Risk Appetite Attempting to Stage a Recovery

January 10, 2012

Stocks, commodity prices and commodity-sensitive currencies are higher.

  • Share prices rose 3.3% in China, 2.2% in India, 1.3% in Indonesia, and 1.1% in Singapore and Australia.
  • In Europe, the German Dax, Paris Cac and British Ftse have so far risen 2.5%, 2.3%, and 1.2% on the day.
  • Oil and gold prices have climbed 1.6% each to $102.94 per barrel and $1633.60 per troy ounce.
  • The dollar is down 0.9% against the kiwi, 0.8% versus the Aussie dollar and 0.5% relative to the loonie. 
  • The dollar otherwise is unchanged against the euro, Swissie, yen and yuan.  Sterling has edged 0.1% lower.
  • The yields on 10-year German bunds and British gilts are each four basis points firmer.  The JGB is steady.

The Fitch credit rating agency had some cautiously upbeat remarks about Europe.  France is likely to retain its top rating.  Market players still anticipate a downgrade of France by S&P later this month, but no such announcement has occurred as yet.

IMF Managing Director Lagarde meets today with the German Chancellor and finance minister in hopes of promoting progress toward solidifying a plan for Greece.

Chinese trade figures released overnight are generating hopes that the central bank there will cut reserve requirements within ten days and before the start of the Chinese New Year holiday.  Import growth of 11.8% in the year to December was considerably weaker than expected and below on-year increases of 22.1% in November and 28.7% in October.  Exports advanced just 13.5% on year, about as expected.  The trade surplus of $16.52 billion last month was twice as high as predicted due to lower import demand, not stronger exports.  For 2011 as a whole, China’s trade surplus narrowed 14.5% to $155.1 billion.  Exports grew 20.3%, down from a 31.3% increase in 2010.  Imports climbed 24.9% last year.

The Bank of France’s business sentiment index unexpectedly edged a point higher to a reading of 96.  That was the first on-month improvement since the index peaked at 110 last January.  French industrial production climbed 1.1% in November, defying forecasts of a marginal decrease.  Output was also 1.1% greater than in November 2010.  Factory output rose 1.3% on month and 2.2% on year.

According to the British Retail Consortium, same-store sales in the U.K. rose 2.2% in the year to December, considerably more than assumed, but investors were cautioned that this result reflected a weak base of reference due to heavy snow in December 2010 and heavy price discounting just before Christmas.  Total retail sales reported by the BRC were 4.1% greater than a year earlier.  Shop prices posted a 4.1% on-year rise. 

The Royal Institute of Chartered Surveyors’ British house price balance index edged up a point in December to a 17-month high of minus 16%.

Australian building approvals jumped 8.4% in November following a 10% drop in October.  This rebound surpassed expectations.  New Zealand building permits sagged 6.4% in November versus an expected moderate increase.  House prices in New Zealand were 2.4% greater in December than a year earlier, a 15-month high.

The Japanese Nikkei-225 index advanced 0.4%.  No trading was done Monday due to the Coming of Age holiday.  Japanese stock and bond transactions in the last week of 2011 generated a JPY 214 billion capital inflow versus an outflow of JPY 465 billion in the week of December 24.  Malaysian industrial production dropped 4.6% in November and surpassed the year-earlier level by a much smaller-than-expected 1.8%.

In Germany, real manufacturing sales fell 1.1% in November and exceeded the year-before level by 2.0%.  That’s well down from a 7.9% on-year advance in January-November.  There were 4.8% fewer corporate bankruptcies in October than a year before.

Finnish industrial production fell 3.5% in the year to November compared to a 0.7% increase in the first 11 months of 2011 versus the same period of 2010.  Romanian industrial output was 3.1% greater in November than a year before.  Swedish industrial production sank 1.9% in November and was up only 0.2% on year.  Swedish industrial orders fell 4.8% on month and by 8.4% on year. Danish retail sales posted on-month and on-year declines in November of 0.5% and 1.8%.

In Norway, CPI and PPI inflation last month stood at 0.2% and 8.2%.  Danish consumer prices were unchanged in December and 2.5% higher than a year before.

South African business sentiment scored a 99.1 in December, up from a reading of 97.4 in November.  Motor vehicle sales recorded an 11% on-year advance in December.

The New Hampshire Republican presidential primary is being held today.  Regional favorite Mitt Romney is expected to win; the questions are by how much and who takes second place.  Scheduled U.S. economic data include wholesale inventories, the Labor Department’s JOLTS index, the NFIB gauge of small business sentiment, the IBD/TIPP optimism index, and weekly chain store sales.  Williams, Pianalto, and George of the Federal Reserve speak publicly.  So does Nowotny of the ECB.  Canadian housing starts arrive too.

Copyright 2012, Larry Greenberg.  All rights reserved.  No secondary distribution without express permission.

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