US and Japanese consumer spending increase

The data from the US on Friday were mostly positive.

Consumer spending rose 0.8 percent in February. After adjusting for inflation, spending rose 0.5 percent, the most in five months.

However, income rose just 0.2 percent, less than the 0.3 percent increase in the price index for personal consumption expenditure.

Still, consumer spending looks likely to stay resilient. The Thomson Reuters/University of Michigan’s final index of consumer sentiment rose to 76.2 in March, the highest since February 2011, from 75.3 last month.

Another report on Friday showed that the Institute for Supply Management-Chicago's business barometer fell to 62.2 in March from 64 in February.

Earlier on Friday, data from Japan had also been mostly positive.

Household spending rose 2.3 percent in February from a year, a sharp reversal of the 2.3 percent fall in January.

Housing starts rose 7.5 percent in February from a year earlier, the first rise in six months.

Industrial production unexpectedly fell 1.2 percent in February. However, a survey showed that producers expected output to increase 2.6 percent in March and 0.7 percent in April.

Furthermore, the Markit/JMMA Japan Manufacturing purchasing managers index rose to 51.1 in March from 50.5 in February.

In another piece of good news for Japan, the unemployment rate fell to 4.5 percent in February from 4.6 percent in January.

Japan also moved out of deflation in February. The core consumer price index rose 0.1 percent in February from a year earlier.

In the euro area, deflation remains far from being a concern. Indeed, inflation slowed only slightly to 2.6 percent in March from 2.7 percent in February.

US fourth quarter growth unchanged, eurozone economic sentiment and UK house prices fall

Annualised US fourth quarter GDP growth was confirmed at 3.0 percent on Thursday. Encouragingly, real gross domestic income increased 4.4 percent, up from 2.6 percent. Another report showing a decline in initial claims for unemployment benefits last week to 359,000, the lowest in nearly four years, suggests that the US economy is continuing to grow in early 2012.

The eurozone economy, though, continues to struggle. The European Commission's index of executive and consumer sentiment in the euro area fell to 94.4 in March from 94.5 in February.

Elsewhere in Europe, the UK housing market has suffered a setback. Mortgage lender Nationwide reported on Thursday that house prices fell 1.0 percent in March, their sharpest monthly fall in more than two years in March. Also on Thursday, data from the Bank of England showed that approvals for home loans fell to an 8-month low in February.

Compounding the UK economy's difficulties, the GfK consumer confidence index fell to -31 in March from -29 in February.

Chinese stocks fall, US durable goods orders rebound

Stocks in China fell sharply on Wednesday. Bloomberg reports:

China’s stocks fell the most in four months after Societe Generale SA said Chinese corporate profits won’t grow at all this year and the nation’s largest copper producer reported slumping earnings...

The Shanghai Composite Index fell 62.3 points, or 2.7 percent, to 2,284.88 at the close, its biggest drop since Nov. 30. The CSI 300 Index declined 2.8 percent to 2,474.90...

Industrial companies posted their first January-February profit decline since 2009, as net income dropped 5.2 percent from a year earlier to 606 billion yuan ($96 billion), the National Bureau of Statistics said yesterday. That compared with a 34.3 percent gain in the first two months of 2011.

The industrial profit figures suggest 2012 consensus earnings estimates for Hong Kong-listed Chinese companies are “far too optimistic,” Societe Generale strategists Guy Stear and Anthony Lee wrote in a note to clients dated yesterday...

There was minimal impact on stock markets elsewhere though. The S&P 500 also fell on Wednesday but by just 0.5 percent.

Sentiment in US markets on Wednesday was not helped by weaker-than-expected economic data. US durable goods orders rose 2.2 percent in February, rebounding only partially from the 3.6 percent decline in January. Orders excluding transportation equipment increased 1.6 percent while orders for non-defense capital goods excluding aircraft increased 1.2 percent.

