Waiting for Results of FOMC and Ecofin Meetings

March 16, 2010

The dollar is down 0.3% against the kiwi and sterling, 0.2% against the Canadian and Swiss currencies, and off 0.1% against the euro and Aussie dollar.  It firmed 0.1% against the yen,  EU Finance ministers (Ecofin) have reportedly agreed in principle on some technical details for pooling funds that will be given directly to Greece if necessary, but much remains unclear like whether the plan could serve as a prototype for other fiscally challenged EMU members, the size of the aid to Greece, and the contributions to that package from Germany, France and other healthier governments.

An FOMC statement is due at 18:15 GMT.  No significant changes are anticipated.  The BOJ, on the other hand, could announce an increase in quantitative easing tonight to further counter deflation.

In the Pacific Rim, stocks fell 0.3% in Japan, Hong Kong, and Pakistan.  Equities dropped 1.6% in Sri Lanka but rose by 0.8% in Taiwan and 0.7% in China.  European bourses are stronger, with gains of 0.9% in France and 0.8% in Germany and Britain.

Ten-year German bund, British gilt, and Japanese JGB yields each edged one basis point higher.

Gold advanced 0.8% to $1113.80 per ounce, while oil edged 0.1% higher to $79.87 per barrel.

Euroland consumer prices were confirmed to have risen in February by 0.3% from January and 0.9% from a year earlier.  Core inflation eased to 0.8% from a 12-month pace of 0.9% in January and 1.0% in December.  The ECB targets total CPI inflation at below but close to 2.0%.

Investor confidence about the future in Germany and Euroland slackened for a sixth straight month in March according to the ZEW Institute, but current conditions again improved.  The German expectations index printed at 44.5 after 45.1 in February and a September peak of 57.7.  Such remains above a long-term average score of 27.2, nonetheless.  The current situation component was minus 51.9 versus minus 54.8 in February and minus 74.0 last September.  Euroland’s ZEW expectations index was 37.9 against 40.2 in February and 59.6 last September.  The current situation component was minus 61.3 versus minus 62.1 in February and minus 77.9 back in September.

Germany’s IWH Institute projects export-led German GDP growth of 1.8% both this year and in 2011.

From Britain, the Department of Community and Local Government house price index recorded a 12-month advance of 6.2% in January, twice December’s 2.9% increase and well above analyst expectations.

French consumer prices advanced 0.6% last month, more than forecast, and by 1.3% from February 2009.  Italian consumer prices firmed 0.1% on month and 1.2% on year.

Czech retail sales posted on-year declines in January of 5.0% overall and 6.2% for autos.

Dutch industrial production rose 6.7% in January and 6.4% from a year earlier.  Retail sales were 4.9% lower than a year before, however.

Spanish house prices fell 4.3% between the final quarter of 2008 and 4Q09, which was less than the 7.0% drop in the year to 3Q09.

Minutes from the Reserve Bank of Australia’s March policy meeting when the Official Cash Rate was hiked for a fourth time declared that it was “appropriate” to have a gradual increase of rates and indicated that further adjustments may be necessary to hold inflation within its target.

Japanese machine tool orders were 217.4% higher than a year earlier in February after a 189.4% jump in January.

Filipino unemployment firmed to 7.3% in January from 7.1% in December.

Turkish consumer confidence improved to 81.9 in February from 79.2 in January.

Besides the FOMC statement, the U.S. today releases data for housing starts, building permits, import prices and labor productivity.  Canada’s monthly survey of manufacturing sales, orders, and inventories will be also reported today.

Copyright Larry Greenberg 2010.  All rights reserved.  No secondary distribution without express permission.

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