Opening Act on Last Week of February

February 24, 2014

It’s been a comparatively uneventful Monday session for the dollar, which shows no net change against the euro, yuan or sterling, a 0.1% uptick against the Swiss franc, but 0.2% declines relative to the yen and Canadian, Australian and New Zealand dollars.

Share prices slumped 2.2% in China, but less action was seen in other bourses around the Pacific Basin where equities lost 0.8% in Hong Kong, 0.5% in Taiwan, South Korea and Indonesia, and 0.2% in Japan and the Philippines.  Stocks are off 0.4% in Italy, 0.3% in Britain and 0.1% in Germany but up 0.4% in Spain, 0.2% in France and 0.1% in Switzerland.

Ten-year Japanese, German and British sovereign debt yields have not changed since Friday’s close.

Gold continued to recover, rising 0.9% to $1,336 per ounce and is 9.1% above its level of January 2.  Oil edged 0.2% lower to $102.05 per barrel.

In Ukraine, parliament’s vote brought down the Russian-allied Yanokovych government.  Where the President is hiding remains a mystery.  New presidential elections will be held May 25.

In Sydney, Australia, G20 finance ministers endorsed pro-growth policies with the goal of enhancing GDP growth worldwide by 2 percentage points over the coming five years.  The plan includes continuing the very accommodative monetary policies in most advanced economies.

ECB President Draghi reiterated the readiness to implement further steps if inflation is deemed too low and again noted that considerably more information for reaching a decision will be available by the March 6 policy meeting.

IFO reported mixed business climate data for February.  On the industrial survey, a better-than-expected overall business climate reading of 111.3, up 0.7 points from January’s score, masked a 0.6-point deterioration to 108.3 in expectations.  All of the improvement was concentrated in current conditions, particularly in the retail sector.  Moreover, the IFO services business climate gauge fell to a 3-month low of 21.0 in February from a reading of 25.5 in January.  Business expectations in services slumped to a four-month low of 12.1 from 18.5 the month before.

Euroland consumer prices fell 1.1% on month in January.  The 12-month rate of increase  held steady at 0.8% but was 1.2 percentage points less than in the year to January 2013.  On-year inflation in Spain slowed from 2.6% in January 2013 to 0.3% last month; in Italy to 0.6% from 2.4% a year earlier; in France to 0.8% from 1.4%; in Cyprus by 3.6 percentage points to minus 1.6%; in Germany to 1.2% from 1.9%; in Greece to negative 1.4% from zero in the year to January 2013; and in Finland to 1.9% from 2.6%.

Transcripts from the FOMC meetings in 2008 — the year the U.S. and global economies fell apart — make a very interesting read and one with considerable contemporary relevance.  Some of the same officials now chomping at the bit to “normalize” policy by ending QE and urging a start to interest rate hiking strongly resisted aggressive easing during 2008, while Janet Yellen led a faction that recognized correctly that the economy wasn’t stabilizing and urged throwing every tool the Fed had at the problem.

In China, property prices rose 9.6% in the year to January.  More cities showed higher prices than a year earlier than had been the case in December.

CPI inflation in Singapore dipped 0.1 of a percentage point to 1.4% in January.  Taiwanese industrial output was 1.8% lower in January than a year before.

Czech and Finnish producer prices respectively fell 0.7% and 0.9% in the year to January.  Czech consumer sentiment deteriorated by a sharp 3.7 points to a reading of -9.0 in February, which was almost as week as in December, but overall economic sentiment was unchanged. Dutch business sentiment deteriorated from +0.7 in January to minus 0.1 in February. 

Scheduled U.S. data to be released today include the Chicago Fed National Activity Index, the estimate of the service sector purchasing managers index compiled by Markit Economics, and the Dallas Fed manufacturing index.  The Bank of Israel will be issuing its latest scheduled interest rate announcement.

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

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