St George Economics economy and finance update

Share Markets:

Sentiment was less upbeat overnight, with a surprising fall in UK industrial production and concerns about the Euro zone weighing.

The US stockmarket had edged lower overnight, following a run of seven consecutive daily gains.

The Dow was little changed, while the S&P 500 slipped 0.2% and the Nasdaq fell 0.3%.
 

Bonds:

US government bonds gained ground (yields fell) as the lacklustre stockmarket performance enhanced the appeal of safe haven government bonds.
 

Foreign Exchange:

The Aussie dollar strengthened against the major currencies, with rising yields on Australian bonds encouraging investors.

The Yen weakened on a report the Bank of Japan may engage in further monetary stimulus sooner than expected, with the nominee Governor for the Bank of Japan, Kuroda hinting he may ease monetary policy as soon as he takes office next week, rather than waiting for the next scheduled meeting on April 3-4.

The Yen fell to a four-and-a-half year low versus the Aussie.

Sterling weakened against the Aussie, hitting a 28-year low, on weak UK industrial production data and expectations of further monetary easing from the Bank of England.
 

Commodities:

Commodity prices strengthened, led by copper with signs of strength in Chinese auto sales providing support.
 

Australia:

Business confidence fell from a reading of 3 in January to a reading of just 1 in February according to the latest NAB business survey.

There were marginally more optimists than pessimists among the businesses surveyed.

Confidence is below its long run average but remains above the level reported in December 2012.

Business conditions also deteriorated, falling to a reading of -3 in February, from -2 in January.
 

Europe:

The head of Germany's central bank, Weidmann said the Euro zone's "crisis is not over despite the recent calm on financial markets."
 

United Kingdom:

Industrial production fell 1.2% in January, held down by disruption to oil supply at a North sea rig.

Even excluding oil and utilities, however, factory output fell 1.5% in January.

For the year to January, total industrial production is down 2.9%.
 

United States:

NFIB small business optimism was stronger than expected, rising to a reading of 90.8 in February, from 88.9 in January.

It was the third consecutive monthly increase in the index, although it remains below its level in October last year.

 

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