20130103 0934 Global Markets Related News.

Asia FX By Cornelius Luca - Wed 02 Jan 2013 17:23:23 CT (CME/www.lucafxta.com)
The appetite for risk soared only intraday during the first trading day in 2013 because the Congress, in a well timed move, finally approved a deal to avert a "fiscal cliff". However, the next two months will see further negotiations over the debt ceiling, so the mood for risk soured quickly in FX. As I had already warned you, this so-called success will be in reality a mixed success at best because no grand deal was achieved. The European and commodity currencies futures gave up early gains, the commodity currencies ended off their best levels, while the yen dug to new lows (to the happiness of the Japanese exporters). The US stock markets surged. Gold, oil and silver closed up. The short-term outlook for the European and commodity currencies is sideways. The medium-term outlook for most of the foreign currencies is sideways. The LGR short-term model is long on European and commodity currencies. Good luck!

Overnight
US: The ISM's purchasing managers index climbed to 50.7 in December from 49.5 in November.
US: Construction spending fell by 0.3% in November after rising 0.7% in October.

Today's economic calendar
China: Non-manufacturing PMI for December

Stocks, Commodities Rally as Treasuries Drop on Budget (Bloomberg)
U.S. stocks surged, sending the Standard & Poor’s 500 Index to its biggest rally in a year, and commodities jumped after Congress passed a bill averting most of the tax increases and spending cuts threatening the recovery in the world’s biggest economy. Treasury yields gained.
The S&P 500 rose 2.5 percent to 1,462.42 at 4 p.m. in New York and has increased 4.3 percent in the past two sessions. The Stoxx Europe 600 Index (SXXP) climbed 2 percent to the highest since February 2011 as equities added to last year’s 13 percent global rally. Industrial metals led commodities up and oil advanced to a three-month high. The Dollar Index (DXY) reversed an early slide, while Treasury 10-year yields climbed eight basis points.
President Barack Obama said he will sign into law the bill undoing tax increases for more than 99 percent of households as Republicans vowed to fight him for spending cuts in exchange for raising the debt ceiling. An industry report today showed American manufacturing expanded in December at a pace that shows the industry is stabilizing after reaching a three-year low a month earlier.
“Short-term, a deal is good for the market,” Thomas Garcia, head of equity trading at Santa Fe, New Mexico-based Thornburg Investment Management Inc., said by telephone. His firm oversees about $80 billion. “Long-term, more has to be done in the way of spending cuts before we can declare victory.”

Most Asian Stocks Rise After U.S. Manufacturing Expands (Bloomberg)
Most Asian stocks rose, pushing a regional equities index to its highest level in 17 months, after a gauge of U.S. manufacturing added to optimism that the outlook for economic growth is improving.
Rio Tinto Group, the world’s second-largest mining company, climbed 1.7 percent in Sydney as metals prices rose. Australian miner Aquarius Platinum Ltd. (AQP) soared 16 percent, the most in four years, amid speculation that South African supply of the metal will be lower during the first quarter. Samsung Electronics Co. fell 1.3 percent in Seoul after being named in a new patent- infringement complaint filed in Washington by InterDigital Inc. over technology related to the latest mobile-phone standards.
The MSCI Asia Pacific Excluding Japan Index (MXAPJ) rose 0.1 percent to 476.55 as of 11:29 a.m. in Sydney, adding to yesterday’s biggest gain in three months. Almost three shares gained for each that fell. A close at this level would be the highest since August 2011. Standard & Poor’s 500 Index futures fell 0.2 percent today after the gauge jumped 2.5 percent yesterday. Markets in mainland China and Japan are closed today for holidays and Hong Kong’s market is yet to open.
“We expect growth to accelerate through 2013,” said Gerard Minack, global strategist at Morgan Stanley in Sydney. Asia’s “recovery isn’t as tethered to policy makers and structural headwinds. Equities look cheap relative to the past 30 years.”
Australia’s S&P/ASX 200 Index gained 0.5 percent, as did New Zealand’s NZX 50 Index. South Korea’s Kospi Index slid 0.1 percent, dragged lower by Samsung, which accounts for 20 percent on the gauge.

