The EUR and AUD strengthened in the Asian session after China’s Q4 growth beat market estimates with 8.9 percent y/y growth recorded versus 8.7 percent expected – but still lower than Q3’s 9.1 percent. The expansion was the slowest we have seen in 10 quarters, with slower exports and the effect of measures against property and other asset bubbles taking its toll, and brought the full-year’s growth down to 9.2 percent from 10.4 percent in 2010.
Other China data showed similar characteristics with industrial production rising 12.8 percent y/y versus 12.3 percent expected and retail sales rose 18.1 percent y/y versus 17.2 percent expected. Again, there is a suspicion that the better December numbers come as a result of companies accelerating production forward as the Lunar New Year celebrations fall in January this year.
Elsewhere in the region, Singapore exports data for December also showed a surprise, and marked improvement. Non-oil domestic exports rose 9 percent from a year earlier after a revised 1.4 percent increase in November but electronics exports continued to make dismal reading with a 4.6 percent y/y decline in the month. The slack was taken up by a hefty increase in pharmaceutical shipments – up 38.6 percent y/y in the month.
The Japanese government left its assessment of the economy unchanged in its January report, maintaining that the economy was picking up slowly though still in a severe state following the earthquake last March. But its outlook for exports was lowered for the first time in 3 months to a “weakening” status with exports to Asia as a result of the Eurozone crisis a major factor.
There was not much to report from yesterday’s activity with tight ranges and slow trading activity as the US holiday provided little impetus to trade. EUR continued to stabilize at lower levels after the Friday sell-off. Markets showed muted reaction to Moody’s comments echoing those of S&P saying France’s AAA rating may be under threat if the debt/GDP ratio continues to rise. Interesting to note that in France’s first bill sale after the downgrade yields were lower and the full target amount was reached.
Meanwhile S&P weighed in to Europe’s EFSF with a one notch downgrade, though this had been widely expected following Friday’s actions. The move prompted quick comments from EU’s Juncker and EFSF’s Regling that the move would not result in any change to the fund’s lending capacity. EUR’s support was consolidated on ECB’s buying of Spanish and Italian bonds.
On the European data front, German wholesale prices were much lower in December, falling 3.0 percent y/y from 4.9 percent and flat m/m versus +0.7 percent m/m the previous month. Swiss producer prices, in contrast showed the opposite trait, rising 0.3 percent m/m versus a consensus view of -0.1 percent and -0.8 percent previously. On an annual basis prices fell 2.3 percent following a 2.4 percent decline in November.
Data Highlights
GE Dec. Wholesale Price Index out at flat m/m, +3.0% y/y vs. 0.7%/4.9% prior resp.
Swiss Dec. PPI out at +0.3% m/m, -2.3% y/y vs. -0.1%/-2.8% expected and -0.8%/-2.4% prior resp.
NZ Q4 NZIER Business Opinion Survey out at 0 vs. 25 prior
NZ Dec. Credit Card Spending out at -0.2% m/m, as expected and unchanged from prior
JP Nov. Tertiary Industry Index out at -0.8% m/m vs. -0.4% expected and revised +0.7% prior
SI Dec. Non-oil Domestic Exports out at +9.0% y/y vs. -1.2% expected and revised +1.4% prior
China Q4 GDP out at +8.9% y/y vs. 8.7% expected and 9.1% prior
China Dec. Industrial Production out at +12.8% y/y vs. 12.3% expected and 12.4% prior
China Dec. Retail Sales out at +18.1% y/y vs. 17.2% expected and 17.3% prior
China Dec. Fixed Asset Investment out at +23.8% y/y vs. 24.1% expected and 24.5% prior
NZ Dec. Non-resident Bond Holdings out at 59.1% vs. 60.2% prior
Upcoming Economic Calendar Highlights
(All Times GMT)
JP Machine Tool Orders (0600)
Sweden Unemployment Rate (0700)
UK DCLG House Prices (0930)
UK CPI/RPI (0930)
UK BOE’s King, Haldane, Cohrs and Jenkins to speak (0930)
EU Euro-zone CPI (1000)
GE ZEW Surveys (1000)
EU ZEW Survey (1000)
CA Int’l Securities Transactions (1330)
US Empire Manufacturing (1330)
CA BOC Rate Announcement (1400)
UK BOE’s Posen to speak (1830)
Andrew Robinson
SAXO BANK