Dollar Stronger But Stocks and Bond Yields Fall

January 5, 2011

The dollar rose overnight by 0.6% against the euro, 0.5% relative to the Aussie dollar, and 0.3% versus the yen, Swissy, and kiwi.  The dollar edged up 0.1% against the yen, shows no change against sterling and has softened 0.3% relative to the Chinese yuan.  Investors continue to react to yesterday’s FOMC minutes, which presented a soberer view of the economy than many were expecting and which noted that a significant improvement needs to occur before the planned $600 billion of bond buying is cut short.

Equities fell 1.7% in Taiwan, 1.0% in Indonesia, 0.6% in Australia, and 0.4% in China.  Stocks gained 0.8% in Thailand and 0.4% in Hong Kong but in Europe show losses of 1.4% in Germany, 1.3% in France and 0.6% in Britain.

Ten-year sovereign bond yields slipped four, three and one basis points in Germany, the U.K., and Japan.

Oil prices fell 1.2% to $88.35 per barrel, while gold edged up 0.1% to $1380.50 per ounce.

Euroland’s service-sector purchasing managers index for December was revised up a half-point to 54.2.  The German 59.2 reading matched November’s 39-month high, with very buoyant growth in jobs.  The French index was 54.9, revised from a preliminary 54.1 and just a tenth of a point below November’s strong 55.0.

  • Several peripheral economies appear to face double-dip recessions.  Spain’s services PMI lost 2.1 points to 46.2, its fifth straight sub-50 reading and the lowest score since December 2009.  Italy’s index relapsed to 50.2 after improving 3.4 points to 54.4 in November.  The Irish index dropped 3.4 points to a recessionary 47.4. 
  • Euroland’s composite purchasing managers index was revised upward to 55.5, same as the reading for November which had been the best since August.  The composite indices for Germany and France stood at 60.3 and 56.3, underscoring the two-tier Euroland economy.

Britain’s construction-sector PMI survey produced a reading of 49.1 following nine consecutive scores of 50.0 or better.  British weather in December was poor.

Industrial orders in the euro area advanced 1.4% in October and was 14.8% greater than a year earlier.  The core measure of orders went up 0.9% in October but was only 0.3% greater than the 3Q average level, signifying some loss of momentum.  German orders were 18.8% higher than a year before, while Spanish orders recorded only a 2.8% 12-month gain.

Producer prices in Euroland firmed 0.3% in November and 4.5% on year.  Energy costs climbed 0.9% in the latest reported month, while all other producer prices rose merely 0.1% and by 3.0% from a year before.

Growth in Japan’s monetary base decelerated to a 12-month increase of 7.0% in December from 7.6% in November, but the 7.0% on-year rise in 4Q10 surpassed the third-quarter’s 5.8% rate of climb.  Japanese motor vehicle sales posted a fourth consecutive on-year drop in December, a decline of 28% that trimmed the gain for all of 2010 to 11%.

China’s composite HSBC purchasing managers index eased to 55.2 in December from 55.8 in November and a six-month high of 57.4 in October.  The services component was unchanged last month at 53.1.

India’s composite PMI fell back to 58.9 in December after a 2.9-point increase to 61.3 in November.

In Australia where the central bank has so far implemented seven rate increases of 25 basis points each, new home sales slipped 0.2% in November.

Filipino consumer prices rose 0.5% on month and 3.8% on year in December, accelerating from 3.0% in the year to November.  Taiwan reported December-over-December increases of 1.3% in consumer prices and 2.2% in wholesale prices.

Bank Indonesia left its monetary policy rate unchanged at 6.5% as analysts were expecting.  The rate has been steady since August 2009.

Romania’s central bank retained a 6.25% key interest rate, the level since May 2009.  Analysts were not expecting a change there, either.

Spanish industrial production was 2.3% greater than a year earlier in November.  Spanish consumer sentiment fell 5.4 points to 64.6 last month.  Portuguese consumer confidence continued weakening last month, recording a negative 50.2 reading after minus 44.9 in November.  The overall economic climate worsened to minus 1.0 from minus 0.5. 

Hungarian producer prices climbed 1.5% on month and 8.2% in the year to November.  Hungary’s jobless rate averaged 10.7% in September-November, a bit less than assumed.  Icelandic producer price inflation accelerated to 2.9% in November from 1.0% in October. Austrian wholesale price inflation advanced to 9.1% last month from 7.7% in November.  Russian consumer prices increased 1.0% in December and were 8.7% higher than a year earlier.

Brazilian industrial output slid 0.1% in November but was 5.3% greater than a year earlier.

The U.S. will release its service-sector purchasing managers survey results and the ADP private jobs estimate today, as well as weekly oil inventories and mortgage applications.  Tom Hoenig, the FOMC’s outspoken hawk, speaks today.  Canada reports producer prices and raw material prices.

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

Tags: , ,


Comments are closed.