S&P 500 Rallies Most in One Year as Lawmakers Pass Budget (Bloomberg)
U.S. stocks rallied, giving the Standard & Poor’s 500 Index its biggest gain in more than a year, as lawmakers passed a bill averting spending cuts and tax increases threatening a recovery in the world’s biggest economy.
All 10 groups in the S&P 500 (SPX) rose at least 1.8 percent and the 30 stocks in the Dow Jones Industrial Average rallied. Apple (AAPL) Inc. and Facebook Inc. (FB) jumped more than 3.2 percent, pacing gains with technology companies. U.S. Steel Corp. climbed 8.6 percent after the shares were upgraded at Credit Suisse Group AG. Zipcar Inc. soared 48 percent after Avis Budget Group Inc. agreed to buy the company.
The S&P 500 jumped 2.5 percent to 1,462.42 at 4 p.m. in New York. The benchmark index is up 4.3 percent over two days, the most since November 2011. The Dow climbed 308.41 points, or 2.4 percent, to 13,412.55 today. The Nasdaq Composite Index soared 3.1 percent to 3,112.26. About 7.9 billion shares traded hands today, or 29 percent above the three-month average. U.S. exchanges were closed yesterday for the New Year’s holiday.
“We sold off on the uncertainty of what it means to go over the fiscal cliff and that’s been removed,” James Paulsen, the chief investment strategist at Minneapolis-based Wells Capital Management, which oversees about $325 billion, said in a telephone interview. “We’re re-valuing the market based on what’s closer to the underlying economy and most of the economic reports have been pretty good.”
The House of Representatives passed a bill just after 11 p.m. in Washington yesterday by a vote of 257-167, undoing income tax increases for more than 99 percent of households. The S&P 500 surged 1.7 percent on Dec. 31, the biggest rally on the final day of a year since 1974, as Republican and Democratic lawmakers made last-minute concessions to finalize the deal.

European Stocks Jump to 22-Month High on U.S. Budget Deal (Bloomberg)
European stocks rallied to the highest in 22 months as U.S. lawmakers passed a budget bill that avoided most scheduled tax increases threatening a recovery in the world’s largest economy.
Rio Tinto Group and Volkswagen AG (VOW) climbed at least 4 percent each to lead mining companies and automakers higher as Chinese manufacturing grew. ArcelorMittal gained the most in 11 weeks after selling a stake in its Canadian unit for $1.1 billion. BAE Systems Plc (BA/) soared 4 percent as the U.S. budget deal delayed defense spending cuts.
The Stoxx Europe 600 Index (SXXP) jumped 2 percent to 285.33 at the close of trading, the highest level since Feb. 28, 2011. The gauge posted the biggest annual rally in three years in 2012, rising 14 percent, as the European Central Bank’s program to purchase bonds of the region’s weakest economies helped ease concern the euro area will fracture.
“It’s good to get the U.S. budget deal resolved and to get the details, as it’s been dragging on for a while,” said Andrea Williams, head of European equities at Royal London Asset Management, which oversees about $1.1 billion. “Politics were a real ball last year; this year started well.”
The number of shares changing hands in Stoxx 600 companies today was 29 percent higher than the 30-day average, according to data compiled by Bloomberg. Germany’s DAX Index advanced 2.2 percent to a five-year high and the U.K.’s FTSE 100 (UKX) climbed above 6,000 for the first time since July 2011. The Swiss market was closed for a holiday.

