Weaker Dollar, Bonds and Stocks on Fresh Wave of Risk Aversion

May 12, 2015

The dollar fell overnight by 1.2% against the Swiss franc, 1.1% versus the Australian dollar, 1.0% vis-a-a-vis the euro, 0.7% relative to sterling, and 0.6% against the kiwi.  The dollar also rose 0.2% against the loonie, held flat against the yuan and edged only 0.1% lower vis-a-vis the Japanese yen.

Share prices fell 2.3% in India, 1.1% in Hong Kong and 0.8% in Singapore.  Chinese equities advanced 1.2% in continuing reaction to the weekend’s easing of central bank policy.  The Nikkei closed unchanged, but in European trading, stocks have declined 2.2% in Germany, 1.8% in Spain, Great Britain and France, 1.3% in Switzerland, and 0.8% in Italy. 

Higher sovereign debt yields have been the epicenter of risk avoidance.  The 10-year Australian yield shot up 19 basis points, and futures trading show the U.S. Treasury yield up another six basis points at six-month high of 2.34%.  10-year British gilt and German bund yields advanced by 7 basis points, and the 10-year Japanese JGB yield level of 0.45% is six bps higher and its most elevated since mid-November.

West Texas Intermediate oil rose 1.9% to $60.38 per barrel.  Comex gold climbed 0.7% to $1,190.80 per troy ounce.

Sterling was boosted by a 0.5% March-on-February increase in British industrial production, most since last September.  That gain followed a 0.1% rise in February and a 0.1% downtick in January.  Production rose just 0.1% in 1Q and was 0.6% greater than a year earlier.

European finance ministers met for a second day.  The sides remain far apart on Greek debt discussions.

Australian home loans grew 1.6% in March, exceeding forecasts.  Ahead of the unveiling of Australia’s 2015/16 government budget, Fitch said the economy’s triple A credit rating is not in jeopardy.

House prices in New Zealand climbed 0.5% on month and 9.3% on year in April.

Japan’s index of leading economic indicators rose 0.8 points to a 6-month high of 105.5 in March, but the index of coincident economic indicators dropped 1.2 points to a 19-month low of 109.5.  The index of lagging economic indicators dropped to a 5-month low.  Japanese international reserves rebounded $4.757 billion to $1.250 trillion in April following a $5.976 billion decline in March.

The Bank of France’s business sentiment index printed at 98 in April, up from 97 in March, and officials now predict French GDP will rise 0.3% this quarter.

In the year to April, consumer prices rose 0.6% in Romania and 0.5% in the Czech Republic, but such fell 0.2% in Sweden.

Industrial production in the year to March climbed 2.9% in Romania and 9.0% in Hungary.

Finnish and Dutch retail sales each rose 0.4% in the year to March.

Turkey’s current account deficit widened 40% on month to $4.96 billion in March.

Scheduled U.S. data releases today include the NFIB small business sentiment index and the Labor Department JOLTS index of job hires and separations.  Weekly chain store sales arrive, too.

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

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