Australian January consumer confidence rose to 100.6, an increase of just +0.6%. The modest increase suggests that the RBA will cut interest rates by 25 bps to 2.75% at its next meeting on 5th February;
The Japanese government is to announce its candidates (3 of them) to replace retiring BoJ board members, including the BoJ governor, Mr Shirakawa, on the 15th February. Clearly, the authorities will choose potential candidates who will be more willing to follow the governments policies. However, such appointments will need the consent of the Upper House, which is controlled by the opposition. If the current administration can push through their candidates, they will have 5 (out of the 9 person BoJ board) members who should respond favourably to the current administration’s policies, as 2 existing members are considered dovish;
Japanese machinery orders rose by +3.9% in November M/M, much higher than the +0.3% expected, and the +2.6% rise in October – a positive development;
China’s inward FDI continues to decline. FDI dropped by -4.5% in December Y/Y, to US$11.7bn, the 13th decline in 14 months. FDI declined by -3.7% to US$111.7bn in 2012, though outward investment rose by +US$77.2bn. Expect this trend to continue. In particular, outward investment should rise materially, as the Chinese authorities use their foreign currency holdings to help Chinese companies finance overseas acquisitions and investments generally. Indeed, outward investment could well surpass inward investment within 1 year;
My particularly well informed friend expects that the Chinese authorities will mandate a major increase in e-cars production, to avoid the serious pollution problems affecting the country. Will follow and report shortly;
In an interview with the FT, Mr (ditherer) Rajoy urges Germany to pursue growth policies. In addition, he defended the country’s decision not to seek a bailout and/or assistance from the ECB. He added that Spanish banks were sufficiently capitalised. All I can say is that he better stop smoking those “aromatic cigarettes”, fast. German officials have stated that EZ countries should stick to their deficit reduction plans – so there Mr Rajoy;
EZ December inflation (CPI) rose by +0.4% M/M or +2.2%, in line with expectations. Core inflation rose to +1.5%, up from +1.4% in November;
The German Ministry of Economy has cut German GDP growth to just +0.4% this year. Seems pretty conservative to me. I will stick to my +1.0% to +1.25% for the current year – German business lobbies suggest +1.0% GDP for the current year;
US December retail sales rose by +0.5%, higher than the +0.2% expected and the revised +0.4% in November, the largest rise in 3 months. Ex autos, petrol and building materials, retail sales rose by +0.6%, higher than the +0.5% in November.
PPI declined by -0.2%, more than the -0.1% expected, though not as much as the -0.8% decline in November. PPI came in at +1.3% for 2012, the slowest rise since 2008;
US December CPI came in flat M/M as expected though up from the -0.3% in November.
Core CPI was just +0.1% higher, weaker than the +0.2% expected and +0.1% in November.
No real concerns on the inflation front at present;
Outlook
Asian markets closed mainly lower, with the Nikkei down over -2.5%, as the Yen rose, following comments by the Economy Minister and the LDP’s Secretary General that suggested that the Yen’s decline was too sharp. These guys better get their act together. European markets are lower and US futures suggest a weaker opening, as well.
Gold is trading at US$1676, with March Brent at US$109.75.
The Euro is trading at US$1.3276, though has recovered following conflicting views as to its strength by EZ policy makers – they and the Japanese seem to have quite a lot in common. In addition, the World Bank forecasts that the EZ economy will contract this year – for the 2nd consecutive year. In addition, they have downgraded global growth.
The Yen has strengthened, following the confused statements by Japanese politicians – currently trading around Yen 88 – still expect it to weaken though and am beginning to short against the US$, slowly.
Continuing to reduce my equity holdings.
US earnings seem positive, especially JPM and GS this morning.
Kiron Sarkar
16th January 2013
