Dollar Mixed and Stocks Higher

May 18, 2010

Stocks climbed 2.1% in China, 1.2% in Hong Kong, 0.9% in Thailand, 0.5% in Indonesia, and 0.1% in Japan and Australia.  Equities are 1.2%, 1.0%, and 0.7% higher in France, Germany and Britain.

The dollar has risen 0.4% against sterling, 0.3% relative to the yen and 0.2% versus the Australian dollar.  The greenback also lost 0.4% against the kiwi, 0.3% against the Canadian dollar, 0.2% relative to the euro and 0.1% against the Swiss franc.

Ten-year yields on British gilts and Japanese JGB bonds are up 3 and 2 basis points, while bunds are unchanged.

Commodities also indicated lessening rise aversion, as gold eased 1.1% to $1214.70 per ounce and oil recovered 2.2% to $71.61 per barrel.

The Aussie dollar lost ground to the New Zealand and U.S. dollars after minutes from this month’s Reserve Bank of Australia policy meeting revealed extensive discussion and concern about the European sovereign debt crisis and satisfaction that the 150-bp rise of the official cash rate thus far to 4.5% leaves policy “well placed.”  From New Zealand came word that producer input price inflation accelerated last quarter to a quarterly gain of 1.3% and an on-year positive change of 0.6%.

Japan’s tertiary index of service sector activity dropped much more sharply than forecasts, losing 3.0% in March after a 0.3% dip in February.  The index still rose 1.1% in 1Q as a whole and by 0.7% between 1Q09 and 1Q10.  The 12-month increase in March was 1.6%, twice that of 0.8% in February.

Japanese consumer confidence improved 1.1 points in March, posting the fourth improvement in a row and reaching the best level since October 2008.  The low-point in December 2008 was a reading of 26.2.

Monthly estimates of Japan’s Tankan business diffusion indices were released by Reuters, showing a four-point improvement in manufacturing to a 26-month high of +4 but a one-point dip in non-manufacturing to minus 15.  The survey pointed to likely uptrends in each index over the coming three months.

Hong Kong joblessness remained at a 15-month low of 4.4% in February-April, down from 4.9% in the final quarter of 2009.

British consumer price inflation accelerated more rapidly than anticipated in April with a monthly gain of 0.6% that raised the 12-month rate of rise to a 17-month high of 3.7%.  Core CPI was 3.1% in April after 3.0% in March and 2.9% in February.  Retail prices jumped 1.0% on month and to a 12-month increase of 5.3%, most since mid-1991.  RPIX inflation hit an on-year pace of 5.4% versus 4.8% in March and 4.2% in February, while the RPIY index that excludes the impact of indirect taxation changes went up 3.9% versus 3.5% in the year to March.  A letter from Bank of England Governor King to the new Chancellor of the Exchequer George Osborne stuck to the line that the rise of inflation will not be sustained.

Euroland consumer prices increased 0.5% in April and by 1.5% from a year earlier, matching the flash indication.  Core inflation eased to a very low 0.7% from 0.9% in March.

Euroland’s seasonally adjusted trade printed a surplus in March of only EUR 0.6 billion, with huge monthly gains of 10.3% in imports and 7.5% in exports.  The surplus in February had been EUR 3.4 billion.  The unadjusted trade deficit in 1Q10 was EUR 2.0 billion, down from EUR 11.5 billion in 1Q09 with exports and imports showing on-year growth of 12.6% and 9.2%.  In January-February, Germany posted a EUR 20.6 billion surplus, but France, Spain,Italy, and Greece racked up respective deficits of EUR 9.0 billion, EUR 8.0 billion, EUR 5.7 billion and EUR 4.3 billion.

Jean-Claude Juncker of the European Union said around EUR 20 billion of lending aid to Greece from other EU states should be available now.

The ZEW Institute in German reported the index of investor sentiment toward Germany fell to 45.8 in May from 53.0 in April and that the sister index for the whole euro area slid to 37.6 from 46.0.  These declines reflect uneasiness about the sovereign debt crisis in the region.  Current conditions, however, improved to minus 21.6 from minus 39.2 in Germany and to minus 48.5 from minus 52.4 in Euroland.

Italy’s trade deficit in March of EUR 1.342 billion was smaller than expected and compared to a deficit of EUR 2.327 billion in February and a surplus of EUR 69 million a year earlier.  Industrial orders in Spain showed accelerated growth of 12.0% on year in in March after 7.4% in February.

French payroll employment slid 0.1% last quarter and was 1.3% lower than in the first quarter of 2009.  Wages rose 0.7% in the quarter.

Swedish jobs were 1.5% lower than a year earlier in the first quarter, but job vacancies showed brisk gains.  House prices in Sweden climbed 1.0% in February-April and were 9.0% greater than a year earlier.  Norway’s trade surplus printed last month at NOK 27.1 billion, 15.8% wider than in April 2009.  Exports were 11.1% higher than a year before. 

Scheduled U.S. data today are monthly producer prices and housing starts and weekly chain store sales.  Canada releases data on securities transactions with other countries. Turkey’s central bank is meeting but not expected to change its interest rates.

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



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