Meanwhile, fourth quarter economic growth in the UK has been revised down to -0.3 percent from -0.2 percent but French growth was confirmed at 0.2 percent.

There were some encouraging data from the euro area. In Italy, an index of manufacturing sentiment rose to 92.1 in March from 91.7 in February while in Germany, the inflation rate eased to 2.3 percent in March from 2.5 percent in February.

A report from the European Central Bank on Wednesday provided only a mixed picture of monetary developments in the euro area though. The report showed that M3 money supply growth accelerated to a 2.8 percent annual rate in February from 2.5 percent in January. However, loans to the private sector grew at a 0.7 percent annual rate in February, down from 1.1 percent in January.

US consumer confidence falls

US economic data again came in mostly weaker on Tuesday. The Conference Board's consumer confidence index fell to 70.2 in March from 71.6 in February. The S&P/Case-Shiller composite index of home prices in 20 metropolitan areas was flat in January. The Richmond Fed's index of manufacturing activity fell to 7 in March from 20 in February.

In contrast, Europe's economy is showing signs of stabilising. In the UK, the CBI distributive trades survey's March sales balance rose to zero in March from -2 in February. Insee's indicator of French consumer confidence rose to 87 in March from 82 in February. However, GfK's German consumer confidence index is expected to fall to 5.9 in April from 6.0 in March.

Markets rise despite weaker US data

Stocks and commodities started the week on a positive note, thanks to comments from Federal Reserve Chairman Ben Bernanke as well as improved prospects for bailouts in the euro area. Bloomberg reports:

The Standard & Poor’s 500 Index rallied 1.4 percent to close at 1,416.51 at 4 p.m. New York time, returning to its highest level in almost four years. The Stoxx Europe 600 Index added 0.9 percent. Treasury 10-year yields climbed two basis point to 2.25 percent after increasing as much as six points earlier. Oil increased 16 cents to $107.03 a barrel. The Dollar Index, a gauge of the U.S. currency against six major peers, fell for a second day while gold and silver rallied.

Bernanke said that while he’s encouraged by the unemployment rate’s drop to 8.3 percent, further improvement in the job market will require continuing the central bank’s stimulative monetary policies. Chancellor Angela Merkel said Germany may back plans for the temporary and permanent euro-area rescue funds to run in parallel. European finance ministers will meet on March 30 to discuss raising a 500 billion-euro ($664 billion) ceiling on the region’s financial firewall.

Investors appeared to have focused on the positives and seemed relatively undaunted by more evidence that the US housing recovery lost steam in February. The National Association of Realtors reported on Monday that pending home sales fell 0.5 percent in February.

But weaker US data on Monday were not just limited to housing. The Chicago Fed's National Activity Index fell to minus 0.09 in February from 0.33 in January. The Dallas Fed's general business activity index fell to 10.8 in March from 17.8 in February.

The euro area, though, provided some positive economic data. In Germany, the Ifo business climate index rose to an eight-month high of 109.8 in March from 109.7 in February. Italy's consumer confidence index also rose to an eight-month high of 96.8 in March from 94.4 in February.

US housing recovery takes a break

The recovery of the housing market in the United States made little progress recently if last week's data are any indication.

The week started positively enough. Monday saw the National Association of Home Builders report that its NAHB/Wells Fargo Housing Market index held steady at 28 in March, unchanged from February's reading which was revised down from 29. The latest readings are the highest since June 2007.

Tuesday saw mixed data on housing starts from the Commerce Department. Starts fell 1.1 percent in February to an annual rate of 698,000 units. However, new building permits jumped 5.1 percent to an annual rate of 717,000, the highest since October 2008.

The dataflow turned more negative on Wednesday. The Mortgage Bankers Association reported that mortgage applications fell 7.4 percent in the previous week, with purchasing activity falling 1.0 percent. The National Association of Realtors reported that existing home sales fell 0.9 percent in February to an annual rate of 4.59 million.

