Firmer Stocks, Dollar and Yen

May 28, 2014

Share prices have risen 1.0% in China and South Korea, 0.7% in New Zealnad and Taiwan, 0.6% in Hong Kong, 0.4% in Indonesia, and 0.3% in Australia.  In Europe, equities so far are up 0.8% in Italy, 0.3% in Spain, and 0.1% in Paris, London, Frankfurt and Zurich.

The dollar is 0.1% softer against the yen but up by 0.6% relative to the kiwi, 0.3% versus sterling, 0.2% vis-a-vis the euro, Swiss franc and Australian dollar and 0.1% against the yuan.  The loonie is steady against its U.S. counterpart.

The 10-year British gilt yield is down three basis points, and equivalent German bunds and Japanese JGBs have slipped a basis point.

The prices of WTI oil and gold firmed 0.1% to $104.26 per barrel and $1,265.50 per ounce.

Euro area sentiment data were mostly better than forecast in May.  The economic sentiment index advanced 0.7 points to 102.7, best since June 2011.  Consumer confidence improved 1.5 points.  Industrial sector sentiment rose 0.5 points.  Construction sentiment went up 0.4 points, and service sector sentiment climbed 0.3 points.  The business climate index rebounded to 0.37 in May after dropping to 0.28 in April from 0.40 in March.

The Conference Board’s index of Ezone leading economic indicators slipped 0.1% last month, while the index of coincident economic indicators remained unchanged.

Subdued money and credit figures for the euro area in April provide another reason for the ECB Governing Council to ease policy next week.  A deceleration of on-year M1 money growth to 5.2% from 5.6% caused M3 money expansion to slow to 0.8% from a 12-month 1.0% increase in March and 1.3% in February.  The 3-month on-year increase dropped to 1.0% in February-April from 1.2% in the first quarter.  Credit and bank loans to the private sector respectively posted 12-month declines of 2.5% and 1.8% in April.

French consumer spending in April was weaker than forecast, dropping 0.3% on month and 0.5% on year.  French producer prices dipped 0.1% on month and 0.9% from April 2013.

Italian business sentiment stagnated at a reading of 99.7 in May, once again failing to reach the threshold of 100.

German unemployment rose in May by 24K, defying expectations of a 15K decline.  Such was the first increase in unemployment since last November.  The jobless rate held steady at 5.2% on a normalized ILO basis and at 6.7% in the national statistic.  German employment rose 0.1% on month in April and accelerated to a 12-month increase of 1.0% from 0.8% in the first quarter.

German import prices dipped 0.3% in April but recorded the smallest 12-month decline, 2.4%, since January.  Excluding mineral oil, import prices fell 2.6% on year.  Export prices slid 0.1% from March and 0.8% versus a year earlier.

On the Iberian Peninsula, Spanish retail sales grew 0.7% between April 2013 and April 2014, beating expectations of no change.  Portuguese consumer confidence improved 0.9 points to a still-weak reading of minus 29.4 in May.  Business sentiment in Portugal rose 0.3 to +0.1.

The Confederation of British Industries’ survey of distributive sector trends continued to produce a saw-toothed pattern, printing at +16 in May after +30 in April, +13 in March, +37 in February, +14 in January and +34 in December.

Swiss GDP advanced 0.5% on quarter and 2.0% on year in the first quarter.  In those same comparisons, Danish GDP went up 0.9% and 2.8%, respectively.  Both economies had larger on-year advances than in the final quarter of 2013.  The UBS Swiss consumption indicator slipped back to a reading of 1.72 in April after rising from 1.52 in February to 1.84 in March.

Norwegian retail sales (excluding gasoline) rose 0.5% on month and 3.4% on year in April.  Irish retail sales dropped 0.9% on month but climbed 6.8% from April 2013.  Icelandic CPI inflation edged up to 2.4% this month from 2.3% in April.

Another sign of weaker Chinese growth was highlighted by a slowdown of the 12-month increase in corporate profits to 9.6% in April from 10.7% in March.

Bank of Japan Governor Kuroda in a speech left the door open for further stimulus if needed but continued to tout the progress being made toward eradicating deflation.

New Zealand business sentiment fell to a six-month low of 53.5 in April from readings of 64.8 in March and 70.8 in February.

The Westpac-MI gauge of Australia’s index of leading economic indicators suffered its largest monthly drop, 0.5%, in some five years.  But construction completions in Australia rose 0.3% this quarter, beating expectations of a decline.

U.S. chain store sales fell 1.2% last week and recorded a somewhat smaller on-year rise of 2.1%. Mortgage applications fell 1.2%, more than reversing a 0.9% increase in the prior week.

There will be a Brazilian interest rate announcement later today.

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

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