Stocks in Australia and the Aussie as a currency versus its major peers fell sharply as a report showed business investment in Australia has collapsed to a multiyear low. Fears that the extremely one dimensional miraculous economic activity in Australia could be reaching an organic end; carving out chunks of your land, to then filter out minerals and deliver them to China, are now being heightened. This concern has been made all the worse due to certain indications, such as iron ore supplies mounting up in China, as the economic business chain is appearing to stagnate.
There was better news from New Zealand where exports to China, and in particular dairy products, has reached a record high. A $469m rise in milk powder, butter, and cheese products led the boost in exports to China, a record 30 per cent of New Zealand’s total January exports. Nearly half of the country’s dairy exports went to China in the month.
Turning our attention to Europe there’s been two interesting data prints from Germany illustrating how well the economy is fairing overall. Firstly, unemployment is down by 14,000 for the month, the jobless rate is now at 6.8%, a two decade recorded low. Secondly, and a slightly more tricky piece of data to analyse, is the fact that Germany’s import prices have fallen by 2.3% annually up to January 2013. Now on the face of it this would appear to be good news, however, it could be setting off what we could term as a deflationary spiral chain linked throughout many of the countries supplied by Germany with raw materials and parts. Also export prices fell (by 0.8%) suggesting that the spectre of deflation could be creeping into the German economy…
Stocks in Greater China initially climbed overnight as China’s central bank finally allowed the country’s currency to rise slightly, ending a seven-day losing streak across all the Chinese main indices. Putin has put Russia’s armed forces on alert in Ukraine. He ordered a drill by forces in western Russia, including areas bordering Ukraine. Sergei Shoigu, defence minister, insisted the exercise was “largely unrelated to events in Ukraine”.
German Import prices in January 2014: –2.3% on January 2013
As reported by the Federal Statistical Office (Destatis), the index of import prices decreased by 2.3% in January 2014 from the corresponding month of the preceding year. In December and in November 2013 the annual rates of change were –2.3% and –2.9%, respectively. From December 2013 to January 2014 the index decreased by 0.1%. The index of import prices, excluding crude oil and mineral oil products, was 1.9% below the level of a year earlier. The index of export prices decreased by 0.8% in January 2014 from the corresponding month of the preceding year.
German Unemployment Falls for Third Month as Economy Strengthens
German unemployment fell in February for a third month and more than economists predicted as companies became more confident in the recovery in Europe’s largest economy. The number of people out of work decreased by a seasonally-adjusted 14,000 to 2.914 million, after falling a 28,000 the previous month, the Nuremberg-based Federal Labor Agency said today. Economists forecast a decline of 10,000, according to the median of 30 estimates in a Bloomberg News survey. The adjusted jobless rate was 6.8 percent, unchanged from January and at a two-decade low.
Australia Private New Capital Expenditure and Expected Expenditure
The trend volume estimate for total new capital expenditure fell 0.7% in the December quarter 2013 while the seasonally adjusted estimate fell 5.2%. The trend volume estimate for buildings and structures rose 1.1% in the December quarter 2013 while the seasonally adjusted estimate fell 3.5%. The trend volume estimate for equipment, plant and machinery fell 4.6% in the December quarter 2013 while the seasonally adjusted estimate fell 8.6%.
New Zealand Exports to China hit record level
A record percentage of New Zealand exports went to China last month, leading to this country’s highest trade surplus for January. A total of $4.1 billion of exports left New Zealand last month, up $729 million on January 2013, Statistics New Zealand said today China accounted for $1.2b worth of exports, up $590m on January 2013. A $469m rise in milk powder, butter, and cheese products led the boost in exports to China, a record 30 per cent of New Zealand’s total January exports. Nearly half of the country’s dairy exports went to China in the month.
Market snapshot at 9:30 am UK time
The ASX 200 closed down 0.47%, the CSI 300 down 0.43%, the Hang Seng up 1.74%, the Nikkei down 0.32%. Euro STOXX is down 0.53%, CAC down 0.30%, DAX down 0.56%, FTSE down 0.32%. The DJIA equity index future is down 0.14%, SPX future down 0.03%, NASDAQ future up 0.07%.
NYMEX WTI oil is down 0.28% at $102.30 per barrel, NYMEX nat gas down 0.79% at $4.50 per therm. COMEX gold is down 0.17% at $1325.70 per ounce, with silver down 0.56% at $21.27 per ounce.
Forex focus
The dollar was at $1.3689 per euro after strengthening 0.4 percent yesterday, the most since Jan. 31st, to $1.3687. It was little changed at 102.39 yen. The Japanese currency traded at 140.17 per euro following a 0.3 percent climb to 140.11. The dollar was near a two-week high against a basket of its major peers before Federal Reserve Chair Janet Yellen speaks today amid prospects the central bank will continue to scale down its bond purchases.
The Aussie lost 0.5 percent to 89.28 U.S. cents, trimming its advance this month to 2 percent. Australia’s currency dropped after business investment fell the most in four years. Capital spending decreased 5.2 percent in the fourth quarter, the most since September 2009, the Bureau of Statistics said in Sydney today.
The pound traded at $1.6675 early London time after falling 0.1 percent yesterday. It has risen 1.4 percent this month, the most since November. Sterling was at 82.08 pence per euro having lost 0.1 percent since Jan. 31st. The pound was little changed versus the dollar before Bank of England policy maker David Miles speaks in London today.
Sterling was headed for a monthly loss versus the euro as investors await an industry report on business conditions. Britain’s gross domestic product expanded 0.7 percent in the fourth quarter after growing 0.8 percent in the previous three months, the Office for National Statistics said yesterday.
The pound has gained 13 percent in the past year, the best performer among 10 developed-nation currencies tracked by Bloomberg Correlation-Weighted Indexes. The euro appreciated 6.2 percent and the dollar rose 1.5 percent.
Bonds briefing
Benchmark 10-year USA treasury debt yields rose one basis point, or 0.01 percentage point, to 2.67 percent early in London from yesterday. The price of the 2.75 percent note due in February 2024 fell 2/32, or 63 cents per $1,000 face amount, to 100 21/32.
Treasuries are headed for their best two-month gain in almost two years as harsh winter weather damps the outlook for the U.S. economy and turmoil in Ukraine drives demand for the safest assets. The government auctioned $35 billion in five-year notes to stronger-than average demand yesterday. Indirect bidders, an investor class that includes foreign central banks, purchased 50.7 percent of the five-year notes, compared with an average of 44.6 percent for the past 10 sales.
Japan’s 10-year government bond yield was steady at 0.585 percent. Australia’s 10-year sovereign yield sank 6 basis points to 4.06 percent after the report showing that the nation’s business investment declined more than economists forecast.
Germany’s 10-year yield fell three basis points, or 0.03 percentage point, to 1.59 percent early London time, the lowest since July 24th. The 1.75 percent bund maturing February 2024 rose 0.235, or 2.35 euros per 1,000-euro face amount, to 101.45. Germany’s 10-year bunds rose, pushing yields to the lowest level since July, before a report that analysts said will show annualized inflation in Europe’s largest economy slowed in February.
