Calm before U.S. Sequestration
February 28, 2013
It doesn’t look like the sequestration, across-the-board U.S. federal spending cuts, will be averted.
But equities are doing well, with overnight gains of 3.0% in China, 2.0% in Hong Kong, 2.7% in Japan, 1.7% in Indonesia, 1.6% in the Philippines, and 1.3% in Australia. In Europe, the Dax and Spanish Ibex are 0.8% higher. The British Ftse, Paris Cac and Italian MIB are up 0.4%, 0.3%, and 0.2%. U.S. stocks opened higher on mixed news.
U.S. real GDP didn’t get revised upward as much as assumed. GDP edged up 0.1% at an annualized rate last quarter. Net foreign demand accounted for just 0.24 percentage points (ppts) of growth, and inventories exerted a 1.55 ppt drag. Government spending slumped 6.9% and depressed GDP by 1.38 ppts. Government spending fell 1.7% in 2012 and 3.1% in 2011 after just a 0.6% rise in 2010 – and all this is before the sequestration.
In other U.S. news, however, jobless insurance claims declined 22K last week to 344K, and the Chicago and Milwaukee purchasing manager indices rose by 1.2 and 5.2 points to 56.8 and 56.5, respectively. The Chicago score is an 11-month high.
The dollar is narrowly mixed with losses against commodity-sensitive currencies of 0.5% versus the kiwi, 0.4% relative to the Aussie dollar and 0.3% against the loonie, but gains of 0.3% against the euro and 0.2% versus the Swiss franc. Sterling and the yuan edged up 0.1% against the dollar.
Gold is down 0.4% at $1589.70 per ounce. Oil is 0.1% firmer at $92.81 per barrel.
The British 10-year gilt yield is up a basis point, and the 10-year Japanese JGB slid another basis point to 0.66% after Prime Minister Abe made his BOJ leadership team officials. He wants Kuroda to be governor with Iwata and Nakaso as deputy governors. All the choices had been rumored. All support an aggressively stimulative policy to promote growth and eradicate deflation.
Released Japanese data showed
- A 1.0% increase of industrial production in January, prompting an upgraded assessment to “has bottomed out and shows signs of picking up.”
- The manufacturing PMI went up 0.8 points in February to 48.5.
- Housing starts were 5.0% greater in January than a year before, but construction orders posted a 3.7% drop after a 4.8% on-year rise in December.
- Motor vehicle production was 9.9% lower than in January 2012, but such had dropped 17.2% in the year to December.
Ezone harmonized CPI inflation remained at 2.0% in January, but core inflation slid to 1.3% from 1.5% in December.
German consumer prices rose 0.6% in February, but the 12-month inflation rate slowed to 1.5% from 1.7% in January. German unemployment dropped 3K this month, but the 6.9% unemployment rate marginally exceeded expectations because the prior month was revised upward from 6.8%.
French consumer spending dropped 0.8% last month, flipping from a 0.2% rise in December. Producer prices in France were 0.5% higher in January.
Greek retail sales ended 2012 8.5% below the December 2011 level. Spanish GDP posted a quarterly and on-year drop in 4Q of 0.8% and 1.9%. Spanish consumer prices rose 2.7% in the year to February.
Swiss consumer prices were 0.1% lower in January than a year before. Swiss GDP rose 0.2% in the fourth quarter and by 1.4% from 4Q11, surpassing analyst expectations.
There’s been a rumor that the Netherland’s’ triple A sovereign debt rating is in jeopardy.
In New Zealand, building permits dropped 0.4% in January, the business sentiment index climbed over 16 points to a 39.4 reading, and M3 growth accelerated to 6.4% in January from 6.0% in December. Australian private credit growth remained at a 3.6% 12-month pace in January, but investment last quarter declined at a faster 1.2% than had been imagined and at the quickest rate since the second quarter of 2009. Australian home sales rose 4.2% in January.
South Korean industrial production was 7.3% higher than a year before in January, while its Thai counterpart showed a 10.1% increase. GDP in India slowed from 6.0% in 4Q11 to 4.5% in the year to 4Q12.
Canada’s current account deficit in 4Q12 of C$ 17.26 billion was similar to those of C$ 17.92 billion in the second quarter and C$ 18.04 billion in the third quarter.
Copyright 2013, Larry Greenberg. All rights reserved. No secondary distribution without express permission.
Tags: Canadian current account, foreign exchange, Japanese industrial production, Kuroda