Thursday's data were little better. The Federal Housing Finance Agency reported that home prices were unchanged in January from December on a seasonally-adjusted basis and were down 0.8 percent in January from a year earlier.

Finally, on Friday, the Commerce Department reported that new home sales fell 1.6 percent in February to an annual rate of 313,000. This was the second consecutive fall in new home sales and brought the sales rate down to the lowest since October.

The silver lining in the otherwise weak report on new home sales is that the supply of homes remained at a record low of 150,000 in February, unchanged from January. The falling supply of homes should help relieve downward pressure on home prices and eventually lead to more home building.

French business confidence rises, US new home sales fall

The tables got turned on Friday, with economic data from the euro area coming out better than that from the US.

In the euro area, French business confidence improved this month with the manufacturing industry sentiment index rising to 96 from 93 in February. In Italy, retail sales rose 0.7 percent in January.

However, in the US, new home sales fell 1.6 percent in February. It was the second consecutive decline and will raise doubts about the housing market's recovery, especially after housing starts had also unexpectedly shown a decline earlier in the week.

Markets fall as Chinese and eurozone economies show contractions

Markets were mostly down on Thursday after a number of negative economic reports. The S&P 500 Index fell 0.7 percent to 1,392.78 while the STOXX Europe 600 Index fell 1.2 percent. The 10-year Treasury yield declined two basis points to 2.28 percent.

The day's negative dataflow started in China, where the preliminary HSBC manufacturing PMI fell to 48.1 in March from 49.6 in February.

It continued in the euro area, where industrial new orders fell 2.3 percent in January.

The weakness in the eurozone economy has continued since, with Markit's composite index for the region falling to 48.7 in March from 49.3 in February. The manufacturing PMI fell to 47.7 in March from 49.0 in February and the services PMI fell to 48.7 from 48.8.

The euro area did report though that its consumer confidence indicator rose to minus 19 in March from minus 20.3 in February.

Elsewhere in Europe, UK data also showed weakness, with retail sales falling 0.8 percent in February, the biggest fall in nine months.

The US, however, continued to provide relatively positive data. The Conference Board's index of US leading indicators rose 0.7 percent in February, the most in 11 months. Initial claims for jobless benefits fell by 5,000 to 348,000 last week, the lowest level in four years. US home prices fell 0.8 percent in January from a year earlier, the smallest decline in more than two years, and were unchanged from the previous month on a seasonally adjusted basis.

Japan's trade balance returns to surplus, manufacturers' sentiment improves

Japan achieved an unexpected trade surplus in February. Reuters reports:

Japan's exports fell 2.7 percent in February from a year earlier, Ministry of Finance data showed on Thursday, smaller than economists' median forecast of a 6.4 percent annual decline and following a 9.3 percent drop in the year to January.

The trade balance came to a surplus of 32.9 billion yen ($393 million), the first surplus in five months, compared with the median market estimate for a 120 billion yen deficit. The country posted its biggest ever trade deficit of 1.475 trillion yen in January...

Imports rose 9.2 percent in February from a year earlier, against a forecast for an 8.4 percent increase.

In another positive piece of news on Japan, Reuters reports an improvement in the mood of Japanese manufacturers.

In the Reuters Tankan, the manufacturers' sentiment index, derived by subtracting the percentage of pessimistic responses from optimistic ones, rose 13 points to plus 2, the biggest monthly gain since June 2009 and is seen flat at plus 2 in three months time...

The index for non-manufacturers stayed flat at plus 5 and is expected to improve to plus 9 in June, underpinned by sectors such as construction and real estate that could benefit from reconstruction-related demand.

US building permits surge, UK inflation slows

There was relatively positive news on US housing on Tuesday. Housing starts fell 1.1 percent in February but new building permits jumped 5.1 percent to the highest since October 2008.

Meanwhile, in the UK, inflation slowed in February with consumer prices rising 3.4 percent from a year earlier compared with 3.6 percent in January. Compared to the previous month, however, consumer prices jumped 0.6 percent.

