Weaker Yen and Stronger Share Prices after G20 Meeting

April 22, 2013

G20 central bank governors and finance ministers gave rubber-stamp approval to Japanese stimulus policies.  See my review.  Japan’s Prime Minister Aso said as much.

The yen touched overnight lows of 99.90 per dollar and 130.70 per euro.

Share prices in the Pacific Rim rose by 1.9% in Japan, 2.4% in the Philippines, 1.0% in South Korea, 0.9% in New Zealand, 0.8% in India, 0.7% in Australia, and 0.5% in Singapore and Taiwan, but they dipped 0.1% in China.

Napalitano was selected to another 7-year term as Italy’s president, giving some hope that political gridlock on forming a government might be broken.

A number of members of the European Central Bank Governing Council including Bundesbank President Weidmann made dovish remarks.

Equities in Europe have advanced 1.8% in Italy, 1.3% in Spain, 0.8% in Germany and Britain and 0.6% in France.

The price of gold has leaped 2.7% to $1433.40 per ounce.  WTI crude oil climbed 0.8% to $88.67 per barrel.

Ten-year British gilt yields are three basis points higher.  10-year Japanese JGBs and German bunds are up by two bps and a single basis point, respectively.

Net movements in the dollar since Friday’s close have been confined to +0.2% against the yen, +0.1% versus the euro and yuan, -0.1% relative to the loonie and kiwi, and 0.0% vis-a-vis the Swiss franc and Austraian dollar.

Deficit- and debt-to-GDP ratios were released for members of the EU.  Euroland’s collective deficit contracted by 0.5 percentage points (ppts) to 3.7% of GDP in 2012, but the debt/GDP ratio increased 3.3 ppts to 90.6%.  Individual deficit ratios last year were 4.8% for France, 3.0% for Italy, 10.6% for Spain, 6.4% for Portugal, 6.3% for Cyprus, 10.0% from Greece, 3.9% for Belgium, 4.1% for the Netherlands, 1.9% for Finland, 2.5% for Austria, 7.6% for Ireland, and 0.8% for Luxembourg.  Germany had a 0.2% of GDP surplus.  Some of the notably large debt/GDP ratios could be found in Italy (127.0%), Ireland (117.6% and up from 64.8% three years earlier), Greece (156.9%), Portugal (123.6%), and Belgium (99.6%).

The British deficit narrowed 1.5 percentage points to 6.3% of GDP in 2012, but the debt/GDP ratio widend to 90.0% from 85.5% in 2011.

The Fitch credit rating agency cut the U.K. sovereign debt rating to AA+ from AAA.

The most dovish member of the Swedish Riksbank’s Executive Board, Svensson, is resigning next month in frustration over the inability to persuade other central bankers there to cut interest rates further.

The Conference Board’s index of French leading economic indicators increased 0.6% in February, but the coincident index stagnated that month.

Danish retail sales contracted 0.5% on month and 4.4% on year in March.  Consumer confidence worsened 0.7 points to a negative 2.8 reading in April.

Swiss M3 growth edged up marginally to a 9.9% 12-month increase last month from 9.8%.  The Greek current account deficit widened 223% to EUR 716 million in February.

Japanese supermarket sales, which had recorded a 5.5% on-year drop in February, rose 1.7% in March.  Note that February 2012 had an extra day.

Malaysian unemployment fell 0.4 percentage points to 2.8% in February. Taiwanese joblessness ticked marginally higher to 4.18% in March, the first increase since September 2012.  CPI inflation in Hong Kong ticked down to 3.6% last month from 3.7% on average in the first two months of 2013. 

South Korea, which is especially vulnerable to Japanese yen depreciation, posted a manufacturing purchasing managers index of 52.0 in April, unchanged form March and the third reading of at least 50 in a row.

Many unanswered questions remain about the reasons behind the Boston marathon bombing. 

U.S. existing home sales data and the Chicago Fed National Activity index get reported today.  So does Ezone consumer sentiment and Mexican retail sales.  Tuesday will see the release of preliminary purchasing managers readings for the euro area and China as well as Japanese small business sentiment and several more U.S. housing market statistics.  The Fed announced that Chairman Bernanke will not be able to attend this year’s Jackson Hole monetary policy meetings in late August.

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

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