Weaker Yen and European Stocks, Stronger Asian Equities, and Firmer Oil
December 19, 2014
A volatile week in the marketplace has seen more swings on Friday, but dollar movement against the majors has been less than 0.3% except for a 0.4% drop in the yen.
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Share prices in the Pacific Basin advanced by 2.5% in Australia, 2.4% in Japan, 1.7% in South Korea, 1.3% in Hong Kong, 1.1% in China and Singapore, 1.4% in Taiwan and 1.1% in Singapore. U.S. futures are also up, but in Europe, there have been declines of 1.4% in Italy, 1.1% in Spain, 0.8% in Switzerland, 0.6% in Germany, and 0.5% in France and Britain.
West Texas Intermediate oil bounced up 1.8% to $55.10 per barrel. Comex gold edged 0.1% higher to $1,196.20 per ounce.
The ten-year British gilt edged up a basis point, the same amount that the 10-year Japanese JGB yield slid. German bunds are steady.
The Bank of Japan’s policy settings were not changed this month. The vote was 8-1 with Kiuchi recommending a rollback to settings before quantitative easing was augmented this past October 31. The bank’s economic assessment continues to look for continuing moderately paced recovery, 1.0% core inflation in the near term and an eventual acceleration of inflation back toward the targeted 2%. The assessment points out that the post-consumption tax drop in demand is now waning. A number of elements in the economic assessment were upgraded such as industrial production, housing, and exports. Governor Kuroda’s subsequent press conference struck an upbeat tone. Lower oil prices, he believes, will eventually be a positive for growth, and with expected inflation holding up, he sees no need for extra stimulus now. He flagged stronger wage inflation as critical for the success of the monetary policy mission. Japan’s government also released a monthly economic assessment that sees moderate recovery with consumption lagging other components of demand.
Japan’s all-industry index, a monthly supply-side proxy of GDP, dipped 0.1% in October but was still 0.7% higher than the 3Q average level. Department store sales posted a smaller 1.0% on-year decline in November after falling by 2.2% between October 2013 and October 2014.
Japan’s index of leading economic indicators in October got revised up up to 104.5 from 104.0 but was still 1.7 points lower than September’s value. The index of coincident economic indicators was revised downward to 109.9 but was still higher than September’s 109.3 reading.
German consumer confidence improve 0.3 points to an 8-year high of 9.0, but British consumer confidence slipped 2 points to a 9-month low of minus 4.
Public-sector net borrowing in the U.K. of GBP 13.4 billion in November was lower than forecast. So was the public-sector net cash requirement of GBP 6.7 billion. On the other hand, the Confederation of British Industries reported a huge improvement in its distributive trends index to a reading in December of 61, highest in several years, from 27 in November.
German producer prices were unchanged on month in November and recorded a 0.9% on-year decline. Such had fallen by 1.0% in the years to both September and October but by 0.8% in the years to July and August. The producer price of energy sank 3.1% on year but rose on month.
The euro area current account surplus settled back to a seasonally adjusted EUR 20.5 billion in October following a spike from EUR 19.7 billion in August to EUR 32.9 billion in September. The current account surplus over the past dozen reported months tallied EUR 249 billion, 19% bigger than a year earlier. As a share of nominal GDP, the surplus equaled 2.5%, up 0.4 percentage points compared to the year to October 2013. A EUR 95.3 billion net inflow from portfolio investment and direct investment transactions was roughly twice the size of the EUR 46.2 billion net inflow on such in the previous 12 months.
French business sentiment stagnated at 99 in December. Spain’s index of leading economic indicators rose 0.2% in October. Italian industrial orders rebounded just 0.1% in October after falling 1.5% in September. Irish producer prices rose only 0.6% in the year to November, while Icelandic consumer prices in October were 0.8% higher than a year before.
New Zealand business sentiment declined 1.1 points to 30.4 in December. The forward-looking outlook index declined by 4.4 points to 37.3, a 4-month low. Hong Kong’s current account swung to a HKD 43.3 billion surplus last quarter from a deficit of HKD 8.1 billion in 2Q.
Canadian retail sales were unchanged in October because of a drop in motor vehicles and gas station purchases. Without those, sales went up 0.4% on month.
Canadian CPI inflation declined to 2.0% last month from 2.4% in October. Core inflation slipped 0.2 percentage points to 2.1%. Petro prices slumped 7.5% on month to the lowest level in 45 months.
The Kansas City Fed manufacturing index will be released today. Market activity from here should slow appreciably as most markets, except Japan, prepare for the Christmas holiday break. Previous years when Christmas fell on Thursday were 2008, 2003, 1997, 1986, 1980, and 1975.
Copyright 2014, Larry Greenberg. All rights reserved. No secondary distribution without express permission.
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