Waiting to See if ECB Eases Today

February 6, 2014

The euro is 0.1% softer against the dollar ahead of a key monthly meeting of the ECB Governing Council, which meets amid mounting concern about deflation.

Meanwhile, the Bank of England Monetary Policy Committee as expected just announced no changes in its 0.5% Bank Rate or in the GBP 375 billion ceiling on its asset purchase program.  A quarterly Inflation Report due February 12 is expected to update forward guidance, and minutes of this month’s MPC meeting will be published on February 19.

The dollar is unchanged against the yen and Swiss franc, up 0.2% relative to sterling and 0.1% against the yuan, but down 0.5% against the Australian dollar, 0.3% versus the kiwi and 0.2% vis-a-vis the Canadian currency. 

Share prices are higher in Europe by 1.3% in Italy, 1.2% in Spain, 1.1% in Germany, 1.0% in France, 0.8% in Britain and 0.7% in Switzerland.  Stocks earlier fell 1.1% in China and 0.2% in Japan but advanced by 1.2% in Australia, 1.1% in Singapore, 0.9% in Indonesia and South Korea, 0.7% in Hong Kong, 0.6% in Taiwan and 0.3% in India.

Ten-year sovereign debt yields have risen two basis points in Britain and a basis point each in Germany and Japan.

Gold and oil prices are 0.4% firmer at $1,262.40 per ounce and $97.80 per barrel.

News of a 0.5% decline in German industrial orders in December gives yet another reason for the ECB to perhaps take additional stimulatory action.  However, orders were 6.0% higher than a year earlier and managed to rose 1.2% between 3Q and 4Q13.  Between November and December, domestic orders fell by 1.6%, while foreign orders firmed 0.4%.

The German construction purchasing managers index slipped from a 4-month high of 53.7 in December to a 2-month low of 52.5 last month.

The retail purchasing managers index for the euro area rose by a greater-than-forecast 2.8 points to 50.5 in January.  This was only the second reading since November 2011 to exceed the 50 threshold between expansion and contraction.  The German retail PMI revived from an 8-month low of 50.7 in December to a 54.6 score in January.  The French index increased 3.6 points but was still below 50 with a reading of 49.7, which is a 5-month high.  Italy’s retail PMI dipped to a 2-month low of 45.2.

Global PMIs compiled by J.P. Morgan rose to 53.8 in January from 53.5 in December for services and to 53.9 from 53.8 on the composite index that includes both manufacturing and services.

British new car sales recorded a smaller 7.6% on-year advance in January after a gain of 23.8% in December.  The Halifax index of U.K. home prices advanced by 1.1% in January and was 7.3% higher in November-January than a year earlier.

Last week, stock and bond transactions in Japan generated a net 2.519 trillion yen capital outflow.  Japanese bought nearly 2 trillion yen worth of foreign bonds.

Hong Kong’s private-sector purchasing managers index climbed to a 23-month high of 52.7 in January from 51.2 in December. 

Vietnam’s manufacturing PMI reading in January of 52.1 was the best in 33 months and up from 51.8 in December. 

Taiwanese CPI inflation accelerated to a still-subdued 0.8% on-year in January.

Bangko Sentral ng Pilipinas left the reverse repo rate unchanged at 3.5% and released a similar statement to the prior one of December 12, citing manageable inflation and a challenging global landscape for emerging markets.  The key Filipino interest rate has been at 3.5% since October 2012 when that year’s fourth cut of 25 basis points was implemented.

New Zealand markets were closed for Waitangi Day.

Australian retail sales and trade balance for December were reported.  Retail sales went up 0.5% on month and 4.6% on year.  A second straight and much larger A$ 468 million trade surplus was reported after A$ 83 million in November.  There were deficits in July through October, and the full-2013 balance was in the red by A$ 7.25 billion after a deficit of A$ 23.1 billion in 2012.

Czech industrial production dipped 0.3% in December but was 9.3% higher than a year earlier.  The trade surplus totaled CZK 9.62 billion in December and CZK 351 billion in 2013, 15% wider than in 2012. Hungary’s industrial producito fell 1.9% in December but posted on-year increases of 4.4% that month and 1.4% in 2013 as a whole.

The Swiss trade balance showed deficits of CHF 503 million in December and CHF 23.96 billion in 2013.  Swiss consumer confidence rose 7 points to +2 in 4Q according to the government’s index.

U.S. and Canadian trade figures get released today.  U.S. weekly jobless claims and productivity in 4Q also arrive as does the federal budget.  Tomorrow is the all-important Labor Department jobs report, but market attention now is centered on the ECB.  The Czech National Bank also will be revealing its latest monetary policy decision today.

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

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