Stocks Regroup as Markets Await Obama’s Budget Speech

April 13, 2011

Equities advanced 2.3% in India, 1.4% in China, 1.6% in South Korea, 0.9% in Japan, 1.1% in Singapore, 0.7% in Hong Kong and 0.6% in Taiwan and Malaysia.  In Europe, the German Dax, British Ftse, and Paris Cac have recovered 1.1%, 0.9% and 0.8%.

The improved tone of stocks after losses earlier this week occurred despite speculation that China’s central bank will boost reserve requirements again this month and possibly enact another interest rate increase before midyear.

The yields on ten-year British gilts and German bunds increased by four and three basis points, while that on Japanese JGBs slid by two basis points.

Oil and gold prices recovered 0.2% and 0.4% to $106.49 per barrel and $1459.60 per ounce.

The yen is trading more weakly.  It has fallen 0.6% against the dollar, which otherwise lost 0.7% against the kiwi, 0.5% versus the Australian dollar, 0.3% relative to the Canadian dollar, 0.2% against the euro and 0.1% against the yuan and sterling.  Dollar/Swissy is unchanged.

President Obama will speak on the budget at 17:30 GMT.  Investors anticipate a counterproposal to Congressman Ryan’s Republican blueprint.

The Bank of Canada’s Monetary Policy Report is due at 14:30 GMT.  Late yesterday came word of a 50-basis point increase in the Chilean overnight rate target to 4.5%.  The increase of 50 basis points had been expected and brings cumulative tightening in this rapidly growing Latin American economy to 400 basis points since June 2010.

Industrial production in the euro area grew less (0.4%) in February than analysts expected.  While production increased 1.4% in Germany and Italy, such fell by 1.6% in The Netherlands, 2.5% in Ireland, and 1.0% in Greece.  Output was 7.3% higher than in February 2010 and showed a 1.0% advance in the first two months of 2011 compared to the 4Q10 level.

German wholesale prices jumped another 1.3% last month and were 10.9% higher than a year earlier.  The WPI has soared 14% annualized over the past eight months.  Fuel prices leaped 6.9% in the latest month and were up 20.2% on year.

French consumer prices rose 0.8% last month and by 2.0% on year.  Core on-year inflation was only 0.7%, however.

Japanese domestic corporate goods prices climbed 0.6% in March and recorded a 2.0% 12-month rate of increase versus a drop of 1.3% in the previous statement year to March 2010.  Import prices leaped 1.5% on month and 9.4% on year.  Export prices fell 2.2% on year.

British labor statistics were released.  The claimant unemployment count rose by 700 workers, disappointing expectations of a 3000 drop, but constituted a 4.5% jobless rate for a fifth straight month in March.  The standardized ILO jobless rate averaged 7.8% over the three months to February versus expectations of 8.0% and 7.9% in the three months to November.  Wage earnings in the three months to February were 2.0% higher than a year earlier including bonuses and 2.2% excluding them. 

The Swiss index of producer and import prices posted a gain of 0.4% in March both on a monthly and on-year basis.  Import prices climbed 0.9% on month, while domestic producer prices went up just 0.2%.  Greek import prices, in contrast, jumped 1.9% in February and 7.6% on year.

New Zealand food price inflation firmed to 5.5% in March from 5.3% in February.  A goods and services tax increase last October is still reflected in the data.

Japan’s government downgraded its overall economic assessment and its specific views on exports, industrial production, business sentiment, profits, employment and consumption — all in response to the devastating Great East Earthquake.  This more than reverses an upgrade in the early months of 2011.  Officials also perceive downwardly biased risks surrounding their growth and price forecasts and a presently formulating a supplementary fiscal budget to aid the stricken areas. 

South Korean joblessness held steady at 4.0% last month instead of dipping as forecast.

The Spanish indices of leading and coincident economic indicators each rose just 0.1% in February.  The Czech current account swung from a CZK 0.3 billion deficit in January to a surplus of CZK 15.9 billion in February with a larger merchandise trade surplus of CZK 8.4 billion.

Scheduled U.S. releases today include retail sales, business inventories, the JOLTS index, the Beige Book, and weekly mortgage applications and oil inventories.  Besides Obama, Bullard of the Fed, Stark, Mersch and Weber of the ECB, and Governor Stevens of the Reserve Bank of Australia will be speaking.

Copyright Larry Greenberg 2011.  All rights reserved.  No secondary distribution without express permission.

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