St George Economics economy and finance update
Sentiment lifted on optimism about US earnings. Alcoa, one of the world's major aluminium producers, opened the US earnings season on a positive note, beating forecasts and providing a more upbeat global outlook for 2013. The Dow and Nasdaq rose 0.5% while the S&P500 rose 0.2%.
US treasuries were marginally higher, (yields fell) despite better sentiment in share markets. Demand turned to the secondary market for treasuries, after a sale of ten-year notes was regarded as weak.
The US dollar index rose, with the euro falling on the back of disappointing industrial production data from Germany. The yen weakened against the US dollar and the euro on mounting speculation the Bank of Japan will undergo further monetary easing at its meeting on 21-22 January, and may consider raising its inflation target to 2 percent. GBP also weakened on speculation the Bank of England would ease monetary policy as early as its meeting this Thursday. The Australian dollar initially fell in reaction to weaker than expected retail sales, but recovered in volatile trade on better risk appetite overnight.
Most commodity prices fell with the CRB index lower. Oil prices fell on data showing rising oil inventories. Gold prices also fell on heightened expectations of monetary easing from central banks. BoE and ECB are due to meet this week.
Retail sales were weaker than expected, falling 0.1% in November, following an unchanged result in October. This suggests consumers remained cautious in November, despite a rate cut in October.
For the year to November, retail sales rose 2.9%, down from a 3.1% annual rate in October. For the two months of Q4 so far, retail sales have declined, suggesting consumer spending will make another small contribution to GDP growth in Q4, unless this weak retailing trend is unwound in December.
Job vacancies fell 6.9% in the November quarter, to the lowest since May 2010. For the year to the November quarter, job vacancies were down 7.9%.
HIA new home sales rose 4.7% in November, after rising 3.4% in October, suggesting that lower interest rates are starting to impact the market.
German industrial production rose 0.2% in November, the first rise in four months. However, it was a subdued increase and below consensus estimates for a 1.0% rise. The annual pace of decline was little changed at -2.9% in the year to November.
Building permits fell 5.4% in November, after declining 2.0% in October. The fall in November building approvals was driven by a slump in apartment approvals to a 19-month low. Approvals excluding apartments, however, rose 4.6% in November.
The UK trade balance was a deficit of £9.2bn in November, down from a deficit of £9.5bn in October. Exports rose 2.9%, more than offsetting a 1.1% imports rise.
No US data to report.
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