Loads of Developments this Tuesday

January 28, 2014

The news from Europe, including fourth-quarter British GDP, higher-than-anticipated consumer confidence figures reported in both France and Italy, and Euroland’s index of leading economic indicators, has been upbeat.

Money market rates in China rose in spite of another big liquidity injection by the central bank.  China reported a sharp slowdown in the growth of corporate profits.  China’s index of leading economic indicators slid 0.2% in December.

The share price of Apple is down nearly 8% following a disappointing quarterly corporate report that flagged weaker-than-assumed I-phone sales during the holiday season and portrayed tough going ahead.

A special monetary policy meeting has been called in Turkey for late today.  There’s been somewhat of a respite in the plunge of emerging market currencies, pending the outcome of this meeting.  Turkish consumer sentiment dropped by 2.6 points on month to 72.4 in January. 

The FOMC meets today in day one of Ben Bernanke’s last meeting presiding as chairman.  Another $10 billion tapering to $65 billion is expected to be announced tomorrow.

President Obama delivers the State of the Union address at 20:00 EST tonight before a joint session of the Congress.  The eastern U.S. has meanwhile been engulfed by another blast of the Arctic Vortex

India’s central bank sprung a surprise 25-basis point interest rate hike to stem excessive inflation.

There was some good economic news reported in Australia and Japan.

The dollar rose 0.6% overnight against the yen, 0.3% versus the Swiss franc, 0.2% relative to the euro and 0.1% vis-a-vis the yuan and sterling, but the greenback also lost 0.7% against the Australian dollar and 0.6% versus the kiwi.

There was a 1.3% drop in Australia’s stock market, which had been shut Monday for Australia Day.  In other bourses, stocks fell 1.6% in Taiwan, 0.2% in Japan, and 0.1% in India, Hong Kong and New Zealand but rose by 0.7% in Singapore, 0.4% in Indonesia and 0.2% in China.  Over in Europe, share prices are higher, with gains amounting so far to 1.4% in Spain, 0.9% in Switzerland, 0.8% in Italy, 0.7% in France, 0.6% in Germany and 0.4% in Britain.

Ten-year sovereign debt yields firmed four basis points in Britain and a single basis point in Germany but eased a basis point in Japan.  Spain’s auction of 3- and 9-month paper yielded significantly lower interest rates.

The price of gold is 0.6% softer at $1,256.10 per ounce.  WTI crude oil has firmed 0.5% to $96.18 per barrel.

British GDP expanded by an as-forecast 0.7% in the fourth quarter, posting the largest on-year advance (2.8%) in over five years.  Services (0.8%), production (0.7%) and agriculture (0.5%) recorded quarter-on-quarter gains, whereas construction contracted 0.3%.  Full-2013 growth of 1.9% followed gains of 1.7% in 2010, 1.1% in 2011 and 0.3% in 2012 but left the end-2013 GDP level still 1.3% lower than in 1Q08. 

Britain’s index of service-sector activity rose 0.8% in September-November from the previous three months and by 2.3% on year.  November alone was up 2.6% on year.

Italian consumer confidence printed 1.6 points higher at 98.0 in January.  Analysts were predicting a reading of 97.  Italian wage inflation remained at 1.3% in December.

French consumer sentiment rose a point unexpectedly to 86 in January.

The Conference Board’s index of Ezone leading economic indicators recorded back-to-back advances of 0.6% in November and December, even as December’s index of coincident economic indicators slid 0.1%.

Swedish producer prices, retail sales and trade figures were released.

  • Despite a 1.2% energy-driven increase in December, on-year PPI inflation ended 2013 at a mere +0.3%.
  • The first monthly drop in retail sales volume (0.8%) happened in December, causing its year-over-year working day-adjusted increase to drop to 1.8% from 4.3% in November.  Retail sales were 3.2% greater in 4Q13 than in 4Q12.
  • The trade surplus was at NOK 1.4 billion in December and NOK 59.4 billion in 2013 after surpluses of NOK 64.4 billion in 2011 and NOK 60.7 billion in 2012.

German import prices fell 2.6% on average in 2013 following increases of 7.1% in 2010, 6.4% in 2011 and 2.2% in 2013.  Import prices dropped 2.3% in the year to December, while export prices posted a 1.0% decline in the same period. 

At Davos, ECB President Draghi had reiterated his belief that a Japanese-like deflation wasn’t coming to the euro area but reassured that drastic unconventional measures would be invoked if needed to avoid deflation.

Irish retail sales increased 0.6% in December and were 3.0% above the end-2012 level.

Japan’s small business sentiment index ticked up 0.2 points to a reading of 51.3 in January.  This was the fourth straight score above 50.0. 

Japanese corporate service prices went up 0.3% on month and 1.3% on year in December.  CSP inflation swung from negative 0.7% in 2011 and negative 0.4% in 2012 to positive 0.5% last year.

Chinese corporate profits grew 6.0% in the year to December, down from 9.7% in the year to November.  December’s result was far beneath the average 2013 increase of 12.2%.

Slightly improved business sentiment in South Korea occurred among manufacturers and non-manufacturers alike in the latest reported month.

On-year Taiwanese GDP growth accelerated to 2.9% last quarter from 1.6% in 3Q and averaged 2.2% in 2013 as a whole.

Thai factory output slumped 6.2% between December 2012 and December 2013.  The drop was somewhat greater than forecast.

The Reserve Bank of India, led by Governor Rajan, boosted the repo and reverse repo rates by 25 basis points each to 8.0% and 7.0%.  The central bank’s baseline forecasts believes that monetary restraint taken at this time and earlier will be sufficient to generate a disinflationary price trend and that if the forecast is right, near-term further rate hikes will not be needed.  The corollary that rates will be raised if the forecast is too optimistic is also implied.

Australia’s business conditions index jumped 7 points to +4 in December, which is the best level in two years.  Business confidence stayed level at +6.  According to Conference Board calculations, Australia’s index of leading economic indicators posted a smaller 0.2% increase in November following a 0.5% increase in October.  The index of coincident economic indicators went up 0.2% in each month.  The broad picture painted by these data shows continuing economic expansion over the coming half-year but at a slower pace.

Scheduled U.S. data today are durable goods orders, consumer confidence, the Case Shiller house price index, the Richmond Fed manufacturing index, and weekly chain store sales.

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

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