Markets Relieved as House Approves Senate Fiscal Bill

January 2, 2013

The Japanese, Swiss and New Zealand markets remained closed, but other countries began their new year today.

The dollar hit a low of 1.3300 per euro and a high of JPY 87.36 in this first session of 2013.  EUR/YEN touched a high of 116.02.  Compared to 2012 closing levels, the dollar has risen 0.3% against the yen but lost 1.0% versus the Australian dollar, 0.9% against the kiwi, 0.8% relative to the loonie, 0.6% against the euro, 0.5% versus the Swiss franc, and 0.4% against sterling.  The greenback edged 0.1% higher against the yuan.

In the Pacific Rim, stocks soared 2.9% in Hong Kong, 1.7% in South Korea and China, 1.2% in Australia, 1.1% in Vietnam and Singapore, 1.0% in Taiwan, 0.8% in the Philippines, and 0.7% in India and Indonesia. 

In Europe, equities have so far advanced 3.2% in Spain, 2.9% in Italy, 2.2% in Germany and France, and 2.1% in Britain.

Commodities rallied.  The price of oil increased 1.2% to $92.92 per barrel.  Gold rose 0.4% to $1682.7 per ounce after posting its smallest gain in years during 2012.

Ten-year sovereign bond yields leaped twelve basis points in Britain and Germany.

The Republican-controlled House of Representatives approved the Senate tax bill by a vote of 257-167 but with only a minority of Republican support.  The senate’s vote (89-8) had been much more bipartisan.  Republicans are bemoaning that the deficit has not been addressed, but the reaction of financial markets around the world shows clear relief.

Many manufacturing purchasing manager surveys for the month of December were released today.  Results were mixed.

  • Euroland’s revised PMI printed at a 2-month low of 46.1, down from a flash reading of 46.3 and a November score of 46.2.  Within the common currency area, Ireland was again the only nation with a reading above the 50 no-change threshold, and Ireland’s 51.4 score was down a full point and at a 4-month low.  Germany’s 46.0 was at a 2-month low.  So was Austria’s 48.1 reading and the Spanish and Greek scores of 44.6 and 41.4.  The readings for France of 44.6 and Italy of 46.7 were at 4-month highs, however, and the Dutch reading of 49.6 constituted a 3-month peak.
  • Britain’s 51.4 manufacturing PMI was much better than forecast, 2.3 points above the November result, and better than the 2012 average score of 49.2, but a sub-50 average of 49.5 in the fourth quarter suggests that manufacturing still contracted last quarter.
  • Sweden posted a 44.6 PMI, 1.4 points higher than in November and signaling the slowest contraction since September.
  • The Danish PMI advanced to 57.0 from 56.6 in November.
  • Hungary’s 48.9 joined the sub-50 readings of August and October.  Above-50 results occurred in the alternate months of July, September, and November.
  • The Czech PMI of 46.0 was very disappointing and unexpected after 48.2 in November.  46 was the worst result since July 2009.
  • Poland’s PMI edged 0.3 points higher to 48.5, best since July.
  • Australia’s PMI manufacturing survey produced an unchanged and weak reading of 44.3, the tenth sub-50 score in a row.
  • South Korea’s 50.1 exceeded 50 for the first month since May. 
  • Taiwan’s 50.5 also was above 50 for the first time since May as well as 3.2 points better than the November result. 
  • Investors were encouraged by China’s government-sponsored CFLP purchasing managers survey, which at 50.6 was above the 50 no-change threshold for a third straight time.
  • Indonesia’s PMI slid to 50.7, a three-month low, from 51.5 in November.
  • Vietnam posted a 49.3 reading, down from a PMI manufacturing score of 50.5 in November.
  • India’s PMI improved to 54.7 from 53.7 in November and 52.9 in October.  It was the best score since June.  Many countries seem to be heading into 2013 on a firmer footing, of which India is one.  The aversion of a U.S. fiscal cliff should lend this improvement further momentum.
  • The Turkish manufacturing PMI was 53.1, up from 51.6 and at a 14-month peak.

German consumer prices rose 0.9% on month in December and by 2.1% in on-year terms.  Inflation in Hesse, Saxony, and Bavaria was even higher at 2.2%.

Australian M3 money growth slowed to a 12-month increase in November of 7.3% from 7.6% in October.  Australian commodity prices were 8.0% lower than a year earlier in SDR terms in November.

Thai consumer price inflation accelerated from 2.7% in November to 3.6% last month, but core inflation of 1.8% remained below 2.0%.  Indonesian CPI inflation held steady at 4.3%, with a core pace still marginally above 6.0%.

China’s index of leading economic indicators dipped 0.2% in November.

Turkish consumer confidence improved sharply in December.

South Korea’s $2.0 billion trade surplus last month was less than half as large as November’s surplus and well below forecasts.  Indonesia’s trade deficit narrowed considerably in November.  GDP rebounded a shade more than forecast last quarter, averting a technical condition of recession.

The U.S. manufacturing purchasing managers survey will be released at 15:00 GMT.  Construction spending data also arrive.

Copyright 2013, Larry Greenberg.  All rights reserved.  No secondary distribution without express permission.

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