Friday, 14 January 2011

Spain clears hurdle too

European sovereign debt concerns eased further on Thursday after more successful bond sales. Reuters reports:

Investors showed appetite for Spain's debt Thursday, pushing borrowing costs up less than expected at its debut debt auction for 2011 and alleviating some concerns about the euro zone's more vulnerable debtor nations.

Spain sold 3 billion euros of its five-year bonds, at the top end of the Treasury's target range but less than the 3.4 billion euros sold at the previous auction on November 4, which had a higher target. Bids of over 6 billion euros were taken.

The Treasury paid nearly a full percentage point more to sell the debt than last time, but much less than a 150 basis point premium priced in at the start of the week had suggested.

Minutes later, Italy also sold 6 billion euros of debt, again at the top end of its target range.

The successful bond sales boosted the euro, as did hawkish words from the ECB. From Bloomberg:

European Central Bank President Jean-Claude Trichet signaled he’s prepared to raise interest rates if needed to fight inflation even as leaders struggle to contain the region’s sovereign-debt crisis.

“We are permanently alert, we are never pre-committed not to move interest rates and our level of interest rates is designed to deliver price stability,” Trichet said at a press conference in Frankfurt today. At the same time, the benchmark rate, which the ECB left at 1 percent, is still “appropriate.”

The Bank of England also left interest rates unchanged on Thursday amid a report of a weaker-than-expected 0.4 percent rebound in industrial production in November.

Rate hikes, though, are already the trend in Asia. On Wednesday, the Bank of Thailand raised interest rates and on Thursday, it was the Bank of Korea's turn.

One Asian country that is unlikely to raise interest rates soon, though, is Japan, where machinery orders fell again in November. AFP/CNA reports:

Japan's core private-sector machinery orders, an indicator of corporate capital spending, fell for the third consecutive month in November in another dreary sign for the economy, data showed Thursday.

The 3.0 per cent fall on-month missed the median forecast of a Dow Jones Newswires and Nikkei poll for a 1.8 per cent rise, with the government warning of weakness in the non-manufacturing sector.

Looking in better shape recently is the US economy. Bloomberg reports the latest US economic data:

The U.S. trade deficit unexpectedly shrank in November as growing global demand and a weaker dollar help boost overseas sales of everything from aircraft to cotton.

The gap shrank 0.3 percent to $38.3 billion, the smallest in 10 months, as exports climbed to the highest level in more than two years, according to data today from the Commerce Department in Washington. Other reports showed increases in claims for jobless benefits and wholesale prices.

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