After yesterday’s sharp rise in equities markets in Europe and the USA, global markets retreated in Thursday’s afternoon session with European indices falling back sharply. This was despite various European agencies publishing positive data regarding the overall state of the European economy. The EUROFIN meetings also provided details regarding the next small tranche of funds to be supplied to Greece. According to Eurostat, the official statistics body of the European Union, Europe’s inflation is currently running at 0.9% in November, up from 0.7% the previous month.
In the UK a business advisory group, the CBI, published a survey of manufacturing suggesting that certain key metrics were running at 18 year highs. Despite being a low impact news story and noting that the CBI are unashamed cheerleaders for UK business, this data may prove to be prophetic in terms of UK economic growth in 2014.
In Canada manufacturing sales rose by 1%, sales reached their highest point since May 2012. In the USA builder confidence reached a recent high, a reading of 58 being 4 points ahead of last month. The confidence was amplified by the volume of prospective buyers.
The USA balance of payments came in just short of the anticipated $101 billion negative at -$96 billion for the latest quarter. Still close on $450 billion for the year and failing to cause a ripple throughout the markets. It would appear that such negative figures are now the accepted norm in our consumer takes all society and economies. The USA inflation data and rate was published on Tuesday, inflation running at 1.2% annually.
The Eurogroup of finance ministers confirmed that Greece will receive its next aid tranche, worth €1bn in total. In a statement, President Jeroen Dijsselbloem (who is also Dutch finance minister) said:
[quote]I note with satisfaction that Greece has achieved the four milestones agreed with the Troika institutions in the context of the third review of its economic adjustment programme. I am confident that the Greek authorities will swiftly conclude their discussions with the Troika institutions in order to allow for a completion of the ongoing review of the country’s economic adjustment programme.[/quote]
The milestones:
- Greece has placed over 12,500 public employees in the mobility scheme as part of the strategy to make the public administration more efficient.
- Greece has taken adequate measures to significantly restructure or liquidate three state-owned companies which were intended for privatisation.
- A code of lawyers was adopted to enhance the functioning of this regulated profession.
- Greece took the required steps to improve the financial situation of the two main water companies, by clearing government arrears, in order to facilitate their privatisation.
Builder Confidence Rises Four Points in December
Builder confidence in the market for newly built, single-family homes improved four points to a 58 reading on the National Association of Home Builders/Wells Fargo Housing Market Index (HMI) for December, released today. This gain reflected improvement in all three index components – current sales conditions, sales expectations and traffic of prospective buyers. “This is definitely an encouraging sign as we move into 2014,” said National Association of Home Builders (NAHB) Chairman Rick Judson, a home builder from Charlotte, N.C.
Canada Monthly Survey of Manufacturing, October 2013
Manufacturing sales increased 1.0% in October to $50.1 billion. With this gain, sales reached their highest level since May 2012. The sales increase in October was mostly caused by higher sales in the food industry. Sales also rose notably in the chemical industry. Sales advanced in 13 of 21 industries, representing 49% of the manufacturing sector. Non-durable goods sales advanced 2.6% while durable goods sales declined 0.5%. Constant dollar sales were up 1.0%, indicating a rise in volumes. In the food industry, sales rose 6.9% to $7.7 billion in October.
U.S. International Transactions: Third Quarter 2013
The U.S. current-account deficit, the combined balances on trade in goods and services, income, and net unilateral current transfers, decreased to $94.8 billion (preliminary) in the third quarter from $96.6 billion (revised) in the second quarter. The deficit decreased to 2.2 percent of current-dollar gross domestic product (GDP) from 2.3 percent in the second quarter. The decrease in the current-account deficit was more than accounted for by an increase in the surplus on income.
US Consumer Price Index – November 2013
The Consumer Price Index for All Urban Consumers (CPI-U) was unchanged in November on a seasonally adjusted basis, the U.S. Bureau of Labor Statistics reported today. Over the last 12 months, the all items index increased 1.2 percent before seasonal adjustment. The energy index declined in November, offsetting increases in other indexes to result in the seasonally adjusted all items index being unchanged. The indexes for gasoline and for natural gas fell significantly, more than offsetting increases in the electricity and fuel oil indexes.
Momentum remains strong in the manufacturing sector – CBI survey
Growth in the UK’s manufacturing sector continued to strengthen with order books and output touching an 18-year high for the second consecutive month, according to the latest CBI Industrial Trends Survey. The survey of nearly 400 manufacturers found that both the size of total order books and the pace of output growth over the past three months were once again the highest recorded since 1995. Export orders also rose considerably, reaching their strongest level for 22 months, with the improvement mainly driven by the chemicals and motor vehicles & transport equipment sectors.
