Christmas Break

December 25, 2012

Financial markets are closed today throughout Europe and in the United States, Canada, Australia and New Zealand.  The most notable exception was Japan, which opened after a three-day weekend observing the Emperor’s birthday.  Many places will stay shut for Boxing Day tomorrow, such as Britain, Hong Kong, Australia, Canada, Greece and Italy.

In Japan, an LDP-led coalition with New Komeito will be installed Wednesday.  Incoming Prime Minister Shinzo Abe will unveil his cabinet tomorrow and reiterated the firm intention to mandate a 2% inflation target next month.  If BOJ leadership is unwilling to do this, the central bank law will be changed to make it so.  The LDP was voted back into power by a landslide margin and seemingly has the mandate to impose a much easier monetary policy stance.  The terms of Bank of Japan Governor Shirakawa and the two deputy governors expire in March, and Abe appoints their replacements.

Japanese corporate service prices rose 0.2% in November, the first monthly increase since April.  On-year CSP deflation lessened to minus 0.4% from minus 0.7% in October.  There was a seasonal 1.8% monthly increase in advertising costs.  Transportation service prices also posted a monthly advance.

Dollar/yen touched 84.965 overnight, the dollar’s highest level since April 11, 2011, but is 0.1% softer on balance at present.  The U.S. currency has also edged down 0.2% against the Swiss franc and 0.1% versus the euro and Aussie dollar.  The greenback shows no net change against the loonie, kiwi or sterling.

The Japanese Nikkei-225 advanced 1.4% and is back above the 10K threshold in response to the shift in Japanese demand management.  Share prices climbed 2.8% in China.

Gold prices, up 0.2% at $1663.15 per ounce, got a nudge from the incoming Japanese government’s intention to impose pro-growth monetary and fiscal policies.

Oil prices edged 0.1% lower.  The 10-year Japanese JGB yield of 0.77% is unchanged.

The Bank of Israel cut its benchmark interest rate by 25 basis points to 1.75%.  Such was the fourth such cut of 2013 and results in the lowest level since September 2010.

The U.S. fiscal cliff remains an ongoing concern.  U.S. holiday shopping this year appears to have posted a gain on 2011 but not as large an advance as hoped.  GDP growth of 2.6% between 3Q11 and 3Q12 was a percentage point better than the 1.6% increase between the third quarters of 2010 and 2011.

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

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