Better Market Tone as Middle East Fear Ebbs

February 25, 2011

Stocks recovered 1.8% in Hong Kong and Singapore, 1.7% in Sri Lanka, 0.9% in Thailand, 0.7% in Japan, 0.6% in Australia and 0.4% in India.  In Europe, equities climbed 1.2% in Paris, 0.5% in Frankfurt, and 0.2% in London.

Ten-year sovereign debt yields rose three basis points in Germany, two bps in Britain and a single basis point in Japan.

Commodity-sensitive currencies are firmer, with gains of 0.3% in the kiwi and Aussie dollar and 0.2% for the Canadian dollar. Dollar/yen is steady.  So is the yuan.  The greenback has risen 0.3% against sterling, 0.2% versus the Swiss franc and 0.1% against the euro.

Oil prices settled back below $100 in North America on Thursday and remain below that level today.  At $97.79 per barrel, West Texas Intermediate futures are 0.5% higher since Thursday’s close.  Gold, however, has fallen 0.9% to $1403.00 per ounce.

Saudi Arabia has boosted output to around 9 million barrels daily.  News from Libya is mixed.  One rumor claimed Gaddafi was shot.  Another report contained a warning that he will use chemical weapons on his own people.

British GDP growth in 4Q10 was revised weaker to now show a drop of 0.6% on quarter and an on-year advance of just 1.5%.  Business investment sank 2.5% from 3Q, much weaker than assumed, and net exports exerted an even larger drag than first thought.  Government spending (+0.7%) and personal consumption (minus 0.1%) were a little stronger than expected.  Consumption and investment were their weakest since 2Q09, and imports grew their fastest since that same quarter.  A 2.5% plunge in construction was attributed to foul weather.  Production advanced 0.7%, but service sector output fell 0.7%.

British consumer confidence remained very depressed in February, printing at minus 28 after minus 29 in January.  Value added taxes were hiked in January to 20% from 17.5%.  The British monthly service sector index dived 1.3% in December and was marginally negative versus 12 months earlier.

Japanese consumer prices fell 0.4% on month in January excluding seasonal food and not adjusted for seasonal variation.  The non-food, non-energy index dropped 0.7%.  In on-year terms, those measures posted declines of 0.2% and 0.6%.  Seasonally adjusted consumer prices recorded no change in January for all items and the two core measures.  Tokyo consumer prices in February slid 0.1% on month and on year.  The two core measures registered on-year drops of 0.4% and 0.3%.

Five German states reported February CPI data.  Three of the states announced an increase of 0.6% on month, and the other two saw consumer prices rise by 0.5%.  It looks like on-year inflation may be a tick above the 2.1% rate of increase that analysts have been expecting.  Price pressure is coming from commodities.

Belgian consumer prices advanced 0.6% in February and accelerated to a 12-month 3.4% rate of increase after 3.2% in the year to January.  Non-energy consumer prices rose 1.7% on year.

Spanish producer prices also surpassed expectations, advancing 2.4% on month in January and rising to a 12-month pace of 6.8% from 5.3%.

Euroland M3 growth slowed in January, while lending picked up.  M3 grew 1.5% in the year to January, down from 1.7% in December, but the 3-month on-year increase edged up to 1.7% from 1.6% in October-December.  Private loans expanded 2.4% on year after a 1.9% increase in December.  Loans to businesses increased 0.4% following a 0.2% on-year drop in December.  Lending to households went up 3.1% after a 2.9% rise in the year to December.  Funds continue to shift from M1 into less liquid forms of money.

Swedish M2 growth slowed to a 12-month increase of 3.8% in January from 4.1% in December.  Finnish retail sales in volume terms were 1.8% higher than a year earlier in January, down from a 2.3% rise in the year to December.  Norway’s jobless rate remained at 3.0% in February.

French consumer spending fell by 0.5% last month but was 2.4% greater than in January 2010.

The Swiss index of leading economic indicators edged higher to 2.18 in February, beating expectations of a 2.08 reading after 2.16 in January.

Austria’s manufacturing purchasing managers index improved to 61.9 this month from 60.3 in January.

Russia’s central bank announced an unexpected 25-basis point hike of its refinancing rate to 8.0%.

Industrial production in Singapore recorded a 12-month increase of 10.5% last month, up from 9.0% in the year to December. 

South Korea’s current account unexpectedly swung into the red by USD 230 million in January, as the trade surplus fell 56% to $1.63 billion.

Scheduled U.S. data today feature revised fourth-quarter GDP growth and also include the U. Michigan consumer sentiment index.  Mexican GDP, current account and unemployment figures arrive.  Many monetary officials speak today: Lacker and Yellen of the Fed, Bean of the Bank of England, and Constancio of the ECB.  Results of the Irish parliamentary elections will be learned and are expected to result in a change of government for that troubled euro area economy.

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

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