Markets in an Unsettled State of Mind

January 30, 2012

Two developments have not happened that were presumed likely by this point, and the appetite for risk has fallen.  EU leaders are meeting in Brussels with the intent of hammering out details for enforceable fiscal discipline and an enlarged bailout fund.

  • China reopened after a week-long holiday closure, but monetary policy there was not eased further.
  • Greece failed to reach a final accord with private creditors on a debt restructuring.

Stocks fell by 2.2% in India, 1.8% in Indonesia, 1.7% in Hong Kong and China, 1.2% in South Korea, 1.0% in Singapore, 0.8% in The Philippines, 0.5% in Japan, and 0.4% in Australia.  In Europe, share prices have sagged 1.0% in Paris, 0.9% in London, and 0.7% in Frankfurt.

The yields on 10-year British gilts and German bunds fell by seven and six basis points.  The comparable JGB dipped another basis point to 0.96%.

Gold and oil prices dropped 0.8% and 0.6% to $1721.90 per ounce and $98.99 per barrel.

The dollar and yen moved higher in tandem by 0.8% against the Australian dollar, 0.7% versus the euro and Swiss franc, 0.5% relative to the kiwi, 0.3% against the loonie and sterling, and 0.1% against China’s yuan.

Euroland sentiment indices for January were released.  Several figures from 2011 were also revised.  The business climate index rose .11 points to minus 0.21.  Such had bottomed out in November at minus 0.42, but the index remains well below its February 2011 reading of 1.43.  Overall economic sentiment improved by a smaller-than-forecast 0.6 points to 93.4 in January, remaining below November’s reading of 93.5.  This was the first monthly increase since the index was at 107.6 last February.  Industrial confidence failed to improve, instead remaining at December’s minus 7.2.  Consumer sentiment ticked up 0.6 points but remained at a very depressed level of minus 20.7.  Sentiment in services increased 2.0 points to negative 0.6, but the mood in retail worsened by 3.3 points to minus 15.5.  Construction, which was weaker than minus 25.0 all last year, picked up 0.6 points to negative 28.3.

Five German states have now reported January consumer prices.  The preliminary estimate is based on the readings of six states.  Four of the states reported a monthly dip of 0.4%, and the other state had a 0.3% month-on-month decline.  The data suggest that inflation will be a tenth percentage point higher than forecast.  Core German inflation is lower than 2.0%.  German real wholesale sales rose 1.6% in the year to 4Q11 and by 2.5% in 2011 as a whole.

Spanish real GDP fell 0.3% last quarter and posted a rise of only 0.3% from the final quarter of 2010.  The quarterly contraction was the first in eight quarters, but growth for 2011 as a whole amounted to merely 0.7% in Spain.  Spain is now in recession and will remain so this year.

Italian business sentiment plumbed to a 26-month low of 92.1 in January from 92.5 in December and a high of 103.5 last March.  Prime Minister Monti will be meeting today before the EU summit with his German and French counterparts.  President Sarkozy of France proposed a hike in French value added taxation.

Dutch producer prices fell 0.2% in December and to a 12-month 6.1% advance from 7.8% in the year to November.  Portuguese consumer confidence weakened further in January, printing down 0.3 points at negative 57.1.  Icelandic PPI inflation slowed to 6.7% at end-2011 from 8.4% in November and 12.8% in October. 

Britain’s Hometrack house price index was unchanged this month and down 1.6% on year, the smallest 12-month rate of drop since December 2010.

Filipino GDP advanced by a considerably stronger-than-forecast 0.9% in 4Q11.  GDP was also 3.7% higher than a year earlier.

According to the Bank of New Zealand’s monthly index, service sector activity slowed to a crawl in December.  South Korea’s $3.96 billion current account surplus in December was the smallest since September and 13.2% narrower than in November.

U.S. personal income and spending figures will be released by the Commerce Department today.  The Dallas Fed manufacturing index also arrives.  Colombia’s central bank will be making an interest rate announcement.

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

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