Euro Weakens and Equities Remain on Tenterhooks

January 5, 2016

The euro weakened overnight by 0.8% against the dollar and 1.2% relative to the yen.  The U.S. currency has otherwise appreciated 0.7% versus the Swiss franc, 0.5% vis-a-vis the kiwi and 0.3% against the Aussie dollar and sterling, but it shows a 0.3% relative to the yuan and no change against the loonie.

Stocks in the Pacific Rim fell 1.6% in Australia, 1.0% in New Zealand, 0.9% in Hong Kong, 0.5% in Taiwan, 0.3% in Japan and 0.2% in India. 

China’s Shanghai Composite index lost a further 0.3% in spite of a large 130 billion yuan liquidity injection from the central bank.  It was also announced that authorities are seeking regulatory modifications to disincentivize block selling of equities.

In Europe thus far, stocks have dropped 1.2% in Greece, 0.4% in Germany, and 0.3% in France and Switzerland but show gains of 0.5% in Italy, 0.3% in Spain and 0.2% in Britain.

Tensions between Saudi Arabia and Iran depressed the price of West Texas Intermediate crude oil by a further 0.6% to $36.55 per barrel.  Gold, on the other hand, is 0.6% firmer at $1,081.45 per troy ounce.

Sovereign debt 10-year yields are respectively up two basis points in Germany, unchanged in the U.K. and down a basis point in Japan.

Euroland’s flash consumer price data for December put total inflation at 0.2% and core inflation at 0.9%.  Food and services decelerated to 1.2% and 1.1%.  Non-energy CPI inflation was 0.9%, down from 1.0%.

Bank of Japan Governor Kuroda reiterated that the central bank is prepared to do whatever it takes to keep the economy from sliding back into deflation.  Prime Minister Abe earlier spoke about the government and BOJ coordinating efforts in this regard.

The Japanese monetary base recorded lessening on-year growth of 29.5% last month, down from 32.5% in November, 38.2% in December 2014, and 43.2% in full-2014.  Likewise, the Bank of Japan balance sheet expanded 27.6% between December 2014 and December 2015, down from 37.7% per annum over the previous two years between December 2012 and December 2014.

Japanese motor vehicle sales growth accelerated to 3.1% on year last month from 0.3% in November.

Germany released another sound labor market report.  Jobs grew 1.0% in the year to November, attaining their highest level since the 1990 reunification of the western and eastern parts of the country.  Unemployment in December fell 14K, matching November’s decline but twice as much as forecasters were anticipating.  The jobless rate stayed at 6.3% in national terms but fell to 4.3% on an ILO basis.

There were more purchasing manager surveys reported:

  • Norway’s manufacturing PMI dropped 0.8 points to a 4-month low of 46.8.  The economy is getting whacked by continuing oil price uncertainty.
  • The British construction PMI lifted off of November’s 7-month low of 55.3, gaining 2.5 points to 57.8, which still lies below October’s reading of 58.8.
  • Canada’s manufacturing PMI sank 1.1 points to 47.5, lowest since at least 2010.
  • Mexico’s factory PMI printed down 0.6 points to 52.4, a 3-month low.
  • The U.S. manufacturing PMI compiled by Markit Economics sank 1.6 points to a 38-month low of 51.2 in December.
  • J.P. Morgan’s global manufacturing PMI dropped 0.3 points last month to 50.9.  Growth slowed in both production and new business orders.

Ireland’s jobless rate of 8.8% in December is down from 10.2% a year earlier.  Hungary’s 6.2% average unemployment in September-November was a full percentage point less than a year before.  The Spanish jobless rate fell 55.8K last month, twice as much as in November, and plunged a record 354.2K last year.

Portuguese consumer sentiment weakened 0.4 points to an 11-month low of negative 14.1 in December.  Business confidence also softened.

Italian CPI inflation remained steady last month at 0.1% overall and 0.9% core.

Producer prices in Thailand dropped 2.7% between end-2014 and end-2015.

Scheduled U.S. data today include weekly chain store sales and monthly car sales and New York regional PMI.  Canada reports producer prices.

Copyright 2016, Larry Greenberg.  All rights reserved.  No secondary distribution without express permission.

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