Chinese New Year

February 3, 2011

Numerous Asian markets were closed today for the Lunar New Year, including China, Indonesia, Malaysia, Taiwan, Hong Kong and South Korea.

Unrest in Egypt appears to be escalating, but Suez Canal traffic is still flowing normally.  Oil prices are 0.8% higher at $91.59 per barrel.  Gold edged up 0.1%.

Fate of the euro, down 0.3% against the dollar, hinges critically on what EU leaders do about expanding the debt bailout fund.  They are holding a summit in Brussels today and tomorrow.

Dollar changes are mixed.  It’s up 0.5% against the Swiss franc and 0.2% versus the kiwi and yen but off 0.3% versus the Aussie dollar and off 0.1% against the Canadian dollar and sterling.

Stocks rose 2.0% in India, 0.5% in Australia, and 0.3% in Thailand but fell 0.3% in Japan and are trading lower in Europe.  The Paris Cac has lost 1.1%, while stocks in the U.K. and Germany are trading off 0.4% and 0.1%.

Spanish auctions of two- and five-year debt netted lower yields.  The 10-year JGB yield is steady, while its German and British counterparts are off one and up one basis points, respectively.

Service sector purchasing manager survey results have been released for a number of countries.  This is for the month of January.

  • Readings for Euroland, Germany, and France got revised higher.  The euro area index in services was 55.9, compared to a preliminary indication of 55.2 and December’s 54.2.  55.9 is a 5-month high and at the same level as in August after dipping to 53.3 in October.  Euroland’s composite score of 57.0 is 0.7 above the flash estimate and 1.5 points greater than December’s result.  Germany remains king of the Euroland pack with upwardly revised readings of 61.3 on the composite index and 60.3 for services.  Each hadn’t been greater since 2006.  The French composite index of 57.6, a 4-month high, was 1.3 points better than December’s score.  The service PMI of 57.8 also represents a four-month high and was 2.9 points above the December level.
  • Britain’s service-sector PMI score of 54.5 constitutes an eight-month high and suggests a return to positive growth of less than 0.5% in 1Q11.
  • Spain’s PMI-services remained below 50 as were the August-through-December results but at 49.3 was the best score of the bunch, implying the slowest level of contraction since July, when the reading was last above 50.
  • Italy had a 49.9 reading on its services index, down from 50.2 in December and 54.4 in November.
  • The Irish index rebounded sharply to 53.9 from 47.4 in December and 50.8 in November.
  • Japan’s composite PMI improved to 50.9 from 49.4 in December, 48.7 in November and 47.2 in October and showed the strongest cost pressures since October 2008.  The Japanese services index of 50.4 exceeded the long-term average reading of 44.8 and December’s 50.2 result.
  • India’s composite PMI rose to 59.6 from 58.6 but was accompanied by a record high indication of input prices.  A separate data release showed primary wholesale price inflation accelerating to 18.4% on year in the week of January 22 from 17.3% in the prior week.
  • Russia posted composite and service-sector PMI readings of 54.6 and 54.2 last month, representing slower growth than in December.
  • The United Arab Emirates had a service-sector score of 54.2, up from 53.0 in December.

The volume of retail sales in the euro area fell 0.6% in December, the worst month in the second half of 2010.  Bad weather was a negative factor.  Retail sales were 0.9% lower than in December and fell at a 2.6% annualized rate between 3Q10 and 4Q10.

Turkish consumer prices firmed 0.4% last month but decelerated to a 4.9% 12-month rate of increase from 6.4% in December.  Producer prices shot up 2.4% on month in January and accelerated to 10.8% on year from 8.9% in December.

The National Bank of Romania left its main interest rate steady at 6.25% as was expected.  It’s been there since May.

The Czech National Bank likewise held its interest rate structure unchanged, including a 2-week repo rate of 0.75%.  No changes were forecast.

The Swiss trade surplus narrowed unexpectedly to CHF 0.870 million in December from CHF 1.95 billion in November.  Trade swung from a CHF 4.6 billion surplus in 2009 to a CHF 3.8 billion deficit last year.  Spanish consumer confidence rebounded to 70.7 last month from 64.6 in December.

Japanese stock and bond transactions generated a JPY 726 billion inflow last week.

Australia recorded an AUD 1.98 billion trade surplus in December.  While greater than forecast, such was 4.7% narrower than November’s surplus.  Australian building approvals jumped 8.7% in December but were still 5.0% lower than a year earlier.  New Zealand’s jobless rate rose to 6.8% last quarter from 6.4% in 3Q10.  Business confidence in South Africa slid slightly to 87.4 in January from 87.6 in December.

Markets await the ECB press conference at 13:30 GMT.  No rate change is anticipated.

Scheduled U.S. data include non-farm productivity and unit labor costs, the service sector purchasing managers survey results, factory orders, monthly chain store sales, and weekly jobless claims.  Fed Chairman Bernanke has a speaking engagement.

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

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