Fresh Wave of European Anxiety

April 17, 2013

After constructive sessions overnight in Asian trading, European stocks again hit the skids.  The dollar is up and commodities are lower. 

There have been unconfirmed speculation that German debt might suffer a rating downgrade.

Construction output in the euro area fell 0.8% in February on top of a 2.1% slump in January.  Construction had contracted 1.9% between 3Q12 and 4Q12.

The Swedish Riksbank revised its projected repo rate path lower while keeping the level at 1.0%.

Bank of England minutes revealed a 6-3 vote not to raise asset buying, with Governor King joining Miles and Fisher in a dissent to expand quantitative easing by GBP 25 billion.  Within the majority preferring no more easing, some concern about rising expected inflation was expressed. 

The German Dax is presently showing a 1.3% decline, while share prices on the Paris and Spanish bourses are 1.1% weaker.  The Milan exchange is off 0.7%, and the British Ftse has lost 0.5%.  In the Pacific Rim, the Nikkei recovered 1.2%, and equities rose 1.1% in New Zealand, Australia, and Indonesia.

The dollar has appreciated 0.6% against sterling, 0.4% versus the yen and Australian dollar, 0.3% relative to the kiwi and loonie, and 0.2% against the euro and Swiss franc.

As this week’s meeting of G20 finance ministers and central bank governors nears, the Chinese yuan rose another 0.2% against the greenback.

Gold slid 0.2% to $1385.30 per ounce.  WTI oil dropped 0.8% to $88.04 per barrel.

Germany’s 10-year bund auction produced a record low 1.28% yield.  The 10-year British gilt is off two basis points, whereas the 10-year JGB firmed two bps to 0.60%.

Japanese consumer confidence improved 1.2 points to 44.8, the strongest reading since May 2007.

The Westpac index of Australian leading economic indicators rose 0.6% in February, a 3-month high.

Consumer prices in New Zealand, which are reported quarterly, went up 0.4% in 1Q, the most in a year, but the 12-month increase of 0.9% remained below 1.0%.

South Korean producer prices posted a larger 2.4% on-year drop in March after falling 1.6% in the year to the prior month.  Such fell 0.4% compared to February.  Malaysian consumer prices edged up 0.1% on month and accelerated 0.1 percentage points to a 12-month increase of 1.6% in March. South African consumer price inflation held steady at 5.9% last month.  Singapore’s SGD 4.6 billion trade surplus in March was 88% bigger than the February surplus.

The latest batch of British labor statistics showed

  • A greater-than-forecast 7.0K decline in the claimant count of unemployment in March following a 5.3% drop in February. 
  • A marginally higher ILO-basis jobless rate of 7.9% in December-February versus 7.8% in November-January.
  • Lessening wage inflation.  Average weekly earnings in December-February recorded on-year increases of just 0.8% and 1.0%, respectively with and without the inclusion of bonus pay.  These gains were down from 1.2% and 1.3% in November-December and less than analysts were forecasting.

The Swiss ZEW expectations index, a measure of investor sentiment, improved to a reading of 20.0 in April after scoring a 10.0 in February and 2.3 in March.

EU car sales were 10.2% weaker than a year earlier in March following a 10.5% drop in the year to February.

Spain’s leading and coincident indices of economic indicators both slipped 0.3% in February.

Central banks in Canada and Brazil have scheduled interest rate announcements today.  The Bank of Canada, which last changed its rate target in September 2010, is not expected to adjust policy.  However, analysts are looking for a 25-basis point hike in the Brazilian Selic rate.

There’s been no announced breakthrough in the Boston marathon crime investigation.  The type of bomb suggests international terrorism, but the date of the crime on anniversaries of Waco and Oklahoma City suggests domestic terrorism.  So does the fact that the final mile of the race had been dedicated to the Newtown massacre victims.

U.S. mortgage applications rose 4.8% last week following a similar increase in the prior week of April 5.  The Fed Beige Book of regional economic conditions will be published today at 18:00 GMT.  Let’s hope it’s not leaked early as were the recently reported meeting minutes.  Fed officials Rosengren, Stein and Bullard speak publicly.

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

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