Weak Ezone GDP Data Sends Euro Below $1.2900

May 15, 2013

The dollar is stronger across the board, with gains of 0.8% against the Swissie, 0.6% versus the euro, 0.4% relative to the yen, loonie and Aussie dollar, 0.2% against the kiwi, and 0.1% versus the yuan and sterling.

Japan’s Nikkei-225 shot up 338 points or 2.3%, closing above 15,000 for the first time since January 2008.  From a low three months ago on November 13, it has soared 74.2%.  Elsewhere in the Pacific Rim, share prices climbed 2.5% in India, 1.1% in the Philippines, 0.8% in Taiwan, 0.6% in China and Australia and 0.5% in Hong Kong, but just 0.1% in South Korea.  In Europe, a gain of 1.3% in the Spanish IBEX exceeds the equity gains of 0.7% in Italy, 0.4% in France, 0.2% in Germany and 0.1% in Britain.

The 10-year German bund and British gilt yields are three basis points higher.  The 10-year JGB is up a basis point even though the BOJ plans an unusually large money market infusion at the end of this week. 

Commodities continue to fade, with overnight losses of 1.0% in gold to $1410.70 and 0.7% in oil to $93.53 per ounce.

Euroland GDP contracted for the fifth time in six quarters, dropping quarterly by 0.2% in 1Q13 and by 1.0% from the first quarter of 2012.  GDP had risen 0.6% between end-2010 and end-2011.

On-year German GDP growth swung into the red with a drop of 0.3% despite a quarterly uptick of 0.1%.  GDP had risen 1.0% in the year to mid-2012.

French GDP posted a 0.2% quarterly contraction for the third time in four quarters and was 0.4% weaker than in 1Q12.

Italian real GDP sank 0.5% on quarter and has fallen for the most consecutive quarters in over 40 years.  Spanish GDP also fell by 0.5% last quarter.  Italian and Spanish GDP were respectively 2.3% and 2.0% lower than in the first quarter of 2012.

In the year to 1Q13, GDP slumped by 5.3% in Greece, 3.9% in Portugal, 4.1% in Cyprus, 2.0% in Finland, 1.3% in the Netherlands, and 0.5% in BelgiumAustrian GDP was unchanged both from 4Q12 and from a year earlier.

Among some east European economies, GDP between 1Q12 and 1Q13 fell by 1.9% in the Czech Republic and 0.3% in Hungary but firmed 0.4% in Poland.

Japan’s tertiary index of service-sector activity proved disappointing and continued its recent volatility with a dive of 1.3% in March after rising 1.2% in February but falling 1.6% in January.  The tertiary index posted first-quarter drops of 0.5% both from 4Q12 and 1Q12.

Japanese consumer confidence unexpectedly dipped 0.3 points to 44.5 in April.  The quarterly average readings were 44.1 in 1Q13 and 39.4 in 4Q12.

Australian labor cost inflation slowed to 3.2% last quarter from 3.4% in 4Q12.  Labor costs went up 0.7% between 4Q12 and 1Q13.  Aussie new auto sales fell by 1.6% in April and recorded a smaller 3.3% 12-month increase after climbing 4.5% in the year to March.

Malaysian GDP growth slowed to an on-year pace of 4.1% in the first quarter from 6.5% in 4Q12.  Malaysia’s current account surplus fell sharply to MYR 8.7 billion in 1Q13 from MYR 22.8 billion in the last quarter of 2012.  South Korean unemployment slid a tenth of a percentage point to 3.1% in April.  India’s current account deficit of $5.3 billion in the first quarter of 2013 was 31% narrower than in 4Q12.  Retail sales in Singapore were 7.4% lower in March than a year before.  Turkish unemployment dipped 0.1 percentage points to 10.5% last quarter.

Premier Li of China disparaged the need for fresh fiscal stimulus.  Former Japanese Finance Minister Sakakibara expressed comfort with recent yen developments and unconcern about the rise of long-term interest rates thus far.

The latest mixed batch of monthly British labor statistics were released.  The pleasant news is that the claimant count of joblessness fell 7.3K in April, twice as much as expected and almost as much as a 9.9K contraction in March.  This nudged the claimant jobless rate down a tenth percentage point to 4.5%.  The ILO-basis jobless rate also slid 0.1 percentage points to 7.8% in 1Q13 from 7.9% in the three months to February.  On the other hand, wage growth has been practically nil.  Average earnings in 1Q were up from the first quarter of 2012 by a mere 0.4% including bonus pay and 0.8% when bonuses are excluded.

The Bank of England published a new quarterly Inflation Report that slightly bumped projected growth downward, retained a downwardly biased risk to the baseline growth projections, and predicted that inflation is likely to return to the 2% target by early 2015, about six months earlier than imagined before.

The Central Bank of Iceland left its key seven-day lending rate at 6.0%.  While monetary officials noted that the outlook for GDP growth is a tad softer than thought earlier this year and predicted a speedier drop of inflation into target, they also observed that excess capacity is shrinking and reaffirmed that the interest rate, which at 6% signifies an accommodative stance, will eventually need to go higher.

The ZEW index of investor expectations toward Switzerland pancaked to a reading of 2.2 in May from 20.0 in April.  The Swiss index of producer and import prices rose 0.2% last month and were 0.1% lower than in April 2012.

The Greek credit rating was bumped up by Fitch to B-.

French consumer prices dipped 0.1% on month and were just 0.8% above a year earlier in April.  Danish wholesale prices climbed 2.1% in the year to 1Q13.

Finnish retail sales fell by 0.4% in the year to March following a 0.5% 12-month rise in February.  The Dutch trade surplus widened by a billion euro to EUR 4.94 billion in March.  Norway’s trade surplus narrowed 29.4% to NOK 26.6 billion in April.  The Czech current account deficit widened 29.3% to CZK 35.8 billion in March.  Swedish capacity usage of 84.6% last quarter matched the reading in the final quarter of 2012.

This busy day of data releases continues in North America with the arrival of U.S. industrial production, capital flow figures, and producer prices. Also on tap are the Empire State Manufacturing Index and the National Association of Home Builders index.  Meanwhile, Canada reports existing home sales and the monthly survey of manufacturing inventories, orders and sales.  Later tonight (morning in Tokyo), investors will learn first quarter Japanese GDP growth.

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

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