A survey by the Confederation of British Industry suggests that inflation pressures in the UK persist in March as the survey's price expectation balance rose to 24 from 10 in February. This comes even as the total order book balance fell to -8 this month from -3 in February.

Housing market weakens in China, steady in US

China's housing market is deflating. A report on Sunday showed that home prices in China's 70 major cities fell 0.1 percent in February when compared to January. Prices fell in 45 of the 70 cities.

The US housing market, though, may still be maintaining a recovery path. The NAHB/Wells Fargo Housing Market index was unchanged at 28 in March, the highest level since June 2007.

Inflation accelerates but Fed maintains accommodative policy

Inflation in the United States is rising again but the Federal Reserve is unlikely to change its accommodative stance in monetary policy.

US inflation data released by the Labor Department on Friday showed that consumer prices rose 0.4 percent in February, more than the 0.2 percent increase in January.

The increase in the CPI in February was mostly due to a 6.0 percent jump in the price of gasoline. Excluding food and energy, consumer prices rose just 0.1 percent in February, less than the 0.2 percent increase in January.

On a year-on-year basis, overall consumer prices were 2.9 percent higher in February, the same as in January and significantly down from the recent peak of 3.9 percent in September last year.

Excluding food and energy, consumer prices rose 2.2 percent in February from the previous year, down from 2.3 percent in January, which had been the highest rate of increase since September 2008.

However, while the year-on-year rates indicate that the trend of inflation is down, the pick-up in the rate of monthly increase in February is probably a better indication of the latest trend. The decline in year-on-year rates mostly reflects a deceleration in inflation last year, when monthly increases in the CPI had slowed to the extent that the latter had been practically flat in the final quarter of last year. The January and February data indicate that the period of deceleration is over.

In fact, the Labor Department's inflation data confirm the pattern already seen in the Institute for Supply Management's price indices. Both the ISM's manufacturing and non-manufacturing price indices had been on declining trends since early 2011. However, those declining trends ended towards the latter part of last year. Since October, both the manufacturing and non-manufacturing price indices have been rising.

So the overall evidence thus far indicates that inflation in the US is accelerating.

Despite this, the Federal Reserve appeared sanguine about the inflation situation in its statement released following its monetary policy meeting last week. Noting that inflation is rising mainly due to the recent increase in oil and gasoline prices, it said that the rise will likely be temporary. It said that rates of resource utilisation in the economy remain low. The unemployment rate, while declining, remains elevated.

Thus, the Fed said that it expected to “maintain a highly accommodative stance for monetary policy”.

US data show flat industrial output, higher inflation and lower consumer confidence

US economic data on Friday were not as positive as usual.

Industrial production was unchanged in February despite a 0.3 percent increase in manufacturing output. However, January production was revised up to show a 0.4 percent increase from an initial flat reading.

Capacity utilisation fell to 78.7 percent from 78.8 percent in January.

However, the consumer price index rose 0.4 percent in February. This was more than the 0.2 percent increase in January.

The increase in the CPI was mostly due to a 6.0 percent jump in the price of gasoline. Consumer prices excluding food and energy rose just 0.1 percent.

Higher inflation is nevertheless hurting consumer sentiment. The Thomson Reuters/University of Michigan consumer sentiment index fell to 74.3 in March from 75.3 in February as one-year inflation expectations rose to 4 percent in March from 3.3 percent in February.

Positive US economic data push stocks and 10-year yield up

US economic data continued to come in positive on Thursday.

Initial claims for unemployment benefits fell 14,000 to 351,000 last week. The New York Federal Reserve's Empire State general business conditions index rose to 20.21, its highest level since June 2010, from 19.53 in February. The Philadelphia Federal Reserve's business activity index rose to 12.5 from 10.2.

Wholesale price inflation picked up last month, the producer price index increasing 0.4 percent, up from January's 0.1 percent gain.

