Official figures have confirmed that the UK economy slipped by 0.2% for the fourth quarter of 2011. Household spending was up 0.5% quarter on quarter, the highest since the second quarter of 2010. Government spending, meanwhile, was ahead by 1% over the previous three months. Benefiting from a weaker pound exports were up by 2.3%.
The economy has recovered barely a half of the 7 percent of output lost during the 2008-2009 recession, only Japan and Italy are further behind among Group of Seven nations and unemployment is at a 16-year high of 8.4 percent and rising..
Stats Snapshot
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- UK gross domestic product (GDP) in volume terms decreased by 0.2 per cent in the fourth quarter of 2011
- Output of the production industries fell by 1.4 per cent, within which manufacturing fell by 0.8 per cent
- Output of the service industries was unchanged, while output of the construction industry fell by 0.5 per cent
- Household final consumption expenditure increased by 0.5 per cent in volume terms in the latest quarter
- In current price terms, compensation of employees fell by 0.3 per cent in the fourth quarter of 2011
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Could the German GDP figures differ from that previously announced in mid February?
[quote]The gross domestic product (GDP) of Germany fell by 0.2% in the fourth quarter, after increasing 0.6% between July and September, according to the Federal Statistical Office. German growth rate slowed to 1.5% in the fourth quarter after 2.6% last quarter, hampered by a slowdown in foreign trade and consumption. Exports fell 0.8% in the quarter, after growing 2.6% last quarter. Net trade has shaved 0.3 percentage points in the fourth quarter. The German budget deficit fell to 1.0% of GDP in 2011 against 4.3% in 2010.[/quote]
Market Overview
Global stocks advanced for a second day, oil gained and the yen weakened versus all its major peers. The MSCI All-Country World Index rose 0.3 percent as of 8:00 a.m. in London while the Stoxx Europe 600 Index added 0.4 percent. Standard & Poor’s 500 Index futures climbed 0.3 percent. The yen fell 0.7 percent against the euro, reaching the weakest level since November. Oil increased 0.6 percent to $108.45 a barrel and copper declined for a third day. The cost of insuring against default on European corporate debt fell.
The yen reached 107.86 per euro, the weakest since Nov. 7. The currency was poised for a weekly drop against its 16 major peers after swings in currencies from Group of Seven nations fell to the least since 2008, spurring demand for higher yields.
FX Volatility
If forex traders have noticed that the market appears to be slow moving over the past week or so then there’s a reason, the implied volatility of three-month options on G-7 currencies as tracked by the JPMorgan G7 Volatility Index fell as low as 9.76 percent yesterday, the least since Aug. 8, 2008, as option traders scaled back risks of large exchange-rate moves.
Lloyds Losses
Lloyds Banking Group Plc has reported that its full-year net loss grew on a weakening U.K. economy, missing analysts’ estimates, and said income will drop this year. The net loss was 2.8 billion pounds compared with a loss of 320 million pounds for 2010, the London-based lender said in a statement today missing the 2.41 billion pound estimate of 14 analysts surveyed by Bloomberg.
Market snapshot at 10:15 am GMT (UK time)
The main indices of the Asia Pacific markets closed in positive territory. The Nikkei closed up 0.54%, the Hang Seng closed up 0.12% and the CSI closed up 1.60%. the ASX 200 closed up 0.48%. European bourse indices are in positive territory in the morning session. The STOXX 50 is up 0.88%, the FTSE is up 0.14%, the CAC is up 0.61 and the DAX is up 1.01%. The Athens exchange, the ASE, leads the board this morning up by 1.14%. Brent crude is flat at $123.60 per barrel whilst WTI is up to $108.29. Comex gold is down $4.2 an ounce. The SPX equity index future is up 0.29%.
Commodity Basics
Iran, the second-biggest member in the Organization of Petroleum Exporting Countries, produced about 3.5 million barrels of oil a day last month, according to analysts’ estimates compiled by Bloomberg. Saudi Arabia had output of 9.7 million barrels a day and Iraq had 2.8 million.
Oil advanced a seventh day, the longest winning streak since January 2010, on signs of economic recovery from the U.S. to Germany and concern escalating tension with Iran threatens crude supplies. Futures climbed from the highest close in more than nine months and headed for a third weekly gain.
Oil for April delivery increased as much as 0.8 percent to $108.70 a barrel in electronic trading on the New York Mercantile Exchange and was at $108.33 at 8:46 a.m. London time. The contract yesterday gained 1.5 percent to $107.83, the highest close since May 4. Prices are 4.9 percent higher this week and up 11 percent the past year.
Brent oil for April settlement advanced 7 cents to $123.69 a barrel on the London-based ICE Futures Europe exchange. The European benchmark contract’s premium to New York-traded WTI was at $15.36, compared with $15.79 yesterday. It reached a record of $27.88 on Oct. 14.
Forex Spot-Lite
The yen slid versus all its major peers as foreign-exchange volatility at its lowest in more than three years prompted buying of higher-yielding currencies.
The euro reached its strongest level in more than 10 weeks against the dollar before a German report forecast to confirm resilience in Europe’s largest economy. The greenback slid against New Zealand’s dollar before U.S. data predicted to show new homes sales increased. The won rose after a report showed South Korean consumer confidence climbed to a three-month high.
The yen fell 0.6 percent to 107.61 per euro as of 7:01 a.m. in London, poised for a 2.9 percent drop since Feb. 17, the third-straight weekly decline. It touched 107.70 per euro, the lowest since Nov. 7. Japan’s currency slid 0.6 percent to 80.51 per dollar, and reached 80.54, the weakest since July 11. The euro was at $1.3369 from $1.3373 yesterday after earlier touching $1.3380, its highest level since Dec. 12.
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