Emerging Stocks Jump as BRICs Set for Bull Market on U.S. (Bloomberg)
Developing-nation stocks rose to a 10-month high, pushing the MSCI BRIC Index of the largest emerging markets up 22 percent from last year’s low, after U.S. lawmakers passed a bill that averted spending cuts and tax gains that had threatened the world’s largest economy.
Samsung Electronics Co. (005930), the world’s biggest maker of televisions and mobile phones, rallied 3.6 percent to a record, pushing an index of emerging-market technology stocks to the highest in more than 12 years. China Pacific Insurance (Group) Co. (267) jumped to a 17-month high after Credit Suisse Group AG included the stock among its 2013 top picks. Brazil’s Bovespa Index (IBOV) surged to the highest since April, boosted by Vale SA.
The MSCI Emerging Markets Index jumped 2.1 percent to 1,078.16 in New York, the highest since March 2. The MSCI BRIC Index (MXBRIC) rose 2.6 percent to close in a bull market. The House of Representatives voted in favor of budget law as Republicans abandoned efforts to add spending cuts, boosting confidence in the U.S. economy. The 21 nations in the developing-nations gauge send about 17 percent of their exports to the U.S. on average, data compiled by the World Trade Organization show.
“The fiscal cliff was one of the big drags on the market at the end of the last year, so I suspect that for the next few days and weeks we’re going to see markets run up further,” Neil Shearing, the chief emerging markets economist at Capital Economics Ltd., said by phone from London.

Yen Stays Lower Versus Euro Before BOJ’s Nishimura Speaks (Bloomberg)
The yen remained lower following a decline versus the euro yesterday before Bank of Japan Deputy Governor Kiyohiko Nishimura speaks tomorrow amid speculation policy makers will boost cash infusions to end deflation.
The dollar reached the highest in more than two years versus the Japanese currency before data that economists say will signal improvement in the U.S. job market. New Zealand’s currency held a gain after milk powder prices climbed to a six- week high at an auction.
“The Japanese yen is very overvalued still,” said Thomas Averill, managing director in Sydney at Rochford Capital, a currency and interest-rate risk management company. “There’s quite a lot of weakness in the yen to come.”
The yen traded at 115.05 per euro as of 8:49 a.m. in Singapore after losing 0.6 percent to 115.17 yesterday. The dollar touched 87.36 yen, the strongest since July 29, 2010, before trading little changed from yesterday at 87.24 yen. The greenback was at $1.3188 per euro from $1.3186.
Japan’s newly installed Prime Minister Shinzo Abe said in a New Year statement on Jan. 1 that the most urgent issue for his country was to break out of currency appreciation and deflation. “Bold” monetary policy is one of the three prongs of his economic measures, he said.
The nation’s markets are shut today for a holiday.
ADP Research Institute may say today that companies in the U.S. added 140,000 workers in December, up from a 118,000 increase the prior month, according to the median estimate of economists surveyed by Bloomberg News. The data will be followed by a government report tomorrow projected to show payrolls rose 150,000 workers last month, the most since August.

Aussie Near 2-Week High, Bond Yields Rise on U.S. Outlook (Bloomberg)
The Australian dollar was near a two- week high as the passage of U.S. budget legislation improved prospects for the world’s largest economy and supported demand for higher-yielding assets.
Australian bonds fell, pushing the 10-year yield to the highest in more than four months, before a private report that may show gains in U.S. employment. Growing investor appetite for risk also lifted global equities. The New Zealand dollar, also known as the kiwi, was near its strongest level in two weeks after milk powder prices climbed to a six-week high at auction.
The budget agreement “brightens the outlook for the U.S. economy in the first quarter and removes one of the roadblocks to a strong start to the year,” said Sean Callow, a senior currency strategist at Westpac Banking Corp. in Sydney. “For the time being, we’re probably running with a pretty positive view on risk appetite that supports the Aussie dollar and the kiwi.”
The Australian dollar bought $1.0496 as of 11:25 a.m. in Sydney from $1.0504 at the close yesterday when the currency touched $1.0524, the strongest since Dec. 19.
The yield on 10-year Australian debt was at 3.39 percent after earlier climbing as much as three basis points, or 0.03 percentage point, to 3.44 percent, the highest since Aug. 21.
The Standard & Poor’s 500 Index (SPX) of U.S. shares surged 2.5 percent yesterday, the biggest advance in a year. The Stoxx Europe 600 Index jumped 2 percent.

