China reported February’s inflation data this morning and CPI showed a sharp drop to 3.2% y/y from 4.5% the previous month, beating positive consensus estimates of 3.4%. Food prices fell 0.3% m/m after the Lunar New Year celebrations were completed. This brings the overall inflation rate well below the government’s target of 4% for 2012 and is creating some short-term optimism about a near-term policy easing and helping risk currencies. On the PPI front, PPI was flat y/y versus a +0.1% forecast and +0.7% last month.
The other data release to concern Asian markets was Australia’s trade balance for January. The headline appeared a shocker, slipping into deficit for the first time since February last year (-A$205 mln that time). The deficit slumped to –A$673 mln missing consensus forecasts of a surplus of A$1.5 bln by a large margin. Yet the kneejerk reaction from AUD was quite muted, with losses of only 20 pips versus the USD. Then it emerged that there were some extenuating circumstances affecting the data. Exports were down 8% on the month with coal shipments affected by poor weather, while the timing of shipments of non-monetary gold (any gold not held by monetary authorities as reserve assets) also suffered delays. With those two exceptions, the data becomes quite meaningless and in the end was mostly ignored by the market.
During the session, the comments surrounding participation in the Greek PSI deal appeared to get more bullish as time wore on, with Greek officials suggesting the participation rate could be as high as 95% and IMF’s Lagarde saying the swap numbers “look promising”. Asian bourses and risk currencies found support on that basis.
The ECB kept rates on hold overnight, as expected, but Mr. Draghi sounded a note of caution on inflation by saying there were upside risks. The upside potential for the EUR was enhanced by reports of a good response to the private bond swap offer (which improved further overnight). AUD also benefitted from the better sentiment and reports that China’s Ministry of Industry and Information Technology predicted a 2012 growth rate of 8.8% (7.5% is now the “official” target). In other central bank news, the Bank of England and Bank of Canada both left rates unchanged. The BOE also left its asset purchase programme unchanged. The Bank of Canada noted a slight improvement in the economic outlook, but warned that there was a lot of monetary stimulus within the Canadian system.
On the US front, weekly initial jobless claims were a mild disappointment with a 362k print, higher than last week’s 354k and above the consensus 352k. They seem to be plateauing after an almost continuous decline since last September. The weekly consumer comfort index showed a mild improvement to -36.7 from -38.8, hitting its highest level in almost 4 years.
Data Highlights
CA Feb. Housing Starts out at 201.1k vs. 200.0k expected and revised 198.1k prior
CA Jan. New House Price Index out at +0.1% m/m, +2.4% y/y vs. 0.1%/2.5% expected and 0.1%/2.5% prior resp.
US Initial Jobless Claims out at 362k vs. 352k expected and revised 354k expected
US Continuing Claims out at 3416k vs. 3400k expected and revised 3406k prior
CA Bank of Canada leaves rates unchanged at 1.0%
US Bloomberg Consumer Comfort Index out at -36.7 vs. -39.0 expected and -38.8 prior
NZ Feb. Credit Card Spending out at -0.3% m/m vs. +0.1% expected and revised +0.9% prior
JP Feb. M3 Money Stock out at +2.5% y/y vs. 2.6% expected and 2.6% prior
AU Jan. Trade Balance out at –A$673 mln vs. +A$1500 mln expected and revised +A$1325 mln
China Feb. CPI out at +3.2% y/y vs. 3.4% expected and 4.5% prior
China Feb. PPI out at flat y/y vs. +0.1% expected and +0.7% prior
Upcoming Economic Calendar Highlights (All Times GMT)
China Industrial Production (0530)
China Retail Sales (0530)
China Fixed Asset Investment (0530)
GE Trade Data (0700)
GE CPI (0700)
Sweden Industrial/Manufacturing Production (0830)
Norway CPI/PPI (0900)
UK Industrial/Manufacturing Production (0930)
UK PPI Input/Output (0930)
CA Unemployment Rate (1200)
CA Int’l Merchandise Trade Balance (1330)
US Trade Balance (1330)
US Non-farm Payrolls (1330)
US Unemployment Rate (1330)
US Avg. Hourly Earnings (1330)
US Wholesale Inventories (1500)
UK NIESR GDP Estimate (1500)
Andrew Robinson,
SAXO BANK