Several New Developments Hurt Appetite for Risk

March 10, 2011

Chinese exports recorded only 2.4% on-year growth in February versus 37.7% in January and posted its largest trade deficit, $7.3 billion, since 2004.

Moody’s downgraded Spain’s credit rating by a full notch to Aa1 from Aa2 with a negative outlook.

Australian jobs fell 10.1K in February, their first monthly decline in 18 months.  The jobless rate was 5.0% for a third straight time.  Part-time workers dropped by 57.7K, most in over three years.

The Bank of England decided not to tighten policy, leaving its Bank Rate at 0.5% and its asset purchase program ceiling at GBP 200 billion.  They’ve been at those levels since March 2009 and November 2009, respectively.  Minutes are due March 23rd.

Japanese fourth-quarter GDP growth was revised marginally lower to an annualized decline of 1.3% from a drop of 1.1%.  The price deflator showed an on-year decrease of 1.6%.  Growth in non-residential investment got revised to 2.0% annualized from 3Q versus a preliminary estimate of 3.7%.  Nominal GDP plunged 2.8% at an annualized rate last quarter but rose 1.8% in 2010 as a whole.

The German current account surplus fell sharply to EUR 7.2 billion in January from EUR 19.3 billion in December but was better than the year-earlier surplus of 5.6%.  Seasonally adjusted merchandise exports fell 1.0% on month in January.  The seasonally adjusted trade surplus of EUR 11.8 billion was lower than December’s EUR 14.2 billion and less than the EUR 13.5 billion monthly average during the second half of 2010.

Investors have very low expectations about tomorrow’s summit of EU leaders.  The bond yield premiums associated with Euroland’s peripheral government debt have climbed steeply in the last week.

While French industrial production advanced 1.0% in January and 6.1% on year, which were much bigger gains than forecast, Italy reported that its industrial production plunged 1.5% that month and was merely 0.9% greater than a year earlier.

Despite Libya’s ongoing civil war and word of a lack of oil to export, WTI petroleum prices fell 0.9% to $103.46 per barrel.  Gold prices fell 0.6% to $1420.70 per ounce.

Share prices fell by 1.5% in Japan, 1.8% in China, 1.2% in Taiwan and South Korea, and 1.4% in Australia.  In Europe, British, German and French stocks have so far lost 1.0%, 0.8%, and 0.7% on the day.

Ten-year German bund and British gilt yields fell three basis points apiece.  The 10-year JGB rose a single basis point to 1.31%.

The dollar is higher on risk aversion, climbing 0.7% against the Australian dollar, 0.5% against the euro, 0.4% relative to the Swiss franc, 0.3% versus sterling, 0.2% against the Chinese yuan, Japanese yen and New Zealand dollar, and 0.1% versus the Canadian dollar.

The Reserve Bank of New Zealand slashed its Official Cash Rate by 50 basis points back to its cyclical low of 2.5%.  The consensus call among analysts had been a reduction of 25 basis points.

The Bank of Korea, in contrast, boosted its policy rate by another 25 basis points as was expected to 3.0%.  Such was the fourth 25-bp increase following moves last July, November, and January.  A fairly hawkish statement was released.  South Korean producer prices climbed 0.7% last month and accelerated to a 12-month 6.6% rate of increase.

The ECB March Bulletin reiterated Trichet’s hawkish remarks last week, including the call for strong vigilance, which is a coded message to expect a tightening in April.

Japanese domestic corporate goods prices rose 0.2% in February, less than half as much as expected, and were 1.7% higher than a year before.  Export prices rose 0.9%, and import prices jumped by 1.6% on month and 7.6% on year.  Stock and bond transactions last week generated a JPY 863 billion net capital inflow.

German real manufacturing sales eased 0.2% on month in January because of a 1.7% drop in the foreign turnover component.  Sales were still up 11.6% on year.  One of the German economic think tanks, RWI, revised projected 2011 economic growth higher to 2.9% and released a 2012 growth forecast of 2.4%.

British industrial production climbed 0.5% in January and recorded a higher 4.4% on-year increase after 3.6% in December.  Factory output went up 1.0% from December and 6.8% from January 2010.

Dutch consumer prices rose 0.7% on month and 1.9% on year in February.  Danish consumer prices firmed 1.2% in the same month but retained January’s on-year 2.7% inflation rate.  Swedish consumer prices rose 0.6% in February and 2.5% from a year before, but the core Swedish inflation rate was just 1.3%.  Romanian CPI inflation advanced to 7.6% from 7.0% in January.  Irish consumer prices leaped 0.9% on month and accelerated to 2.2% on year in February. Greek consumer prices fell 1.3% in January but posted a 4.4% rise from January 2010.

Norway reported producer as well as consumer price data for February.  The PPI went up 1.2% and 21.2% on year, while the CPI climbed 0.4% but decelerated to a 12-month pace of 1.2% from 2.0% in January.  The core Norwegian CPI rate was just 0.8%.

Spanish retail sales were 4.7% lower in January than a year earlier.  The Czech current account deficit narrowed 77% on quarter to CZK 20.9 billion in the fourth quarter.  Industrial output in Finland fell 2.7% in January but was 5.9% above the year-earlier level.

Malaysian industrial output increased 0.4% in January but was just 1.0% greater than a year earlier after a 4.2% December-over-December advance.

Indian wholesale price inflation slowed to 14.0% in the final week of February from an on-year pace of 14.9% in the previous week.

The United States and Canada release trade figures at 13:30 GMT.  Investors will also have keen interest in whether new jobless insurance claims remained below 400K in the latest reported week, and the Federal monthly budget figures will be announced late today.  German Chancellor Merkel and the ECB Governing Council member Gonzalez-Paramo will be speaking today.  Peru issues its latest interest rate decision.

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

Tags: , ,


Comments are closed.