Dollar and Yen Fall as Optimism Returns

* The dollar fell against most major currencies on Monday as positive global economic data induced investors to buy riskier assets. The ISM US manufacturing PMI showed US manufacturing activity expanded to the highest level since August 2004; personal income grew slightly more than expected; and personal spending increased for a third consecutive month. The S&P 500 rose 15.32 to 1,089.19. The yen fell as risk aversion eased. Sterling rose modestly on the strongest manufacturing PMI in 15 years and speculation the Bank of England will exit its quantitative easing program at Thursday’s policy meeting. Earlier the pound was pressured by opinion polls indicating neither of the big parties would win a majority in the upcoming election. The oversold Australian and Canadian dollars rose on higher commodity prices. The Reserve Bank of Australia is expected to raise its key interest rate by 25 basis points to 4.00%.
* The EUR/USD rose for the first day in six as the Greek yield spread narrowed. EU Economy Commissioner Joaquin Almunia stated that EU executives believed Greece can fix its budget crisis but there are risks. If those risks materialize, the EU would demand new measures, such as new taxes and cutbacks. The EUR/USD is in a strong downtrend but oversold and bounced on the 1.38-area support today. There are resistances the 1.40 and 1.42 areas.


Financial and Economic News and Comments

US & Canada

* US personal income rose a slightly more-than-expected 0.4% m/m in December after an upwardly revised 0.5% m/m gain in November, while personal spending grew a slightly less-than-expected 0.2% m/m, a third consecutive month-on-month increase, following November’s upwardly revised 0.7% m/m advance, data from the Commerce Department showed, signaling the US economic recovery is steadily progressing. Personal income climbed 0.5% y/y in December; personal spending rose 4.0% y/y. Disposable personal income increased 0.4% m/m in December and advanced at a 5.5% annual rate in the past three months. Wages and salaries increased 0.1% m/m in December after a 0.4% m/m gain the prior month. The personal consumption expenditure deflator increased 0.1% m/m in December and rose 2.1% y/y. The core PCE deflator, which excludes food and energy, increased 0.1% m/m in December and grew 1.5% y/y.


* The US ISM manufacturing index jumped to a higher-than-expected 58.4 in January from a downwardly revised 54.9 in December, indicating US manufacturing activity expanded for a sixth straight month and reached the highest level since August 2004, according to data from the Institute for Supply Management. The index’s key components rose and remained above the 50 growth level in January, signaling sustained expansion in the US manufacturing industry. The new orders index increased to 65.9, the highest since December 2004, from 64.8. The production index rose to 66.2 from 59.7. The employment index grew to 53.3 from 50.2, indicating employment expanded in January to the highest level since April 2006. Inflation grew at a faster pace, with the prices paid index advancing to 70.0 in January from 61.5 in December.


* US construction spending fell 1.2% m/m in December to a seasonally adjusted $902.5 billion annual rate, after a revised 1.2% m/m decline to $913.2 billion in November and an upwardly revised 1.5% m/m gain to 923.9 billion in October, according to figures from the Commerce Department. December construction spending fell 9.9% y/y.


Europe

* The eurozone manufacturing PMI increased to 52.4 in January (vs. preliminarily reported 52.0) from 51.6 in December, indicating euro-area manufacturing expanded to the highest level since January 2008, final January manufacturing PMI data from Markit Economics showed.
* The German manufacturing PMI rose to 53.7 in January (vs. preliminarily reported 53.4) from 52.7 in December, suggesting the manufacturing sector in Germany continued its expansion at slightly faster pace, according to final January manufacturing PMI data from Markit Economics
* The UK manufacturing PMI rose to a higher-than-expected 56.7 in January from an upwardly revised 54.6 in December, indicating the UK manufacturing sector expanded to its highest level since 1994, according to PMI data from Markit Economics and the Chartered Institute of Purchasing and Supply.
* UK house prices increased 0.1% m/m in January, a sixth consecutive monthly gain, Hometrack reported, cautioning that the data reflects distortions and a lack of supply that mask underlying weakness of demand. January house prices declined 0.8% y/y.
* Mortgage approvals unexpectedly fell to 59,023 in December from a downwardly revised 60,045 in November, the first fall in more than a year, according to a report from the Bank of England. M4 was down 1.1% m/m in December, the largest decline since records began in 1982.

Asia-Pacific

* The Chinese manufacturing PMI declined to a seasonally adjusted 55.8 in January from 56.6 in December, indicating China’s manufacturing activity recorded the second-fastest growth since 2008, according to PMI data from the Federation of Logistics and Purchasing. The new orders index slipped to 59.9 in January from 60.0 in December The output index declined to 60.5 from 61.4. Despite the declines, those numbers remained above the 50 expansionary level. The export orders index increased to 53.2 from 52.6. Meanwhile, the HSBC/Markit Chinese manufacturing PMI rose to a record in January, according to a separate report from HSBC Holdings Plc and Markit Economics.

Источник: Hans Nilsson

01.02.2010