International
Markets News Tuesday; Bank of Japan sees improved economic outlook; China reported elevated inflation level in January
By Finfacts Team
Feb 15, 2011 - 9:02 AM

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Eurogroup meeting of Eurozone finance ministers, Brussels, Feb 14, 2011. The wheelchair-bound German finance minister, Wolfgang Schäuble, is on the near right. In 1990, the then federal interior minister survived an assassination attempt.

Bank of Japan: The Bank of Japan kept its key interest rate at around 0 to 0.1% today.

In a commentary on the economic outlook, the bank said: "Japan's economy is gradually emerging from the current deceleration phase. As the growth rate of the global economy has started increasing again led by emerging and commodity-exporting economies, Japan's exports and production are showing signs of resuming an uptrend. Business fixed investment has started to pick up. The employment and income situation has remained severe, but the degree of severity has eased somewhat.

As for private consumption, demand for some goods has suffered a reverse after the sharp increase seen previously. Housing investment has started to pick up. Meanwhile, financial conditions have continued to ease further. The year-on-year rate of decline in the CPI (excluding fresh food) has continued to slow as a trend."

China Inflation: China reported today that inflation moderated slightly in January but remained at 4.9%, compared with the official 4% target.

The National Bureau of Statistics reported that annual inflation followed a 4.6% increase in December and a two-year high of 5.1% in November.

Last week, the People's Bank of China hiked the key benchmark interest rate to 6.06% from 5.81%

The producer price index (PPI), the main gauge of inflation at the wholesale level, rose 6.6% in January year on year.

Food prices, which account for a third of the basket of goods in China's consumer price index (CPI) calculation, surged 10.3% year on year.

The price of grain rose 15.1% year on year, and that of eggs was up 20.2%. Fresh vegetables advanced 2%, while fruit was up 34.8%.

Barclays: UK bank Barclays, reported today that its annual net profit surged 36% to £3.56bn in 2010.

The bank said it would pay £3.4bn in staff bonuses, down 7% compared with 2009.

"Barclays delivered a significant increase in profit, despite continued economic challenges in our principal markets: historically low interest rates; sluggish volumes in many market segments; and considerable regulatory uncertainty," the new American chief executive, Bob Diamond, said.

NBC's Richard Engel has the latest on the unrest in Bahrain and CNBC's Scott Cohn has the latest on the search for former Egypt president Mubarak's millions:

Euro area GDP growth in Q4 set to disappoint: Davy economist, Conall Mac Coille, comments  -- "Asian stock markets rose this morning (February 15th) following news that CPI inflation in China was 4.9% in January, weaker than the 5.4% figure the market had expected. That said, output price inflation was 6.6% in January, considerably stronger than the market had expected, indicating that inflationary issues will remain a concern. So stock markets will remain focused on the potential for a tightening of monetary policy in response to price pressures in China.

Today sees the release of euro area GDP for the fourth quarter of 2010. Euro area GDP growth is expected to be 0.4% in Q4, up slightly from growth of 0.3% in Q3. However, the Q4 figures released early this morning for Germany and France indicated that expectations for the euro area are likely to be disappointed. GDP growth in Germany was 0.4%, slightly weaker than the 0.5% expected. Growth in France was just 0.3%, considerably weaker than the 0.6% expected. Q4 GDP data for Austria, Greece, Italy are released later today and for other individual euro area countries later in the week. But given the large weight of the core economies, the aggregate euro area GDP number released later this morning is unlikely to meet market expectations.

Stock markets will have to weigh the positive news from China against the less favourable euro area Q4 GDP numbers. That said, poor weather conditions are likely to have pushed down on activity in Q4. For example, the construction sector detracted from growth in Germany. Purchasing manager indices for January indicate that growth remained robust going into Q1 in both the services and manufacturing sectors. So the euro area Q4 GDP data are unlikely to weigh heavily on stock markets."

Economic View: Room for manoeuvre on EU interest rate; Goodbody economist, Juliet Tennent, comments - - "There was further political rhetoric ahead of the Ecofin meeting in Brussels yesterday, with the European Commissioner for Economic and Monetary Affairs, Oli Rehn, suggesting that while there is no room for a unilateral re-negotiation of the EU/IMF deal with Ireland, there may be room for maneuver on the interest rate.

He also reiterated that any change to the existing interest rate would be as part of an EU wide agreement and not specifically in response to pressure from Ireland. While the lowering of the interest rate would clearly be helpful to Ireland (a 1% reduction equates to €675m saving per annum) it is only part of an overall solution that is necessary (see our note on Irish Debt Dynamics of the 8th February).

