It’s Okay to Carry Risk

February 7, 2011

Monday markets have been calm and in a hopeful mood about such dangers as the European debt negotiations, the Egyptian situation, and the resistance of general inflation against commodity price pressures.  At 16:00 GMT, stocks show mostly decent gains, the dollar is modestly higher, and oil prices have been low.  Today’s data calendar was thin and uneventful.

The Nasdaq, S&P, and DJIA show additional gains of 1.0%, 0.8%, and 0.7% from their closing levels last week.  Football fans, who have observed a tendency for U.S. stocks to advance in years when the NFC (or teams in the AFC that predate the AFL) wins the super bowl, entered this year’s title game in a no-lose situation.  With the Green Bay Packers, one of the leagues oldest and most decorated franchises, getting the crown, traders have reason to believe the bull market rally still has plenty of life.   Stocks rose 1.1% in France, 0.9% in the U.K. and Germany and 0.5% in Japan.  Some Asian markets have reopened, but China will remain shut until Wednesday for the Lunar New Year.

On the day, the dollar has risen 0.3% against the euro, yen and Swiss franc, 0.2% against the Canadian dollar, and 0.1% relative to sterling.  The greenback is unchanged on net against the yuan, Australian dollar and kiwi.

The ten-year Treasury yield has advanced three basis points.  Its British and Japanese counterparts firmed a single basis point, while the 10-year German bund yield slid one basis point.

Oil prices are trading 1.4% lower at $87.78 per barrel, while gold is steady at $1348.60 per ounce.

The day’s most meaningful release was German industrial orders.  Although such recorded a larger-than-anticipated decline of 3.4% on a 9.3% plunge in foreign demand for capital goods, orders had advanced 5.2% in November and still managed to climb 2.7% in the fourth quarter or 11.2% at an annualized rate.  Orders were also 19.7% higher than at the end of 2009.

The Sentix gauge of investor sentiment toward the euro area rebounded strongly to a reading of 16.7 in February from 10.6% in January. 

The Czech Republic released several economic indicators for December.  Retail sales volume fell 2.1% that month and by 1.3% in 2010.  Industrial output declined 0.9% and recorded a somewhat smaller by decent 12.7% advance from December 2009.  The trade surplus narrowed very sharply to CZK 1.0 billion from CZK 12.4 billion in November.

Australia’s construction purchasing managers index has signaled contraction for eight straight months, and the latest reading of 40.2 in January after 43.8 in December indicates an accelerating pace of decline.  Australian retail sales firmed 0.2% in December and by 1.9% on year, less than expected, but job ads in January were 40.5% greater than a year earlier.  Australian monetary policy was left on hold last week.

Japan’s index of leading economic indicators firmed 0.8 points to 101.4 in December, according to the preliminary estimate.  The diffusion index was above 50 for the first time since last April, thus pointing to an end to the pause in Japan’s economic recovery.

Indonesian real GDP was 6.9% greater last quarter than in 4Q09.  On-year advances of 16.1%, 8.7%, and 7.3% were posted in exports, business investment and public-sector spending.  GDP fell 1.4% on quarter.  The results were better than forecast.

Canadian building permits advanced 2.4% in December and by 19.8% in 2010.

Looking ahead to Tuesday, Japan releases figures covering the current account, money and lending growth, and the economy watchers index.  Germany reports industrial production.  French merchandise will be reported, as will same-store British sales, Canadian housing starts, and the U.S. JOLTS index and NFIB small business sentiment gauge.

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



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