The last trading session before most of Asia disappears for the extended Lunar New Year holidays was a quiet affair though Asian bourses put in a strong showing and risk generally consolidated yesterday’s up-move.
On the data front, we saw the flash estimate of HSBC’s manufacturing PMI for China in January and it showed a barely changed reading from December. Coming in at 48.8, marginally higher than 48.7 last month, the number suggest that the suspicion of front-loading production in December ahead of the Lunar New Year may be unfounded with a stable performance, albeit still below the 50 expansion/contraction threshold.
In other data, Australian export prices pulled back by -1.5 percent in the fourth quarter as commodity prices eased but a slightly lower AUD and higher global energy prices pushed import prices 2.5 percent higher during the quarter. Despite the shift in prices, Australia’s terms of trade remain at impressively strong levels after a near-term peak last April (corresponding nicely with the near-term peak in the AUD).
The prospect that a deal on Greek private sector involvement (PSI) is getting closer, strong auctions by France and Spain (courtesy of ECB liquidity provision, no doubt) and strong jobless claims data out of the US all combined to give risk another leg up overnight and saw the EUR breaking through the 1.29 level versus the dollar for the first time in two weeks. One has to wonder at what level a EURUSD would trigger weak EUR shorts (still at record levels) to bail out – above 1.30?
Spain sold well over its target (EUR 6.6 billion vs. target of EUR 4.5 billion) in maturities from 4 to 10 years while France sold just short of its target, but unloaded a total of nearly EUR 8 billion. The markets barely glanced at leaked drafts of the new EU treaty (which showed a combined EFSF/ESM fund with a minimum of €500 bln firepower) and more comments from ECB’s Weidmann about his opposition to further ECB bond buying together with warnings from Fitch that revisions of six Eurozone countries are likely failed to dampen the positive risk sentiment.
On the US data front, weekly jobless claims reversed al last week’s slide with the best number in almost four years, 352k from a revised 402k last week, while continuing claims also slid to a 3-1/2 year low. The January Philly Fed index came in below forecast at 7.3 but a hefty 3.5 points downward to December’s data left some with a bitter taste. Elsewhere the weekly Bloomberg consumer comfort index deteriorated to -47.4 from -44.7 and January’s economic expectations slipped to -19 from -17. Nevertheless, Wall St extended its rally to a third day with the DJIA rising 0.36 percent, S&P +0.49 percent and the Nasdaq +0.67 percent.
Wishing all a Happy Chinese New Year from Asia.
Data Highlights
CA Nov. Manufacturing Sales out at +2.0% m/m vs. 1.2% expected and revised -0.6% prior
US Dec. CPI out at flat m/m, +3.0% y/y vs. 0.1%/2.2% expected and flat/3.4% prior resp.
US Dec. Core CPI out at +0.1% m/m, +2.2% y/y vs. 0.1%/2.2% expected and 0.2%/2.2% prior resp.
US Dec. Housing Starts out at -4.1% m/m vs. -0.7% expected and revised 9.1% prior
US Dec. Building Permits out at -0.1% m/m vs. -0.2% expected and revised 5.6% prior
US Initial Jobless Claims out at 352k vs. 384k expected and revised 402k prior
US Continuing Claims out at 3432k vs. 3590k expected and revised 3647k prior
US Bloomberg Consumer Comfort Index out at -47.4 vs. -44.7 prior
US Jan. Bloomberg Economic Expectations Index out at -19 vs. -17 prior
US Jan. Philadelphia Fed Index out at 7.3 vs. 10.3 expected and revised 6.8 prior
AU Q4 Export Price Index out at -1.5% q/q vs. -2.0% expected and +4.0% prior
AU Q4 Import Price Index out at +2.5% q/q vs. 0.6% expected and flat prior
China Jan. Flash HSBC Manufacturing PMI out at 48.8 vs. 48.7 prior
Upcoming Economic Calendar Highlights
(All Times GMT)
JP All Industry Activity Index (0430)
JP Leading/Coincident Index (0500)
GE PPI (0700)
UK Retail Sales (0930)
CA CPI (1200)
CA Wholesale Sales (1330)
US Existing Home Sales (1500)
Andrew Robinson,
SAXO BANK