 Indeed a resolution to the European debt crises remains under negotiation and yields on peripheral bonds have been moving upwards recently, as markets get impatient with the slow pace of progress. In this regard a small step was taken at yesterday’s Ecofin meeting, with European finance ministers agreeing, as part of a comprehensive permanent package expected to be finalized by the end of March, to double the lending capacity of the European Financial Stability Facility to €500bn in 2013."

Callum Henderson, global head of FX research at Standard Chartered, speaks to CNBC's Oriel Morrison about the impact of China's weaker-than-expected inflation data on the currency markets:

US Markets

In New York Monday, the Dow fell 5 points or 0.045 to 12,268.

The S&P 500 added 0.24% and the Nasdaq added 0.28%.

Asia Markets

The MSCI Asia Pacific rose 0.1% Tuesday.

Japan's Nikkei 225 climbed 0.20%; China's Shanghai Composite was flat; Australia's S&P/ASX 200 Index dipped 0.10% and India's Sensex gained 0.37%.

Asia benchmarks

Finfacts Reports

German economy slowed in fourth quarter of 2010; Annual GDP growth at 3.6%; French GDP grew at 1.5%
Irish debt haircuts would be welcome; Stupid to start immediate war now with Europe
Eurogroup finance ministers agree on bigger bailout fund; EU banks will be subject to "single rulebook"
UK commercial property capital growth rose fractionally in January at 0.1%
Markets News Afternoon: Rehn says interest rate on Ireland's EU-IMF bailout could be cut
Dr. Peter Morici: Budget demagoguery; White House says deficit in current year to spike to $1.65trn - - the largest dollar amount ever
Industrial production fell 0.1% in both Eurozone and EU27 in month of December 2010 -- Annual rise of 8% and 7.7%
OECD composite leading indicators point to continued expansion
Fidelity Investments - - the US investment giant -- to add 100 new jobs in Galway and Dublin

In Europe, the Dow Jones Stoxx 600 is up 0.17% in early trading Tuesday.

The ISEQ has dipped 0.11% in Dublin.

CRH fell 1.27%; Greencore rose 0.93%.

European Benchmarks

Irish Share Prices

Irish Stock Market Capitalisation by Company

Key Index Performance Statistics

Euribor Rates

AIB Daily Report

Bank of Ireland Daily Report

Currencies 

The euro is trading at $1.3486 and at £0.8405.

For live currency updates, check the right-hand column of the Finfacts home page.

The US dollar fell to $1.6038 per euro on Tuesday, July 15, 2008 - an-all time record.

Commodities

The Baltic Dry Index, a measure of shipping costs for dry commodities, hit an all-time High of 11,771 on the 21st of May, 2008. From that time it reversed and on the 5th of December, 2008 it hit a low of 663 - - close to a 1986 low.

The BDI closed at 3,005 on Thursday, Dec 31st - - a rise of 289% in 2009. The index averaged 59% lower in 2009 than a year earlier.

On Thursday, July 15, 2010, the index  fell for the 35th straight session, by 9 points, or 0.537%, to 1,700 points, Bloomberg report.

On Friday July16th, the BDI rose 20 points or 1.12% to 1,700 to break the 35-session losing streak.

On Friday last week, the BDI rose 42 points or 3.70% to 1,178.

The Financial Times reported earlier in January, that Australia’s flooding and fears of ship oversupply has pushed down a gauge of the cost of hiring ships to carry coal, iron ore and other dry bulk by nearly half since October to the lowest level since the aftermath of the financial crisis. The Baltic Dry index, the widely watched measure of dry bulk charter rates, fell to 1,453, nearly half the 2,784 peak reached on October 27, 2010.

Crude oil for March 2011 delivery is currently trading on the Chicago York Mercantile Exchange (CME/Nymex) at $85.28 per barrel, up 47 cents from Monday's close. In London, Brent for March delivery is trading on the International Commodities Exchange at $103.96. The North Sea benchmark accounts for two-thirds of the global market.

The margin between the US benchmark WTI (West Texas Intermediate) used on the New York Mercantile Exchange and Brent is almost at $19 a barrel.

The FT said last Friday that a surge in oil inventories in Cushing, Oklahoma, where WTI is delivered into America’s pipeline system, has depressed the value of the benchmark against other yardsticks. The International Energy Agency said on Thursday that with “few relief valves” to cut the stock overhang in Cushing, the price dislocation “may persist for months [or years] to come”.

Gold spot price

The spot price of an oz of gold is trading in New York at $1,364.70, up $2.70 from Monday's close.


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