Poor European Data Throw Investors into a Risk-Off State of Mind

January 31, 2014

Share prices lost yesterday’s traction and have so far fallen 1.3% in Germany, 1.1% in France, 1.0% in Britain, Switzerland and Spain, and 0.9% in Italy.

Most Asian bourses were shut for the Lunar New Year.  The celebrations of the Year of the Horse last five days in China.

Japan’s Nikkei lost another 0.6%, falling beneath 15,000.  Stocks edged up 0.1% in Australia and India.

Commodity-sensitive currencies faltered.  The dollar is up 0.9%, 0.6%, and 0.3% against its Australian, New Zealand and Canadian counterparts.

In keeping with the new wave of risk aversion, the yen climbed 0.4% against the dollar, which otherwise edged up 0.2% versus the euro and 0.1% relative to the Swiss franc and sterling.  The yuan is steady.

Ten-year British gilt and German bund yields fell by four and two basis points.  Treasury futures indicate a likely drop in yield, too.

Oil settled back 0.9% to $97.36 per barrel.  Gold rose 0.6% to $1,249.20 per ounce.

A 2.5% month-on-month drop in German retail sales volume in December caught analysts, who’d been predicting a small rise, completely by surprise and resulted in a 0.9% 4Q-over-3Q decline and the same 0.1% calendar year rise in 2013 as recorded in 2012.  Retail sales were 2.4% lower in December than a year earlier and 0.9% below the 4Q average level.

French consumer spending slid 0.1% last month.  French producer prices were unchanged on year in December, while Italy’s PPI showed a 1.8% December-over-December drop.

Worries about Euroland sliding into deflation were most fanned by the release of the preliminary CPI estimate for January, whose on-year rise edged down to 0.7% from 0.8% in December, 0.9% in November and 2.0% in December 2012.  The 0.7% matched a four-year low set in October.  Core inflation of 1.1% was a half percentage point lower than in the year to January 2013. 

Ezone unemployment held at 12.0% for a third straight month in December, down a hair from September’s record 12.1%.  While Germany (5.1%) and Austria (4.9%) had comparatively low jobless rates, Greece (27.8%) and Spain (25.8%) continue to experience depressions in their labor market.  Italy’s 12.7% was above the regional mean.

Greek retail sales volume was 2.9% higher in November than a year earlier, a favorable swing from a drop of 16.8% in the previous 12 months.  Norwegian retail sales increased 0.7% in the year to December.

Japan typically released a slew of economic indicators on the final day of the month.

  • Industrial production jumped 1.1% in December and was 7.3% above its year-earlier level.  Output climbed 1.9% between 3Q and 4Q.
  • Motor vehicle production recorded growth of 12.2% between end-2012 and end-2013.
  • Total CPI inflation edged up 0.1 percentage point to 1.6% in December.  Core inflation (excluding fresh food) rose to 1.3%, highest since October 2008, and consumer prices excluding food and energy ticked up to 0.7% from 0.6%.
  • The jobless rate sank 0.3 percentage points to 3.7% in December, lowest since October 2008, but employment was 0.3% less than in December 2012.
  • The manufacturing PMI index advanced 1.4 points to 56.6, signaling the fastest rate of expansion since February 2006.  The index first moved above 50 in March 2013.
  • Real household spending, however, dropped 0.5% between November and December and posted a 0.7% on-year increase.  Real disposable income fell by 2.1% on year.
  • Housing starts were 18.0% greater in December than at end-2012 compared to a 10% increase a year earlier.  Construction orders increased 4.9%, similar the 4.8% end-2011 to end-2012 rate of rise.

Australian producer price inflation was significantly more subdued last quarter than assumed.  The PPI went up only 0.2% from 3Q and retained a 1.9% 12-month rate of increase.  While import prices rose 5.1% on year, domestic producer prices only climbed 1.6% between end-2012 and end-2013.  Private credit in Australia advanced 3.9% in the year to December.

Scheduled U.S. data to be released today include the Chicago and Milwaukee PMIs, personal income and spending, and the U. Michigan/Reuters consumer sentiment index for January.  Canada reports November GDP, and the Bank of Mexico broadcasts its latest interest rate decision.

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

Tags: , ,


Comments are closed.