Marc Chandler

About the Author Marc Chandler

Marc Chandler has been covering the global capital markets in one fashion or another for 25 years, working at economic consulting firms and global investment banks. A prolific writer and speaker he appears regularly on CNBC and has spoken for the Foreign Policy Association. In addition to being quoted in the financial press daily, Chandler has been published in the Financial Times, Foreign Affairs, and the Washington Post. In 2009 Chandler was named a Business Visionary by Forbes. Marc's commentary can be found at his blog (www.marctomarket.com) and twitter www.twitter.com/marcmakingsense

Dollar, Rupee, and Japanese Economic Data Update

Australia, New Zealand, UK markets closed for Boxing Day.  

After rallying last week, oil prices are off 2%, base and precious metals lower.

European core and peripheral bond markets are highs, with yields slipping mostly 2-3 bp. No end to the political uncertainty in Spain, but Spanish 10-year bonds are matching regional performance.

Equities have a heavier bias.  Asian shares were mixed.  The Nikkei rose 0.6% while the Shanghai Composite fell 2.6%.  Reports suggest that the anticipation of the end of the sales ban on large investors and a new IPO regime, weighed on Chinese sentiment. This is the biggest decline in a month for Chinese shares.   Weak industrial profits, especially among state-owned enterprises (-9.5%) also took a toll.    Asia markets open late, like India, Malaysia, Thailand and Indonesia advanced.    European equities are lower, with the Dow Jones Stoxx 600 off 0.25%, led by the energy sector, consumer staples, materials and financials.  Volume in Europe is about a third of the recent average.   An opening loss of around 0.3% is currently anticipated.

The US dollar is mixed.   European currencies are a little firmer while the dollar-bloc is softer.  The dollar is also slightly higher against the Japanese yen.  Last week, the dollar eased against the Chinese yuan every day on a closing basis, but bounced back smartly today after the PBOC fixed it higher.  The close (CNY6.4873) represents a new four-year high.

News

Japanese data disappointed.  November industrial output fell 1.0%, twice what the consensus expected. It was the first decline in three-months.   However, due to base effect, the year-over-year rate improved to 1.6% from -1.4% in October. The increase in the inventory ratio (2.9%) reflected a decline in shipments and an increase in inventories, which will have to run down later.   Retail sales fell 2.5% in November.  The Bloomberg consensus was for a 1.4% decline.  The year-over-year pace fell to 1.0% from 1.8%.   The data raises concern that the economy has yet to find traction even though the initial contraction in Q3 (after a decline in Q2) was revised away due to a pick-up in capex.

The only US data today is the Dallas Fed’s Manufacturing survey.  The Bloomberg consensus is for a -7.0 reading, a deterioration from -4.9 in November.   It has been negative all year, weighed down ostensibly by the energy-related activities.  It averaged -14.6 in Q2 and -10.0 in Q3.  Assuming a consensus report, it would average -8.2.

The Indian rupee rose for an eighth consecutive session to a new five-week high.    The anticipation of new foreign inflows appears to be a key driver.  Starting with the New Year, India will give a higher quota (INR165 bln or ~$2.5 bln) for foreign purchases of sovereign and state-government bonds.   India bonds advanced for the third session, with the benchmark 10-year bond yield of 7.7%.