Focus on Central Banks and Stock Market Behavior

June 6, 2013

Share prices fell sharply in Asia but are up in Europe.  Equities dropped 1.5% in Singapore and South Korea, 1.3% in China, 1.1% in Australia and Hong Kong and 0.9% in Japan.  Stocks are up 0.9% in Spain, 0.4% in France, and 0.2% in Germany but unchanged in the U.K. and 0.3% softer in Italy.

There has been a somewhat unexpected further reduction of the Serbian one-week repo rate to 11.0%.  In mid-May, such was cut for the first time since early 2012  to 11.25% from 11.75%.

Japan’s chief cabinet secretary said Japan’s economy mostly benefits from a softer yen except in the case of some importers.

As expected, the Bank of England left policy settings unchanged this month.  Minutes of the June meeting will be published on the 19th of this month.

The ECB, whose refinancing rate was cut 25 bps to 0.5% last month, is not expected to ease policy further today. Economic sentiment and PMI figures for May showed some improvement, although the recession continues.

Yesterday’s released Federal Reserve Beige Book depicted accelerating growth in the Dallas District and a range of modest to moderate expansion in the other 11 central bank districts of the United States.

The dollar is mixed, dropping 0.3% against sterling, 0.2% relative to the Canadian dollar and 0.1% against the euro and Swiss franc but gaining 0.4% against the Australian dollar and 0.1% versus the yen, kiwi and yuan.

The 10-year JGB yield is four basis points lower after a successful 30-year JGB auction that produced a bid-cover ratio of more than 4.0.  The 10-year British gilt is off a basis point, and the 10-year German bund is steady. 

German industrial orders sank 2.3% in April.  The drop surpassed expectations and undid March’s 2.3% increase, leaving April’s level 0.1% below the first quarter average.  Orders for domestic capital goods, a leading indicator of future business spending, dropped 3.2%, and foreign orders were 1.5% lower.  The one bright spot was a strong advance in orders for consumer goods.  Total industrial orders were 0.4% below their year-earlier level.

The German construction PMI printed in May at 50.6 after 13 straight sub-50 readings including 48.8 in April.

Swiss consumer prices ticked up 0.1% between April and May but posted a deflationary 0.5% 12-month rate of decline.

The Halifax measure of British house prices increased 0.4% in May and accelerated to a 2.6% on-year advance in March-May from 2.0% in February-April.  The data were a bit stronger than forecast.  The U.K. construction PMI released on Tuesday had shown a 1.4-point improvement to a seven-month high of 50.8.  British new car sales were 11.0% higher in May than a year earlier. 

Global PMI readings compiled by J.P. Morgan revealed a 1.6-point rise in the service-sector activity index to 53.7 and a 1.2-point improvement to 53.1 in the composite index of both manufacturing and services.

Ireland’s services purchasing managers index worsened 2.5 points to 52.7 but managed to stay above the 50 no-change threshold for a tenth month in a row.

The Greek jobless rate rose to 26.8% in March from 26.7% in February.  Irish unemployment stayed at 13.7% last month.  Dutch CPI inflation edged up to 2.8% in May from 2.6% the month before.

Australia’s trade surplus in April narrowed to A$ 28 million following surpluses of A$ 203 million in February and A$ 555 million in March.  Between March and April, exports fell by 1.2%, while imports rose 0.9%.

Japanese stock and bond transactions last week generated a JPY 999 billion capital inflow, which was 43% greater than the prior week’s net inflow.  Japanese investors sold a net JPY 1.173 trillion of foreign bonds last week.

U.S. jobless insurance claims are due at 08:30 EDT (12:30 GMT).  At the same time, ECB Pdt Draghi will begin a press conference to answer questions about the Governing Council’s latest thoughts about economic trends and policy responses.

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

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