Spotlight on the United States
April 18, 2013
The IMF/World Bank spring meetings in Washington D.C. kick off today. G20 finance ministers and central bank chiefs attending those meetings will be holding separate talks and issuing a communique that reportedly calls on all nations not to devalue competitively but does not single out Japan explicitly. The governor of India’s central bank said intervention as a policy tool has acquired greater respectability.
President Obama will be in Boston attending a service for victims of the marathon bombings. A person has been held in connection with the ricin-laced letter sent to the president and a senator of Mississippi. A manhunt is underway for a person seen talking on a cell and dropping a bag at the site of the second marathon explosion.
Meanwhile, there has been a blast at a fertilizer plant in Waco, Texas. There are fatalities and over 150 injuries, many seriously. Coincidentally, the marathon bombing occurred on the 20th anniversary of the Branch Davidian fire in Waco.
Investors await U.S. jobless insurance claims data for last week. Such settled back to 346K in the week of April 6 from 388K in the prior week. 350K constitutes a psychological threshold.
Watch the wires today for potential market-moving comments by officials. IMF Director Lagarde speaks publicly today. So do Fed officials Kocherlakota, Lacker, and Raskin as well as Bank of Canada Governor Carney.
Japan’s Nikkei fell 1.2% overnight. Elsewhere in the Pacific Rim, share prices lost 1.6% in Australia, 1.2% in South Korea, 0.3% in Hong Kong and 0.2% in Taiwan but firmed 0.3% in China and Indonesia and 1.5% in India. In Europe, stocks have recovered from a difficult Wednesday by 0.7% in Spain, 0.6% in France and Italy, and 0.3% in Germany and Britain.
The dollar strengthened 0.3% against the yen and 0.1% versus the yuan but fell otherwise by 0.6% relative to the Australian dollar, 0.2% against the loonie, euro, Swissie and kiwi and 0.1% relative to sterling.
Gold is 0.8% higher but still under $1400 at $1393.10 per ounce. Oil rose 1.1% to $87.60 per barrel.
The 10-year Japanese JGB yield is 2 basis points softer at 0.58% but above its level when the BOJ announced dramatic steps to depress long-term interest rates, boost nominal GDP growth and secure 2% inflation. The 10-year German bund and British gilt yields have edged higher by one and two basis points. Spanish and French sovereign debt auctions resulted in lower yields.
Moody’s retained its AAA rating on German debt but with a negative outlook. Moreover, Egan Jones, a second-tier credit rating agency, cut Germany’s rating by a notch to A from A+.
Japan reported a JPY 362 billion customs trade deficit for March on a seasonally unadjusted basis, which compares to a deficit of JPY 82 billion in March 2012. Exports and Imports were 1.1% and 5.5% greater than a year before. The seasonally adjusted deficit narrowed to JPY 922 billion from JPY 1.093 trillion in February as exports rose 1.6% on month but imports dropped 1.2%. A fiscal 2012 deficit of JPY 8.17 trillion follows a deficit in FY2011 of JPY 4.42 trillion and a surplus in FY10 of 5.33 billion. Exports declined 2.1% last fiscal year, while customs imports increased 3.4%.
Japanese stock and bond transactions generated a JPY 1.88 trillion net capital inflow last week after an inflow of JPY 2.47 trillion in the previous week. Money poured into Japanese stocks. Japanese department store sales recorded on-year growth of 3.9% in March after an uptick of only 0.3% in February (2012 was a leap year). Bank of Japan Board member Miyao predicted that inflation would exceed 1% next year.
Chinese foreign direct investment increased 1.4% on month and 5.65% on year last month, which was a steeper advance than anticipated. Chinese property prices increased in 68 of 70 cities last month, climbing 3.6% on month.
Business sentiment in Australia improved to a reading of +2 last quarter from minus 5 in 4Q12. New Zealand consumer confidence bounced back 3.8% in April from a 5.1% slide in March. New Zealand job ads rose 0.7% last month after climbing 1.8% in February.
As expected, monetary policymakers at the Bank of Brazil lifted the Selic interest rate to 7.5% from 7.25% in a move designed to contain above-target inflation and suppress the tendency of inflation expectations to drift higher. The action was the first hike in two years and followed an easing cycle from 12.5% that began in August 2011. Brazil is also experiencing slower-than-desired economic growth.
British retail sales slumped 0.7% last month and by 0.5% from March 2012. Without auto fuel, sales dropped 0.8% on month and rose just 0.4% on year after 3.2% in February. The decline in sales was somewhat greater than predicted.
Italy’s current account deficit narrowed to EUR 1.59 billion in February from EUR 4.61 billion in January and EUR 4.49 billion a year before.
The Dutch jobless rate widened 0.4 percentage points to 8.1% in March. Hong Kong unemployment ticked up to 3.5% in 1Q13 from 3.4% in December-February.
Besides jobless claims, investors will learn the latest reading on the Philly Fed manufacturing index and index of leading economic indicators.
South African wholesale turnover fell 1.3% on month in February and recorded a smaller 12-month increase of 3.7% versus 7.4% in the year to January.
Copyright 2013, Larry Greenberg. All rights reserved. No secondary distribution without express permission.
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