Investors responded to the data by sending the S&P 500 above 1,400. It rose 0.6 percent on Thursday to close at 1,402.6, the highest close since June 2008.

The 10-year Treasury yield increased one basis point to 2.28 percent for its seventh consecutive increase, the longest stretch of increases since 2006.

China's stocks fall as property curbs stay

China's stock market is having some difficulty getting a sustained recovery going. The Shanghai Composite Index tumbled 2.6 percent on Wednesday even as stock markets in the rest of Asia rose.

The fall in Chinese stocks came after Premier Wen Jiabao said that there would be no relaxation of curbs on the property market. However, China is reportedly easing restrictions on lending capacity at three of the nation’s four biggest banks.

There was a more explicit easing move in Norway on Wednesday. The central bank there cut its key policy rate to 1.50 percent from 1.75 percent, the lowest since late 2009.

Further easing from the ECB appears unlikely for the time being though after a report on Wednesday showed that consumer prices in the euro area rose 2.7 percent in the year to February. Another report showed that industrial production in the euro area rose 0.2 percent in January from the previous month.

Elsewhere in Europe, there was bad news for Britain. Fitch Ratings revised down its outlook on Britain's AAA rating to negative on Wednesday. This comes as another report on Wednesday showed the unemployment rate holding at a 16-year high of 8.4 percent in the three months to January.

Markets rise with US retail sales

Markets had a positive session on Tuesday. The Standard & Poor's 500 Index rose 1.8 percent while the Dow Jones Industrial Average rose 1.7 percent to its highest level since 2007.

It was not just US markets that rose. The STOXX Europe 600 Index also rose 1.8 percent while the MSCI Asia Pacific Index rose 0.6 percent.

The news for the day had been mostly positive, even though monetary policies in Japan and the US were left unchanged after central bank meetings on Tuesday.

The Bank of Japan kept its interest rate unchanged at a range of zero to 0.1 percent and refrained from increasing its asset purchasing scheme. However, it did expand a special loan scheme by 2 trillion yen to 5.5 trillion yen.

The Federal Reserve also left monetary policy unchanged as it expects moderate economic growth and a gradual decline in the unemployment rate.

The Federal Reserve did say on Tuesday that 15 of the 19 largest US banks passed its latest stress test.

Investor sentiment in the US was also boosted by a report showing that retail sales rose 1.1 percent in February.

Meanwhile, investor sentiment in Germany has also improved. The ZEW index of investor and analyst expectations jumped to 22.3 in March, its highest reading since June 2010, from 5.4 in February.

Mixed economic data for Asia but OECD sees positive change in momentum

There were mixed data from Asia over the last few days.

On Saturday, China reported a huge trade deficit of $31.48 billion for February. Exports rose 18.4 percent from the previous year while imports surged 39.6 percent.

On Monday, India reported that industrial production rose 6.8 percent year-on-year in January, accelerating sharply from 2.5 percent in December.

Also on Monday, Japan reported that core machinery orders rose 3.4 percent in January but the consumer confidence index fell 0.5 point to 39.5 in February.

Further indication of weakness in Japan came on Tuesday, with the tertiary index reported to have fallen 1.7 percent in January.

Nevertheless, Japan, together with the US, are seen by the Organisation for Economic Co-operation and Development as the drivers of a positive change in momentum in its latest report on composite leading indicators for the OECD economies.

The CLI for the OECD area rose to 100.9 in January from 100.5 in December. The CLI for the US rose to 102.5 from 101.8, the CLI for Japan rose to 102.6 from 102.1 and the CLI for the euro area rose to 98.7 from 98.5.

Global economy still growing despite relapse in euro area

Economic data released over the past two weeks mostly reinforced the view that growth in the global economy generally held up in early 2012 although the eurozone economy failed to show further improvement.

