Eye on the U.K.

January 23, 2013

Sterling hasn’t reacted much to news out of Britain, edging 0.1% higher against the dollar.

  • Prime Minister Cameron’s delayed speech on Britain’s relationship to the EU promised an in/out referendum by December 2017 if Conservatives are reelected.  He like Britain to stay in the EU but only if the rules of its relationship to the group can be renegotiated.
  • Published minutes from the Bank of England’s January 9-10 meeting of the Monetary Policy Committee speak of a “modest improvement” in the global environment but are more ambivalent in discussing the domestic economy.  There was little appetite for boosting quantitative stimulus at this time.  Only David Miles wanted such as a means to soften sterling.
  • A speech by Bank of England Governor King reiterated a readiness to stimulate further in the future if that becomes necessary.  King’s term ends around midyear, and he will be succeeded by Mark Carney, who’s the current Governor of the Bank of Canada.
  • U.K. monthly labor statistics were better than forecast.  The claimant count of unemployment fell by 12.1K last month on top of an 8.6K drop in November and was 40.5K lower than at the end of 2011.  The 7.7% ILO-basis jobless rate in September-November was down from 7.9% in the previous 3-month period.  Average worker earnings in September-November were 1.5% higher than a year earlier, down from and increase of 1.7% in June-August.

In the wake of Tuesday’s announced Bank of Japan decisions, which disappointed investors, Japanese financial markets showed the most stirring overnight.  The yen advanced 0.4% against the dollar.  The Nikkei plunged 2.1%, and the 10-year JGB yield edged a basis point higher.

The monthly economic assessment of Japan prepared by the government revealed the first upgrade since May.  While repeating that the economy shows weakness recently due to a deceleration of the world economy, the latest assessment adds that “signs of a bottoming out can be seen in some areas.”  In that regard, industrial production, business sentiment and personal consumption are cited.  The Bank of Japan’s assessment also was modestly upgraded.

The U.S. currency has fallen 0.2% against the kiwi and 0.1% versus the euro, Swissie, sterling and loonie.  The dollar is unchanged against the Chinese yuan and 0.1% firmer relative to the Australian dollar.

Share prices declined 0.8% in South Korea, 0.2% in the Philippines and Taiwan, and 0.1% in Hong Kong.  Equities rose 0.4% in China and Singapore and 0.2% in Australia and India.  In Europe, the German Dax and British Ftse are 0.3% and 0.2% higher, but stocks have eased 0.5% in Italy and 0.2% in France and Spain.

The 10-year German bund and British gilt yields are unchanged.  So is WTI oil at $96.68 per barrel.  Gold slipped 0.1% to $1692.40 per ounce.

Australian fourth-quarter CPI data showed less inflation that anticipated, in turn kindling hope from Treasurer Swan not to mention investors that the central bank has flexibility to cut interest rates further.  Overall consumer prices rose 0.2% sequentially and was 2.2% higher than in 4Q11.  Core inflation on both a trimmed mean basis and a weighted median basis ended last year at 2.3%, closer to the target floor than ceiling.

The MI-Westpac index of Australian leading economic indicators rose 0.6% in November following a 0.1% uptick the month before.

Taiwanese industrial production fell 0.6% on month in December and was just 2.4% greater than a year earlier.  That was a much smaller 12-month rate of advance than analysts were anticipating and followed a 5.9% rise in the year to November.

Malaysian consumer price inflation ticked down 0.1 percentage points to 1.2% in December. Singapore CPI inflation of 4.3% last month exceeded forecasts of 4.3%.  Thailand exports and imports posted on-year growth in December of 13.5% and 4.7%.  South Korea’s finance minister complained that recent won gains were excessive.

China’s index of leading economic indictors rose 0.4% in December according to the Conference Board.  That was less than increases of 1.6% in October and 1.1% in November.  The coincident index advanced 0.7%, only half as much as in November.  China’s economy does not seem to be rebounding quite as soundly as hoped.

French business sentiment surprised analysts with a 3-point decline to a reading of 86 in January.  a 90 score had been forecast.

The Swiss ZEW expectations index, a gauge of investor confidence, rose 8.6 points to a reading of minus 6.9 this month.  Italy’s current account swung to a EUR 683 million surplus in November from deficits of 250 million euros in October and EUR 3.44 billion in November 2011. 

Danish consumer sentiment recovered to a score of minus 2.7 in January after dropping 3.4 points to negative 4.7 in December.  Wage inflation in Iceland eased to 4.7% last month from 5.0% in November.

The Bank of Spain believes that country’s recession intensified last quarter, with GDP probably falling 0.6% from 3Q and by 1.7% on year.

The Bank of Canada makes its first scheduled interest rate announcement at 15:00 GMT today and is not expected to change its 28-month-old stance.  An update of the Monetary Policy Report will be released later and accompanied by a press conference.  Weekly U.S. chain store sales and mortgage applications figures arrive today.  So does the preliminary estimate of Ezone consumer confidence and updates to the IMF’s World Economic Outlook.  In Davos, Switzerland, the annual World Economic Forum conference began today and will run through Saturday.

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

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