Euro Hits some Bumps in the Road

February 4, 2013

The dollar has climbed 0.5% against the euro, 0.4% against the Swiss franc, and 0.1% versus the yen and yuan.  It is also down 0.3% against the Aussie dollar, 0.2% versus the kiwi and sterling, and 0.1% against the loonie.

Spanish Prime Minister Rajoy, who meets with German Prime Minister Merkel today, is snared in a widening corruption scandal.  Italian opinion polls ahead of this month’s election show mounting support for former Prime Minister Silvio Berlusconi, who would rescind some austerity tax hikes and other measures that have gained Italian fiscal policy respect in the market under the Monti government.  Concerns over these two developments have lifted peripheral sovereign debt yields in Euroland to one-month highs.

Japanese Finance Minister Aso made more remarks to promote a weakening yen.

The ten-year British gilt and Japanese JGB yields advanced by six and four basis points.  The 10-year bund yield is a basis point higher.

Share prices have dropped in Europe after mixed movements in the Pacific Rim earlier.  Stocks have slumped by 1.8% in Italy and 1.2% in Spain.  Other losses amount to 0.7% in France, 0.5% in Britain, and 0.4% in Germany.  Japan’s Nikkei, which rises every time a government officials disparages the yen, closed up another 0.6%, and stocks advanced by 1.9% in the Philippines and 0.9% in Taiwan.  Equities fell 0.3% in Australia and 0.2% in India and Hong Kong.

The price of WTI crude oil settled back 0.8% to $97.01 per barrel, while gold dipped 0.3% to $1665.80 per troy ounce.

J.P. Morgan’s global manufacturing purchasing managers index printed at 51.5 in January, up from 50.1 in December and 49.6 in November.

The British construction PMI remained at 48.7 in January, lowest since mid-2012 and down from 50.9 in October.

China’s non-manufacturing government-authorized purchasing managers index edged up a tenth of a point to 56.2 in January. It was the 4th improvement of the index in a row and the 11th straight reading above the 50 expansion-or-contraction threshold.

Saudi Arabia’s non-oil purchasing managers index printed in January at 58.1, in between December’s 58.3 reading and November’s 57.0 score.  58.1 connotes considerable buoyancy.

The Sentix gauge, a measure of investor sentiment toward the euro area, continued to improve in February with a reading of negative 3.9 following minus 7.0 in January, minus 16.8 in December and minus 18.8 in November.  February’s was the best result in over a year.

Ezone producer prices slid 0.2% on month for the second straight time in December and also matched November’s 12-month 2.1% rate of increase.  Non-energy producer prices were unchanged on month and up only 1.6% from December 2011.

German new car sales were 8.5% lower in January than a year earlier.  A private survey in the U.K. revealed stronger business sentiment this quarter than in the final quarter of 2012 and suggests that GDP growth will return to the black at the start of 2013. 

Japan’s monetary base was 10.9% greater in January than a year earlier, reflecting the BOJ’s increasingly aggressive quantitative easing.  The base advanced 7.0% in 2012, however, which was less than a gain of 15.2% in 2011.

Australian building permits fell 4.4% in December, resulting in a reduced 9.3% 12-month increase after a climb of 14.1% in the year to November.  Aussie job ads dropped 0.9% in January (18.4% on year) after sliding 2.8%, reflecting further weak labor market demand.  The MI-TD measure of inflation expectations edged up to 2.5% from 2.4% in December.  The Reserve Bank of Australia kicks off a week tomorrow of key central bank policy meetings.  Analysts want to see how dovish the statement is and whether there is an easing move.

New Zealand commodity prices rose 0.3% on year in January.  South African motor vehicle sales growth accelerated to a 12-month increase in January of 14.1% following a gain of 1.8% in December.

Turkish consumer price inflation climbed to a 3-month high of 7.3% in January from 6.2% in December.  PPI inflation eased to 1.9% from 2.5%, however.

The New York area PMI, known as the NAPM index, gets released today, along with U.S. factory orders.  Italy’s upcoming election, the ECB press conference this Thursday, and a meeting of G20 central bank chiefs and finance ministers in Moscow at mid-February are attracting increasing attention.

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

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