Markets in a Risk-Averse State of Mind as Easter Break Nears

April 4, 2012

The Nikkei tumbled 2.3%, and the German Dax, Paris Cac, and British Ftse show drops of 1.8%, 1.2%, and 1.1% so far.  Stocks fell 1.9% in Indonesia, 1.1% in Thailand, 1.0% in Singapore, 1.5% in South Korea, 0.5% in Malaysia, 0.6% in India and 0.4% in The Philippines.

Investor caution was fanned by weakly subscribed Spanish auctions today and yesterday’s FOMC minutes that showed a disinclination to stimulate further in absence of substantially weaker growth or sub-target inflation.  There is angst about the size of German wage awards and ahead of the ECB press conference at 12:30 GMT today.

The yen and dollar are stronger, typical of spikes in risk aversion.  The yen has advanced 0.7% against the dollar, which otherwise shows gains of 0.7% against the Australian dollar, 0.6% versus the euro, Swissie, and kiwi, 0.4% against the loonie and 0.3% relative to sterling.

Gold tumbled 2.3% to $1634.00 per ounce.  Oil is priced 0.6% softer at $103.34 per barrel.

Ten-year German bund and British gilt yields are unchanged, however.

Service sector purchasing manager survey results for March have been released.

  • Euroland’s service-sector reading of 49.2 constitutes an upward revision from a preliminary estimate of 48.7 but the sixth sub-50 score in seven months.  Scores below 50 connote contraction, and those above 50 indicate expansion.  Within the euro area, Germany’s 52.1 reading was a 4-month low, France’s 50.1 was a 2-month high, Italy’s 44.3 was a 2-month high, Spain’s 46.3 an 8-month high and Ireland’s 52.1 a two-month low.  Business expectations improved to an 8-month high, but the first-quarter average was below 50, just as was the case in 4Q11.
  • Euroland’s composite purchasing managers index printed at 49.1 in March, a three-month low.  Germany’s 51.6 was at a 3-month low as well, while France scored a 48.7, which was a 5-month low.  The Spanish (46.0) and Italian (45.6) composite readings were both at 2-month highs, while Ireland’s 52.4 represented an 11-month peak.
  • India’s service PMI of 52.3 was the weakest reading since October, and its composite score of 53.6 was a 4-month low.
  • Britain produced one of the brightest spots.  Its service PMI jumped from 53.8 in February to 55.3 last month, suggesting economic growth in the first quarter of about 0.5% (and some 2% annualized).
  • Australia’s service-sector purchasing managers index stayed very weak at 47.0 after 46.7 in February, and the sales index was lower than 45.0.  This report and a separate release of Aussie trade data today weighed on the Australian dollar, which has been as low as $1.0244 this morning versus the low of $1.0265 yesterday.  The Aussie trade deficit of A$ 480 million in February followed an upwardly revised deficit of A$ 971 million in January and constituted the first consecutive deficits in two years.  Analysts had anticipated a February surplus of about A$ 1 billion.
  • Russia’s service-sector PMI of 52.3 was the lowest since last October.  The composite PMI reading was at a 4-month low of 56.3 and suggests growth of 4% or less.

Former Massachusetts Governor Romney swept the Wisconsin, Maryland, and D.C. Republican primaries.

Euroland retail sales volume dipped 0.1% in February, the fifth drop in six months, and was 2.1% lower than a year earlier. 

Severe storms hit Japan near Tokyo.

German factory orders rebounded only 0.3% in February following an inwardly revised 1.8% drop in January.  Analysts had been projecting a 1.5% recovery.  The new figures leave orders in the first two months of 2012 unchanged from the 4Q level, when orders had plunged 4.3% at an annualized rate compared to 3Q11.

Britain’s Halifax house price index jumped 2.2% in March, most since May 2009.  Prices in 1Q12 were just 0.6% lower than a year earlier, their smallest three-month on-year drop since August-October 2010.  According to the British Retail Consortium, shop prices were 1.5% higher than a year earlier in March, up from a 1.2% increase in the year to February.

Czech retail sales fell 0.2% on month and 1.6% on year in February.  Irish unemployment stayed above 14.0% in March. Denmark recorded a DKK 8.0 billion current account surplus in February, 36% wider than in January. 

German workers are demanding wage increases of more than 6% over two years and getting such, underscoring that ECB policy is too loose for Euroland’s largest economy and explaining the Bundesbank leadership’s rising frustration.

Filipino consumer prices rose 0.2% on month and eased a tenth to a 12-month increase of 2.6% in March.

Scheduled U.S. data today include the service sector purchasing managers survey results for March and the ADP estimate of private employment. 

Polish interest rates were left unchanged after this week’s policy meeting.  The ECB just announced no change in its key rates as well.  Draghi’s press conference starts at 12:30 GMT.

Copyright 2012, Larry Greenberg.  All rights reserved.  No secondary distribution without express permission.

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