FOMC Begins Two-Day Meeting
April 24, 2012
There’s been scant overnight movement in the dollar, which is unchanged against the euro, Swissie and loonie, up 0.1% relative to the yen and kiwi, and off 0.1% versus the yuan and sterling. EUR/USD continues to trade near $1.3150, and the yen has an 81 handle.
Stocks in Asia and Europe were more stable than yesterday, although Japan’s Nikkei fell by 0.8% and below 9,500. Share prices in Europe, by contrast, have risen 1.1% in Paris, 0.8% in Frankfurt, and 0.5% in London. Stocks also rose 0.9% in Thailand, 0.7% in India, 0.4% in Singapore, New Zealand and Indonesia, 0.3% in Hong Kong and 0.2% in Australia. Equities fell 0.5% in South Korea.
Sovereign 10-year bond yields firmed three basis points in Germany and one basis point in Japan and Britain.
Spain’s government was able to sell EUR 1.9 billion of 3- and 6-month bills but at significantly higher interest rates than in the March auction.
Gold advanced 0.4% to $1639.30 per ounce. Oil prices edged 0.1% higher to $103.17 per barrel.
The weakest currency overnight has been the Australian dollar, which fell 0.4% against its U.S. counterpart following the release of soft Aussie consumer prices. Like the PPI released Monday, consumer prices surprised on the downside. The headline index edged up just 0.1% last quarter, halving on-year CPI inflation to 1.6%, lowest since the third quarter of 2009. On-year CPI inflation had been 3.1% in the final quarter of 2011 and 3.3% in the first quarter of 2011. Australia reports two measures of core inflation, which fell to 2.1-2.2% last quarter from 2.6% in 4Q11. These results point almost surely will prompt the Reserve Bank of Australia to cut the 4.25% Official Cash Rate in May. There is additional market chatter that a subsequent reduction will occur in June.
Japan’s corporate service price index rose by a greater-than-forecast 0.7% last month, cutting the 12-month rate of decline of 0.3% from 0.6%. Advertising costs leaped 7.3% on month.
The Bank of Japan’s balance sheet widened to JPY 140.4 trillion on April 20 from JPY 139.6 trillion at the end of fiscal 2011 (March 31). Investors expect monetary officials to announce an expansion of quantitative easing at the end of this week.
Britain’s public sector net borrowing in March of GBP 18.2 billion (excluding financial interventions) was the most in 16 months. The public sector net cash requirement of GBP 16.5 billion was 27% larger than forecast, and net debt reached 66% of GDP. The Tory-led Cameron government is meeting deficit overshoots with more austerity, which creates a risk of voter backlash. A string of European governments, most recently in The Netherlands, have fallen over their perceived handling of fiscal policy.
French consumer confidence improved a point to a reading of 88 in April from 87 in March and 82 in the first two months of 2012.
Czech business sentiment fell 1.7 points in April to 89.5, while consumer confidence edged up 0.1 to a score of 72.3.
The UBS Swiss consumption indicator improved to 1.22 in March from readings of 0.94 in December, 0.93 in January, and 0.90 in February. But Switzerland’s trade surplus narrowed more sharply to CHF 1.7 billion in March from CHF 2.6 billion in February on a strong advance in imports.
Finnish PPI inflation settled back to 1.4% last month after 12-month rates of rise of 1.8% in January and 2.2% in February. Irish PPI inflation firmed to 2.6% from 2.3% in February. Finland’s 8.5% jobless rate in March exceeded expectations. Swedish unemployment dipped to 7.7% last month. Italian wages were flat for a second straight month and 1.2% higher than in March 2011. Icelandic wages were 12.1% higher than a year before in nominal terms last month and posted a 5.3% gain in inflation-adjusted terms. Retail sales volume in Hungary posted declines in February of 0.5% from January and 1.4% from a year earlier.
China’s index of leading economic indicators rose 0.8% in March, the least in three months, while the coincident index went up 0.6% versus a gain of 4.0% in February. The Hong Kong trade deficit of HKD 43.9 billion in March was 9.5% wider than a year before, and both imports and exports recorded declines.
South Africa’s index of leading economic indicators rose for a sixth consecutive month, climbing 1.1% in February, but the coincident index slid 0.3%.
Tuesday will be a busy day for U.S. data releases: the Richmond Fed manufacturing index, new home sales, the Case Shiller and FHFA house price indices, consumer confidence, and weekly chain store sales. Canada reports retail sales, and Mexico’s index of leading economic indicators arrives. Belgium’s business sentiment index is due. German finance minister Schaeuble and ECB policy maker Gonzalez-Paramo speak in public today.
Hungary’s central bank will reveal its latest interest rate decision, expected to be no change. The Fed commences a two-day FOMC meeting that will culminate in a Bernanke press conference on Wednesday. What could have been a big day in the presidential election campaign will instead be anti-climatic, since Romney has all but sewn up the Republican nomination. There are primaries in CT, DE, NY, PA and RI.
Copyright 2012, Larry Greenberg. All rights reserved. No secondary distribution without express permission.
Tags: Australia consumer price inflation slows, Dutch government collapse, FOMC, Schaeuble
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