Treasury Futures Stay Lower Before Jobs Reports (Bloomberg)
Treasury 10-year futures contracts stayed lower after falling yesterday as economists said reports this week will show hiring picked up.
U.S. government securities fell 0.5 percent in the past month, the biggest loss among 26 debt-market indexes tracked by Bloomberg and the Federation of Financial Analysts Societies. Bonds tumbled yesterday after U.S. lawmakers agreed on a plan to avert most of the tax increases and spending cuts scheduled to start this year that threatened the world’s biggest economy. Treasuries were closed in Japan today for a holiday.
Ten-year futures contracts for March delivery were little changed at 132 1/8 today as of 8:48 a.m. in Singapore. They dropped 5/8 yesterday, the most in 11 weeks. Trading of bonds, notes and bills is scheduled to take place as usual today in the U.K. and the U.S., according to the Securities Industry and Financial Markets Association website.
“Yields will go a little higher,” said Marc Fovinci, the head of fixed income in Portland, Oregon at Ferguson Wellman Capital Management Inc., which has $3.2 billion in assets. “The partial resolution of our fiscal cliff has taken an immediate recession off the table, and that has reduced the flight-to- quality bid in the market.”
Ten-year yields may rise to 2.25 percent in a year from today’s 1.84 percent, he said. Ferguson Wellman is favoring U.S. corporate bonds over Treasuries, he said.

Bipartisan House Backs Tax Deal Vote as Next Fight Looms (Bloomberg)
The fiscal bill passed by Congress solves an immediate dilemma, averting income-tax increases for most Americans while taxing top-earners more, yet leaves unanswered a longer-term question of taming the federal debt.
Republicans have immediately turned to their next battle -- counting on the need to raise the nation’s $16.4 trillion debt ceiling to try to force President Barack Obama to accept cuts in entitlement programs such as Medicare. Congress must act as early as mid-February to prevent a default and the dispute may reprise a similar 2011 episode that led to a downgrade of the U.S. credit rating.
“Without meaningful reform of entitlements, real spending controls, and a fairer, cleaner tax code, our debt will continue to grow, and our economy will continue to stumble,” House Speaker John Boehner said in a statement after the vote.
Obama said he’s “very open to compromise.” Medicare spending can be reduced, he said, yet “we can’t simply cut our way to prosperity.”
The deal that cleared the House and Senate yesterday falls short of any “grand bargain” on fixing the debt that some leaders had hoped to achieve. Former Senator Alan Simpson, a Wyoming Republican, and Erskine Bowles, a chief of staff to former President Bill Clinton, co-chairmen of Obama’s deficit commission that proposed a $4 trillion solution of tax increases and spending cuts, today called the legislation “truly a missed opportunity.

Outlook for 2013 Improves as U.S. Manufacturing Climbs (Bloomberg)
Manufacturing picked up in December, reflecting growth in orders, employment and exports that indicate the U.S. expansion will be sustained in 2013 following the budget deal.
The Institute for Supply Management’s manufacturing index climbed to 50.7 from a three-year low of 49.5 in November, the Tempe, Arizona-based group reported today. Fifty is the dividing line between expansion and contraction. Other data showed fewer outlays for non-residential projects pushed down construction spending in November for the first time in eight months.
A rebound in housing and stabilization in global growth point to a pickup in sales that will boost companies such as General Electric Co. (GE) Stocks surged, sending the Standard & Poor’s 500 Index to its biggest rally in a year, as Congress passed a bill averting spending cuts and tax increases that threatened to push the world’s largest economy into a recession.
“We are starting the new year on at least a fairly firm note,” said Tim Quinlan, an economist at Wells Fargo Securities LLC in Charlotte, North Carolina, who projected the ISM index would climb to 51. While some manufacturers have been holding back because of the budget debate, he said, “there is demand in this economy. As soon as businesses are able to take advantage of this, we’ll see a bigger contribution from manufacturing to overall economic growth.”
The S&P 500 advanced 2.5 percent, the biggest gain since Dec. 20, 2011, to 1,462.42 at the close in New York. Commodities surged and Treasuries fell after Congress passed a bill preventing tax increases for more than 99 percent of households.

