Investors Enter 2011 With Fresh Optimism

January 4, 2011

Japan, Australia, and Britain reopened after New Year holidays, bringing markets close to normal volume.  The data calendar is light today, however.  New Zealand was a rare market to remain closed today.

Following a solid initial U.S. session in equities, stocks in Asia advanced 2.0% in China, 2.2% in Pakistan, 1.7% in Japan, 1.2% in Malaysia, 1.0% in Hong Kong, 0.9% in Indonesia and Thailand, 0.7% in South Korea and 0.5% in Singapore and Sri Lanka.  The British Ftse leaped 2.2%.  Stocks are up 0.6% in France and 0.2% in Germany but off 0.1% in Australia.

J.P. Morgan’s global factory purchasing managers index improved 1.1 points to a six-month high of 55.0 in December.  Yesterday came news that the U.S. and euro area PMIs had risen by 0.4 and 1.8 points to 57.0 and 57.1.  More PMI surveys were released today.

  • Britain’s manufacturing PMI index rose 0.8 to 58.3 in December, up sharply from a 10-month low of 53.7 in September and the best score since September 1994.  Such was the 17th reading of 50 or better in a row.
  • The Norwegian PMI slipped back to 54.4, matching October’s result, from 55.7 in November.
  • Australian manufacturing continues to struggle as attested by anther 0.9 drop to 46.3.  The Aussie factory PMI had been as high as 54.4 in July.
  • The United Arab Emirates index was 53.0, a tenth better than in November.

The dollar was mixed overnight, climbing 1.0% against the Swiss franc, 0.7% and 0.6% against the Australian and New Zealand dollars, and even 0.4% against the yen, which had been well-bid in late December.  The dollar slid 0.3% against the euro and yuan and by 0.1% against the Canadian dollar.

Long-term interest rates advanced.  Ten-year sovereign yields firmed eight basis points in Britain, supporting the pound as a 2.5-percentage point value-added tax hike to 20% was implemented there.  The 10-year JGB yield firmed four basis points, and its German bund counterpart is two basis points higher.

Oil prices increased 0.4% to $91.93 per barrel, while gold eased 1.0% to $1408.40 per troy ounce.

German labor statistics were weaker than forecast for the first time a quite a while.  Unemployment unexpectedly rose 3K in seasonally adjusted terms, defying expectations of a 10-15K decline.  The unadjusted unemployment total rose 8.5K, hurt by a very cold December that depressed construction activity.  On a brighter note, the jobless rate held steady at 7.5%, much lower than unemployment in the rest of Euroland and the United States.  Job vacancies increased 10K for a second straight month, and employment was a strong 1.0% greater than in November than a year earlier.

Euroland’s preliminary consumer price inflation estimate was 2.2% in December, above 2.0% for the first time since 4Q08.  The ECB targets inflation at “below, but close to, 2.0%.”  The 12-month CPI increase was 1.9% in October and November and 1.4% in mid-2010.  Some analysts are predicting that higher inflation will be a central theme of 2011, not just in Europe but everywhere.

Thai consumer price inflation accelerated to 3.0% in December from 2.8% in November.  Core CPI rose to 1.4% from 1.1%.

Italian CPI inflation climbed to 1.9% last month from 1.7% in November.

Australian commodity prices advanced 3.2% in December and were 47.7% greater than a year earlier.  Australia has been hit this month by severe flooding.

The British PMI survey in manufacturing revealed the highest input price reading in that data series’ history.

British M4 fell 0.8% on month and by a larger 1.4% on year in November.  U.K. mortgage approvals increased marginally to 48K in November, but net consumer credit dipped GBP 0.1 billion.  And a GBP 0.8 billion increase in net mortgage lending was smaller than October’s rise of GBP 1.2 billion.

According to INSEE, the French statistical agency, consumer confidence in the euro area’s second largest economy weakened three points to minus 36 last month.

Scheduled U.S. data today include monthly factory orders and weekly chain store sales and consumer confidence.  Minutes from last month’s FOMC meeting will be released.

Copyright Larry Greenberg 2011.  All rights reserved.  No secondary distribution without express permission.



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