A Day of Big Events

March 20, 2013

The proposed levy on Cypriot bank deposits was rejected by that country’s parliament by a vote of 36 to zero with 19 abstentions.  Tremendous uncertainty surrounds the scramble for an alternative plan to secure bailout aid and how this development might hurt the post-OMT stabilization of Ezone and global financial markets.  Cyprus constitutes just 0.2% of Ezone GDP, but the possibility of contagion affects the entire region.

The FOMC will releases a statement at 18:00 GMT.  A Bernanke press conference is scheduled to begin at 18:30 GMT.  The Fed is not expected to curb its accommodative quantitative easing.

British Chancellor of the Exchequer delivers the annual U.K. budget at 12:30 GMT.  The Conservatives have shown no predisposition to back away from their austerity, austerity, and austerity approach, which has thus far delivered a stagnant economy and little fiscal improvement.  Attention has turned to the possibility that Osborne will introduce a new mandate for the Bank of England that, like the Fed’s, will instruct monetary policymakers to consider growth as well as inflation.

Bank of England minutes from the meeting of March 6-7 revealed another 6-3 split vote rejected a proposal to expand the asset purchase program limit to GBP 400 billion from the present ceiling of GBP 375 billion.  Governor Mervyn King, as in February, sided with the minority view that sought more quantitative easing.  Miles and Fisher also wanted more ease now.  Concern that doing this might jeopardize inflation expectations were expressed by Ian McCafferty.  Bank of England policymakers were unanimous in approving no change in the 0.5% Bank Rate, which has been steady since March 2009.

Japanese markets were closed today in observance of the Vernal Equinox holiday.

The dollar is narrowly mixed with gains of 0.2% against the yen and kiwi, no change versus the yuan, and dips of 0.3% against sterling and the ueuro and 0.2% relative to the loonie, Swissie, and Australian dollar.

Equities rallied 3.4% in China and 1.0% in Hong Kong, but share prices fell by 1.0% in South Korea, 0.7% in India, 0.6% in Singapore, 0.5% in Taiwan and 0.4% in Australia.  European stocks are up, suggesting that investors prefer Cypriot uncertainty to the certainty of a precedent that penalizes bank depositors.  Share prices have so far risen 0.8% in Madrid, 0.7% in Milan and Paris, 0.6% in Frankfurt and 0.2% in London.

The price of gold remained unchanged at $1611.00 per ounce. Oil, in contrast, advanced 0.8% to $92.86 per barrel.

Ten-year British gilt yields climbed five basis points, and German bunds are up two bps.

Iceland’s central bank again left its key 1-week collateralized lending rate at 6.0%, the level since a 25-basis point hike last November.  That move had been the sixth tightening since August 2011, totaling 175 basis points in all.  The medium-term outlook is for a resumption of the cycle of rate hikes in keeping with reductions of economic slack in Iceland.  Currently elevated inflation is projected to subside.

The South African Reserve Bank is the third central bank scheduled to announce an interest rate decision today.  An unchanged 5.0% policy interest rate is the likely outcome.

Euroland recorded a greater-than-forecast EUR 14.8 billion current account surplus in January.  Such averaged EUR 13.3 billion in the fourth quarter of 2012.  Over the twelve months through January, there was a EUR 119.9 billion surplus, up from EUR 16.5 billion in the prior twelve months to January 2012. 

British labor statistics were released.  The claimant unemployment count fell by a lower-than-forecast 1.5K in February following December’s decrease of 10K.  The ILO-basis rate of unemployment held at 7.8% during the three months to January.  Average wage earnings posted an on-year advance of just 1.2% in January, which was a mere 0.1 percentage point more than the all-time record low.  Wages have grown more slowly than prices for the past 40 months.

German producer prices slid 0.1% on month in February, helped by a 0.3% drop in energy.  On-year German PPI inflation of 1.2% was the lowest in seven months and down from 1.7% in January.  Non-energy producer price inflation was very low at 1.0% last month.

The Swiss ZEW expectations index fell more than forecast to a reading of 2.3 this month from 10.0 in February.  The French index of leading economic indicators rose 0.5% in January.

Danish consumer sentiment slid 0.1 to minus 2.1 in March.  Dutch consumer confidence improved three points to negative 41 in March.

New Zealand’s current account deficit of NZD 3.255 billion last quarter constituted a modestly bigger-than-expected 5.0% of GDP.

The Westpac index of Australian leading economic indicators rose 0.3% in January, same as in December.

Malaysian CPI inflation ticked upward to 1.5% in February from 1.3% in January.  South African CPI inflation of 5.9% after 5.4% in January represents its highest level since last April.

U.S. mortgage applications fell 7.1% last week.  Such was the second consecutive weekly drop.  30-year fixed-rate mortgages rose a basis point to a 7-month high of 3.82%.

Copyright 2013, Larry Greenberg.  All rights reserved.  No secondary distribution without express permission.

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