Awaiting Bernanke Press Conference

April 27, 2011

The FOMC is not expected to change its 0-0.25% fed funds target.  The announcement is due earlier than normal (12:30 EDT) because Chairman Bernanke will hold an open press conference at the usual time of 14:15 EDT (18:15 GMT).

The dollar is mixed, showing gains of 0.8% against the yen and 0.2% relative to the Swiss franc but losses of 0.5% versus sterling, 0.3% against the Australian dollar and yuan, and 0.2% against the euro, which is now at 1.4669.  The New Zealand and Canadian dollars are unchanged against the greenback.  Late today will come word from the Reserve Bank of New Zealand on its Official Cash Rate, which most likely will be left at a cyclical low of 2.5%.

Stocks are also mixed, with rises of 1.4% in Japan, 0.8% in Indonesia, 1.1% in Taiwan, 0.3% in Singapore and 0.4% in Thailand but drops of 0.7% in China, 0.8% in Australia, and 0.5% in Hong Kong and India.  In Europe, the German Dax, Paris Cac and British Ftse have traded up by 0.7%, 0.5%, and 0.1% so far.

The 10-year British gilt yield fell five basis points, while its Japanese and German counterparts are steady.

Oil and gold prices firmed overnight by 0.4% and 0.2% to $112.65 per barrel and $1506.60 per ounce.

A 1.6% rise in Australian consumer prices last quarter surpassed expectations and lifted the on-year rate of climb to 3.3%.  That compares to 2.7% in the year to 4Q10 and was the greatest four-quarter advance since 3.7% in the year to 4Q09.  Core inflation remained steady, however, at between 2.2% and 2.3%.

Large-store retail sales in Japan plunged 7.7% on year in March with department store sales diving by 15.0%.  Total retail sales fell 7.8% on month after a 0.8% uptick in February and were 8.5% weaker than a year earlier.  That resulted in an on-year decline of 3.0% in the first quarter after a dip of 0.4% in the year to 4Q10 and a rise 0f 0.8% in the year to 3Q10.

The Shoko Chukin index of Japanese small business sentiment slumped to 36.1 in April (36.0 for manufacturers and 36.2 for non-manufacturers) from 49.5 in March.  It was the weakest reading for this key barometer since May 2009.

South Korean consumer confidence firmed two points in April to a round reading of 100.  Business sentiment in New Zealand rebounded from the shock of the Christchurch earthquake, rising to 14.2 this month from minus 8.7 in March.  Taiwan’s index of leading economic indicators firmed 0.2% last month.

Industrial orders in the euro area recorded another strong advance of 0.9% in February following monthly gains of 1.2% last October, 2.1% in November, 2.5% in December, and 1.2% in January.  Orders in the first two months of 2011 averaged a rise of 4.0% compared to the mean 4Q10 level.  While February orders rose 3.2% in Germany, 2.7% in France, and 2.0% in The Netherlands, they fell by 1.7% in Ireland, 0.8% in Greece, and 0.3% in Spain.

Five German states have reported April CPI data.  Consumer prices rose 0.3% on month in three instances, 0.2% in one and 0.4% in the other, suggesting a 0.3% on the whole.  On-year inflation accelerated in every case, reaching 2.5% in three instances.  Core inflation remained lower than 2.0%.  The German index of leading economic indicators rose 0.7% last month, similar to a 0.6% rise in February.  German consumer confidence softened to 5.7 in May from 5.9 in April.

According to preliminary estimates, British real GDP rose 0.5% last quarter, returning to the level of 3Q10.  Activity in the fourth quarter had been hammered by foul weather.  In 1Q11, output in production industries went up 1.1%, matching the 4Q10 result and producing an on-year increase of 2.6%.  Construction staggered another 4.7%, and services increased by 0.9%.

Britain’s monthly services index rose 0.6% in February and 1.5% on year.   Mortgage loans totaled 31,660 in March, an 8-month high but still 9.9% less than in March 2010.  Net mortgage lending of GBP 0.846 billion was 68% less than a year before.  The most hawkish Bank of England policymaker, Andrew Sentance, again called for a gradually rise in interest rates beginning now.

Italian consumer confidence dropped to 103.7 in April from 105.1 in March.  French consumer confidence held unchanged at 83 in April but was two points lower than such had been at the start of 2011. Finnish business sentiment scored a 7.0, much weaker than anticipated, but consumer confidence in the only Nordic member of Euroland stayed generally stable at 17.8.

Today’s release of U.S. durable goods orders get released today but will be overshadowed by the FOMC announcement and ensuing Bernanke press conference.  He is expected to stay neutral if asked for advice about cutting the budget and to give answers to monetary policy that leave the Fed plenty of flexibility over the short run.

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

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