Inflation trending higher but still within reason
Consumer inflation expectations edged up from 2.1% to 2.3% in January. Inflation expectations remain well-contained, but are trending higher.
Rising inflation expectations are in step with the higher-than-expected inflation result released earlier this week.
US share markets slumped overnight after global growth expectations were dampened and risk aversion rose.
It followed the release yesterday of a Chinese gauge that signalled a contraction of Chinese manufacturing.
The Dow Jones fell by 1.1% and the S&P 500 index dropped 0.9%.
US 10-year Treasury bond yields fell from 2.85% to 2.78%. A 10-year inflation-linked auction was soft, the real yield at 0.66% being 0.5bp above pre-auction market yield.
Australian government bond yields (implied by futures) started falling after the China data and continued throughout the evening; the 3-year from 3.00% to 2.90%, while 10-year yields fell from 4.12% and 4.02%.
The US dollar index fell from just above 81.2 to near 80.40 overnight. EUR/USD rose from 1.3540 to 1.3688 because strong Eurozone PMI provided some support.
USD/JPY extended the Sydney afternoon decline from 104.40 to 103.37. AUD/USD also extended the afternoon's decline from 0.8810 to a 3½-year low of 0.8732.
NZD/USD initially bucked the trend, rising from 0.8270 to 0.8338 but then succumbed to 0.8273. Chinese rating agency Dagong downgraded NZ's outlook but there was no obvious market impact. Indeed, AUD/NZD fell from 1.0620 to 1.0531 - a fresh eight-year low.
Gold futures jumped to the highest closing price in nine weeks as the USD weakened overnight, boosting demand for the precious metal.
Meanwhile, West Texas Intermediate crude oil rose to a three-week high after a report showed that US distillate supplies dropped and cold weather boosted demand for heating. The widely-watched index of commodities, the CRB index, gained ground in the overnight session.
The HSBC-Markit manufacturing PMI fell from 50.5 to 49.6 in the flash estimate for January, the lowest result in six months.
Reports have cited factory closures ahead of the Chinese New Year holiday period. Any data from China over January and February might be difficult to interpret, although a softening outlook for China was already in prospect.
The Conference Board leading economic index rose 0.4% in December.
The Euro zone PMI composite rose from 52.1 to 53.2 in the January advance report, its highest since June 2011.
The factory and services PMIs rose to 53.9 and 51.9, respectively. Germany did the heavy lifting in the factory survey, rising from 54.3 to 56.3, but services were little changed at 53.6, and still down from 55.7 in November last year.
France's PMI stayed in contraction territory, but less so with factories up 1.8 points to 48.8 and services rising from 47.8 to 48.6 in January.
Eurozone consumer confidence improved from -13.5 to -11.7 in January's advance report, not far off the trough of -10 seen in 2011 ahead of the recession that began later that year.
ANZ job ads fell 0.7% in December, the second consecutive monthly fall.
However, on a year ago, job ads were 4.7% higher.
The recent improvement in economic activity points to labour market conditions improving in New Zealand and keeps a rate hike in coming months on the table.
The business NZ manufacturing PMI fell from a revised 57.0 to 56.4 in December. Despite the drop, the index remains well above 50 signalling expansion.
The ANZ-Roy Morgan consumer confidence index rose by 4.9% to 135.8 in January, the highest reading in seven years.
It is well above the 100 level which indicates optimists outweigh pessimists, reflecting a strengthening outlook for the economy.
UK CBI reported sales fell from 34 to 14 in January, suggesting a weaker start to the year for retailing. This data stands in contrast with the official statistics on retailing, which has been strong.
Initial jobless claims rose 1k to 226k in the week ending 18 January, but on average, layoffs are still lower than around the first half of last year.
Existing home sales rose 1.0% in December but revisions left the 4.87mn annualised pace of sales weaker than the previously published November sales pace.
Poor weather may have impacted sales in the northeast and midwest, but November and December together were the weakest two months for sales in 2013.
Separately, the FHFA reported house prices up 7.6% in the year to November.
The leading index rose 0.1% in December on top of November's revised 1.0% gain.
The Chicago Fed national activity index fell from 0.60 to 0.16 in December (47 components rose and 38 fell).
The Kansas City Fed factory index rose from -3 to 5 in January, reversing most of December's fall from 6 in November.
But some of the detail was less encouraging. Production fell to -8 for the second month running, shipments/orders grew softly (3/5) but jobs surged to 11.