Offsetting Market Forces

May 11, 2015

Interest rate cuts by the People’s Bank of China sent Chinese share  prices up 2.9%.

Impasse in Greek debt talks sent Greek share prices down 2.9%.  German politicians seem more inclined to gamble on Greece exiting the euro, as Greek leaders hint that a scheduled EUR 780 billion payment to the IMF due tomorrow may not happen.  Eurozone finance ministers meet today and Tuesday.

Reserve Bank of New Zealand interest rate policy appears poised for possible trend reversal.  This depressed the kiwi by 1.3% against its U.S. counterpart.

Equities advanced 2.9% in China, 1.4% in India and 1.3% in Japan.  Smaller 0.5% gains were made in Singapore and Hong Kong.  The Korean Kospi went up 0.6%, but Australia’s market closed 0.2% lower.  In Europe, stocks are down most sharply in Greece (2.9%) and France (1.3%), followed by Italy (0.5%) and Germany (0.4%).  Just ahead of the Bank of England’s expected announcement of no policy change, the Ftse is 0.3% firmer.

The dollar is unchanged against the Swiss franc, yuan and sterling.  It has risen 0.4% against the euro and Aussie dollar, 0.3% relative to the loonie, and 0.1% vis-a-vis the yen.

The 10-year British gilt yield firmed 4 basis points, but the 10-year German bund and Japanese JGBs are two basis points lower.

West Texas Intermediate oil fell 0.6% to $59.04 per barrel.  Comex gold at $1,184.80 per ounce is down 0.3%.

The final trigger for Chinese interest rate cuts announced Sunday came from CPI and PPI data.  The People’s Bank of China sliced 25 basis points off both the one-year lending and one-year deposit rates and increased the ceiling on bank savings deposits.  Consumer prices in April fell 0.2% on month and rose only 1.5% on year.  Inflation has been below the 2.0% target since last August.  Meanwhile producer prices recorded a 4.6% 12-month decline for the second month in a row.

Ireland’s construction purchasing managers index surged upward to a 4-month high of 57.2 in April from 52.9 in March and 52.0 in February.

The Australian business conditions index slid two points to a reading of +4 in April, while business confidence was steady at +3.

Germany’s Finance Minister Schaeble accused Greece of violating rules and suggested that Grexit might not only happen but also prove favorable.  Greek industrial production increased 2.7% on month and 5.0% on year in March.

Norwegian consumer price inflation stayed at 2.0% last month, while producer prices recorded a 12-month 5.6% plunge.  Danish consumer prices were 0.5% higher than a year before in April.

March trade figures were reported for several economies.  Romania’s balance swung to a 260 million euro surplus from a EUR 70 million deficit in February.  Denmark posted a DKK 0.5 billion surplus, down from DKK 6.8 billion the month before.  This saw the Danish current account swing to a DKK 7.48 deficit from a DKK 7.6 billion surplus in February.  The Cypriot deficit widened over 10% to EUR 2.7 billion.  Hungary’s March surplus of EUR 929 million was 45% greater than in March 2014, and its 1Q surplus of EUR 2.49 billion was 27% bigger than a year earlier.

Malaysian industrial production strengthened 0.6% on month and 6.9% on year in March, beating street expectations.  Dutch industrial output dropped 1.4% on month and 6.5% on year.

As expected, the Bank of England’s Bank Rate was kept at 0.50%, and the asset purchase program’s GBP 375 billion size wasn’t changed, either.  The central bank publishes its quarterly Inflation Report on Wednesday, and minutes of today’s meeting will be released on May 20.

The Federal Reserve’s monthly labor market conditions index will be reported later today.

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

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