Japanese Dec core machinery orders slipped 1.7%mth

Morning Report

News and views

The US Treasury’s bank rescue package held sentiment up for another day. Treasury Secretary Geithner will announce the details at 11am ET, quelling the media’s enthusiastic speculation regarding its contents. Also lending support to the risk-lovers, Chinese bank lending in January jumped to the equivalent of 30% of total 2008 total. The recent bounce in Chinese activity partly explains the basing action in commodities. WTI oil is up 1%, and Baltic Shipping is +10%, although copper consolidated near the session end to be -1%. The S&P500 is roughly unchanged as we write, banks outperforming to be +2%. Safe haven assets such as gold (-2%) and US treasuries (+4bp to 3.04%) continued to see outflows, as did the US dollar.

After some hefty Japanese selling during yesterday’s domestic session, NZD broke upwards through the 0.5370 resistance level, in this phase of global confidence, and renewed appetite for carry currencies. It reached the 0.5450 area, before pulling back towards the old resistance.

AUD/USD was bought from Europe’s open, and reached 0.6850 before resting around 0.6780. AUD/NZD weakened from 1.2750 to 1.2550, and looks soft while risk appetite remains firm.

Europe took the EUR higher, from 1.29 to 1.31, a smaller-than-expected German trade balance the only notable data release. Barclays bank beat profit expectations, helping GBP from 1.47 to 1.50. USD/JPY stayed within its two day range of 91 to 92.

Japanese Dec core machinery orders slipped 1.7%mth, somewhat smaller than median projection for -8.6%, after plunging 16.2%mth in Nov. The decline in the annual pace moderated to -26.8%yr from -27.7%yr in Nov, the steepest annual drop in 10 years. More spectacularly, foreign orders rebounded an unexpected 27.6%mth, drawing the annual decline back to -29.4%yr from -44%yr.

Japan December current account surplus slipped to ¥125bn from ¥581bn. This included a trade deficit of –¥198bn, in line with the merchandise trade data, along with ongoing deficits in services and transfer. A ¥724bn income surplus was more than responsible for the overall current account surplus, yet do note that income has fallen 28%yr. December data showed exports were hit by the global downturn –35.1%yr, with imports –21.2%yr.

German trade surplus fell to €6.9bn in December. Exports fell another 3.7% following a 10.8% plunge in November, while imports fell by 4.1%, likely a reflection of lower energy prices that month. Germany is one of the more export-oriented economies in Europe, and in the current financial crisis, surplus countries are proving to be just as vulnerable as deficit ones.

Eurozone Sentix investor confidence index fell from -34.4 to -36.1 in February. The current conditions index plunged to a record low of -52.25. However, expectations recorded their third straight monthly gain, from -31.5 to -18.25.