Investors Watching North African Developments
January 31, 2011
Trading today has been calmer than on Friday. News highlights from Egypt include
- About 150 feared dead in Egyptian unrest.
- Foreigners are scrambling to leave the country.
- A Suez Canal officials said traffic through the seaway has not been affected.
- Moody’s cut its rating on Egyptian debt to Ba2 from Ba1.
- Egypt’s stock market and banks remained closed.
- Credit default swaps in the area are higher.
- Stocks have fallen less sharply in Europe than in Asia overnight.
- British and French banks said to have the largest Egyptian loan exposures.
Stocks dropped by 2.3% in Indonesia and the Philippines, 1.6% in Singapore, 1.8% in South Korea and Thailand, 1.2% in Japan, 0.7% in Hong Kong, and 0.4% in New Zealand and Australia. China’s market rose 1.3%, however, and markets are down only 0.4% in Germany, 0.3% in France, and 0.1% in Great Britain.
The dollar, which snapped higher before the weekend on safe haven demand, settled back 0.3% against the euro, 0.2% versus sterling, and 0.1% relative to the Canadian dollar. It also rose 0.4% against the Chinese yuan, 0.2% against the kiwi, and 0.1% relative to the yen and Swiss franc. The Aussie dollar is steady.
Oil edged up only 0.1% further to $89.34 per barrel after shooting up 4.3% on Friday. A major market fear is that shipping lanes may get disrupted if Egypt’s unrest spreads further, lifting world energy costs. Gold dipped 0.9% to $1329.20 per troy ounce.
Ten-year sovereign bond yields firmed a basis point each in Germany and the U.K. but held steady in Japan.
Russia’s central bank announced an unexpected 50-100 basis point increase in reserve requirements to 3.0-3.5% but left its key refinancing rate steady as expected at 7.75%.
Japan’s Ministry of Finance confirmed there had been no intervention support for the yen in January. Four pieces of better-than-anticipated Japanese data were released overnight.
- Industrial production rose 3.1% in December (+4.6% on year) after a 1.0% advance in November. The December level was 0.9% higher than the 4Q10 average level, and officials revised up their forecast for January production to +5.7% from +3.7% predicted a month ago. The assessment of industrial production was upgraded from “has weakened” to “shows signs of an upward movement.”
- The manufacturing purchasing managers index advanced 3.1 points in January to 51.4, connoting expansion instead of contraction. This was the best reading since last July.
- Housing starts were 7.5% higher than a year earlier in December following on-year gains of 6.4% in October and 6.8% in November.
- Construction orders, which analysts expected to fall on year, were instead 13.1% greater than in December 2009.
For a third straight month, Japanese motor vehicle production recorded an on-year drop. Such fell 5.1% after declines of 8.4% in the year to October and 6.7% in the year to November. Auto output had been previously higher on year in the first nine months of 2010.
German retail sales volume dropped 0.3% on month and 1.3% on year in December. Increases had been predicted after indications of stronger consumer confidence. Retail sales had declined 1.9% in November and posted a 4Q-over-3Q drop of 1.7%. Sales rose just 1.2% in 2010.
Euro area CPI inflation accelerated to 2.4% in January according to the preliminary report from 2.2% in December, 1.9% in October and November and 0.9% in January 2010. Core inflation has remained steady, but the ECB, unlike the Fed, pays more attention to total inflation than core.
Italian producer prices rose 0.6% in December and accelerated to a 12-month 4.5% rate of rise from 3.9% in November. Business sentiment in Italy improved to 103.6 in January from 103.1 in December, 101.7 in November and 100.1 in October.
Spanish consumer price inflation climbed to 3.3% in January from 3.0% in December and 2.3% in November. Hungarian producer prices were 8.1% higher in December than a year earlier. Portuguese industrial output was 3.3% higher than a year earlier in December. Norwegian retail sales fell 2.0% last month and slowed to a 12-month rise of 2.1%. Greek retail sales fell 2.0% in November.
Filipino GDP jumped 3.0% on quarter in 4Q10 and by 7.1% on year, the most in over 20 years. GDP rose 7.3% last year, a conspicuously brisk pace considering that the Philippines is one of very few Asian economies where interest rates remain at their cyclical lows.
Taiwan’s manufacturing PMI reading advanced sharply to 59.8 in January from 54.7 in December and 51.7 in November. Input prices recorded their highest score in the history of this data series. Taiwanese GDP was 6.5% greater than a year earlier last quarter. Thailand’s business sentiment index slid to 51.6 in December from 52.5 in November. The Thai current account surplus in December totaled $1.8 billion, and exports were 18.8% larger than a year earlier. Singapore’s jobless rate ticked up to an enviably low 2.2% in 4Q10 from 2.1% in 3Q. Such also averaged 2.2% in calendar 2010. Malaysian producer prices increased by 2.3% in December and 7.4% from a year earlier in December. South Korean industrial production rose 2.8% on month and by 9.8% on year in December.
Australian private sector lending rose only 0.2% on month in December but was 3.4% greater than in December 2009. New Zealand building permits plunged 11% last month, their sixth drop in a row. New Zealand recorded a NZD 250 million trade deficit in December. Exports were 11% higher than a year earlier. On-year South African M3 growth slowed to 6.9% in December from 7.2% in November, but the expansion rate of private credit quickened to 5.6% from 4.6%. South Africa also announced a December trade surplus of ZAR 10.3 billion for last month, 23% wider than in November.
Canadian monthly GDP, PPI and raw material price statistics get released at 13:30 GMT. The United States will be reporting personal income and spending and mid-western PMI-manufacturing scores later today. Lockhart of the Fed speaks in public today.
Copyright Larry Greenberg 2011. All rights reserved. No secondary distribution without express permission.
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