Awaiting Possible New Clues from the FOMC

March 19, 2014

The FOMC decision is due at 1600 GMT and will be followed by Janet Yellen’s first press conference a half hour later.

Malaysian Flight 370 is still missing, with concerns climbing it will never be found.

The dollar is unchanged against the euro and kiwi, up 0.4% versus the loonie and 0.1% relative to the yen, Swiss franc, Australian dollar and yuan. 

Sterling strengthened 0.3% as the Bank of England’s MPC minutes exhibited greater tolerance for its rise than anticipated.  The minutes showed unanimous 9-0 votes for the 0.5% Bank Rate and GBP 375 billion limit on the asset purchase program.  The recovery is spreading according to officials but not yet on a sustainable footing to tolerate tightening.

The Bank of Iceland retained a 6.0% seven-day collateralized lending rate.  It’s been at that level since six 25-basis point increases spaced out between August 2011 and November 2012.  Inflation is below target in Iceland but projected to rise eventually.

Share prices in the Pacific Rim fell 0.8% in China, 0.5% in Taiwan, 0.4% in Singapore and 0.1% in Hong Kong and South Korea.  Equities rose 0.4% in Japan and New Zealand, 0.3% in Indonesia, and 0.2% in Australia but were unchanged in India.

Gold fell 0.9% to $1,347.20 per ounce.  WTI oil edged down 0.1% to $99.59 per barrel.

The 10-year British gilt yield ticked up a basis point, while its Japanese counterpart slipped 1 basis point.  German bunds are steady.

Japan’s customs clearance trade deficit in February, JPY 1.133 trillion is seasonally adjusted size, was down from JPY 1.763 trillion in January and at a four-month low.  Nonetheless, it exceeded analyst expectations.  There was a JPY 800 billion unadjusted deficit on year-over-year growth of 9.8% in exports and 9.0% in imports.  The year-to-date deficit was 49.1% greater than a year earlier.

Japan’s January index of leading economic indicators got revised upward by 0.9 points to a reading of 113.1.  The coincident and lagging economic indicators also were revised higher.

Japan’s all industry index, a supply-side monthly gauge of GDP, rose 1.0% in January.  Declines of 3.2% in construction and 0.4% in public sector administration were offset by advances of 3.8% in industrial production and 0.9% in services.  The all-industry index was 3.3% greater than in January 2013 after a 1.8% 4Q13-over-4Q12 increase.

British labor statistics were decent.  Once again, the claimant count of unemployment was better than expected, declining by 34.6K in January and to a 5-year low of 3.5%.  The ILO harmonized jobless rate stayed at 7.2% in November-January.  On-year wage growth ticked higher to 1.4% including bonuses and 1.3% for regular pay only.

Euroland labor cost inflation of 1.4% in the final 2013 quarter easily surpassed expectations of a 0.8% on-year pace and was the highest since 2.0% in the first quarter of 2013.  Wages were 1.9% greater than a year before, but non-wage labor costs were unchanged on year.

Construction output in the euro area advanced by 1.5% in January on top of a 1.3% monthly increase in December.  The 12-month change swung to a climb of 8.8% from a December-over-December 0.1% downtick.

The French current account deficit of EUR 3.90 billion in January was considerably larger than anticipated after a EUR 1.2 billion shortfall in December.  France’s index of leading economic indicators rose 0.3% in both December and January, but the index of coincident economic indicators stagnated in each month.

Greek import prices fell 2.8% in the year to January, three times more than in the year to December.  The ZEW expectations index of investor perceptions of the Swiss economy posted a lower reading of 19 in March after 28.7 in February.

New Zealand’s seasonally adjusted NZD 0.8 billion current account deficit in the final quarter of 2013 was the smallest in 15 quarters.  The cumulative deficit of NZD 7.5 billion in 2013 equaled 3.4% of GDP, down from 4.1% of GDP in the four quarters through 3Q13.  Strong dairy exports was a prime factor behind the better-than-anticipated data.

Australia’s index of leading economic indicators according to the Westpac measure fell 0.1% in both January and February.

South Korean producer prices fell by 0.9% in the 12 months to February, tripling their on-year decline in January.

South African consumer price inflation edged up to 5.9% last month from 5.8% in January.  South African retail sales climbed 0.8% in January and 6.8% on year.

U.S. mortgage applications dropped by a further 1.2% in the week of March 14 even as the 30-year fixed mortgage rate slid two basis points to 4.50%.

The U.S. current account will be released today but will be overshadowed by the FOMC press conference and the annual British budget presentation.

Copyright 2014, Larry Greenberg.  All rights reserved.  No secondary distribution without express permission.

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