Budget Deal Seals Breaks for Wind Farms, Puerto Rico Rum (Bloomberg)
Wind farms, motorsports tracks, global banks and other businesses won revived tax breaks in a $75.3 billion package included in a last-minute budget deal Congress passed yesterday.
he package of tax extensions survived attempts to curb them to reduce the U.S. budget deficit that has exceeded $1 trillion for four years. Their beneficiaries and lobbyists received a reprieve and a chance to bargain for another extension this year.
The breaks are “generally economically useless or harmful,” lowering General Electric Co. (GE)’s tax bill, padding accounting firms’ research-credit business and letting lawmakers repeatedly tap lobbyists and companies for donations, said Bob McIntyre, director of Citizens for Tax Justice. The Washington group favors higher taxes on companies.
“If you make them permanent, you get the campaign contribution once,” McIntyre said. “You do it every year or two, they have to ante up again and again.”
The tax-break extensions, mostly for companies, made it into the bill past Republican demands for spending cuts and Democratic resistance to benefits for businesses. Both parties have complained for years about some of the special-interest provisions.
Most of the tax breaks had expired at the end of 2011 and will be extended through 2013. The companies that benefit say the on-again, off-again breaks are important though the uncertainty makes it almost impossible to use them to plan business investments.

Congress Budget Pact Would Crimp Not Crush U.S. Growth (Bloomberg)
The U.S. economic expansion probably will be crimped without being halted by the budget deal that won approval by the House of Representatives last night after being forged by the Senate and White House.
The agreement permanently reinstates the income tax cuts for most workers that ended Dec. 31, continues expanded unemployment benefits and delays automatic spending cuts for two months. It would let a two percentage point payroll tax cut expire.
The elimination of the payroll tax cut, coupled with higher income taxes on the wealthy, will help clip growth in the first quarter to 1 percent, from 3.1 percent in 2012’s third quarter, the latest data available, according to economists at JPMorgan Chase & Co. (JPM) and Bank of America Corp. The expansion will strengthen later in the year as the housing market continues to rebound, they forecast.
“It’s going to definitely present a headwind for the economy,” Michael Feroli, chief U.S. economist for JPMorgan Chase in New York, said. “We’re looking for a downdraft in growth in the first half of the year, with the economy coming back in the second.”
The package isn’t the grand bargain on deficit reduction that lawmakers wanted when they created the tax-and-spending deadlines over the past three years. Instead, it would avert most of the immediate pain and postpone Congress’ fiscal feud for two months -- until a February fight over raising the $16.4 trillion debt limit.

Construction Spending in U.S. Unexpectedly Fell in November (Bloomberg)
Spending on U.S. construction projects unexpectedly dropped in November, restrained by declines in non-residential building and public works.
Outlays fell 0.3 percent to $866 billion annual rate after increasing a less-than-previously estimated 0.7 percent in October, the Commerce Department reported today in Washington. The median forecast of 41 economists surveyed by Bloomberg called for a 0.6 percent increase. Housing climbed to the highest level in more than four years.
The residential real-estate market will probably continue to drive spending as record-low mortgage rates, an increasing population and dwindling inventory boost construction. At the same time, the damage from superstorm Sandy and government budget battles that raise concern about the outlook for growth may curb the rest of the industry.
“There’s good, solid momentum story in the residential sector,” said Julia Coronado, chief economist for North America at BNP Paribas in New York. “We now have a construction sector that’s a modest contributor to GDP rather than a drag. This is a very gradually healing story, not a boom story.”
Also today, the Institute for Supply Management’s factory index rose to 50.7 in December from 49.5 a month earlier, the Tempe, Arizona-based group said. Economists in a Bloomberg survey projected a reading of 50.5.

