Upbeat Investor Mood as Britain Reports Resilient Retail Sales

February 17, 2012

Risk appetite has been evident.

  • The dollar overnight eased 0.6% against the kiwi, 0.2% versus sterling, and 0.1% relative to the Australian and Canadian dollars.  EUR/USD is steady.  So is the Chinese yuan.  The yen lost 0.3% against the greenback, which edged above JPY 79.0.
  • Share prices in the Pacific Rim jumped 2.4% in The Philippines, 1.6% in Japan, 1.3% in South Korea, Indonesia and Pakistan, and 1.0% in Hong Kong.  Stocks also gained 0.9% in Thailand and 0.8% in Singapore and India.
  • In Europe, the Paris Cac and German Dax are 1.0% and 0.9% higher, while the British Ftse has risen 0.4%.
  • Oil and gold prices increased by 0.4% and 0.3% to $102.75 per barrel and $1733.70 per ounce.
  • While the 10-year British gilt yield increased four basis points, German bunds and Japanese JGBs are unchanged.

British retail sales climbed 0.9% in January, a sharp contrast from expectations of a slight decline.  Sales were 4.4% greater than a year earlier and up 2.0% in volume terms.  In the three months to January, sales advanced 1.6%, the same resilient pace as in the prior three months to October, and such exceeded sales a year earlier by 5.0%.  Non-auto retail sales performed somewhat better than total sales, rising by 1.1% in value and 1.2% in volume during January.

Construction output in the euro area posted a second straight monthly increase in December, rising 0.3% and recording a 7.8% gain from a year earlier.  Output nonetheless fell by 1.8% last quarter (7.2% annualized).

There was some reassuring news on the Greek debt front.  Reports surfaced that the euro group of top finance ministry officials, which meets Monday, are considering a reduction of the interest rate on new aid to Greece and some other outside-the-box actions to meet the additional help for Greece that will be needed.  China’s central bank is said to have purchased some Spanish debt in a show of support for resolving the euro debt crisis. 

Because of the resignation of German President Wulff over improper personal matters, Chancellor Angela Merkel canceled today’s planned trip to Italy and talks with Prime Minister Monti. 

Japanese Prime Minister Noda formally proposed that the sales tax be doubled to 10%.  Minutes from the Bank of Japan’s January 23-24 Policy Board meeting foreshadowed the easing of monetary policy undertaken at the February meeting earlier this week.  Much concern was expressed about the strong yen’s potential for depressing business confidence and Japan’s stock market.  Yen strength was blamed not only on the euro debt mess but also easier monetary policy at other key central banks.  Some Board members advocated better communication of the BOJ’s stance.  It is hoped that the clarification of the 1% inflation objective will accomplish such.

German producer price inflation was stronger than assumed in January.  The PPI increased 0.6% on month and 3.4% on year.  Non-energy producer prices went up 0.4% and by 1.8% from a year earlier.  Energy producer price inflation subsided to 7.3% from 8.3% in December.

Euroland’s current account posted only the second seasonally adjusted surplus of 2011 in December, amounting to EUR 2.0 billion.  The other surplus occurred in September.  For 2011 as a whole, however, the current account deficit narrowed to only EUR 30.6 billion (0.3% of GDP) from EUR 45.7 billion in 2010.  Euroland had a "Basic" surplus (current account plus direct investment and portfolio investment) of EUR 192 billion in 2011, 3.4 times greater than in 2010.

Greek CPI inflation slowed to a five-month low of 2.1% in January from 2.2% in December.  Portuguese PPI inflation ticked up to 4.6% last month from 4.4% at end-2011.  Austrian producer prices fell 0.5% on month in January and to a 2.2% twelve-month rate of rise from 2.3% in December.  Spain’s index of leading economic indicators increased by 0.3% in December, but the index of coincident indicators slid another 0.2% in the month.

Singapore’s trade surplus in January was 83.6% smaller than in December.  An early Chinese New Year was a factor in the drop.  South Korea’s index of leading economic indicators recovered 0.4% in December from a 0.9% drop in the prior month.

Brazilian unemployment climbed to 5.5% in January, a shade more than forecast, from 4.7% in December.

Canadian consumer prices accelerated in most respects in January.  The 12-month rise in all consumer prices of 2.5% compared to 2.3% in December.  Core inflation ticked higher to 2.1% from 1.9% in December.  Energy was 6.5% above a year ago (including 6.8% for gasoline) after a 12-month 6.0% increase in December.  In seasonally adjusted on-month terms, the CPI rose 0.5% last month after dipping 0.2% in December.  Core climbed 0.3% following a 0.1% dip, and food went up 0.3% versus a 0.2% gain in December.

U.S. consumer prices and index of leading economic indicators (LEI) will be released today.  Canada  reports its LEI, too.  The U.S. Treasury market will observe an early close for the long President’s Day holiday weekend.

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

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