Euro area annual inflation up to 0.9%
Euro area annual inflation was 0.9% in November 2013, up from 0.7% in October. A year earlier the rate was 2.2%. Monthly inflation was -0.1% in November 2013. European Union annual inflation was 1.0% in November 2013, up from 0.9% in October. A year earlier the rate was 2.4%. Monthly inflation was -0.1% in November 2013 In November 2013, the lowest annual rates were observed in Greece (-2.9%), Bulgaria (-1.0%) and Cyprus (-0.8%), and the highest in Estonia (2.1%), Finland (1.8%) and Germany (1.6%).
Market overview at 10:00 PM UK time
The DJIA closed down marginally by 0.06% at 15875, SPX down 0.31%, NASDAQ by 0.14%. European indices suffered a sharp selloff over the two trading sessions on Tuesday; STOXX 50 down 1.24%, CAC down 1.24%, DAX down 0.86%, FTSE down 0.55%.
The DJIA equity index future is down 0.08% at the time of writing, the SPX future is down 0.42%, NASDAQ down 0.27%. STOXX future is down 0.97%, DAX future down 0.62%, CAC future down 1.00%, FTSE future down 0.33%.
NYMEX WTI oil is down 0.38% on the day at $97.11 per barrel, NYMEX nat gas is up 0.02%, COMEX gold sold off sharply by 1.15% at $1230.10 per ounce, silver on COMEX is down 1.02% at $19.90 per ounce.
Forex focus
The dollar slipped 0.3 percent to 102.67 yen mid-afternoon New York time, after touching 103.92 yen on Dec. 13th, the strongest level since October 2008. It was little changed at $1.3768 per euro. The 17-nation common currency fell 0.3 percent to 141.36 yen. The dollar traded at almost a five-year high versus the yen as the Federal Reserve begins a two-day meeting that may will result in a reduction of currency-debasing stimulus.
The Aussie fell 0.4 percent to NZ$1.0773 after earlier touching the weakest since October 2008. It was 0.5 percent weaker at 88.98 U.S. cents. The Aussie dollar fell to a five-year low versus New Zealand’s currency as the Reserve Bank of Australia said in minutes of its most recent meeting that it maintained the option to cut interest rates.
The pound fell for a fifth day against the dollar after a government report showed U.K. consumer-price inflation unexpectedly slowed in November to the lowest level in four years. Sterling declined 0.2 percent to $1.6267.
The dollar has strengthened 3.6 percent this year, according to Bloomberg’s Correlation-Weighted Indices, which track 10 developed-nation currencies. The yen declined 14 percent, the worst performer, while the euro advanced the most, gaining 8.7 percent.
Bonds
Five-year note yields dropped four basis points, or 0.04 percentage point, to 1.5 percent late New York time. The price of the 1.25 percent security due in November 2018 gained 6/32, or $1.88 per $1,000 face amount, to 98 27/32. Benchmark 10-year yields sank four basis points to 2.84 percent, while the current two-year note yield declined one basis point to 0.32 percent. The government’s sale of $32 billion of two-year notes drew the strongest demand since January as investors bet policy makers won’t raise the benchmark rate without tying an increase to employment or inflation thresholds. Treasury notes due in five to 10 years led gains as traders weighed whether the Fed will begin reducing $85 billion in monthly bond buying this week or at its January or March meetings.
Treasuries rose amid speculation the absence of inflation will allow the Federal Reserve to reiterate at the conclusion of a two-day meeting tomorrow that borrowing rates will remain low even if policy makers slow bond purchases.
Fundamental policy decisions and high impact news events for Wednesday December 18th
Wednesday sees the publication of the German IFO business climate index, expected in at 109.7. The UK publishes its latest claimant count figures, predicted to be down 35.2 K month on month. The expected percentage claimant count is expected in at 7.6%. The UK’s BoE MPC reveals the votes on interest rate setting and quantitative easing both expected in as unanimous votes. ECONFIN meetings continue through the week, whilst the Swiss ZEW sentiment index is published.
In the afternoon session attention turns to the USA data, housing starts data is predicted in at 0.91 million year on year, whilst crude oil inventories might have the capacity to shock again with the previous week’s figure coming in -10.6 m barrels. Then attention turns to the FOMC and the expected news regarding the potential taper, the Fed’s base rate decision will be announced expected to remain at 0.25%, thereafter the FOMC will deliver an explanatory statement and deliver their economic projections.