Bond Tab for Biggest Economies Seen Falling $220 Billion (Bloomberg)
The world’s leading economies will have $220 billion less sovereign debt to refinance in 2013, cutting supply after every major government bond market rallied for the first time since the 2008 financial crisis.
The amount of bills, notes and bonds coming due for the Group of Seven nations plus Brazil, Russia, India and China will drop to $7.38 trillion from $7.60 trillion in 2012, according to data compiled by Bloomberg. Japan, the U.K., Germany, France, Italy and Brazil will see a decline, while the U.S., Canada, Russia, India and China will face an increase.
While high debt loads are blamed for curbing global economic growth, bond investors are encouraged by signs that some nations are starting to rein in spending as they extend the average maturity of their obligations. Instead of rising, borrowing costs are falling as supply decreases, inflation remains in check and central banks from the U.S. to Europe cut interest rates to record lows.
“The progress made in fiscal adjustments has been quite significant in a number of countries, perhaps more than the market is realizing,” said Mohit Kumar, the London-based head of European interest-rate strategy at Deutsche Bank AG, Germany’s biggest bank. “Policy will remain accommodative. I don’t expect to see a selloff in core government bonds. There will be enough demand.”

N. Korea’s 2011 China Trade Grew More Than 60 Percent (Bloomberg)
North Korea’s trade with China expanded more than 60 percent to $5.63 billion in 2011, as the totalitarian regime deepened its dependence on its main political and financial backer.
Commerce with China accounted for 70.1 percent of the North’s total $8 billion trade in 2011, up from 57 percent in the previous year, South Korea’s national statistics office, Statistics Korea, said in its annual report today in Seoul. North Korea does not report economic data. Inter-Korean trade amounted to about $1.71 billion in the same year.
China provides North Korea economic aid and serves as its diplomatic shield at the United Nations Security Council. As a veto-wielding permanent member of the Security Council, China has resisted efforts to impose fresh punishment against North Korean leader Kim Jong Un over a Dec. 12 missile launch that demonstrated a heightened ballistic capability.
Excluding a dip in 2009, trade between the two countries has increased every year since the start of 2000, when the statistics bureau started releasing estimates. Data for 2012 will be released around the end of next year.
North Korea’s economy expanded 0.8 percent in 2011 and gross national income per capita was 1.33 million won ($1,239), nearly one nineteenth that of South Korea’s 25 million won, according to the Bank of Korea. South Korea’s total nominal gross national income was 38.2 times that of the North’s 32.44 trillion won.
The regime imported 3.8 million barrels of crude oil for 2011. Power generation capacity was 6.9 million kilowatts, less than one-10th that of South Korea. Steel production was 1.23 million tons and production of chemical fertilizer production was 471,000 tons.
North Korea’s population rose to 24.3 million in 2011 from 24.2 million the previous year -- about half of South Korea’s. Population estimates were based on North Korea’s 1993 and 2008 censuses.