In the United States, the employment report last Friday showed that nonfarm payrolls increased by 227,000 in February. This followed increases of 223,000 and 284,000 in December and January respectively, thus maintaining a positive trend in employment growth. The unemployment rate was unchanged at 8.3 percent, which is the lowest since February 2009.

Also, US February purchasing managers indices for both manufacturing and services stayed above the 50 mark that separates expansion from contraction. The Institute for Supply Management's manufacturing PMI fell to 52.4 in February from 54.1 in January but the non-manufacturing index rose to 57.3 from 56.8.

Meanwhile, in Japan, Markit's composite output index rose slightly to 51.2 in February from 51.1 in January. The Markit/JMMA manufacturing PMI slipped to 50.5 in February from 50.7 in January but Markit's services business activity index rose to 51.2 from 51.0.

Other economic data from Japan were also mostly positive. The index of coincident economic indicators slipped to 93.1 in January from 93.6 in December but the index of leading economic indicators rose to 94.9 from 93.8. The economy watchers survey showed that the current conditions index rose to 45.9 in February from 44.1 in January while the future conditions index rose to 50.1 in February, the highest since April 2007, from 47.1 in January.

Among the major developed economies, the eurozone economy is the laggard based on recent data. After having risen above the 50 mark for the first time in five months in January, Markit's composite index for the region was back below it in February, falling to 49.3 from 50.4 in January. The services index fell to 48.8 from 50.4 but the manufacturing index improved to 49.0 in February from 48.8 in January.

Despite the weakness in the euro area, the JPMorgan global all-industry output index increased for the fourth consecutive month to 55.5 in February, the highest level in a year, from 54.5 in January.

JPMorgan Global All-Industry Indices
	January	February
Output	54.5	55.5
New orders	54.0	54.7
Input prices	56.8	59.4
Employment	52.6	52.2

US employment maintains growth but China's economy slows

US economic data on Friday were positive.

US nonfarm payrolls increased by 227,000 in February while the unemployment rate stayed at 8.3 percent. With revisions adding a total of 61,000 jobs in December and January, the past six months have added 1.2 million jobs, the most since the six months to May 2006.

Meanwhile, the US trade deficit widened in January, usually a sign of a growing economy. Exports increased by 1.4 percent while imports increased by 2.1 percent to hit a record high.

In Europe, the highlight of the day was the news that Greece has activated collective action clauses to force through its debt swap, prompting the International Swaps & Derivatives Association to declare a credit event.

Economic data from the euro area on Friday were mixed. German exports rose 2.3 percent in January while French industrial production rose 0.3 percent in January. However, Italian industrial production fell 2.5 percent in January.

Also seeing a fall in industrial production in January was the UK. Industrial output shrank 0.4 percent.

China's economy also appears to be cooling. Factory output in the first two months of 2012 grew 11.4 percent from a year ago, its lowest level in over 2½ years. Inflation slowed to a 20-month low of 3.2 percent in February.

Central banks leave interest rates unchanged

Considering the fact that three major central banks concluded monetary policy meetings, Thursday turned out to be relatively uneventful for investors.

The Bank of England left interest rates at 0.5 percent and made no additional quantitative easing.

The Bank of Canada left interest rates at 1.0 percent while saying that the Canadian economic outlook was "marginally improved".

Investors, though, were mostly focused on the European Central Bank. The ECB left interest rates at 1.0 percent. ECB President Mario Draghi told a news conference that the eurozone economy is stabilising but is subject to downside risks. Meanwhile, inflation is likely to stay above 2 percent in 2012 with risk to the upside.

The ECB may not have provided additional support for financial markets but there was, nevertheless, good news from the euro area on Thursday with reports that private investors have agreed to swap about 85 percent of their Greek government bonds for new securities.

There was also good news on the data front in the euro area. Germany reported that industrial production rebounded 1.6 percent in January after having fallen 2.6 percent in December.

