Mixed Picture

February 5, 2014

Japan’s Nikkei rebounded 1.2% from a 4-month low on some better-than-expected Japanese earnings from Panasonic, Toyota and Sony.  But in a sign of continuing risk aversion, the dollar fell 0.5% against the yen.

The greenback is unchanged against the euro, Swissie, Aussie dollar and yuan.  It shows gains of 0.3% versus sterling and 0.2% relative to the kiwi but has dipped 0.2% against the loonie.

In other bourses, share prices fell 2.3% in Taiwan, 1.1% in China, 0.6% in Hong Kong, and 0.5% in Australia but gained 0.7% in Indonesia, 0.4% in Malaysia and the Philippines, and 0.2% in South Korea and India.  The German Dax is unchanged, while equities have thus far advanced 0.4% in Britain, Switzerland and Italy and by 0.3% in France.

The yields for 10-year British gilts and Japanese JGBs fell by three and one basis point.  The JGB is below 0.6% at 0.59%.  The 10-year German bund is steady at 1.65%.

Prices for WTI crude oil and gold have risen 0.7% and 0.6% to $97.87 per barrel and $1,259.00 per ounce.

In a data shocker, euro area retail sales volume slumped 1.6% in the final month of 2013.  Such were 1.0% below the end-2012 level and down 2.7% at an annualized rate between 3Q and 4Q. 

But composite and service-sector purchasing manager indices for January point to a strengthening economic recovery in the euro zone at the start of 2014.  If sustained in February and March, Ezone GDP could post an unannualized rise of about 0.5%.

  • The composite euro area PMI printed at 52.9, a point better than the 4Q13 average score and signaling the fastest growth of activity since June 2011.
  • The composite PMIs rose to a 78-month peak in Spain, a 31-month high in Germany, and 3-month highs in Italy and France.  Ireland had the strongest reading, 57.8, but it was below December’s 81-month peak of 61.8.
  • One concern is the growing divergence between strengthening manufacturing and slower growth in services.  Euroland’s service-sector PMI, 51.6, constitutes a 3-month low.  The German index also hit a three month low, and Ireland’s 61.5 was down from an 82-month peak in December. 
  • France had sub-50 readings in its composite and service PMIs of 48.9 in each case, but they were at 3-month highs.

The British service-sector PMI fell by 0.5 and to a 7-month low, but the reading was still very buoyant at 58.3.  Rainfall was blamed.  Earlier this week, readings were reported of 64.6 in the U.K. construction PMI and 56.7 in manufacturing.  It looks like GDP in 1Q could post a rise of 0.8% or more.

Japan’s composite PMI edged up 0.1 to a 3-month high of 54.1, but the improvement was all concentrated in manufacturing.  The services PMI fell to a 5-month low of 51.2 in January from 52.1 in December and 55.3 in October.  Another troubling Japanese sign was news that base wages in December were 0.2% below the year-earlier level.  Unless wages match the acceleration of prices, the attempt to end deflation in a sustainable way would likely stay elusive.

Other released PMI data today revealed the following results:

  • Taiwan’s manufacturing index rose 0.3 points in January to 55.5, indicating the fastest growth since April 2011, but input price inflation accelerated, too.
  • Russia’s composite PMI dipped below the 50 expansion-or-contraction threshold, clocking in at 49.6.  Service sector activity barely rose with a PMI of 50.2 in that sector.
  • India recorded sub-50 PMIs of 48.3 in services — the seventh sub-50 result in a row but up from 46.7 in December — and 49.6 in the composite index.
  • South Africa’s PMI slipped to a 4-month low of 50.3.
  • Lebanon’s index plumbed to a record low of 44.7, 4.3 points weaker than the December reading.
  • The Swedish services PMI slipped to a 3-month low of 55.9 from 57.7 in December and 57.0 in November.  Still the level indicates solid expansion.
  • The Aussie service-sector performance of services index signaled lessening contraction with a reading of 49.3 after 46.1 in December and 48.9 in November.

The National Bank of Poland as expected retained a record low 2.5% level on its seven-day repo rate.  The last change, a 25-basis point cut in July 2013 culminated 225 basis points of reduction since November 2012.

British shop prices posted a record 1.0% on-year decline in January according to the British Retail Consortium.

In the year to December, retail sales rose 1.8% in Hungary and 5.2% in the Czech Republic.

Filipino CPI inflation ticked up to 4.2% in January from 4.1% and embodied a core inflation rate of 3.2%.  Producer prices in the Philippines, in contrast, dropped 4.0% during the twelve months to January.

On-year Indonesian GDP growth of 5.7% last quarter was up from 5.6% in 3Q but below the desired 6% level.

The New Zealand jobless rate slid to 6.0% last quarter from 6.2% in 3Q and was the lowest rate since the first quarter of 2010.  Labor participation improved to 68.9% from 68.6%.  Private-sector base wages increased 0.6% on quarter, most in two years, and 1.7% on year.

The ADP measure of private jobs growth in the United States, 175K in January, was about 20K less than forecast.  U..S mortgage applications increased 0.4% last week, while the 30-year fixed mortgage rate dropped 5 basis points to 4.47%.  Canadian building permits, Mexican consumer sentiment, the U.S. service-sector PMI, and U.S. energy inventories will be released later.

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

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