Japanese Market Volatility Intensifies

May 30, 2013

The more Japanese officials express unconcern, the uglier the mood of the markets there becomes.  The Nikkei-225 plunged another 5.2% to 13,589, 13% below its May 22 closing level.  Compared to its low that day of 103.74 per dollar, the yen’s high today of 100.46 constituted an appreciation of 3.3%.  The 10-year JGB yield fell back four basis points overnight to 0.88%.

BOJ Deputy Governor Nakaso stressed that the government must implement promised structural reforms if the BOJ’s effort to raise expected inflation is to succeed.  Finance Minister Aso said banks should manage to handle the drop in their balance sheet from falling bond prices.  Another economic advisor said its okay for nominal interest rates to firm so long as inflation-adjusted interest rate levels stay very low.

Other stock markets in the Pacific Rim recorded declines of 3.8% in the Philippines, 1.4% in Indonesia, 1.1% in Taiwan, 0.9% in Australia and Singapore, and 0.3% in Hong Kong and China.  European equities are higher, however, with gains of 1.4% in France, 1.0% in Italy, 0.6% in Germany, 0.5% in Spain, and 0.2% in Britain.

Movement in the dollar has been mixed.  The greenback is down on balance by 0.3% against the euro and 0.2% versus the Swiss franc and sterling, but the U.S. currency also has risen 0.3% relative to the yen, 0.4% against the kiwi, 0.2% versus the Aussie dollar and 0.1% relative to the yuan and loonie.

There’s a report from PIMCO that incoming Bank of England Governor Mark Carey will seek a large depreciation of the pound.

Gold has climbed 0.6% to $1399.10 per ounce. Oil is 0.7% softer at $92.47.

Officials at the Central Bank of Brazil made a larger-than-forecast 50-basis point hike in the Selic interest rate to 8.0%.  Brazil is the only G20 central bank that has lately been raising interest rates.  Inflation is at the top of the central bank’s target range.

Despite ongoing recession, released euro area data showed improvement in the retail purchasing managers index and in economic sentiment.

The retail PMI for Euroland rose 2.4 points to an 8-month high of 46.8 in May.  Germany scored a 51.5, the first reading above the no change level since January and the highest score since June 2012.  The French retail PMI, 45.3, was 1.6 points above the April level and at a 4-month high, while Italy’s retail PMI jumped 4.9 points to an 8-month high of 42.1.

The Ezone’s economic sentiment index printed 0.8 points higher at 89.4 in May, beating analysts expectations and the best level since 90.1 in March.  Industrial sector confidence rose 0.8 points as well to minus 13.0.  Service sector sentiment was 1.8 points stronger at minus 9.3.  The retail sector improved 1.6 points, and consumer confidence, which matched its preliminary indication, was 0.4 points better.  Only construction, which at minus 33.6 was the lowest score since November, became worse in May. Euroland’s business confidence index of -0.76 showed a rise of 0.28 points to a 3-month peak.

Swiss GDP figures also were better than anticipated.  Led by consumer activity, real GDP increased 0.6% in the first quarter, three times faster than forecast, but on-year growth nonetheless slowed to 1.1%. 

Spanish GDP dropped 0.5% last quarter and 2.0% from the first quarter of 2012, which was close to expectations.  Portuguese retail sales and industrial output were 2.6% and 1.8% higher in April than a year earlier.  Portuguese business sentiment rose 0.4 to minus 3.2 in May, while consumer sentiment worsened 0.8 points to minus 55.0. Industrial production in Cyprus plunged 0.9% on month and 16.1% on year in May. 

The Danish seasonally adjusted jobless rate edged up 0.1 percentage points to 4.5% in April.  Core retail sales in Norway fell 0.6% on month in April.

The 12-month decline in Dutch producer prices lengthened to 3.0% in April from 1.9% in March.  Icelandic producer prices dived 10.5% in the year to April after falling 4.4% on year in March.  Italian producer prices slid 0.4% on month and 1.0% on year in April.Spanish CPI inflation picked up 0.3 percentage points to 1.8% in May.  Belgian CPI inflation edged up 0.2 percentage points to 1.2% in May.

Foreigners continue to abandon Japanese sovereign debt, selling a net JPY 1.12 trillion last week after sales of 801 billion yen in the prior week.  Japanese stock and bond transactions generated a JPY 792 billion net capital outflow last week after an outflow of JPY 971 billion in the week of May 17.

The latest reading of South Korean business sentiment dropped 4 points in manufacturing but rose a point in non-manufacturing.  Industrial production in South Korea rose 1.7% in the year to April.  In Hong Kong, retail sales in April were 20.7% greater than a year before.  Volume increased by 19.4%.

Australian statistics released today were mixed.  Private business investment slumped 4.7% last quarter, more than twice the size of the drop in the final quarter of 2012.  But building permits jumped by 9.1% in April, best in seven months, and were 27.3% greater than a year earlier.  In New Zealand, building permits soared 18.5%, more than rebounding from an 8.3% drop the month before.

In the year to April, South African M3 money, private credit, and producer prices rose by 10.0%, 9.1%, and 5.4%.  Money and credit growth accelerated, while PPI inflation slowed from 5.7% in March. 

The Philippines experienced Asia’s fastest growth in the first quarter.  GDP rose 2.2% on quarter and 7.8% on year. 

Turkish consumer confidence improved to a one-year high of 77.5 in May from 75.6 in April.

Scheduled North American data releases today include U.S. revised GDP and pending home sales and Canada’s current account and monthly PPI report.  A load of Japanese figures will be released Friday, the last day of May.

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

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