Thank God It’s Friday and a Quiet One at That

May 20, 2011

Not to much is happening this Friday.  No U.S. data releases are scheduled.  The euro has dipped back under $1.43.  The Bank of Japan made no further changes at this month’s Policy Board meeting despite a big drop in the latest all-industry index reading.  French Finance Minister Legarde appears to be the front-runner to succeed IMF Managing Director Strauss-Kahn, who resigned yesterday.  The Bank of Korea’s chief economist likened the United States to a “hedge fund,” borrowing at cheap Treasury bill rates and investing in higher-yielding emerging markets.

The dollar has recovered 0.3% against the euro but otherwise shows losses overnight of 0.6% against the kiwi, 0.2% versus the Canadian dollar and Chinese yuan, and 0.1% against the yen, sterling and Australian dollar.  Dollar/Swissy is steady.

Stocks were mixed in the Pacific Basin but are higher in Europe.  Share prices fell 0.6% in Taiwan, 0.5% in Australia, 0.4% in Thailand, 0.3% in The Philippines, 0.2% in Malaysia, and 0.1% in Japan, but equities gained 1.0% in India, 0.8% in South Korea, 0.6% in Pakistan and 0.3% in Indonesia.  The Chinese bourse was unchanged.  The British Ftse is up 0.7%, and the German Dax and Paris Cac have risen 0.3%.

The yields on ten-year Japanese JGBs fell three basis points.  Those on German bunds and British gilts are a basis point lower.  The spreads on Euroland peripheral bonds widened.

Oil and gold prices rose 0.5% apiece to $98.97 per barrel and $1500.40 per ounce.

Japan’s all-industry index slumped 6.3% in March and by 2.0% in the first quarter.  In March, industrial production plunged 15.5%.  Construction and services dropped by 8.6% and 6.0%.  Public spending was unchanged.  The all-industry index, a supply-side monthly gauge of GDP, was already 4.0% lower in March than the 1Q average level, setting the stage for more negative economic growth in the second quarter of 2011.

Following deliberations lasting five hours and 28 minutes on Thursday and Friday, the Bank of Japan Policy Board voted unanimously to retain a zero to 0.1% overnight money target and did not consider additional quantitative stimulus.  Strong downward supply-side pressure on GDP is deemed likely for the time being, but the start of a recovery is anticipated in the autumn.

Euroland recorded a EUR 4.7 billion current account deficit in March, the smallest shortfall since October.  The unadjusted current account deficit accrued to EUR 52.5 billion in the twelve months to March versus EUR 16.6 billion in the previous dozen months to March 2010.  Because of larger portfolio capital inflows, however, the Basic Balance, which adds the current account and long-term capital movements, posted a EUR 166.8 billion surplus in the latest twelve reported months versus EUR 116.5 billion in the 12 months to March 2010.

German producer prices increased 1.0% in April and were 6.4% higher than a year earlier.  PPI inflation over the first third of 2011 was 10.5% annualized, led by the spike in energy costs.  Energy producer prices rose 2.6% on month in April and 11.8% from a year earlier, while all other producer prices climbed 0.4% on month and 4.2% on year.

Dutch consumer confidence remained weak with a reading of minus 10 in May.

Italian industrial orders rose 8.1% on month and 21.2% on year in March.  Industrial sales gained 2.0% and 12.2% on year. 

The ECB continues to resist any suggestion of re-profiling the debt of the peripherals.  If Greek debt maturities are lengthened, the central bank will not accept such as collateral.  Ireland’s trade balance showed a slightly bigger surplus in March of EUR 3.9 billion, but Italy’s trade deficit that month widened.

New Zealand credit card spending rose 1.6% on month and 6.0% on year in April.  Singapore wholesale turnover showed a smaller 1.8% on-year drop last quarter after declining 3.6% between 4Q09 and 4Q10.  Taiwanese export orders were 10.4% higher than a year earlier in April.

Canadian seasonally adjusted consumer prices went up 0.3% in April after jumping 0.8% in March.  On-year CPI inflation held steady at an above-target 3.3%, but core inflation slid to 1.6% from 1.7%.  The Bank of Canada’s medium-term target is 2.0%.  Energy prices were 17.1% higher than in March 2010, while all other consumer prices posted a 2.0% year-over-year advance in the month.

Canadian retail sales are also due today, and so is the preliminary estimate of Euroland consumer confidence.  New York Federal Reserve President Dudley has a speaking engagement.

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

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