St George Economics economy and finance update
DESPITE a dip in consumer confidence, US markets picked up on Friday night. The slowly growing US economy is giving rise to the prospect of ongoing earnings growth.
This positive sentiment is outweighing the fact that the 'fiscal cliff' tax hikes were merely postponed for two months and will take effect at the end of February unless further agreement is reached.
The Dow rose 0.4% as did the FTSE100.
Other European markets fell with the Dax down 0.4% and the French CAC40 down 0.1%.
US treasury prices rose (yields fell) as the bond market contemplated the impact of upcoming US fiscal discussions.
On Friday, Republican House Majority Leader Eric Cantor said the House would consider a bill to extend the debt limit by three months in order to force the Senate to pass a budget.
US ten year bonds ended last week at a yield of 1.84%. Australian long bonds yield 3.41%.
The AUD dipped into the US$1.04 range on Friday night but recovered to move back into the 1.05 range towards the end of the New York session.
The US dollar moved higher against the euro and the yen over the weekend.
A quiet night on commodity markets on Friday with gold down marginally and oil up marginally.
No significant data released and nothing due today.
Chinese GDP data was roughly in line with consensus expectations, with annual growth at 7.9% in the year to the December quarter (consensus 7.8%).
Other data released included industrial production, which edged up from 10.1% to 10.3% in the year to December.
Retail sales also picked up, rising from 14.9% to 15.2% in the year to December.
The run of data coincides with expectations and other indicators that the Chinese economy picked up towards the second half of 2012.
Consumer price inflation in New Zealand fell during the December quarter, declining 0.2%. The annual pace of inflation was reported at just 0.9%. Falls in the prices of fruit and vegetables lay behind the December quarter result.
Consumer sentiment fell to a one-year low in the US.
The University of Michigan's measure fell to 71.3 with respondents citing the fiscal cliff debate as a major detractor. Earlier improvements in sentiment during 2012, based on solid job growth, appear to have dissipated.
The US celebrates Martin Luther King Jr. Day on Monday which will coincide with the inauguration of US President Obama for his second term.
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