St George Economics economy and finance update
US share markets were only marginally higher, despite a run of positive economic data.
While data from China, Europe and the US revealed an improvement in their economies, a disappointing earnings report from Apple dragged down technology stocks.
The S&P500 rose to its highest in five years at one point, but closed flat. The Dow rose 0.3%, but the Nasdaq fell 0.7%.
Treasuries fell (yields rose) as positive jobs data signalled that the US economy was on the mend, while an improvement in risk appetite lessened demand for safe-haven bonds.
The US dollar was mixed against major currencies, weaker against the euro on more positive risk sentiment but stronger against the yen.
The yen weakened after a Japanese official said the government had no problem with the US dollar hitting ¥100 (currently around ¥90.2).
The Australian dollar weakened, despite the positive Chinese data and encouraging news on the global front last night.
Commodity prices were mixed, with the CRB index slightly weaker. Oil prices rose, supported by more positive economic data. Meanwhile, gold prices fell sharply on technical selling and weaker demand for safe havens.
Near-term risks to US public finances have now eased and demand could be switching from gold to alternate inflation hedges such as Treasury Inflation-Protected Securities (TIPS).
No data released yesterday.
The HSBC manufacturing index rose from 51.5 to 51.9 in the flash estimate for January.
It was the first indicator for 2013, and provides an encouraging sign that the pickup in growth towards the end of 2012 has continued through to the turn of the year.
The flash estimates for January's European PMI surveys showed a modest improvement in both the services and manufacturing indices, although both remain well below 50.
The composite index posted its third consecutive increase, rising to 48.2 from 47.3. Manufacturing rose to 47.5 from 46.1 while services rose from 47.8 to 48.3. The country breakdown, however, revealed continued weakness in France with both manufacturing (42.9 from 44.6) and services (43.6 from 45.2) falling again.
Germany posted robust increases in both surveys.
The merchandise trade balance narrowed from a revised deficit of ¥954.8bn to ¥641.5bn in December, the sixth consecutive month of deficits.
While a prolonged trade deficit will raise concerns about Japan's ability to fund its large public debt burden, a weaker yen and a pickup in global growth should lead to an improvement in Japan's trade position.
Exports fell 5.8% in the year to December, while imports rose 1.9% in the year.
The New Zealand business PMI rose to 50.1 in December from 48.8 previously, pointing to an expansion in manufacturing activity (readings above 50).
US initial jobless claims fell 5k to 330k in the week ending 19th January.
The decline was unexpected and is most likely attributed to seasonal swings at the start of the year and adjustments made for the holiday period.
Nonetheless, the decline takes claims down to the lowest level in five years. The spike in the four-week moving average that occurred in Q4 following Hurricane Sandy has now reversed.
US leading indicators increased to 0.5% in December following a flat reading in November. There were positive contributions from jobless claims and interest rate and credit markets which offset the drag from ISM new orders and consumer expectations.
Signs continue to point for further, albeit slow, improvement in the leading indicators.
The Kansas City Fed manufacturing index fell from a revised -1 to -2 in January, suggesting that manufacturing has yet to see any significant lift in activity despite signs of improvement in the US economy overall.
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