Large Setback in European Share Prices
April 17, 2015
Markets are hedging against the once-unthinkable possibilities of a Greek debt default or Greece leaving the common European currency area or both, and there is fear that the consequences will not hit Greece alone.
Share prices have dropped by 2.2% in Italy, 2.1% in Spain, 1.9% in Germany, 1.4% in France, 1.2% in Greece and Switzerland, and 0.7% in Great Britin.
Most bourses in the Pacific Rim fell, too, with losses of 1.2% in Japan and Australia, 0.8% in India, and 0.3% in New Zealand and Hong Kong. But China, where stocks closed 1.8% higher and at a seven-year high after the China Securities Regulatory Commission chairman made optimistic remarks about market prospects, was a notable exception.
The dollar suffered broad declines overnight on greater confusion over coming Fed monetary policy, with losses of 0.6% against sterling and the kiwi, 0.5% versus the euro and Swiss franc, and 0.3% vis-a-vis the yen, loonie and Australian dollar. The yuan stayed level against the dollar.
Ten-year sovereign debt yields fell seven basis points in the U.K., two bps in Japan, and another basis point in Germany. The latter, at 0.08%, is edging closer to zero. The Swiss 10-year government bond yield is already in deep negative territory at -0.17%, and Japan’s JGB has slid all the way back to 0.30%. In futures trading, the U.S. 10-year Treasury has dropped several basis points to 1.85%.
WTI oil prices fell 1.3% to $55.98 per barrel, while Comex gold rose 0.6% to $1,205.10 per ounce.
In conflicting overnight comments by Federal Reserve officials, Mester and Fisher expressed a desire to begin raising the federal funds target as soon as June, while Rosengren and Lockhart urged waiting somewhat longer before acting.
The Central Bank of Chile retained a 3.0% monetary policy rate, the level since a 25-basis point cut last October.
Consumer confidence in Japan printed 0.8 points higher in March at 41.7, its strongest reading in 15 months and the fourth straight month of improvement after dropping to 38.4 in November.
Britain’s ILO-basis unemployment rate fell to 5.6% in December-February, lowest since 2008, from 5.8% on average in the previous three-month period to November 2014. The claimant count of unemployed British workers fell by 20.7K in March, which was a smaller decline than forecast but enough to be associated with a smaller 2.3% rate of joblessness. On-year growth in weekly earnings of 1.7% with bonuses during December-February was lower than forecast, but regular pay, up 1.8%, accelerated from 1.6% in November-January, and exceeded expectations.
A 2.7% on-year tumble in Swiss retail sales in February was the biggest 12-month decline in this data series’ 12-year history.
The full March consumer price report for the eurozone confirmed preliminary findings. The harmonized CPI posted a month-on-month rise of 1.1% after climbing by 0.6% in February, helped by gains of 1.7% in energy and 3.6% in non-energy industrial goods. On-year inflation of 0.1% was negative for the fourth straight time but down from 0.3% in February, 0.6% in January and 0.2% in December. Core consumer prices rose 1.4% on month and 0.6% on year.
Euroland recorded a EUR 26.4 billion current account surplus in February, a 2-month low after a EUR 30.4 billion surplus in January. Over the 12 months through February, the EUR 240.9 billion current account surplus equaled 2.4% of GDP, up from 1.9% in the previous statement year. The unadjusted basic balance (current account plus net long-term capital movements) during the last twelve reported months widened 259% to a surplus of EUR 447 billion.
Singapore’s trade surplus widened 65% to SGD 8.6 billion last month.
Czech producer price deflation diminished to -2.9% in March from -3.6% in February. Austrian consumer prices rose 1.0% in the year to March.
The meeting of G20 finance ministers and central bank governors continues today in Washington.
The United States and Canada both release CPI data this morning. The U.S. index of leading economic indicators and U. Michigan index of consumer sentiment arrive, too, as does Canada’s report on retail sales.
Copyright 2015, Larry Greenberg. All rights reserved. No secondary distribution without express permission.