Hopeful Week Ending on Cautious Note

January 20, 2012

A dip in risk appetite can be seen in rise of dollar and lower commodities and European equities.  The German Dax and Paris Cac have fallen 0.5% and 0.6% from multi-month highs.  The dollar has advanced 0.4% against the euro and Swiss franc and is up 0.2% against the Australian and Canadian dollars as well as versus sterling.  The yen and yuan are steady.  The kiwi is off 0.1%.

Oil and gold prices slipped by 0.6% and 0.5% to $99.77 per barrel and $1646.80 per ounce.

Ten-year sovereign debt yields firmed two basis points in Germany, Great Britain and Japan.

There’s still no announced accord between the Greek government and its creditors over a voluntary restructuring of debt, which is a necessary precondition for Greece to get a needed loan by March 20.  French President Sarkozy urged quick action from Athens.  German Finance Minister Schaeuble made somber remarks about German growth and Italian debt.

China’s last data release before the week-long Lunar New Year celebration was downbeat.  The HSBC flash manufacturing purchasing managers index printed below 50 for a third straight month at 48.8 in January after 48.7 in December and 47.7 in November.  The output component fell by 2.4 points to 47.0.  These results suggest a further slowdown in the first quarter.

British retail sales in December were about as expected.  Volume rose 0.6% on month and 2.6% on year.  Fourth-quarter volume was only 1.4% greater than a year before.  Nominal sales growth of 6.2% between December 2010 and December 2011 was the most in almost a year.

The French index of leading economic indicators dropped 0.2% in November, while the coincident index edged 0.1% higher.

Italian industrial orders in November were 0.7% weaker than a year earlier.  Industrial sales were unchanged on month and up just 0.2% on year.

Dutch consumer spending in November was 1.2% weaker than a year earlier.  The Greek current account deficit widened 53% on month to EUR 2.3 billion in November.

German producer price inflation averaged 5.7% in 2011, most since 1982.  However, the PPI increased just 0.9% per annum in the three years between 2008 and 2011.  On-year PPI inflation slowed from 6.4% in April to 5.2% in November and 4.0% in December.  Non-energy producer prices in December were 2.0% higher than a year before.

Japan’s all-industry index, a supply-side monthly approximation of GDP, slumped 1.1% in November, more than offsetting October’s 0.8% advance.  The index in October-November was 0.4% lower than its 3Q mean level.  The all-industry index posted a 1.3% drop between November 2010 and November 2011.  Between October and November, industrial production and service sector activity contracted by 2.7% and 0.8%, respectively, while public spending was unchanged.

Japan’s November index of leading economic indicators was revised upward to 93.2 from 92.9 reported earlier this month.  The coincident index was unrevised at 90.3.

CPI inflation in Hong Kong averaged 5.3% last year and stood at 5.7% at the end of the year. Taiwanese industrial production ended 2011 8.2% below its December 2010 level.  Thailand posted a $2.1 billion trade shortfall in December. 

Australia’s terms of trade (export/import price ratio) fell last quarter as export prices contracted 1.5% while import prices went up 2.5%.  Between 4Q10 and 4Q11, however, growth of 14.3% in export prices easily outpaced the 4.7% gain in import prices.  A rising terms of trade lifts income and GDP.  In the year to 4Q10, export prices had risen 19.4%, whereas import prices dipped 1.0%.

Canadian CPI inflation slowed much more than anticipated last month to 2.3% from 2.9% in November.  CPI inflation for full-2011 also had averaged 2.9%.  Seasonally adjusted consumer prices dipped 0.2% between November and December after ticking 0.1% higher in the prior month.  The core seasonally adjusted CPI was unchanged on month in both November and December.  Core inflation slid below its target, falling to 1.9% in December from 2.1% in November.  December saw on-year increases decline in both food prices (to 4.4% from 4.8%) and gasoline to 7.6% from 13.5%.

Canada will also be releasing wholesale sales today.  The main U.S. data release today involves existing home sales.  The all-important South Carolina Republican primary is tomorrow; candidates held a debate last night.  The Bank of Mexico’s first interest rate announcement of 2012 is today, and no rate change is anticipated there.

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

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