As expected the European Central Bank (ECB) kept interest rate unchanged at 0,75 % in its board meeting yesterday. In a following up press conference its president, Mario Draghi, offered a carefully worded optimistic view, indicating a turnaround in the euro zone at the end of 2013. His cautious remarks had the EURO to jump 150 basis points against the dollar reaching a one week high at 1.3280. The dollar lost ground against most currencies, but on announcement of Japan’s economic stimulus policies, USD/JPY jumped to 89,35, the highest level seen since June 2010.
Asian shares eased back on profit taking this morning on news on higher inflation in China. The annual consumer inflation rate accelerated in December to a seven-month high on higher food prices. The growth in Chinese export and a strengthened balance of trade numbers helped the US indexes towards new highs. Nasdaq and Dow Jones rose 0,45 % with the S&P at its highest level in 5 years. The Asian stock indexes are falling back on Chinese inflation fears.
Prime Minister Shinzo Abe announced today that the Japanese government is going to pump USD 150 billion into roads, schools and increased safety for its nuclear plants. These economic stimulus might lead to an increase of 2 % in Gross Domestic Product (GDP) and get Japan out of the vicious deflation spiral. His intended policies have had a very positive impact on Japan’s benchmark Nikkei stock average which climbed a new 1,7 % to a 23 month high. His Keynesian spending measures have, however, been met with criticism from finance traditionalists.
The Chinese export numbers and Draghi’s cautious optimism had a positive impact on oil and commodities. Brent crude jumped to USD 112,50 a barrel, but has eased back below 112 on the inflation fears. Spain first bond auction in 2013 raised more money than expected on lower borrowing costs. 10-year Spanish government bond yields fell to a 10-month low at 4,90 %. The result of the auction gave also a boost to the Euro. Gold and silver rose to USD 1672 and 30,85 an ounce respectively.
President Barack Obama yesterday appointed his chief of staff, Jack Lew, to succeed Tim Geithner as US secretary of finance. Lew a former Citibank manager and budget expert has also served under President Clinton. The appointment stresses that the focus in US financial and economic policies in the near future will be on the budget and how to tackle the difficult budgetary negotiations between Democrats and Republicans in the US Congress.
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