Materially better German investor confidence (ZEW) data

Australian NAB November business confidence declined to -9, from -1 in October, the lowest since May 2009. The business conditions index came in at -5, in line with October, the weakest since March 2009. The confidence index is currently 15 points below the long-run average of +6. The report reveals that retail, manufacturing and wholesale was weak, with the mining component slumping to -4, from +25 previously. Construction was flat, with manufacturing the weakest. The A$ declined on the news, but has rebounded back sharply – currently US$1.0514 – amazing !!!;

Recent polls suggest that Mr Abe’s party, the LDP, together with their coalition partner, the New Komeito party, are heading for a victory in the lower house of Parliament – Reuters suggest that they may gain 300 seats out of the 480 seat assembly. The Japan Restoration Party, a conservative and nationalist leaning party, could gain a further 50 seats. Mr Abe has proposed that the BoJ act more aggressively in terms of monetary easing and has suggested a programme of fixed asset fiscal stimulus. Mr Abe has also been more vocal on China’s territorial claims in the South China Seas. A change in Japan’s pacifist constitution would require a 2/3rd majority in both the upper and lower houses, as well as a public referendum, though the interpretation of that policy is easier to accomplish, reports Reuters

Chinese November bank loans amounted to Yuan 522.9bn (US$84bn) of local-currency loans, reports the PBoC, lower than the Yuan 550bn forecast and Yuan 562.2 in the corresponding period last year. M2 rose by +13.9bn Y/Y, lower than the forecast of +14.1%. Total financing came in at Yuan 1.14tr in November, the lowest since August and as compared with Yuan 1.29tr in October. Somewhat disappointing data;

Greece has just announce that they received some  E32bn nominal of bonds as part of their tender. The average price was E0.335 on the Euro. Given the price, the Greeks slightly missed (by E450mmn) their target – another fudge will occur;

Having announced that he would resign as PM over the weekend, Mr Monti has hinted that he may now stand as a candidate for PM. Mr Monti is expected to announce his decision this week;

Italian business lobby, Confidustria, has revised lower 2013 Italian GDP to -1.1%, from -0.6% previously. GDP is expected to contract by -2.1% this year, slightly better than their previous forecast of -2.4%. Debt to GDP is expected to come in just below 125.9% this year and 126.7% next;

German ZEW December (investors) confidence came in at +6.9, significantly better than the -11.5 expected and the -15.7 reading in November. The economic sentiment index is positive for the 1st time since May 2012. The current situation component came in at 5.7, slightly lower than the 6.0 expected and 5.4 in November. The survey, albeit less important than the IFO survey, suggests that Germany will not face a recession next year. Exports to the US and the ROW (ex the EZ) are rising materially. Having said that Germany is expected to announce negative GDP this Q, with the economy stagnating in Q1 2013;

The US trade deficit widened by +4.9% in October to US$42.2bn, from a downwardly revised US$40.3bn in September, though below expectations of a deficit of US$42.7bn. Exports declined by -3.6%, the most since January 2012. Reduced agricultural exports, due to the drought, hurt exports. Exports declined to US$180.5bn, the lowest since February and US$187.3bn in September. However, imports declined by -2.1%, the lowest since April 2011;

US wholesale inventories rose by +0.6% in October, lower than the +1.1% increase in September, though higher than the +0.4% expected.

US NFIB small business optimism index came in at 87.5 in November, lower than the 92.5 expected and 93.1 in October;


Asian markets closed mixed. European markets are higher on the better German ZEW news. US markets are higher as well, as there is more optimism over the possibility of a deal between the Democrats and the Republicans on the fiscal cliff. In addition, the markets expect that the FED will increase its QE programme tomorrow.

The ZEW data has also helped the Euro, which is currently trading around US$1.30.

Spot gold is trading around US$1707, with January Brent at US$106.60 – oil has been weakening recently and my chartist friends suggest suggest that oil could weaken even further.

All awaiting the FED’s decision re potentially an increased QE programme tomorrow.


Kiron Sarkar


12th December 2012



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