Singapore’s Private Home Prices Climb to Record on Sales (Bloomberg)
Singapore home prices climbed to a record in the fourth quarter after developers sold more homes, a government report showed.
The island state’s private residential property price index rose 1.8 percent to 211.90 points in the three months ended Dec. 31, according to preliminary estimates released by the Urban Redevelopment Authority today. The index advanced 0.6 percent in the previous quarter, which was also a record. Prices rose 2.8 percent in the year, compared with a 5.9 percent gain in 2011, data from the authority showed.
Prices of non-landed private residential properties increased 0.8 percent in prime districts in the quarter, the data showed. In suburban areas, prices climbed 3.4 percent.
The benchmark property index, which tracks 40 developers, gained 1 percent to 791.48 at the close of trading in Singapore, the biggest advance since Dec. 7. CapitaLand Ltd. (CAPL), Southeast Asia’s biggest developer, rose 1.6 percent to S$3.76, while City Developments Ltd. (CIT), Singapore’s second-largest developer, added 0.9 percent to S$12.99.
“Private property prices saw a rebound with the price increase in the fourth quarter contributing to more than 50 percent for the entire year,” Mohamed Ismail, chief executive officer of PropNex Realty, said in an e-mailed statement. “It is expected that the trend will continue and prices will further increase resulting in an overall 4 percent to 5 percent growth in the private property price index in 2013.”

Singapore GDP Topped Survey Last Quarter, Avert Recession (Bloomberg)
Singapore’s economy expanded more than economists estimated last quarter, averting a recession even after the central bank refrained from monetary stimulus as it sought to contain elevated inflation.
Gross domestic product rose an annualized 1.8 percent in the three months to Dec. 31 from the previous period, when it contracted a revised 6.3 percent, the Trade Ministry said in a statement today. The median of 11 estimates in a Bloomberg News survey was for a 1.6 percent expansion. The economy grew 1.2 percent last year, less than a quarter of 2011’s pace.
The World Bank last month raised its outlook for emerging East Asia nations, citing China’s recovery, even as the export- dependent region faces risks from Europe’s protracted sovereign debt crisis. The Monetary Authority of Singapore, which allowed faster currency gains in 2012 to curb price gains, may maintain its appreciation policy after last quarter’s expansion as the island grapples with persistent inflation pressures.
“Global economic conditions will remain challenging in the foreseeable future, and we are not likely to see a notable improvement” until the second half even as China may provide some support, said Leif Eskesen, an economist for HSBC Holdings Plc in Singapore. “This does not mean that the MAS is ready to pull the trigger. Despite the muted growth print and some easing in inflation over the past few months, inflation remains firm and capacity is still very tight.”

Kim Signals Warmer North Korea Ties With South (Bloomberg)
North Korea’s Kim Jong Un named improving the economy and better relations with South Korea as top policy goals for his second year as leader, signaling he may ease his country’s confrontational approach toward Seoul.
“The building of an economic giant is the most important task that comes to the fore in the present stage of building a thriving socialist country,” Kim said yesterday in a New Year address carried by the official Korean Central News Agency. “The reunification of the country is the greatest national task that brooks no further delay.”
Kim departed from the past year’s saber-rattling against South Korean President Lee Myung Bak as Lee’s successor Park Geun Hye prepares to take office Feb. 25. Park has repudiated Lee’s hard-line North Korea policy, expressing her willingness to talk to Kim and help the North join global organizations to thaw ties.
“Kim’s speech mentioned the importance of the economy at far greater frequency than the military,” Cheong Seong Chang, senior research fellow at the Seoul-based Sejong Institute, said in an e-mail yesterday. “The success of the Dec. 12 missile launch has given Kim enough confidence to not have to rely on his father’s military-first policy to garner support.
‘‘The urgency of economic issues also compounds to the North’s need to better ties with South Korea, which makes it likely that Pyongyang will aggressively engage in efforts to resume dialogue,” Cheong said.

