More Signs of Europe Improving

January 9, 2014

The dollar is narrowly mixed ahead of the ECB press conference.  The Bank of Korea and Bank of England already have announced unchanged policy stances.  The dollar is up 0.3% against the Australian dollar, 0.2% versus the kiwi and loonie and 0.1% relative to the yuan and yen but has eased by 0.2% against the euro and 0.1% versus the Swiss franc and sterling.

Share prices mostly fell in Asia but are higher in Europe.  In the former, stocks closed down 1.5% in Japan, 0.9% in China and Hong Kong, 0.7% in South Korea, 0.8% in the Philippines, 0.2% in Singapore, 0.5% in Taiwan and 0.1% in India.  Equities rose 0.7% in New Zealand and 0.2% in Australia, and European markets show gains thus far of 1.3% in Milan, 1.2% in Madrid, 0.4% in Frankfurt, 0.3% in London and 0.2% in Paris.

The ten-year British gilt, German bund and Japanese JGB yields are steady.

WTI crude oil has firmed 0.3% to $92.60 per barrel.  Gold has edged 0.1% higher to $1,226.90 per ounce.

The Bank of England left its Bank Rate at 0.5% and made no change in the GBP 375 billion limit on its asset purchase plan.  The decision was based on its forward guidance, and minutes of this month’s meeting will be published on January 22.

The Bank of Korea’s 2.5% seven-day repo rate was retained.  It’s been at that level since a 25-bp cut last May.  Inflation is below target, but growth this year is projected to be nearly as strong as 4%.

Euroland’s economic sentiment index rose in December by a greater-than-anticipated 1.6 points to 100.0.  Such has returned to its long-term mean for the first time in 29 months.  Construction sentiment improved 3.6 points to minus 27.1.  Consumer confidence was 1.8 points better at minus 13.6, albeit matching the flash estimate.  Industrial sector sentiment went up 0.5 point to -3.4.  Retail sentiment was 2.7 points less negative at -3.4, and service sector confidence climbed 1.1 points to 0.2.  The business climate index dipped 0.04 points, however, to a reading of 0.27 in December.

German industrial production increased 1.9% in November, more than reversing October’s 1.2% drop.  the 12-month rate of increase of 3.5% was three times greater than that seen in the year to October.

While Britain’s merchandise trade deficit in November of GBP 9.439 billion was near analyst expectations and close to October’s GBP 9.651 billion imbalance, the goods and services deficit of GBP 3.238 billion was some 40% larger than forecast yet its smallest size since August.  October’s deficit amounted to GBP 3.496 billion.  Between October and November, merchandise exports rose 2.0%, and imports went up 0.8%.

Chinese CPI inflation fell in December by 0.5 percentage points to 2.5%, lowest since May.  Food accounted for the bulk of the improvement, which surpassed analyst expectations.  Producer prices, down by an unchanged 1.4% on year, posted a 12-month drop for the 22nd month in a row.

Australian retail sales outperformed expectations for a fourth straight month in November, climbing 0.7% from October’s level and 4.6% in on-year terms.  Consumer confidence seems to be reviving in Australia, thanks in part to monetary relief.  While Aussie building permits fell 1.5% in November, they were 22.2% greater than a year earlier.  New Zealand building permits recorded their largest on-month advance, 11.1%, since April.

Consumer confidence slid 1.6 points in Thailand last month to a reading of 73.4. Malaysian industrial output climbed 1.3% in November and was 4.4% greater than a year earlier.  South African factory output recorded small 0.3% increases both on month and on year in November.

Greek unemployment pushed up 0.1 percentage point to yet another record high in October of 27.8%.  Greek industrial output fell 6.1% between November 2012 and November 2013. 

Czech GDP growth in the third quarter was revised upward and back into the black.  Such rose 0.2% following a 0.3% increase in 2Q.  On-year GDP growth remained quite negative, however, at minus 1.2%.  The Czech jobless rate in December matched analyst forecasts of 8.2%.  Czech CPI inflation edged up 0.3 percentage points to 1.4% in December.

The French trade deficit widened 17.6% on month in November to EUR 5.68 billion.  Portugal’s EUR 2.62 billion trade gap that month was 10% smaller than in October.  Other announced November trade balances amounted to deficits of 296 million euros in Cyprus and 390 million euros in Romania and an 804 million euro surplus in Hungary

Norwegian retail sales, excluding petrol, rose 0.5% in November and 1.2% from a year earlier.  Dutch CPI inflation accelerated to 1.7% in December from 1.5% in November.  And Denmark reported a DKK 12.1 billion current account surplus for November.

The ECB Governing Council just announced no changes in its interest rate structure.  Draghi’s press conference begins at 13:30 GMT.

Weekly U.S. jobless insurance claims data get released at the same time.  Canada will report housing starts and permits plus home price figures.  Kocherlakota and George, presidents of the Minneapolis and Kansas City Feds, speak publicly today.  Peru will announce its latest monetary policy decision.

Copyright 2014, Larry Greenberg.  All rights reserved.  No secondary distribution without express permission.

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