Several Points of Keen Interest Despite U.S. Presidents Day Market Closure

February 15, 2016

A 1.2% increase in the Chinese yuan against the dollar was its biggest daily advance since a 2% revaluation engineered in July 2005.

People’s Bank of China Governor Zhou made upbeat remarks about the yuan and China’s economy and balance of payments.

The cause of U.S. Supreme Court Justice Scalia’s death was ruled a heart attack.  No autopsy was performed.  Republicans are unified in opposing any replacement appointed by President Obama during this last year in office, claiming the decision must be left for the new incoming president.

ECB President Draghi gives an important speech to the EU Parliament today, to be followed by testimony there.  Draghi’s desire to ease monetary policy further perhaps next month has been opposed by Germany.

China’s trade surplus widened 5.3% last month to a record $63.29 billion, as exports and imports each plunged.  Exports were 11.2% lower than in January 2015, while imports plummeted 18.8% versus a 7.6% on-year drop in December.  The trade surplus totaled $594.5 billion in 2015 after $582 billion the year before.

Indonesia also reported a sharp contraction of two-way commerce with the rest of the world.  Exports in January were 20.7% lower than a year before, while imports sank 17.5% on year and 13.5% on month.

Norwegian imports fell 14.6% on month in January and 4.2% on year.  Exports fell 12.6% on month and 18.7% on year.

Japanese real GDP fell 1.4% at a seasonally adjusted annualized rate between 3Q15 and the final quarter of the year.  This was the third straight quarter in which the preliminary national income accounts showed a contraction of real GDP, but a technical recession has thus far been avoided as subsequent data put third-quarter GDP growth back in the black.  That said, real GDP was just 0.5% higher in 4Q than a year earlier, and average growth for calendar 2015 was only 0.4% after zero growth in 2014.  Nominal GDP fell 1.2% at a seasonally adjusted annual rate last quarter but exceeded the 4Q14 level by 2.0%.  On-year growth in the GDP price deflator slowed to 1.5% in 4Q from 1.8% in 3Q.  Non-residential investment growth of 5.7% last quarter surpassed expectations, but other components of aggregate demand dropped including personal consumption which plunged 3.3%.  Abenomics hasn’t produced nearly as much growth as needed.

Japan’s tertiary index, a monthly gauge of service sector activity, recorded declines in three of the final four months of 2015, October being the exception.  The tertiary index fell 0.6% on month in December and was only 0.1% higher than a year earlier. 

Revised Japanese industrial production data for December showed a deeper 1.7% monthly decline than indicated by the preliminary estimate.  Industrial shipments fell 1.8%.  Industrial output in 2015 as a whole sank 0.9%.  Capacity use in December dropped 1.0% on month and 3.5% on year.  Capacity was flat.

Euroland’s seasonally adjusted trade surplus slipped to a 2-month low of 21.0 billion euros in December, as exports fell for the first time in four months and imports climbed 0.7%, most since June.  The 2015 trade surplus totaled EUR 246.0 billion, 61.7 billion euros wider than in 2014 on export growth of 5.3% and an increase of 2.3% in imports.

Picking up from Friday’s banking sector-led rebound in U.S. share prices, stock markets rose in the Pacific Rim and Europe this Monday, but a 0.6% drop in China was an exception.  The most impressive recovery happened in Japan, a 1070-point leap equal to 7.2% on the day.  Markets also gained 4.0% in Hong Kong, 2.7% in Singapore, 2.5% in India, 1.6% in Australia and 1.3% in New Zealand.  In Europe, share prices are up 9.9% in Greece, 4.1% in Italy, 3.5% in Spain, 3.7% in France, 3.1% in Germany, 2.9% in Switzerland, and 2.3% in Great Britain.

Ten-year sovereign debt yields increased five basis points in the U.K., 3 bps in Germany and a single basis point in Japan.

In line with the risk-on trend, gold fell back 2.3% to $1,210.03 per ounce, and West Texas Intermediate crude oil recovered 1.4% to $29.86 per barrel.

The dollar has strengthened 0.8% against the Swiss franc, 0.7% versus the yen and euro, and 0.3% relative to sterling, but it also fell back 0.8%, 0.6% and 0.3% against the Australian, New Zealand and Canadian dollars, each of which is sensitive to commodity price developments.

Motor vehicle sales in Australia increased 0.5% in January, exactly reversing December’s decline.  Sales were 5.1% greater than in January 2015.

New Zealand’s service-sector purchasing managers index fell 3.1 points to a reading of 55.4 in January, lowest in at least ten months.

The British Rightmove index of home prices climbed 2.9% on month to a record high in February, lifting the 12-month rate of increase to a 2-month high of 7.3% from 6.5% in January.

Danish producer prices fell 2.1% in the year to January versus a 1.5% December-over-December decline.  Romanian consumer prices fell 2.1% in the year to January.

Finnish GDP slid 0.1% last month and by 0.3% from a year earlier.  The EUR 191 million current account deficit in December was EUR 0.400 billion lower than a year earlier.  On-year growth in Finnish retail sales slowed to 1.6% in December from 2.5% in November.  Finland’s economy as part of the European Monetary System has not performed as well as other Nordic economies that do not participate in the joint float.  The U.K., which also opted out of the euro, will be voting probably on June 23rd over whether to leave the European Union as well.

Wholesale prices in India fell 0.9% on year in January, which was more than predicted.

Retail sales in Singapore fell 2.1% in December, trimming their 12-month increase to 2.9% from 4.6% in November.

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

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