Weaker Yen Helps to Lift Equities

August 13, 2013

The yen is weaker than 98/USD and 1.3% below its Monday close.  Other dollar pairs are hardly changed with gains of 0.3% versus the Swiss franc, 0.2% relative to the loonie, and 0.1% against the Aussie dollar, kiwi, euro and sterling.  The yuan is steady.

Japan’s Nikkei jumped 348 points or 2.6%.  Elsewhere in the Pacific Rim, stocks closed up by 1.7% in the Philippines, 1.5% in South Korea and India, 1.2% in Hong Kong and Indonesia, 1.1% in Taiwan, 1.0% in Australia but only 0.3% in China and 0.1% in New Zealand.  In Europe, equities have risen 0.7% in Germany, 0.6% in Britain, 0.5% in Italy, 0.4% in Spain and 0.3% in France.

The yields on ten-year British gilts and German bunds are up seven and two basis points.  10-year Japanese JGBs slid two bps, but Treasury future yields are higher.

The price of WTI oil firmed 0.6% to $106.79 per barrel, while that of gold eased 0.4% to $1230 per ounce.

Markets continue to react to yesterday’s news of weaker-than-projected Japanese GDP last quarter. Minutes published today from the Bank of Japan’s July 10-11 meeting revealed confidence in rising inflation but some uneasiness about domestic investment and prospects for Chinese demand for Japanese exports.

Core Japanese machinery orders retreated 2.7% in June after a 10.5% surge in May.  A 6.8% increase in the second quarter is expected by officials to be followed by a 5.3% drop in the third quarter.  Foreign machinery orders rose 4.9% last quarter but are projected to fall 9.7% this quarter.

Industrial production in the euro area advanced 0.7% in June and posted this year’s first on-year rise, albeit by just 0.3%.  While German output rose 2.5% on month, production fell by 4.1% in the Netherlands, 2.8% in Portugal, 1.5% in France and 0.5% in Spain.  Industrial production climbed 1.2% between 1Q and 2Q, an annualized 4.8% pace.

The German ZEW Institute measures of investor sentiment improved more than expected in August.

  • The expectations component for Germany, 42.0, was 5.7 points better than July’s result and the best reading since 48.3 last March.  A current situation reading of 18.3 followed scores of 10.6 in July and 8.6 in June.
  • For Euroland, the expectations index rose to 44.0 from 32.8 in the prior month, while the reading for current conditions hardly changed and remained very depressed at minus 74.1.

Germany’s full CPI release for July confirmed the preliminary indications, a monthly rise of 0.5% and a 12-month increase of 1.9%, most since 2.0% in the year to December 2012.  Non-energy CPI inflation stood at 1.8% last month.

German wholesale prices slid 0.3% in July despite a 1.9% increase in mineral fuels.  The WPI was unchanged from a year earlier.

Several British price indicators were also released.

  • According to the ONS, house price inflation accelerated to 3.1% in July from 2.9% in June.
  • U.K. consumer prices were unchanged in July from June and 2.8% above their level in July 2012.  This result, while reflecting persistent pressure, met expectations.  Core CPI inflation eased to 2.0% from 2.3%.
  • The retail price index posted a 3.1% 12-month increase in July, down from 3.3% in the year to June.  Core RPI was 3.2%.
  • Producer output prices rose by 0.2% on month and 2.1% from a year before in July.  Core PPI-O was 1.1%. 
  • Producer input price inflation of 5.0% was at a 16-month high and up a percentage point from the pace in the year to June.

Consumer prices in Sweden were just 0.1% higher than a year earlier in July. Hungary’s 12-month increase of consumer prices edged lower to 1.8%.  Spanish consumer prices fell 0.5% on month and to a 12-month increase of 1.8% in July from 2.1% in the year to June.

Norwegian retail sales rose 3.2% between July 2012 and July 2013.  Dutch retail sales in the second quarter were 3.8% lower than a year before.

Some but not all analysts think the Bank of Chile will cut its benchmark interest rate after today’s policy meeting.

Markets await the release of U.S. retail sales, import prices, business inventories, small business sentiment and weekly chain store sales later today.

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

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One Response to “Weaker Yen Helps to Lift Equities”

  1. gjain6ue says:

    Dear Larry, You are not updating the website frequently. I hope everything is ok. Regards, Gaurav