Lots of European Data Out.. No Change from BOJ

April 7, 2010

The U.S. and Canadian currencies have advanced.  The loonie rose 0.3% against the dollar to CAD 0.9991.  The greenback otherwise gained 0.8% against sterling, 0.4% versus the euro, 0.3% against the Swiss franc, and 0.2% relative to the yen, Aussie dollar and kiwi.

Stocks strengthened 1.8% in Hong Kong, 1.0% in Sri Lanka, 0.9% in Pakistan, 0.6% in Thailand and Indonesia, 0.4% in Singapore and Taiwan, 0.2% in Australia and 0.1% in Japan.  But in Europe, the British Ftse, Paris Cac and German Dax have edged down 0.4%, 0.2%, and 0.1%.

Ten-year sovereign bond yields slid two basis points in Germany and 1 bp in Britain but are two bps higher in Japan.

Oil and gold prices continue to trade firmly at $86.49 per barrel and $1136.30 per troy ounce.

Euroland reported better-than-forecast service-sector purchasing managers survey results.

  • The German PMI-services score in March got revised to 54.9, best since April 2008, from a flash 54.7 reading and 51.9 in February.  The composite PMI was 58.7 versus 55.7 in February and 54.6 in January.
  • The French services PMI was 53.8, revised up from 53.0 but still less than 54.6 in February.  The composite reading was 55.8, a two-month high, after 55.6 in February.
  • Italy’s PMI-services climbed to 55.3, best since October 2007, from 50.8 in February.
  • Spain’s 53.3 reading connotes positive growth in activity.  It was 6.2 points greater than a score of 47.1 in February.
  • Ireland recorded a 49.3 score, a 26-month high to complement a 53.0 reading in the manufacturing purchasing managers index.
  • Euroland as a whole posted scores of 55.9 on the composite PMI, up from 53.7 in February and January.  The 1Q average tally of 54.4 suggests economic growth of 0.5-0.6% last quarter, a pronounced improvement from late 2009.

Britain’s PMI-services settled back more than anticipated to 56.5 in March from February’s spike to 58.4, but the average score of 56.5 in 1Q10 was similar to that of 56.8 in 4Q09.

Real GDP in Euroland during 4Q09 got revised down to unchanged from 0.1%.  GDP was 2.2% lower than a year earlier, revised from a drop of 2.1%.  Business investment fell 1.3%, revised from a decline of 0.8% reported in early March.  Net exports generated a tenth more growth than thought earlier but was offset by a downwardly revised contribution from inventories to zero.  Among members of Euroland, GDP in 4Q rose 0.6% in France, 0.3% in Belgium, and 0.2% in Holland.  GDP in Germany and Finland was unchanged from the previous quarter.  Declines of 2.3%, 0.8%, 0.3% and 0.1% were registered in Ireland, Greece, Italy and Spain.

Euroland producer price inflation decelerated to a monthly gain of just 0.1% in February, with both energy and non-energy also edging up by 0.1%.  Compared to February 2009, the PPI fell 0.5% overall, 0.6% for non-energy and 0.9% for energy products.

German industrial orders were unchanged in February after a 5.1% leap in January.  Analysts had looked for a drop of 0.5 – 1.0%.  Average orders in January-February were 4.6% greater than their 4Q09 level, with evenly balanced increases of 4.7% in domestic demand and 4.5% in export orders.  Domestic capital goods orders, a leading indicator of future business capex spending, was 6.6% greater in January-February than the prior quarter.

Following nearly six hours of talks over two days, the Policy Board of the Bank of Japan as expected voted 8-0 to keep its 0.1% target on uncollateralized overnight money and made no other policy modifications.  Officials left their assessment the same, claiming that the economy is picking up but not yet in a self-sustaining recovery and likely to expand only moderately for the time being.  However, Governor Shirakawa in remarks at a subsequent press conference hinted that the assessment might get upgraded on April 30 when new quarterly forecasts will be unveiled.

The Bank of Japan’s balance sheet totaled JPY 122.2 trillion at the end of fiscal 2009/10 (March 31) versus 124.3 trillion yen a year earlier.

Brazil’s service-sector PMI slid to 55.2 in March from a 21-month high of 55.8 in February.  Likewise, India’s PMI-services of 58.1 was robust but not quite as much so as the 17-month peak of 60.9 posted in February.

Swiss retail sales volume slowed to an on-year increase of 3.1% in February from 4.4% in January.

Hungarian industrial production slid 1.7% in February after surging 8.8% the month before and posted a greater-than-expected on-year increase of 8.4%.

The OECD revised its projected G-7 economic growth rate in 1Q10 to 1.9% from 1.5%.

FOMC minutes released yesterday spoke of a strengthening recovery still subject to headwinds form high unemployment and tight credit and of a greater-than-anticipated recent deceleration of core inflation.  Some policymakers attached greater significance to the damage that could be caused by lifting rates too soon than a bit too late.  The highlight of the U.S. calendar today are speeches by Bernanke as well as Hoenig and Dudley, which will update the thinking reflected in the minutes.  U.S. consumer credit also arrives as do data on Canadian building permits and its IVEY-PMI composite index.

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

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