Euro Sinks Below $1.3000 Threshold

March 1, 2013

A new month brought a barrage of data including manufacturing PMI reports.  The U.S.-minus-Ezone PMI spread widened to 6.3 points.

Congress failed to avert sequestration in the United States.  Markets took the development calmly.

The dollar has strengthened 1.0% against sterling, 0.9% versus the Swiss franc, 0.8% relative to the yen, and 0.6% against the euro, touching a high of 1.2967 against the common European currency.  The greenback edged 0.1% higher against the Australian and New Zealand dollars and dipped 0.1% versus the euro.  The yuan is unchanged.

Stocks are down 1.1% in Italy, 0.4% in Spain and France, and 0.2% in Germany.  U.S. equities are barely changed.  in the Pacific Rim, stocks rose 1.1% in South Korea, 0.8% in Taiwan and 0.4% in Japan but declined 0.6% in Hong Kong and 0.4% in Australia.

Ten-year British gilt and German bund yields are nine and four basis points lower.  The 10-year JGB remains at a low for the move of 0.66%.

Oil prices fell 1.2% to $90.94 per barrel.  Gold drifted back 0.1% to $1576.60 per ounce.

Euroland unemployment rose to 11.9% in January from 11.8% in the previous two months and 10.8% in the first month of 2012.

Preliminary data show that Ezone CPI inflation subsided further to an in-target 1.8% in February from 2.0% in January and 2.7% in February 2012.

A 3.1% resurgence in German retail sales volume in January was the biggest monthly gain since late 2006 but followed a 2.1% decline in December.  Still, January sales exceeded their 4Q12 average level by 2.0%.

Canadian real GDP expanded just 0.6% at an annualized pace last quarter and closed out the period on a down note.  Monthly GDP fell 0.2% in December and was just 0.8% higher than a year before.  Industrial production dropped 1.1% on month and 1.5% on year in December.  GDP grew 1.8% in 2012, down from 2.6% in 2011 and 3.2% in 2010.

Japan reported that

  • Consumer prices dipped 0.1% in January and were 0.3% lower than a year before.  Excluding seasonal food and energy, the CPI was 0.7% lower than in January 2012.  This so-called core-core rate of inflation fell to minus 1.0% in Tokyo in February.
  • Real household spending advanced 1.9% on month in January and by 2.4% on year.
  • The jobless rate dipped a tenth of a percentage point to 4.2% in January.  Jobs were up 0.3% on year.
  • Capital spending fell 8.7% in 4Q, the first decline since 3Q11.
  • Motor vehicle sales were 12.2% lower than a year before in February, similar to the 12.9% drop in the year to January.

The U.S. manufacturing PMI rose 1.1 points to 54.2 in February, lifted by gains of 4.5 points in orders and 4.0 points in production.  The 54.2 reading was 6.3 points higher than Euroland’s unchanged 47.9 PMI score.

The bright spot in Euroland’s PMI results was the best orders reading since June 2011, even though such implied lessening contraction rather than outright expansion.  Among Ezone members, The 50.3 reading in Germany was a 13-month high.  France’s 43.9 was even lower than the readings for Spain of 46.8 and Italy of 45.8.  Spain’s index was a 20-month high, but Italy’s was a 3-month low.  The 49.0 Dutch reading was also a 3-month low.  Austria recorded a 2-month low of 48.3, and although the Greek score was at a 9-month high, at 43.0 it still reflected a deep manufacturing recession.  Ireland’s 51.5 represented a bounce from December’s 9-month low of 50.3.

There are two Chinese PMIs.  That by HSBC was unchanged from its preliminary estimate but down from 52.3 in January.  The government-authorized CFLP-compiled Chinese PMI reading of 50.1was at a 5-month low.  Weakness was attributed in part to the Lunar New Year holiday.

Australia’s PMI improved to an 8-month high of 45.6.

Indonesia posted a 50.5 PMI, up from 49.7.  Vietnam’s PMI fell by 1.8 points to 48.3. Taiwan’s PMI of 50.2 was 1.3 points lower than in January. 

India’s factory-sector PMI showed accelerating activity with a reading of 54.2 after 53.2 in January.  After a 22-month high of 54.0 in January, Turkey’s PMI reading of 53.5 in February was still strong.

Canada’s PMI rose 1.2 points to 51.7, while Brazil’s slid from a 22-month high of 53.2 in January to 52.5.  This is encouraging since Brazilian GDP grew just 1.4% in the year to 4Q12.  South Africa’s PMI score was 53.6, up 4.5 points from January.

Britain released one of the most disappointing PMI reports today with a recessionary 47.9 reading after 50.5 in January.  The U.K. nationwide house price index was also soft with a 0.2% monthly gain but an unchanged zero% from a year before.  Mortgage approvals reported by the Bank of England were lower than forecast.

The Polish and Czech PMI’s were a shade below the 50 no-change threshold at 48.9 and 49.9, respectively.  Hungary’s PMI, however, jumped 4.9 points to 54.0.

Sweden had a nice PMI report, showing a 50.9 reading after 49.2, but Norway’s index sank 1.8 points to 48.3 and weighed on the krone.

The Swiss PMI reading remained above 50 in February but, at 50.8, was 1.7 points below the January reading.

Finnish GDP contracted 1.5% last quarter.

U.S. personal spending edged up 0.2% as expected, but income slumped 3.6%, more than analysts were forecasting.  U.S. construction spending dropped 2.1%, which also was an unpleasant surprise.

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

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