European Stocks Up Ahead of ECB Press Conference

March 3, 2011

Stocks are up 1.4% in Paris and Frankfurt and 1.3% in London ahead of the ECB press conference that starts at 13:30 GMT.  The ECB left rates unchanged.  Earlier today, equities gained 0.9% in Japan, 1.4% in Taiwan, 2.2% in South Korea, 0.5% in New Zealand and Malaysia, and 0.3% in Singapore, Thailand and Indonesia.

The dollar is trading up by 0.4% against sterling, 0.3% versus the Swiss franc and 0.1% against the euro but down 0.3% against the kiwi and 0.1% relative to the yen.  The yuan, Aussie dollar, and Canadian dollar are steady.

Yields on 10-year German bunds and British gilts rose four basis points, and that on JGBs of similar maturity climbed two basis points.

After hitting a record of $1444 per ounce yesterday, gold has settled back to $1429.20, while oil remains above $100 per barrel, though 0.4% lower at $101.84 per barrel.

More purchasing manager survey results have been released, this time for service sector activity.

  • Britain’s fell back to 52.6 after weather distortions depressed December to 49.7 but elevated January to an 8-month high of 54.5.  The data point to GDP growth in 1Q11 that only reverses the 0.6% drop recorded in the final quarter of 2010.
  • Japan’s composite PMI of 51.0 compares to 50.9 in January after sub-50 readings in 4Q, suggesting stability after the recent lull.  The services PMI reading of 49.8 after 50.4 in January shows that services are now lagging behind manufacturing, which earlier had printed at 52.9 in February.
  • China’s services PMI of 51.9 was down marginally from 52.0 in January and 56.4 last October.  China’s composite score of 51.9 was sharply below January’s 54.6 reading, indicating that policy restraint is gaining traction.
  • The euro area’s composite PMI of 58.2 was below a preliminary indication for February of 58.4 but still the best score since July 2006.  The services index of 56.8 was at its best level since August 2007.  The currency union may experience GDP growth this quarter of as much as 0.75% not annualized.  Within the euro area, Germany and France posted service sector readings of 58.9 and 59.7.  February scores pointed a slower rate of expansion in other economies than in Germany and France.  Nonetheless, Ireland (55.1), Italy (53.1) and Spain (50.8) had higher readings in February than January.
  • Australia’s services PMI reading was 48.7 after 45.5 in January, 46.4 in December and 46.2 in November, indicating a slower pace of contraction.
  • India’s composite PMI reading of 61.0 reflected the strongest service sector activity since last July.
  • Hong Kong’s composite index settled back to 53.7, a three-month low, from 55.2 in January and 55.0 in December.
  • The Russian service sector PMI was 53.4, three points below December’s score just two months earlier.
  • The United Arab Emirates has had an expanding service sector, that is PMI readings above 50, for a year and a half.  The latest stood at 54.3.
  • South Korea’s manufacturing PMI printed at 53.4 in February after 53.5 in January.

Revised and more detailed GDP data for Euroland were released.  GDP grew 0.3%, same as in 3Q, and by 2.0% from a year earlier.  Net exports enhanced GDP growth by 0.3 percentage points, while inventories were the source of most drag.  Investment contracted 0.6% and was just 1.2% greater than a year earlier.

German retail sales volume jumped 1.4% in January and recorded on-year growth of 2.6%.  This much better-than-expected performance propelled Euroland retail sales to rise 0.4% in spite of a 1.6% decline in Portugal.  The euro area’s retail sales were 0.2% greater in January than the average 4Q10 level.  Such had declined 1.3% at an annualized rate last quarter.

Swiss retail sales slumped 1.8% in January and by 3.1% on year.  A Swiss National Bank official noted the strength of the franc lately but denied any need for intervention.

France’s jobless rate of 9.6% last quarter was down from an upward-revised 9.8% in the third quarter.

Italian producer prices increased 1.1% in January and accelerated to a 12-month 5.1% rate of increase from 4.5% in the year to December.

Spanish consumer confidence improved to 73.4 in February from 70.7 in January.

Romanian GDP edged up 0.1% in 4Q10 but was still 0.6% lower than in the final quarter of 2009.

Australia’s trade surplus narrowed 7.1% on month to AUD 1.885 billion in January.  Exports fell 4.1%.  South African business sentiment slid a point to 86.4 last month.  Australian building approvals slumped 15.9% in January after an 8.7% rise in December and were 24.8% lower than a year before.

Turkish consumer prices rose 0.7% and decelerated in on-year terms to 4.2% in February from 4.9% in January and 6.4% in December.  The Turkish PPI jumped 1.7% on month and was 10.9% higher than in February 2010.  Hong Kong retail sales volume leaped 23.6% on year in January, well surpassing expectations.

Like the ECB, the Czech central bank holds a policy meeting today.

Scheduled U.S. data include the service-sector purchasing managers index, quarterly labor productivity and unit labor costs, and weekly jobless insurance claims.  Kocherlakota and Lockhart of the Fed have speaking engagements.  Yesterday’s Beige Book observed improving activity.  Bernanke’s reprise gave no indication that QE2 would be aborted before June.  Both factors were accepted by the market.

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

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