Yesterday the stock markets couldn’t get their mojo, maybe because the were digesting the downgrades of several European sovereigns by Moody’s. Or maybe it was the statistic about the abysmal amount of miles driven in the US on the roads (=growth of industrial production should disappoint; this can indeed be the case because the utilities will produce less because of the very mild winter in the US).
But lots and lots of good news should have led to positive markets. Maybe that is why today the markets, discovering the good news of yesterday again, were in a much rosier mood.
In Japan the Bank of Japan surprised with an extra QE of 10 trillion yen and an inflation target of 1% (not in a few years, as was previously the explanation, but in the pretty short term = more QE than the Y 10T of yesterday will be allowed). The Nikkei yesterday turned into the green immediately after the BoJ news. The yen became weaker and politicians were very glad (just in time, they were already debating when to fire Shirikawa).
Central bankers in the world dream of different things. The FED wants 0% interest rates until 2014+, low inflation and lower unemployment rates, in Japan they are dreaming about a higher inflation rate of 1.7% in 2020.
In Indonesia the thought about inflation are completely different: there is 5% seen as wonderful with a range of + or – 1%. The central bank has been pretty good in keeping the inflation in that range and is getting respect for this (in Germany they should throw central bankers that want 5% inflation into prison). In January the inflation was only 3.7% so drastic action was needed. Yesterday the interst rate was lowered with 1%, so they are now 2% lower than at January 18 (level now 3.75%). This makes the rupiah weak, but true despair is not necessary: the economic growth of Indonesia was 6.5% entirely caused by domestic growth so this will automatically do its salutary work to get higher inflation and interest rates over some time.
In India the rise of the wholesale prices was lower than expected: 6.55% while 6.7% was expected (the previous number was 7.5%). This is seen as low enough for the Reserve Bank of India to go in the easing mode (a threshold of 7% was seen). Today the RBI told they do a bit QE: they wanted to buy for 100B rupiah government bonds on Friday.
In Germany the ZEW surprised for the second month in a row spectacularly to the upside. It is positive again, so the recession mood has to be trashed.
In the US the retail sales grew with a pretty strong 0.4% (nominal), while total vehicle sales were -1.1% despite the clearly higher (light vehicles) car sales in January.
In China they thought it was time to leak that inflation after the disappointing rise of 4.1% to 4.5% will plummet below 4% in the coming month. China repeated its New Year resolutions to help Europe via the IMF/ESM, but the markets must be patient. The new dear leader Xi Jiping visited the US and was received with all the regards you can think of, so everybody was glad in China and the US.
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