Investors More Upbeat on Two Developments

February 25, 2013

It does not look like Berlusconi did well in Italian parliamentary elections, which end today.  The three-time former center-right prime minister and opponent of externally imposed austerity needed a strong voter turnout, and such has been smaller thus far than expected.

European stocks in response have jumped sharply by 2.3% in Germany, 2.1% in Italy, 1.6% in Spain, and 1.5% in France. 

Today’s other big political development is a weekend press report that Japanese Prime Minister Abe has settled on ADB President Harukira Kuroda to be his nominee for the next Bank of Japan Governor and will nominate first runner-up Iwata and Nakaso as the two deputy governors.  Kuroda is more dovish than Muto but somewhat less radical in his ideas than Iwata.  He’s used to running a large organization as ADP Pdt since 2004, has strong communicative skills including English fluency, and has prior extensive experience at the Ministry of Finance.  When he was in charge of currency matters, the dollar averaged 116.8 yen, and he believes such a level is more appropriate than the current level.  The yen hit a new 33-month low after this story broke of 94.60 but shows a 93 per dollar handle at the moment.

The Nikkei, which thrives on weak-yen policies, closed 2.4% higher.  In other share price action, stocks rose 1.0% in Indonesia, 0.8% in Australia and the Philippines, 0.6% so far in Britain, 0.3% in New Zealand and China, and 0.2% in Hong Kong.  But equities fell 0.5% in Taiwan and South Korea.

The dollar is 0.7% softer against the euro but 0.4% stronger against the yen.  The greenback has lost 0.5% against the Swissie and 0.4% versus the kiwi but risen by 0.2% relative to the Canadian dollar and sterling.  The Aussie dollar and Chinese yuan are unchanged against the U.S. currency.

10-year sovereign debt yields firmed two and one basis points in Britain and Germany but dipped two bps in Japan.  Italy’s 2-year debt auction went well.

Commodities have been well bid.  Both WTI oil and gold shot up 1.2% to $94.26 per barrel and $1591.80 per ounce.

China’s HSBC-compiled purchasing managers index for manufacturing unexpectedly fell to a four-month low of 50.4 in February from a two-year peak of 52.3 in January.  Foreign orders contracted.  Chinese fuel prices were raised for the first time since September.

Japanese corporate service prices slid less in January (0.2%) than in January of 2012, trimming the 12-month rate of decline to 0.2% from 0.4% in December.

Hong Kong posted a HKD 27.4 billion trade deficit in January, well below Decembere’s HKD 48.0 billion deficit but also well above the shortfall of HKD 8.86 billion in the first month of 2012.  On-year import growth of 23.9% exceeded the gain in exports of 17.6%.

In Singapore, CPI inflation slowed to 3.6% in January, lowest in 27 months, from 4.3% in December.  Singapore’s government projects a 2013 fiscal surplus of about 1.1% of GDP.

Britain’s Chancellor of the Exchequer Osborne rejected an watering down of his austere fiscal strategy in the wake of Friday’s news that Moody’s had downgraded U.K. sovereign debt to Aa1 from a triple A rating previously.  The ratings outlook was classified as stable.

According to British Bankers Association data, mortgage approvals totaled 32,288 last month, less than forecast as smaller than the 33.4K amount in December.

Early repayments of the second 3-year ECB LTRO was smaller than the repayment pace associated with the earlier first 3-year LTRO.

Finnish PPI inflation slowed to a six-month low of 0.7% in January versus 1.5% in December.  Greece posted a EUR 1.1 billion trade deficit in December after a EUR 0.9 billion shortfall in November.  Retail sales posted a 2.1% 12-month drop in December in Hungary but a 3.1% on-year rise in January in Poland.  Poland’s jobless rate crested further to 14.2% in January from 13.4% in December.  The composite Czech economic climate index improved 1.6 points to a reading of minus 2.6 in February.  Business confidence there rose 0.6 points to 2.3.

The latest Chicago Fed National Activity Index arrives today, and so does the Dallas Fed manufacturing indexMark Carney, the Governor of the Bank of Canada who takes over the reins in July of the Bank of England, will be testifying in Canadian parliament today.  The Bank of Israel is not expected to change its key interest rate at today’s monthly announcement.

Argo won the Oscar for best picture of 2012.

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

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