Yen Climbs Further Even as Japanese Golden Week Holidays Begin

April 29, 2016

The yen touched an 18-month high of 106.9 per dollar and is up 0.9% on balance from Thursday’s close.  The trade-weighted dollar is close to a one-year low.

Japanese markets were closed for Showa Day.  Next week’s continuing Golden Week holidays are Constitution Day (May 3), Greenery Day (May 4) and Children’s Day (May 5).  Much of Europe will be shut Monday for May Day.

In continuing reaction to yesterday’s Bank of Japan surprise, the dollar dipped 0.3% against the euro, 0.2% relative to the Swiss franc, New Zealand dollar and Canadian dollar, and 0.1% vis-a-vis the Australian dollar.  The dollar rose 0.1% against sterling.  Among emerging market currencies, the ruble advanced a shade more than 1% today when the Bank of Russia left policy unchanged.  The ruble climbed nearly 5% in April to pace all emerging market currencies.  The Chinese yuan was fixed higher.

In equity action, stocks fell 1.5% in Hong Kong, 0.8% in Singapore, 1.1% in Taiwan, and 0.3% in China but climbed 0.7% in New Zealand and 0.5% in Australia.  European share prices have weakened 1.7% in France, 1.3% in Germany and Switzerland, 1.6% in Spain, 0.8% in the U.K., and 0.6% in Italy.

It’s been a very good month for oil, gold and silver.  WTI crude oil rose 1.0% overnight to $46.49 per barrel, while gold climbed another 0.9% to $1,277.68 per ounce.

Among 10-year sovereign debt yields, the German bund and British gilt shed one and two basis points today.

Eurostat, the EU’s statistical agency, is now releasing an ultra-preliminary estimate of GDP one month into the following quarter.  Today’s initial report showed stronger than expected quarter-on-quarter Euroland GDP growth of 0.6% in 1Q16, twice as much as the second half 2015 pace.  On-year growth remained at 1.6%, however, since GDP also grew 0.6% in the first quarter of 2015.

The eurozone jobless rate fell 0.2 percentage points to 10.2% in March, lowest since August 2011 and down from 11.2% in March 2015.  A 0.5 percentage point drop in youth unemployment between February and March was the main contributor to this improvement.  Youth unemployment nevertheless remains unacceptably high at 21.2%.

Euroland harmonized CPI inflation fell back to -0.2% in April after rising 0.2 percentage points to zero in March.  In the year to April, energy dropped 8.6%, more than the 5.8% decline a year earlier.  Non-energy consumer price inflation slowed to 0.8% in April from 1.0% in March and was similar to 0.7% in the year to April 2015. 

German retail sales volume unexpectedly slumped 1.1% in March, ending the quarter 0.7% below the 1Q mean and just 0.7% higher than in March 2015.

The Swiss index of leading economic indicators edged 0.1 point lower to 102.7 in April.

British M4 money was merely 1.6% higher than a year before in March, and consumer confidence in the U.K. where a referendum looms on leaving the EU swung to a minus 3 reading in April from zero in March.

French GDP grew 0.5% last quarter after a 0.3% advance in the final quarter of 2015.  The main driver of the growth acceleration was personal consumption.  GDP in France was 1.3% greater than a year earlier. 

French consumer prices fell 0.2% in the year to April according to a preliminary report.  Producer prices dropped 4.0% in the year to March.

Austrian real GDP went up 0.6% on quarter and 1.3% on year in the first quarter of 2016.  Austrian producer price inflation remained steady at 3.1% in March.

Spanish real GDP rose 0.8% in 1Q16, the same quarterly gain as in the prior quarter, and was 3.4% higher than in the first quarter of 2015.  Spain’s current account deficit more than doubled in February to EUR 1.455 billion.

Italian consumer prices posted a 0.4% on-year decline in April and were unchanged from March levels.  Italy’s PPI dropped 3.4% on-year in February. 

Icelandic producer prices plunged 10.7% in the year to March.

As was the case with Australia’s CPI report, the Aussie PPI undershot expectations in the first quarter of this year, declining 0.2% from 4Q15 and decelerating to a 1.2% on-year pace from 1.9% in the final quarter of 2015.  Both import prices and domestic producer prices recorded quarterly 0.2% drops.

New Zealand’s business sentiment index improved to a reading of 6.2 in April from 3.2 in March.  Building permits in this economy had slumped 9.8% in March after rising 10.8% in February. 

The Bank of Russia left its policy interest rate steady at 11.0%.  This was the sixth straight Board of Directors meeting to reach that decision.  But the accompanying statement noted receding inflation and price expectations and hinted at future cuts if that improvement continues.

Russia’s manufacturing purchasing managers index dropped another 0.3 points to an 8-month low of 48.0 in April, marking the fifth straight sub-50 reading (meaning a contraction). 

Vietnam’s manufacturing purchasing managers index, in contrast, rose 1.6 points to a 9-month high of 52.3 and including the greatest input price reading in 20 months.

In the year to March, South Korean industrial production and retail sales respectively climbed 2.2% and 5.7%.

The U.S. employment cost index rose 0.6% last quarter but posted a lower on-year increase of 1.9%, down from 2.0% in 4Q15 and 2.6% in the first quarter of 2015.

U.S. personal consumption expenditures increased only 0.1% in March and were flat in volume terms despite a 0.4% rise in nominal personal income.  The PCE price deflator edged 0.1% higher on month but slowed to a 12-month rise of 0.8% from 1.0% the month before.  Core PCE prices also rose 0.1% on month, and and the on-year advance slowed 0.1 percentage point to 1.6%.

Canadian GDP experienced the weakest month in February since September, dipping 0.1% on month and slowing to a 12-month advance of 1.5%.  Industrial production plunged 0.7% on month, and services were unchanged.  Canadian producer prices fell 0.6% in March and were 2.1% below their year-earlier level.  Raw material prices posted a 9.7% on-year plunge despite a 4.5% monthly advance.

Still to come:  U.S. regional PMIs from Chicago and Milwaukee and the U. Michigan/Reuters revised consumer sentiment index for March.

Copyright 2016, Larry Greenberg.  All rights reserved.  No secondary distribution without express permission.

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