No Trouble So Far This Friday the 13th

January 13, 2012

There’s a good buzz in the market about the success of recent European bond auctions.  More auctions today in Italy were well subscribed and resulted in lower yields.  The yields on 10-year German bunds, British gilts and Japanese JGBs slipped by four, two and one basis points.

The Paris Cac, German Dax and British Ftse have thus far risen today by 1.2%, 0.6%, and 0.3%.  Earlier trading in the Pacific Rim saw share prices climb 1.8% in Singapore, 1.1% in Pakistan, 1.4% in Japan, 0.7% in India and Indonesia, 0.6% in Hong Kong and 0.4% in Australia.  A 1.7% drop in Chinese equities was an exception.  China announced the first quarterly decline in its reserves since 1998, reflecting capital outflows.

Dollar movements overnight have been muted.  The dollar rose 0.2% against the euro and Swissie but eased 0.1% versus the yen and kiwi.  The greenback is unchanged against the Canadian and Australian currencies, as well as vis-a-vis the yuan and sterling.

Gold prices eased 0.3% to $1642.70 per ounce. Oil prices edged 0.1% higher but stayed below the $100 threshold at $99.15 per barrel. 

Chinese reserves dropped $20.6 billion in the fourth quarter of 2011 to $3.181 trillion.  After gains of $393.0 in the second half of 2010 and $350.2 billion in the first half of 2011, reserved fell $16.4 billion in the second half of last year.

The Bank of Korea retained its 7-day repo rate at 3.25%, the level since a 25-basis point increase last June.  The decision had been expected.

Japanese Prime Minister Noda shuffled his cabinet.  There’s a new deputy prime minister and defense minister, but Finance Minister Asumi was kept.

Japanese M2 money rose 3.1% between December 2010 and 2011.  M2, M1 and broad liquidity climbed in that span by 2.6%, 5.2%, and 0.4%.  These increases were marginally greater than in November.  In 2011 as a whole, M3, M2, M1 and broad liquidity went up 2.7%, 2.2%, 4.7%, and 0.1%.  One constant of the two-decade malaise in Japan’s economy has been anemic money and credit growth.

Japanese stock and bond transactions in the first week of 2012 generated a net JPY 428 billion capital outflow after a JPY 214 billion inflow in the final week of 2011.

Retail sales in Singapore slid 0.6% in November and posted a slower 6.4% on-year increase after 8.4% in the year to October.

The seasonally adjusted euro area trade balance posted a third consecutive surplus in November, as exports rose 3.9% on month while imports stagnated.  The surplus amounted to EUR 6.1 billion after EUR 0.5 billion in October and EUR 2.5 billion in September.  The unadjusted trade deficit in January-November was EUR 15.1 billion in size after a deficit of EUR 13.0 billion a year earlier.  These shortfalls are trivial but mask huge disparities among the group’s members.  In the first ten months of last year, Germany and Holland enjoyed surpluses of EUR 129.2 billion and EUR 35.9 billion.  The French deficit was EUR 72.5 billion, 42% larger than a year earlier.  Spain and Italy ran up deficits of EUR 40.1 billion and EUR 24.2 billion, while Greece had a EUR 16.9 billion deficit.

British producer price inflation receded faster in December than expected, which is a good omen for consumer prices and the likelihood of more quantitative easing by the Bank of England beyond this month.  The producer output price index recorded its first month-on-month decline in 18 months and slowed to a 12-month increase of 4.8% from 5.4% in the year to November.  The producer input price fell appreciably to a 12-month 8.7% increase from 13.6% in the year to November.  Core PPI-I inflation slowed to 6.9% from 10.0%.

Finnish consumer price inflation slowed to 2.9% in December from 3.4% in November.  Spanish CPI inflation decelerated to 2.4% from 2.9%.  Spain’s core CPI was just 1.5% higher than a year earlier.  Hungarian consumer price inflation slowed somewhat less rapidly, printing at 4.1% after 4.3% in November.  Some of ECB President Draghi’s most strident language at yesterday’s press conference was directed at the Hungarian government, which has been lurching to a more authoritarian stance including proposed steps that would compromise the independence of that country’s central bank.

Dutch industrial production fell 1.2% on month and by 0.6% on year in November, but the Dutch trade surplus widened 46% that month to EUR 4.67 billion.  Hungarian industrial production was 3.5% greater than a year earlier in November. Finnish retail sales value and volume posted on-year advances in November of 5.3% and 1.9%.  The Finnish current account swung to a EUR 302 million surplus in November from a EUR 407 million deficit the month before.  The Czech current account surplus of CZK 6.6 billion in November was five times bigger than the October surplus.

U.S. and Canadian trade figures are due at 13:30 GMT.  Other scheduled U.S. data releases include import prices and the U. Michigan index of consumer sentiment.  Fed officials speaking today are Duke and Bullard.  As per custom, Treasury market trading will close early to start the three-day Martin Luther King birthday holiday weekend.

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

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