Daily Agenda: Downbeat Data from China

Greece scrambles to cover cash shortfalls; euro hits 12-year low against dollar; numbers show manufacturing slump in the U.K.


Tomohiro Ohsumi

In Beijing today, February industrial production, retail sales and fixed investment data fell short of consensus expectations. Following Premier Li Keqiang’s speech last week before the annual National People’s Congress, during which he guided lower GDP forecasts for the country, many investors are seeing further accommodation by the People’s Bank of China — and perhaps stimulus programs from the central government — on the horizon. With numbers from the National Bureau of Statistics show the volume of property sales declining as rapidly as average prices, the housing market remains a key component of risk narratives for Chinese renminbi-denominated markets. After the move over the weekend to allow some restricting of municipal and state managed debt facilities, the notion that the PBOC may being its own quantitative easing program seems increasingly less far-fetched.

U.K. industrial production contracts. The pace of activity in U.K. factories declined in January on the back of lower computer and electronics production, according to data released today by the Office of National Statistics. Total production fell by 0.1 percent for the month while manufacturing-specific activity fared worse at a decline of 0.5 percent. Separately, in a modest boost for the housing market in the U.K., new buyer enquiries and agreed sales increased in January, according to a Royal Institution of Chartered Surveyors survey released today.

New lows for the euro. For the first time in more than 12 years, the euro traded below $1.06 this morning, reaching a level more than 20 percent lower than a year ago. Multiple bank strategists have forecast parity with dollar for the common currency in recent weeks. Deutsche Bank yesterday moved its time frame up to sometime this year for the two currencies to hit equal trading value from earlier estimates. ECB president Mario Draghi gave an address today at the ECB Watchers XVI Conference in Frankfurt. Speaking on the central bank’s quantitative easing efforts, Draghi said, “The beneficial impact of the ECB’s asset purchases on financing conditions will increase the benefits of governments’ structural reforms, rather than reducing incentives for reforms. Firms will be encouraged to increase investment, bringing forward the economic recovery.”

Greece acts to access cash reserves. Media reports surfaced today indicating that the Syriza-led Greek government is moving public accounts into a common fund overseen by the nation’s central bank, allowing Finance minister Yanis Varoufakis to access the pooled capital to handle shortfall in public sector outlays. Athens is due to make good on a €1.2 billion ($1.27 billion) payment to the International Monetary Fund on March 20, increasing the pressure on the nation’s finances as it failed to find an accord with Eurogroup leaders with an initial proposal. Talks with leaders from the troika institutions resume in Brussels today.

Deutsche Post guides lower on increased competition. In a downbeat earnings release, delivery giant Deutsche Post lowered its forecasts for 2015, projecting a 3 percent decline profit growth for a total of just above €3 billion. The world’s largest courier company, privatized two decades ago by the German government, has recently begun a program of investing in logistics to maintain its competitive stance in developed markets.