Indonesia inflation slows a second month (Bloomberg)
Indonesia’s inflation slowed for a second month in December, supporting the central bank’s decision to hold off interest-rate increases as exports slump.
Consumer prices climbed 4.3 percent from a year earlier last month, after a previously reported 4.32 percent gain in November, the statistics bureau said in Jakarta today. The median estimate in a Bloomberg News survey of 15 economists was 4.2 percent.
Bank Indonesia has kept borrowing costs unchanged for 10 straight meetings as exports tumbled and the rupiah weakened. Price pressure in Southeast Asia’s largest economy may rise as a planned increase in electricity tariffs and minimum wages take effect, with a possible reduction in fuel subsides also weighing.
“Inflation has stabilized at its current rate,” Aninda Mitra, head of Southeast Asia economics at Australia & New Zealand Banking Group Ltd., said after the data was released. “We think that inflation is headed higher on account of several factors such as low base effects, higher wages, and impending electricity and fuel price hikes.”
Price gains may accelerate to 4.9 percent in 2013, central bank official Perry Warjiyo said last month.
The rupiah weakened 0.5 percent to 9,685 per dollar as of 2:59 p.m. in Jakarta, after reaching a three-year low of 9,785 earlier, according to prices from local banks compiled by Bloomberg. The currency declined about 6 percent last year, the worst performance in Asia after the yen among 11 most-active Asian currencies tracked by Bloomberg.
Consumer prices rose 0.54 percent last month from November. The core inflation rate was 4.4 percent, the same as the 4.4 percent pace the month before.

U.K. Manufacturing Revives as Euro Factories Struggle: Economy (Bloomberg)
U.K. manufacturing unexpectedly expanded at the fastest pace in 15 months in December as domestic demand improved, indicating some strength in the economy at the end of 2012.
A gauge of factory activity rose to 51.4 from a revised 49.2 in November, Markit Economics and the Chartered Institute of Purchasing and Supply said in London today. The median forecast of 29 economists in a Bloomberg News survey was for a reading of 49.1, unchanged from November’s initially reported level. The pound stayed higher against the dollar after gaining to its strongest level in 16 months.
The report reduces the chance the U.K. will succumb to triple-dip recession after the economy resumed expansion in the third quarter and tensions related to the euro-region debt crisis eased. Still, Markit noted that companies remain “cautious” and the Bank of England has forecast only a gradual recovery through 2013. A separate report showed euro-area manufacturing continued to shrink last month.
“The sector found some stability at the very end of 2012,” said Samuel Tombs, an economist at Capital Economics Ltd. in London. Still, “with the recession in the euro zone set to deepen and consumers at home on course to be hit by a further bout of relatively high inflation, 2013 is shaping up to be another tough year for U.K. manufacturers.”
Today’s report showed that U.K. factory output increased for a second month, with growth accelerating to a 20-month high. The improved performance was mainly due to an improvement in domestic demand, with the sharpest gains in consumer and partly finished goods. Still, Markit said the increase in the index in December “does little to change the view that the sector contracted over the fourth quarter as a whole.”

Euro-Area December Manufacturing Shrinks More Than Estimated (Bloomberg)
Euro-area manufacturing output contracted more than initially estimated in December, adding to signs a recession in the currency bloc may extend into this year as leaders struggle to tackle the sovereign-debt crisis.
A gauge of manufacturing in the 17-nation euro area fell to 46.1 from 46.2 in November, London-based Markit Economics said today. That’s below an initial estimate of 46.3 on Dec. 14. A reading below 50 indicates contraction. The gauge has been below 50 for 17 months.
The euro-area economy has shrunk for two successive quarters and economists foresee a further decline in gross domestic product in the final three months of last year. The European Central Bank forecasts contractions of 0.5 percent and 0.3 percent in 2012 and 2013.
“The euro-zone manufacturing sector remained entrenched in a steep downturn at the end of the year,” Chris Williamson, chief economist at Markit, said in the report. “The region’s recession therefore looks likely to have deepened, possibly quite significantly, in the final quarter.”
The euro was little changed after today’s report and traded at $1.3258 at 10:32 a.m. in Brussels.
With euro-area unemployment at a record, economists project the region’s GDP decreased 0.3 percent in the fourth quarter, according to the median of 22 forecasts in a Bloomberg survey.
“Manufacturers look to be in for another tough year in 2013, though prospects have brightened a little as producers should benefit from signs of stronger demand in key export markets such as the U.S. and China,” Williamson said.