There was also good news from Japan from the Economy Watchers Survey. The current conditions index rose to 45.9 in February from 44.1 in January. The outlook index rose to 50.1 in February, the highest since April 2007, from 47.1 in January.

Japan revises up GDP, Brazil slashes interest rate

Japan's Cabinet Office reported today that it has revised up its fourth quarter GDP estimate to show a 0.2 percent contraction instead of the original estimate of a 0.6 percent decline. The upward revision was mostly due to an increase in the estimate of capital expenditure growth to 4.8 percent from the preliminary estimate of 1.9 percent.

However, Japan's current account balance swung to a record deficit of 437.3 billion yen in January. This was at least partly affected by China's lunar New Year holidays though, which hit Japan's exports to that country.

A report from Japan on Wednesday had provided a mixed picture of the economy at the start of 2012. The index of coincident economic indicators slipped 0.5 point in January but the index of leading economic indicators rose 1.1 points.

Meanwhile, the US economy has made a good start to 2012. It added another 216,000 private sector jobs in February, according to a report by ADP on Wednesday.

However, there was disappointing data from Europe on Wednesday. Germany's Economy Ministry reported that German factory orders fell 2.7 percent in January.

In Brazil, the central bank reduced the Selic rate by 0.75 percentage point to 9.75 percent after industrial production showed a 2.1 percent decline in January, the biggest drop since December 2008.

World stock markets fall

Stocks finally saw a major, worldwide sell-off on Tuesday.

The S&P 500 Index fell 1.5 percent, the most since December, to 1,343.36. The STOXX 600 Europe Index fell 2.7 percent, its biggest loss since November.

Major World Stock Market Indices
	Close on 6 Mar	Change	% Change
S&P 500	1,343.36	-20.97	-1.54
FTSE 100	5,765.80	-109.02	-1.86
DAX	6,633.11	-233.35	-3.40
CAC 40	3,362.56	-124.98	-3.58
Nikkei 225	9,637.63	-60.96	-0.63
Hang Seng	20,806.25	-459.06	-2.16

US services accelerate, China growth target cut

There were mixed economic data from the US on Monday. The Institute for Supply Management’s non-manufacturing index rose to 57.3 in February from 56.8 in January but factory orders fell 1.0 percent in January.

In the euro area, Markit's composite PMI fell to 49.3 in February from 50.4 in January after the services PMI fell to 48.8 from 50.4. However, retail sales rose 0.3 percent in January.

In the UK, the Markit/CIPS services PMI fell to 53.8 in February from 56.0 in January while the British Retail Consortium reported that retail sales rose 2.3 percent on the year in February after a 2.1 percent rise in January.

There were conflicting data on China's services sector, with the National Bureau of Statistics reporting on Saturday that the official services PMI fell to 48.4 in February from 52.9 in January but HSBC reporting on Monday that its China services PMI rose to 53.9 in February from 52.5 in January.

In any case, China's growth is likely to slow this year after Premier Wen Jiabao announced on Monday that the official growth target had been cut to 7.5 percent for 2012.

US bear market: Quite like Japan's actually

The United States stock market is widely considered to have recovered much better from its financial crisis a few years ago than the Japanese stock market did in the early 1990s. The reality for investors may be somewhat different.

After sinking to a low in March 2009, the US stock market has staged a strong rally. Despite some volatility in 2011, the Standard & Poor's 500 Index closed on Friday at 1,369.63, more than double its March 2009 low of 676.53. It is now near its highest level since June 2008 and is just 12.5 percent below its peak of 1,565.15 in October 2007.

The chart below shows the performance of the S&P 500 since October 2007 and compares it with the performance of the Nikkei 225 since December 1989, when Japan began its bear market. The chart shows the S&P 500 recovering much better after hitting its trough than the Nikkei 225.

Much of the credit for the better recovery in the US has gone to the Federal Reserve. The US central bank eased monetary policy earlier and more aggressively during the financial crisis than the Bank of Japan did. Ultra-easy monetary policy helped the US economy to recover and stock prices to rise in response.

