Signs of Strength Reported in Asia

December 9, 2010

Supported by the recent sharp increase in longer-term U.S. interest rates, the dollar rose overnight by 0.4% against sterling, 0.3% versus the euro and 0.2% relative to the Swiss franc.  A stellar Australian jobs report lifted the Aussie dollar by 0.5%, but the kiwi is flat as New Zealand’s central bank signaled a flatter future incline in its interest rates.  The yen and Canadian dollars are also steady.  The yuan edged up 0.1%, as speculation mounts of a Chinese rate hike this weekend.

Stocks fell 2.3% in India and 1.5% in China but rose 1.7% in South Korea, 0.9% in Australia, 1.1% in Thailand, and 0.7% in Malaysia.  In Europe, the Paris Cac and British Ftse are trading 0.6% and 0.3% higher, but the German Dax is 0.1% lower.

Ten-year sovereign debt yields firmed two basis points in Japan after upward revisions of 3Q GDP growth.  German and British yields settled back four and three basis points.

Oil and gold prices firmed 0.4% and 0.1% to $88.60 per barrel and $1384.70 per ounce.

Japanese GDP growth last quarter was revised to 4.5% at an annualized rate and 5.3% on year from preliminary estimates of 3.9% and 4.4%.  Growth in 2Q10 got revised to 3.0% annualized from 1.8%.  The prior two quarters were also revised upward.  The recession in Japan was deeper however, as on-year growth in 3Q09 now shows a plunge of 6.3% instead of 5.1%.  Personal consumption (2.8 percentage points), non-residential investment (0.7 ppts) and inventories (0.9 ppts) accounted for most of last quarter’s economic growth.

Australian jobs shot up 54.6K last month, almost twice as much as October’s respectable 29.7K advance.  Full-time workers advanced by 55.1K in November.  The jobless rate declined to 5.2% from 5.4%.  Credit card spending in New Zealand rose 1.1% last month.

Three central banks released interest rate decisions:

  • The Bank of England as expected left its base rate at 0.5% and asset purchase program ceiling at GBP 200 billion.  Minutes will be released December 22, but check out my preview of the meeting for background information.
  • The Bank of Korea’s base rate stays at 2.75% as forecast.  A statement from officials noted tensions with North Korea, sharply reduced inflation, and sovereign debt problems in Europe that cast a pall on the global outlook.
  • The Reserve Bank of New Zealand’s official cash rate is being kept at 3.0%, as officials also noted that they expect “a more limited” rise of interest rates over the coming two years.

Revised GDP estimates for 3Q10 were released in a variety of countries.  Czech GDP growth was revised to a 1.0% quarterly increase from 1.1% reported initially.  On-year growth of 2.8% compares with 2.4% in the year to 2Q.  Hungarian GDP rose 0.8% in 3Q and by 1.7% from a year earlier.  Greek GDP sank 1.3% from the level in the second quarter and by 4.6% from a year before.  Brazilian GDP increased 0.5% and 6.7% from the third quarter of 2009.  Portuguese GDP increased 0.3% on quarter and 1.4% on year.  Finnish GDP rose by 0.5% and 3.7% on year. 

The ECB Bulletin was published with the typical rehash of Trichet’s press conference remarks.  However, the Bulletin also voiced concern about structural risks from the region’s high level of unemployment.

French non-farm payroll jobs edged up 0.1% last quarter.  Swedish consumer prices rose 0.3% for a second straight month in November, but on-year inflation rose to 1.8% from 1.5%.

German consumer price inflation was confirmed at a 25-month high of 1.5% last month after 1.3% in September and October.  Non-energy CPI inflation was 1.1%.  German labor costs fell by 0.5% in the third quarter and recorded only a 0.4% increase from a year earlier.  Finally, real factory sales were 12.4% greater than a year earlier in October and showed a 10.0% on-year advance in January-October.

Czech consumer price inflation held steady at 2.0% last month.  Irish consumer price inflation was just 0.6% last month, down from 0.7% in October.  Greek unemployment advanced 0.4 percentage points to 12.6% in September.  Dutch consumer prices edged down 0.1% on month in November, holding the 12-month rate of increase steady at 1.6%.  Denmark’s trade surplus narrowed 10% in October.

Britain’s goods and services trade deficit of GBP 3.946 billion in October was smaller than expected.  The merchandise trade deficit widened to GBP 8.529 billion from GBP 8.392 billion in September.  The Halifax index of U.K. house prices dipped 0.1% in November and was 0.7% lower than a year earlier.

South Africa posted a ZAR 79.2 billion current account deficit in the third quarter, equal to 3.0% of GDP.  Although greater than the 2.5% ratio in the 2Q deficit, it was not as wide as analysts were expecting.  Business sentiment in Australia improved to 87.0 in November from 85.9 in October, and factory output rose 1.2% on month and 2.5% on year in October.

South Korean producer prices firmed 0.3% on month and rose 4.9% on year in November.  Industrial production in Malaysia rose 3.0% on year in November; manufacturing output was 4.5% higher.  Consumer confidence in Thailand slid to 70.3 in November from 71.6 in October and a 30-month high of 73.5 in September.

China’s central bank canceled a three-year bond auction, adding further to speculation that it will raise interest rates over the weekend.  It is believed that monthly economic data will be released on the weekend instead of Monday as scheduled originally.

The U.S. releases jobless claims and wholesale inventories today.  Canadian house price figures also arrive.  An interest rate decision in Peru is also awaited.

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

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