3:59 (PM) NZT
Market Overview:The financial markets continue to see increased risk appetite boosting stock markets, albeit with waning momentum. The prospect of central bank stimulus has provided most of the energy behind the initial direction for 2013. The stubbornly slow recovery of economic health in western economies remains a concern. Increasing activity in China provides some hope to the closely connected Asian economy. This week sees the Bank of Japan in the spotlight, with the much anticipated monetary policy decision to be announced. The structural risks in Europe have continued to recede for the most part, with Spain having a good ability to borrow funds throughout last week. The US debt ceiling issue will likely be averted with wide spread recognition that an early compromise to delay a decision is a logical decision. Globally the low levels of inflation continue to exist, with the latest Australian number expected to mirror New Zealand’s low score from last week.
AustraliaLast week saw the Australian employment numbers at center stage. The labour force decreased by a small margin, but the compelling number was the number of part time workers that would like to increase hours. The headline numbers still look relatively healthy with unemployment just easing higher to a very respectable 5.4%. This week sees the focus turn to the 4th quarter inflation number with a .4% rise expected. Given the NZ result from last week was materially weaker than economist expectations, a lower number would not surprise. China numbers continue to show a recovery in activity with the last GDP number at 7.9% growth, and this is directly supportive of the Australian economy. Next week sees a slurry of second tier economic news in Australia, and should be of limited impact in currency markets.
New ZealandLast week was an interesting one for economic news in New Zealand. The NZ Institute of Economic Research released their quarterly Survey of Business Opinion. The survey revealed a healthy jump in business sentiment, with its core energy coming from increasing momentum of the Christchurch rebuild. The 4th quarter of 2012 inflation numbers were lower than expected with a -.2% number coming in against economist expectations of a +.1% result. Of direct impact is the on going elevated level of the New Zealand dollar. This number should ensure the RBNZ is able to leave the cash rate unchanged for the majority of 2013, and if not beyond. There is an absence of economic data in NZ this week, ahead of what will be an unchanged RBNZ monetary policy decision on Thursday next week.
United StatesThe patchy run of economic data in the US continued last week. Stronger than expected retail sales numbers were balanced by the underperformance of manufacturing and consumer confidence numbers. Of note will be the decent corporate earnings results and an inflation number that remains well under control at +.1% for the December month. Stock markets are at five year highs as the FED commitment to support asset markets remains firmly in place. This week sees a relatively quiet week for economic news, with various housing data releases likely to dominate the focus. Next week sees a full economic data calendar. Durable goods sales, the FED’s monetary policy announcement, employment and manufacturing numbers all feature, in what will be an informative week.
EuropeThe grind back towards economic growth continues in Europe. Not helping the situation will be the demand for EURO driven by the recent fall in perceived structural risk in Europe. Last week saw weaker than expected industrial production numbers, as expected inflation numbers (2.2%) and increased demand for non-core member debt. Expect this mixture of fortune to continue throughout 2013 and the painful and lethargic recovery struggles for momentum. This week sees economic sentiment numbers, manufacturing data, and various member unemployment numbers. Also expect the Eurogroup meetings to produce market moving headlines, along with comments from ECB head Mario Draghi.
United KingdomUK economic news remains patchy. Last week’s inflation numbers were as expected at 2.7%. Retail sales numbers confirm consumer spending remains under pressure. Retail sales numbers contracted by .1% , against a +.2% expectation. The Pound Sterling remains vulnerable, especially as funds exit the UK and return to Europe as the structural risks lessen on the continent. This week should prove interesting with the latest employment numbers, BOE monetary policy meeting minutes and 4th quarter preliminary GDP numbers due for release. Next week is relatively quiet with housing and manufacturing numbers to dominate the UK focus.
JapanJapan has been dominant in international news over the last month or so. The new leadership has committed to making bold steps to stimulate the economy and target higher levels of inflation. The BOJ meeting announcement that will be made later on today should confirm the well telegraphed measures indicated in earlier statements. The main objective appears to be weakening the value of the YEN to increase the value of Japanese exports. The YEN has materially weakened in the last month or so, and whether or not this trend continues in the short term will be reliant on the action at today’s announcement. Inflation numbers and the minutes from today’s meeting will be released on Friday and provide focus to round out this week in Japan. Next week will see the latest retail sales, industrial production and household spending numbers released.
CanadaAn air of cautious optimism continues in the Canadian economy. The latest BOC business outlook survey revealed a further increase in sentiment, which is encouraging. This week sees the release of the latest retail sales and inflation data, as well as the monetary policy announcement from the BOC on Wednesday. Next week sees the GDP number for December released and will add further colour to the picture of economic growth. The Canadian dollar remains under valued against its Australasian counterparts, albeit due for a rebound once the US dollar pares its recent losses.
Major Announcements last week:
- UK Inflation 2.7% as expected
- US Retail Sales +.5% vs +.2% expected
- US Inflation +.1% vs +.2% expected
- Australian Unemployment rate 5.4% as expected
- US Phila. Fed Manufacturing -5.8 vs +7.1 expected
- NZ Inflation -.2% vs +.1% expected
- Chinese GDP 7.9% vs 7.8% expected
- UK Retail Sales -.1% vs +.2% expected