However, aggressive easing by the Fed also caused the US dollar to depreciate against other currencies, including the Japanese yen, both during its recession as well as in the subsequent recovery.

In contrast, the Japanese yen was appreciating against the US dollar through most of the period from 1990 to 1994 when the Japanese stock market suffered its initial fall and made its attempted recovery.

For a US-based investor measuring his portfolio's performance in US-dollar terms, the appreciating yen mattered.

The above chart shows that if the Nikkei 225 were to be measured in US dollars, its initial recovery from 1992 to 1994 would be seen to be almost as impressive as that of the S&P 500 from 2009 to 2012 so far.

Conversely, for a Japan-based investor measuring his portfolio's performance in yen terms, the S&P 500 today remains far below its peak in 2007 after converting to yen.

The above chart shows that the rally in the US stock market over the past few years looks less impressive when measured in yen. In fact, the overall performance of the S&P 500 since the peak in 2007 looks almost as dreadful as that of the Nikkei 225 from 1990 to 1994.

Japan sees rise in capital spending and unemployment

Japan's economy is giving mixed signals.

On Thursday, the government reported that capital spending excluding software rose 4.9 percent in the fourth quarter from a year earlier, the most in almost five years.

However, on Friday, January data showed that Japan's unemployment rate rose to 4.6 percent last month from 4.5 per cent in the previous month while household spending fell 2.3 percent compared to the previous year.

Another report on Friday showed that Japan's core consumer prices fell 0.1 per cent in January from a year earlier, the fourth consecutive month of decline.

US manufacturing slows

US economic data on Thursday lacked the strength seen in recent months.

Manufacturing continued to expand in February but at a slower pace as the Institute for Supply Management’s manufacturing index fell to 52.4 from 54.1 in January.

Consumer spending rose 0.2 percent in January. However, after taking inflation into account, spending was flat for the third month running.

Construction spending fell 0.1 percent in January.

Elsewhere, manufacturing in China improved in February. The China Federation of Logistics & Purchasing's manufacturing PMI rose to 51.0 from 50.5 in January while the HSBC manufacturing PMI rose to 49.6 from 48.8.

In the UK, manufacturing continued to grow albeit at a slower pace in February. The Markit/CIPS manufacturing PMI fell to 51.2 from 52.0 in January.

In the euro area, the manufacturing PMI from Markit Economics rose to 49.0 in February from 48.8 in January. However, the jobless rate rose to 10.7 percent in January, the highest since October 1997, and the inflation rate accelerated to 2.7 percent in February from 2.6 percent in January.

US fourth quarter growth revised up

There were plenty of positive economic data on Wednesday.

The US saw an upward revision of estimated fourth quarter growth to 3.0 percent from 2.8 percent. Most components of GDP were revised up, with real disposable income growth raised to 1.4 percent from 0.8 percent.

Other reports showed that US economic growth has been maintained early this year. The Institute for Supply Management-Chicago said its manufacturing index for the Midwest region rose to a ten-month high of 64.0 in February from 60.2 in January. The Federal Reserve's beige book reported that the economy expanded modestly in January through mid-February.

In Japan, industrial production rose 2.0 percent in January while the Markit/JMMA manufacturing PMI stayed just above 50 in February, coming in at 50.5 compared to 50.7 in January.

In the UK, mortgage approvals jumped to 58,728 in January, the highest since December 2009, from 55,019 in December, marking the biggest monthly increase since June 2009. Consumer confidence held steady in February at a seven-month high.

In the euro area, the inflation rate fell to 2.6 percent in January from 2.7 percent in December while in Germany, the unemployment rate was unchanged at 6.8 percent in February, staying at the lowest in more than two decades.

Markets, though, were focused on the ECB's second round of long-term refinancing operation, which ended up seeing 800 banks take up 530 billion euros. The injection of funds helped push Italian and Spanish government bond yields down.