A Busy Day
May 22, 2013
Many things are happening today. One spotlight is on central banks.
- The BOJ did not change policy of aggressive quantitative easing. The economic assessment was upgraded, but market players are somewhat disappointed that no concrete modifications were announced to stop the erratic yet sharply rising trend in JGB yields, which have roughly doubled since early April.
- Fed Chairman Bernanke will be testifying before the Joint Economic Committee in Congress on the U.S. economic outlook starting at 14:00 GMT.
- Federal Open Market Committee minutes from the last policy meeting are also awaited today.
- Minutes from the Bank of England policy meeting earlier this month revealed another 6-3 voting split on whether to boost quantitative easing. The Monetary Policy Committee decided against changing the GBP 375 billion size of the program, although Governor King for the fourth straight month sided with the minority that wants a GBP 25 billion increase. The Bank Rate was left at 0.5%, its level since March 2009.
Another focus of interest has been the gathering of 27 European Union leaders in Brussels for a summit. Corporate tax avoidance is high on the agenda, and the leaders will also be discussing regional energy policy.
Three interesting developments surfaced on the data front.
- Britain reported very disappointing retail sales, which slumped 1.3% in volume terms in April following a 0.6% drop in March. Non-fuel sales declined by 1.4% and were just 0.2% higher than a year earlier.
- Euroland’s current account surplus shot up to EUR 25.9 billion in March, about 3.2% of GDP, from EUR 14.0 billion per month in November-February. The current account surplus widened from 0.4% of GDP in the year to March 2012 to 1.6% of GDP in the ensuing twelve months to March 2013.
- Presumably in response to an uninspiring government budget, Australian consumer confidence sank 7% in May on top of a 5.1% decline in April and was at the lowest level since last August.
The euro gained 0.2% against the dollar overnight, which otherwise advanced by 0.6% relative to the New Zealand and Australian dollars, 0.4% against the yen, loonie, and sterling, and 0.5% vis-a-vis the Swiss franc. The yuan edged 0.1% higher against the dollar.
The 10-year JGB got over 0.90% but is currently unchanged on balance at 0.87%. The 10-year German bund and British gilt yields are two basis points lower.
Oil prices fell by 0.7% to $95.53 per barrel. Gold is 0.5% firmer at $1384.20 per ounce.
Share prices mostly advanced in the Pacific Rim, led by a 1.6% increase in Japan and including gains of 0.8% in the Philippines, 0.6% in South Korea 0.4% in Indonesia, 0.3% in Singapore, and 0.2% in Taiwan and China. There was also some declines — 0.5% in Hong Kong, 0.3% in Australian and India, and 0.7% in Thailand. In Europe, most bourses are lower, including drops of 0.9% in Spain, 0.6% in France and 0.3% in Germany and Britain.
Japan’s seasonally customs trade deficit of JPY 764 billion in April was the lowest since January but some 25% wider than analyst expectations. The unadjusted JPY 880 billion deficit compares to JPY 518 billion in April 2012 in embodies on-year growth of 9.4% in imports versus 3.8% in exports.
Taiwan, as expected, reported an unchanged 4.2% jobless rate for April.
South African CPI inflation failed to recede in April as had been expected. Such instead stayed at 5.9%. Consumer prices rose 0.4% from March, about twice expectations.
British public finances in April produced a GBP 8.035 billion of public sector net borrowing, down from GBP 12.565 billion in March, a GBP 10.759 billion public-sector net cash requirement, down from GBP 26.303 billion a year earlier, and outstanding debt equal to 75.2% of GDP compared to 70.6% a year earlier, 66.6% in April 2011, 57.1% in April 2010, 44.7% in April 2009 and merely 36.5% in April 2008. The relative burden of debt continues to crest, albeit at a slower pace.
The Confederation of British Industries published its monthly survey of industrial trends, whose reading of minus 20 lay halfway between scores of -15 in March and -25 in April.
The Greek current account deficit widened 80% on month to EUR 1.285 billion in March.
Dutch consumer spending fell less sharply in March (0.3%) than in the prior month. Dutch consumer confidence in May improved three points in line with expectations to a reading of minus 32. Danish consumer confidence rose 0.2 points to -2.6 in May.
Canadian and Mexican retail sales figures arrive today. The major U.S. release will be existing home sales, but the big focus will be on Fed policy. Bernanke’s testimony may give further guidance to the likely onset and speed of a wind-down in QE. FOMC minutes will shed light on what other committee members are thinking.
Copyright 2013, Larry Greenberg. All rights reserved. No secondary distribution without express permission.
Tags: Bernanke, BOJ, British retail sales, euro area current account