last quarter, similar to the 2Q growth rate of 0.8%.  On-year GDP growth of 3.0% was likewise not far from the 2.8% rise in the year to 2Q10.

Romanian GDP fell 0.7% last quarter according to revised estimates and was 2.5% lower than a year earlier.

One of the leaks from Wikileaks involves a disparaging remark by Bank of England Governor King regarding fiscal plans and has prompted a former policymaker of the central bank, Blanchflower, to assert that central bank independence has been compromised and to urge King to resign. 

Japanese business investment was 5.0% greater than a year earlier, swinging from a 1.7% on-year drop in the second quarter.  Growth in Japan’s monetary base accelerated to 7.6% on year in November from 6.4% in October and 5.8% in the third quarter.

Australia reported weak retail sales, which dropped 1.1% in October after only a 0.1% uptick in September.  The 12-month rise of retail sales slowed to 2.8% in October from 3.8% in September.  The trade balance figures were better, in contrast.  The surplus widened to AUD 2.625 billion in October from AUD 1.814 billion in September as exports rose 1.1% while imports slid 2.5%.

South African motor vehicle sales accelerated to an on-year gain of 29.6% in November from 22.2% in October.

South Korean GDP grew 0.7% last quarter, half as fast as the 2Q pace, as imports outpaced exports.  The government still expects a 6% growth rate for 2010 as a whole.

Scheduled U.S. data today include weekly jobless insurance claims and monthly chain store sales and pending home sales.  Friday sees the release of the Labor Department’s November jobs report, with analyst expectations now gravitating closer to an increase of 200K workers rather than 150K.

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

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