In the overnight – early morning trading session focus centred mainly on the issues from China in relation to the yuan which the Chinese authorities, in the form of the central bank, appear determined to see devalued versus its major trading peers. As a consequence the renminbi took its biggest fall in over two years. But it wasn’t all doom and gloom from the planet’s largest emerging economy as the Conference Board’s latest LEI data proved. According to the CB; unexpectedly strong growth in bank lending, coupled with improvements in the export sector, helped to support an acceleration of the LEI in January. Consumer expectation was the only negative contributor to the index…
Looking at European data this morning Italian retail figures are out showing that the print came in line with expectations with a 0.4% drop measured over the quarter. However, looking at the yearly drop the figure shows a 2.6% fall, perhaps understandable given the levels of unemployment in Italy, particularly amongst those who regard shopping as a leisure activity.
German GDP figures are out illustrating that the country’s modest growth continues, GDP is up by 0.4% in the latest quarter versus the previous quarter. Over the year the annual growth was measured as 0.4%.
In the UK the latest mortgage lending stats have just been published and they’re showing a ‘recovery’, if indeed that’s the right one word description. The UK govt. is currently underpinning a Help 2 Buy scheme allowing any borrower, with a 5% deposit only, to borrow alarmingly large amounts. Initially aimed at first-time buyers on new housing developments, the scope of the scheme has now been widened to allow anyone to buy with such a small deposit.
Unsurprisingly this is beginning to cause a stampede amongst the house price obsessives in the UK as can be seen from the latest data, with approvals now at their highest monthly levels for over six years and this is only early days for the scheme. The stats. Director at the BBA appears pleased that the UK consumer is happy to take on more debt whilst perhaps being blissfully ignorant of the fact that the govt. loan part of the Help 2 Buy scheme is not free money, it has to be paid back after five years…
BBA statistics director, David Dooks said:
[quote]Following on from last month, mortgage borrowing continues to rise compared to a year earlier as mortgage assistance schemes help first time buyers and housing chains more generally. Approvals for new purchases have climbed quite significantly and are now at their highest point since September 2007. Credit card spending is also on the rise, showing that consumer confidence in the economy continues to improve.[/quote]
Italian Retail trade
The retail trade index measures the monthly evolution of the turnover at current prices of enterprises with retail sale outlets. With effect from January 2013 the indices will be calculated with reference to the base year 2010 using the Ateco 2007 classification. In December 2013 the seasonally adjusted retail trade index decreased by 0.3% with respect to November 2013 (-0.5% for food goods and -0.3% for non-food goods). The average of the last three months compared to the previous three months decreased by 0.4%. The unadjusted index decreased by 2.6% with respect to December 2012.
Detailed German GDP results for the 4th quarter of 2013
The German economy continued to grow moderately at the end of the year. As the Federal Statistical Office (Destatis) already reported in its first release of 14 February 2014, the gross domestic product (GDP) increased by 0.4% – upon price, seasonal and calendar adjustment – in the fourth quarter of 2013 compared with the third quarter of 2013. In the second and third quarters of 2013, too, the German economy had grown (by 0.7% and 0.3%, respectively), after a stagnation at the beginning of the year. Regarding the year 2013 as a whole, the increase amounted to 0.4% (calendar-adjusted: +0.5%).
Conference Board LEI increased sharply in January
The Conference Board Leading Economic Index® (LEI) for China increased 1.2 percent in January. The index stands at 283.4 (2004 = 100), following a 0.8 percent increase in December and a 1.3 percent increase in November. Five of the six components contributed positively to the index in January. Says Andrew Polk, resident economist at The Conference Board China Center in Beijing.
[quote]Unexpectedly strong growth in bank lending, coupled with improvements in the export sector, helped to support an acceleration of the LEI in January. Consumer expectations was the only negative contributor to the index.[/quote]
Yen rises as a safe haven as speculation mounts that China’s growth may be stalling
Significant gains on Wall Street, during yesterday’s trading sessions, improved global sentiment and helped push several Asian bourses up to their best level in a month, with the exception of China…
Stocks in Greater China fell sharply, this coming a day after taking a big tumble, on concerns that the mainland’s real estate boom could stall. By far the bigger story in China was its currency, the renminbi. The onshore renminbi staged its biggest one-day drop in more than two years.
China’s yuan tumbled by the most in 22 months on speculation that the central bank now wants to end to the currency’s steady appreciation in order to ward off speculators before a possible widening of the trading band. The yuan fell 0.25 percent to 6.1135 per dollar mid-morning in Shanghai, sliding for a sixth day, according to China Foreign Exchange Trade System prices.
Market snapshot at 10:00 am UK time
The ASX 200 closed down 0.12%, the CSI 300 down 2.56%, the Hang Seng down 0.32%, with the Nikkei up 1.44%. Euro STOXX is currently down 0.37%, CAC down 0.45%, DAX down 0.25%, with the UK FTSE down 0.42%. Looking towards the New York open the DJIA equity index future is down 0.11%, SPX future down 0.12% and the NASDAQ future down 0.12%.
NYMEX WTI oil is down 0.49% at $102.32 per barrel with NYMEX nat gas down 1.78% at $5.35 per therm. COMEX gold is down 0.31% at $1334.10 per ounce with silver up 0.02% at $21.82 per ounce.
Forex focus
The yen strengthened 0.2 percent to 102.26 per dollar early London time, the biggest advance since Feb. 14th. Japan’s currency gained 0.1 percent to 140.68 per euro. The common currency was little changed at $1.3754. The yuan fell 0.5 percent to 6.1286 per dollar, according to China Foreign Exchange Trade System prices. That’s the biggest drop since December 2008.
The yen advanced the most in more than a week versus the dollar amid speculation a depreciating Chinese yuan may dampen global growth, boosting demand for the Japanese currency as a haven. The yen gained versus all but one of its 16 major peers. China’s yuan tumbled the most in five years on bets the central bank wants an end to the currency’s steady appreciation.
The pound gained 0.1 percent to $1.6673 early London time after rising 0.2 percent yesterday, the first increase since Feb. 14th. Sterling was at 82.41 pence per euro. The pound held a gain from yesterday versus the dollar before an industry report is published that economists believe will show U.K. mortgage approvals rose to the most in more than six years in January.
The pound has gained 12 percent in the past year, the best performer of 10 developed-nation currencies tracked by Bloomberg Correlation-Weighted Indexes. The euro has appreciated 6.8 percent and the dollar has risen by 1 percent.
Bonds briefing
The benchmark USA 10-year debt yield was little changed at 2.74 percent early in London. The price of the 2.75 percent note maturing in February 2024 was 100 1/8.
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