Fed, Bank of Japan, and U.S. Labor Market in the News

April 2, 2010

Markets are closed today for Good Friday in Europe, Australia, New Zealand, Indonesia, India, Singapore, the Philippines, Latin America and Canada.  The U.S. stock market will not open; however, the Treasury market will open until noontime EDT because the U.S. Labor Department is releasing its March jobs report at the usual 08:30 eastern time (12:30 GMT).  Many markets will remain shut April 5 for Easter Monday, for instance in much of Europe and Canada.

The dollar rose overnight by 0.4% against the Canadian dollar, 0.3% versus sterling and the euro, 0.2% relative to the Swiss franc and kiwi and 0.1% against the yen and Australian dollar.

Japan’s Nikkei index gained another 0.4% and posted its eighth weekly advance in a row.  In other Asian markets that were open, equities climbed 1.6% in Pakistan, 0.6% in South Korea, 0.5% in China and Malaysia, and 0.2% in Taiwan.  The ten-year JGB yield closed unchanged at 1.36%.

An unscheduled Board of Governors meeting is planned at the Fed for 14:30 local time on Monday to consider a second discount rate increase.  An initial rise of 25 basis points to 0.75% was announced late February 18, effective the next day to “encourage depository institutions to rely on private funding markets for short-term credit and to use the Federal Reserve’s primary credit facility only as a backup source of funds.”  Back then, Fed officials also advised that they “will assess over time whether further increases in the spread are appropriate in view of experience with the 0.5 percentage point spread” vis-a-vis the top of the FOMC’s 0-0.25% target range for the federal funds rate.

Informed sources expect the Bank of Japan to upgrade the economic assessment after the Policy Board meets April 6-7, perhaps ending the phrase that growth “will remain moderate.”  Exports have been growing faster than anticipated.  No change in monetary policy is expected next week, but the central bank continues to be pressed by the Hatoyama government to do more to combat deflation.  A full semi-annual review of the central bank’s economic forecasts and policy intentions is due April 30.

Japan’s monetary base rose merely 2.1% in the year to March, less than growth of 3.1% in 1Q10 as a whole, 4.4% in 4Q09, 5.6% in 3Q, and 7.5% in 2Q09.

Two factors underlie optimism ahead of the U.S. jobs report, better weather than in February and a boost from census workers.  The ADP private jobs estimate released Wednesday was disappointing, and analysts have scaled down the expected rise in non-farm payroll jobs to 100-150K.  The census is done every ten years.  In March 2000 jobs leaped by 472K after a gain of 121K in February.  In 1990, however, jobs rose 215K in March after a 245K rise in February.  In 1980, such rose 112K in March versus 79K in February, and in 1970, they gained 151K in March versus 126K the month before.  In March 1960, jobs actually fell 55K following a 239K advance in February.  So there was an observably big census-workers effect in March 2000 but not in March of prior census years.

Kenyan CPI inflation slowed to 4.0% on year in March from 5.2% in February.

On-year export growth in Malaysia of 18.4% in February was not as strong as the forecast 27% rise.  A 11.67 billion ringgit trade surplus was recorded.

South Africa’s budget deficit in the financial year through March equaled 6.8% of GDP according to the finance minister, which was lower than anticipated.

Copyright Larry Greenberg 2010.  All rights reserved.  No secondary distribution without express permission.

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