By James Langton

(February 17 – 09:00 ET) – The hotly-anticipated U.S. Producer Price Index came this morning. It’s flat on the headline and down 0.2% on the core rate. This was well below expectations of 0.2% on both the headline and core. The apparent lack of inflation spurred plenty of bond and stock futures buying.

Just as important to inflation-watchers, U.S. Federal Reserve Board chair Alan Greenspan begins his semi-annual Banking Committee testimony this morning at 10:00 ET. Tomorrow morning traders will have the U.S. Consumer Price Index to contend with.

The strong PPI result in the U.S. confirms the optimism evident in Europe. German business confidence was reported at a two-year high in January. France meanwhile is showing its strongest employment gains in 10 years in the fourth quarter. London’s FTSE is up 72 points to 6,218. France’s CAC 40 has added 87 points to 6,133, and the German DAX is up 66 points to 7,556. Germany’s results were tempered by the announcement that the tax on asset sales will remain for a couple of years at least.

There’s a big deal in the paper business today. Finland’s UPM-Kymmene Oyj acquiring Champion International Corp. for US$6.5 billion.

In Asia markets were mixed. The big news there is that the credit rating people at Moody’s Investors Service are considering a lower rating for Japan. It’s federal budget deficit has been growing. Stock traders shrugged off the revelation, pretty much, although it sent bond and currency traders into a bit of a tizzy. The Nikkei closed up 192 points to 19,791. Over in Hong Kong Cable & Wireless continued to track higher, but the index finished down after all. The Hang Seng dropped 62 points to 16,981.

In business news, Toronto-Dominion Bank reported net income of 72¢ per share in the quarter ended January 31. That beat analysts’ estimates by about 8¢ and trumped last year’s earnings of 53¢ per share.

Vengold Inc. the heavy trading penny stock says that it is transforming itself into a new firm to be known as itemus Inc., which will focus on the rather nebulous goal of “accelerating Canadian talent and technology onto the world stage through applied operational expertise and significant investments”.