Lessening Market Impact from Middle East Unrest

February 1, 2011

There was stronger risk appetite today.  The dollar has lost 1.0% against the Australian dollar, 0.6% versus sterling and the kiwi and yen, and 0.5% against the euro, which hit a new high for the move of $1.3776.  The greenback is also down 0.4% against the Canadian dollar, 0.3% relative to the Swissy and 0.1% against the yuan.

Stocks in Europe are trading 1.0% higher in Germany and France and up 0.9% in Britain.  In Asia, the Nikkei rose 0.4%, and equities gained 1.0% in Indonesia, 0.4% in Taiwan, and 0.2% in Hong Kong.

West Texas Intermediate oil settled back 0.9% to $91.39 per barrel, but Brent remains above $100.  Gold firmed 0.3% to $1338.90 per ounce, copper set a record high of $9878 per metric ton, and both aluminum and nickel hit two-year peaks.

Ten-year sovereign bond yields in Germany and Britain each rose six basis points, while the 10-year JGB is up two bps.  The U.S. yield curve is very high.

All is quiet on the Suez Canal, with normal traffic.

Manufacturing purchasing manager readings for January were above expectations in most cases.  Input inflation has accelerated further, however.  Note that readings above 50 connote expanding activity.

  • Britain’s record-high PMI score of 62.0 beat expectations by four whole points and was up from 58.7 in December.  September had seen a 10-month low of 53.5.
  • Euroland had a reading of 57.3, up from a preliminary estimate of 56.9 and a score of 57.1 in December.  This was a 9-month high.
  • Peripheral euro area PMIs improved.  Spain scored a 52.0, a 9-month high after 51.5.  Italy had a 56.6 reading, best since June 2006 after 54.7.  The Irish reading was 55.8, best since April 2009 and up 3.6 points from 52.2 in December.  But the Greek PMI not only fell 0.3 further to 42.8 but was accompanied with the highest input price reading in 30 months.
  • The German PMI of 60.5 was above its flash indication and above 60 for a second straight month.  The French PMI got revised to 54.9 from 54.3 reported earlier but represents a six-month low.  The Dutch index remained steady at 57.5.
  • In East Europe, Poland’s PMI dipped from 56.3 to 55.6 but was still the fifth highest reading ever.  The Czech PMI surged 1.9 points to a new record high of 60.5.  Hungary’s index firmed 0.7 points to 54.7.
  • Other European results: Switzerland 60.5 after 61.2 and the third score over 60 in a row.  Sweden 61.5 after 60.2.  Norway 55.8, best since February 2008.  Russia’s index stayed at a 33-month high of 53.5. 
  • Australia’s PMI rose 0.4 to 46.7.
  • Two Chinese manufacturing PMIs get reported each month.  The government’s measure fell a point to 52.9, while the HSBC index edged up 0.1 to 54.5.
  • India had a robust 56.8 reading after 56.7.
  • South African manufacturing improved sharply to 55.6 from 51.7 in December.
  • South Korea shot a 53.5, nearer to December’s 53.9 than November’s 50.2.
  • Brazil’s PMI-manufacturing index printed at a 9-month high of 53.1, up from 52.4 in December, 49.9 in November and 49.5 in October.
  • Turkey’s PMI was 57.2, up from 56.4 in the previous two months, with input price inflation at a 54-month high.

The Reserve Bank of Australia left its Official Cash Rate at 4.75% as predicted.  Officials are still calculating the effects of the flooding.

German labor statistics were better than expected.  Unemployment fell 13K in January on a seasonally adjusted basis and to a post-unification low of 7.4%.  Job vacancies rose 16K on top of gains of 10K each in November and December.  Employment in December was 1.0% above its level at the end of 2009. 

Euroland’s jobless rate held steady in December at 10.0%.  All months since June had 10.0% unemployment except October’s 10.1%.  The jobless rate at the end of 2009 was 9.9%.

Britain’s Nationwide house price index slid 0.1% in January and by 1.1% from a year earlier.  Such had risen 0.4% in the year to December.  U.K. M4 money fell 1.5% in the year to December.  Mortgage applications slumped in December to 42.6K from 47.3K in November.  Analysts expected 46.5K.  Net lending and consumer credit remain weak.

French producer prices jumped 1.0% in December and accelerated to a 5.4% 12-month rate of rise from 4.5% in the year to November.

Swiss retail sales volume was 0.4% lower in December than a year earlier versus a 1.8% increase seen between November 2009 and November 2010.

Hong Kong retail sales volume posted a 15.9% on-year rise in December and a similar 15.5% advance in 2010 as a whole.

India’s trade deficit contracted 70% on month and 77.6% on year in December.  Exports were 36.4% greater than in December 2009.

Australian commodity prices were 49.0% higher than a year earlier in December.  Aussie house prices firmed 0.7% last quarter and by 5.8% from a year before.  New Zealand hourly wages rose 0.4% last quarter.

South Korean consumer price inflation accelerated to 4.1% in January from 3.5% in December.  Indonesian CPI inflation of 7.0% this month was a tenth higher than December’s figure.

The U.S. manufacturing PMI report, construction spending data and auto sales figures get released today.  More snow today in the northeast.

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


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