Into Equities from Bonds and Gold

May 7, 2013

The Dow Jones Industrial Average, up 0.4%, broke above 15K for the first time.

The German Dax gained 1.0% to an alltime high above 8K.

Elsewhere in Europe, stocks have climbed 1.7% in Italy, 0.9% in Spain, 0.8% in France and 0.5% in Britain.

In Japan, which was closed Monday and Friday for Golden Week observances, the Nikkei shot up 3.6%, closing above 1K for the first time since June 2008.

Elsewhere in the Pacific Rim, share prices rose 1.4% in Malaysia, 1.0% in Indonesia, 1.1% in India, and 0.6% in China and Hong Kong, but Australia’s Bourse dipped 0.2% in spite of the first central bank rate cut since December.  See review of Official Cash Rate reduction to 2.75%.  Australia’s OCR has been lowered 200 bps so far since November 2011.

Ten-year British gilt yields jumped nine basis points.  The 10-year Treasury and JGB yields are three basis points higher.

The price of gold has sunk $16 or 1.1% to $1452.00 per ounce.  The price of WTI crude oil is 0.4% sifter at $95.82.

The U.S. dollar advanced by 0.8% and 0.7% against the Australian and New Zealand dollars, 0.2% versus the Swiss franc and 0.1% relative to the British pound.  The greenback is down 0.3% against the euro and 0.2% versus the yen and loonie.  The Chinese yuan is steady.

There was some encouraging data from Germany.

  • Industrial orders posted back-to-back 2.2% increases in February and March.  Intermediate and capital goods orders went up by 3.6% and 2.0% in March.  Overall orders and domestic orders for capital goods, a forward-looking gauge of business investment, were 2.2% and 1.3% higher in March than their 1Q average levels.  Orders firmed just 0.4% between 4Q12 and 1Q13, however, and were 0.4% lower in March than a year earlier.
  • The German construction purchasing managers index improved from a 13-month low of 41.9 in March to a 6-month high of 48.8 in March.  Being below 50, the March reading signified a slower rate of contraction.

ECB Pdt Draghi left the door open to more monetary easing, contingent on the performance of future data trends.

Following disappointing Australian retail sales reported Monday, the following Aussie data emerged today.

  • The construction PMI fell to a 7-month low of 35.2 in April from readings of 39.0 in March and 45.6 in February.
  • House prices edged only 0.1% upward in the first quarter and posted a 2.6% on-year advance.
  • March saw the first trade surplus, A$ 307 million, since December 2011.  A combined A$ 1.253 billion deficit was recorded in the first two months of 2013.

Average hourly earnings in New Zealand climbed by an as-expected 1.0% last quarter.

Japan’s service-sector purchasing managers index settled back to 51.7 in April from an all-time high of 54.8 in March.  It was the seventh straight reading above 50.  All the socres from November to February had been 51-something, just like the latest reading.

Russia’s service-sector purchasing managers index fell 1.3 points to 53.0 and reflected subdued business confidence.  The composite Russian PMI of 52.4 in April was down from 53.4 in March and 54.9 in February.

The non-oil PMI readings of Saudi Arabia, the UAE, and Egypt each fell in April.  The Saudi PMI was 0.9 lower at a 5-month low of 58.0.  In the United Arab Emirates, the purchasing managers index was also at a 5-month low, printing at 54.0 versus 54.3 in March and 55.4 in February.  Egypt’s PMI of 44.2 was at a 4-month low after scores of 44.8 in March and 46.0 in February.

British shop price inflation slowed to 0.4% in April, their smallest 12-month increase since November 2009, from 1.4% in March.  New car sales in the U.K. were 14.8% greater in April than a year before.

Three Swiss economic indicators were reported.  Reserves contracted CHF 4.7 billion to 433.6 billion francs in April.  The SECO consumer confidence index firmed a point to minus 5 in the first quarter, and the seasonally adjusted 3.1% jobless rate in April was unchanged from March or a year earlier.

Several countries reported industrial production.

  1. Swedish industrial output rose 0.9% on month but was unchanged on year in March.
  2. Danish production grew 0.7% in March, half as much as anticipated.
  3. Czech output was 6.0% lower than a year earlier in March.
  4. In Hungary, production rose 0.4% in March but still posted a 2.9% 12-month rate of decline.
  5. French industrial production recorded declines in March of 0.9% from February and 2.5% from a year before.  These drops easily surpassed expectations.

France experienced an EUR 4.7 billion trade deficit in March, 22% less than in February.  The CZK 32.3 billion Czech trade surplus in March was marginally smaller than projected. Iceland’s ISK 5.1 billion trade surplus in April was 45% smaller than in March.

Dutch CPI inflation picked up to 2.6% in April from 2.3% in March.  Wholesale prices in Austria slid 0.4% on month and fell 1.6% on year in April.  CPI inflation dropped to just 0.1% in Cyprus last month.  CPI inflation of 3.2% in the Philippines in the year to March fell midway between 3.4% in February and 3.0% in January.

U.S. chain store sales last week were 1.0% lower than in the week of April 27 and posted a 12-month advance of 2.4%, down from 2.6% according to the Goldman Sachs/ICSC index.  According to Johnson Redbook, chain store sales in the first four months of April were 2.5% lower than in March but 2.2% higher than a year before.

The IBD/TIPP U.S. optimism index settled back 2.4% or 1.1 points to 45.1 in May, trimming a 4.0-point advance in April.  U.S. consumer credit data also arrive today.

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

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