News in from the German official stats agency has revealed that wholesale prices have reduced by 1.7% perhaps adding to many analysts’ fears that deflation is an issue still stalking the wider European economy.
From Australia the news that the construction sector, on which the economy relies on heavily, is undergoing a contraction may come as a shock to many investors and analysts. The national construction sector fell further into negative territory in February following a sharp fall in new orders and a decline in construction activity. The latest Australian Industry Group/Housing Industry Association Australian Performance of Construction Index (Australian PCI) fell by 4.0 points to 44.2 in February.
The week began with a global shift away from risky assets and ended with broad equity gains. China’s currency (the renminbi) strengthened against the dollar for a fourth straight session, following its biggest weekly loss in nine years last week.
With the Ukraine crisis creating turmoil on the eastern edge of Europe, Mario Draghi declared the eurozone an “island of stability” on Thursday as the European Central Bank held firm on interest rates, despite inflation undershooting its target.
George Osborne faces a black hole of more than £20bn in the UK’s public finances, according to official government economic models. The news suggests that Britain might have to endure extra years of austerity measures before the books are balanced.
The US and its allies on Thursday moved to punish the Kremlin for its intervention in Ukraine hours after Crimea’s parliament accelerated plans to join Russia. In the first concrete steps by the west to penalise Russia the US issued visa bans on Russian officials.
Wholesale prices in January 2014: –1.7% on January 2013
As reported by the Federal Statistical Office (Destatis), the selling prices in wholesale trade decreased by 1.7% in January 2014 from the corresponding month of the preceding year. In December and in November 2013 the annual rates of change were –1.3% and –1.6%, respectively. From December 2013 to January 2014 the index fell by 0.1%.
Australian PCI: Construction sector contracts as activity and orders weaken
The national construction sector fell further into negative territory in February following a sharp fall in new orders and a decline in construction activity. The latest Australian Industry Group/Housing Industry Association Australian Performance of Construction Index (Australian PCI) fell by 4.0 points to 44.2 in February (readings below 50 indicate a contraction in performance). While house building continued to expand in February (52.2) albeit at a lower rate and commercial construction experienced a strong lift (59.9), the steep drop in engineering construction (down 14.6 points to 39.7) along with a further month of contraction.
Market snapshot at 10:00 am UK time
The ASX 200 closed up 0.30%, the CSI 300 down 0.24%, the Hang Seng down 0.19%, the Nikkei up 0.92%. Euro STOXX is down 0.43%, CAC down 0.22%, DAX down 0.81%, FTSE down 0.32%.
Looking towards the New York open the DJIA equity index future is up 0.11%, the SPX up 0.10%, the NASDAQ up 0.06%. NYMEX WTI oil is up 0.19% at $101.75 per barrel, NYMEX nat gas is down 0.51% at $4.64 per therm. COMEX gold is down 0.21% at $1348.90 per ounce, with silver down 0.57% at $21.45 per ounce.
Forex focus
The dollar was little changed at 102.96 yen early in London, from 103.07 yen yesterday, and has climbed 1.1 percent this week, the biggest advance since the period ended Nov. 29th. It traded at $1.3862 per euro from $1.3861, set for a 0.4 percent decline since Feb. 28th.
The shared currency fetched 142.73 yen from 142.86 and was headed for a 1.6 percent weekly gain, the biggest since the five days to Dec. 27th. The dollar was set for its biggest weekly gain in three months versus the yen before the release of U.S. payrolls data, with Federal Reserve officials reiterating the threshold for changing its stimulus tapering is high.
Australia’s dollar traded unchanged at 90.90 U.S. cents after rising as high as 91.13 yesterday, the strongest level since Dec. 11th. It has climbed 1.9 percent this week as data showed economic growth and retail sales rose more than analysts predicted and the trade surplus widened to the most in 2 1/2 years.
Bonds briefing
U.S. 10-year yields were little changed at 2.74 percent early in London. They have risen 9 basis points this week, the most since the five days ended Dec. 27th. The price of the 2.75 percent note maturing in February 2024 was 100 1/8. Treasuries headed for their steepest weekly loss this year as investors withdrew money from U.S. bond funds and economists said a report today will show employment is improving.
