European Share Prices Lower.. So Is the Price of Oil

March 17, 2015

In contrast to gains yesterday in North America that continued in the Pacific Rim today, European stock markets have a mostly offered tone.  First Asia, where share prices closed up 2.1% in South Korea, 1.1% in India and Indonesia, 1.0% in Japan and 1.4% in China.  Australia’s market climbed 0.8%.  But in Europe, stocks are down by 1.3% in Germany, 1.1% in Italy, 0.9% in Spain and 0.5% in France.  Greek stocks, up 2.6%, have been an exception.

The dollar is mixed, having advanced overnight by 0.5% against sterling and 0.2% versus the kiwi but also showing losses of 0.5% relative to the Swiss franc, 0.3% vis-a-vis the euro, 0.2% against the yuan and 0.1% versus the yen.  The Canadian and Australian dollars are unchanged on net against their U.S. counterpart.

West Texas Intermediate oil dived 1.9% to $43.06 per barrel.  All of the rise last month has been reversed, and the price set a new 6-year low.

Comex gold is at $1,153.10 per troy ounce, unchanged on balance.

The ten-year British gilt yield slipped three basis points.  German bunds are steady, and the 10-year Japanese JGB is up a basis point.

Central banks in Japan and Indonesia left their key interest rates unchanged.

  • Since augmenting quantitative stimulus at the end of October, the Bank of Japan has been acquiring JGBs at an annual pace of 80 trillion yen.  Officials at this month’s policy board meeting downgraded their view of near-term inflation to zero from a range of 0-0.5% but retained optimism that core inflation would be approaching the 2% target a year from now.  Bank officials expect a moderate economic recovery to persist but also assume that oil prices stay steady and then firm.
  • Bank Indonesia, which cut its reference interest rate to 7.5% from 7.75% at the previous meeting in February, did not cut further.  Inflation currently lies well above the 3-5% target, and officials also seek to reduce the current account deficit.  February’s easing was the first cut in three years.

More unsettling economic news was reported by China.  Foreign direct investment growth slowed from an on-year rise in January of 29.4% to 17.0% last month.

Minutes from the Reserve Bank of Australia, whose Official Cash Rate was cut in February but not March, revealed that officials at the latter meeting had considered easing further but after discussion opted for giving more time to assess the effect of rate cuts thus far.

Consumer price deflation in the eurozone was halved from 0.6% in January to 0.3% last month.  Prices posted a 0.6% monthly increase reflecting seasonal factors in part.  The 0.3% decline between February 2014 and last month was 1.0 percentage point less than the 0.7% on-year advance registered a year ago.  February was also the third consecutive month to show a negative on-year change in consumer prices.  Some of the individual on-year CPI declines over the past reported year were 1.9% in Greece, 1.2% in Spain, 0.8% in Cyprus, 0.5% in The Netherlands, 0.4% in Belgium, 0.3% in France and 0.1% in Germany.  Inflation in Finland fell from 1.6% in February 2014 to minus 0.1% a year later.  Overall core inflation returned to 0.7%, its level in each month of last quarter from 0.6% in January.

The ZEW Economics Institute in Germany released its March survey results of investors.  Expectations regarding the German economy improved for a fifth straight month, reaching a reading of 54.8 compared to 53.0 in February, 48.4 in January, 34.9 in December, 11.5 in November and -3.6 in October.  Current conditions printed at 55.1 this month after a reading of 45.5 in February and 22.4 in January.  For the whole euro area, expectations rose to 62.4 from 52.7, while the current situation was assigned a value of -36.6, less negative than February’s -48.4.

Japan’s index of leading economic indicators was revised to 105.5 in January from a preliminary estimate of 105.1, but it was still lower than December’s 105.8.  The index of coincident economic indicators was also revised higher and shows an upward trend from 109.5 in November to 110.9 in December, and 113.3 in the first month of 2015.

Singapore’s trade surplus narrowed 39% on month to SGD 5.2 billion in February.  Hong Kong unemployment was at 3.3% in February for an 8th straight month.

South Africa’s current account deficit last quarter of SAR 198 billion, equal to 5.1% of GDP versus a shortfall equaling 5.8% of GDP in the previous quarter.

U.S. housing starts and building permits are being released today along with weekly chain store sales.  Canada’s monthly survey of manufacturing sales, orders and inventories arrives, too.  Turkey’s central bank is holding a policy meeting and will announce its decision very shortly.

Copyright 2015, Larry Greenberg.  All rights reserved.  No secondary distribution without express permission.

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