Lots of News In Spite of U.S. and British Holidays

May 31, 2010

U.S. and British markets are closed for Memorial Day and Spring Banking holidays, respectively.

Stocks were mixed in the Pacific Rim, with gains of 3.1% in Indonesia, 1.8% in Thailand, 1.3% in Malaysia, 1.1% in Taiwan and South Korea but losses of 2.7% in China, 2.2% in Pakistan and 0.6% in Australia.  Japan’s Nikkei edged 0.1% higher.  In Europe, the German Dax is up 0.4%, but Spain’s IBEX lost 0.7%.  The Paris Cac is steady.

The dollar shows gains of 0.5% against the yen and 0.4% relative to the Australian dollar but losses of 0.4% against the Canadian dollar, 0.3% relative to sterling, and 0.2% against the euro and Swiss franc.  The kiwi is steady against its U.S. counterpart.

Ten year German bund yields slid two basis points, while 10-year JGB is unchanged at 1.26%.

Gold is steady at $1214.90 per ounce.  Oil prices are 0.7% stronger at $74.48 per barrel.

Released Japanese data on the final day of May were softer than forecast.

  • Industrial production grew 1.3% in April, less than half as much as METI survey indications, and May and June predictions called for gains of just 0.4% and 0.3%.  However, that still implies a second-quarter advance of 2.2% after 7.0% in 1Q10.  Output was 25.9% greater in May than a year earlier.  The inventory ratio to shipments showed an on-year plunge of 26.7% but a monthly gain of 0.6%.
  • Housing starts firmed only 0.6% on year after declines of 8.1% in January, 9.3% in February and 2.4% in March.
  • Construction orders sank 25.0% on year in April.  Such had risen 42.3% in March but dropped 20.3% in February.
  • On-year motor vehicle production slowed to 50.8% in April from 71.2% in March and 74.9% in February.
  • A bright note emerged in Japan’s purchasing managers index for manufacturing, which printed 0.9 percentage points higher in May at 54.7, best since September 2006.  The jobs subindex improved to 51.4 from 51.0 in April.

Euroland M3 was 0.1% lower in April than a year earlier and down 0.2% in February-April from the same three-month period in 2009.  Private credit and loans were up 0.3% and 0.1% from April 2009.  Mortgage lending accelerated to 2.9%, but loans to firms fell by 2.6% after a drop of 2.4% in the year to March.  Weak money and credit expansion rates point to subdued inflation persisting into 2011 and beyond.

The flash indication of on-year euro area consumer price inflation in May was 1.6%, up from April’s 1.5% but below analyst expectations.

The euro sovereign debt crisis was reflected in May confidence indices.  Overall economic sentiment fell to 98.4 from 100.6 in April but still exceeded a reading of 97.9 in March and the low of 70.6 in March 2009.  Consumer confidence, service sector confidence, and construction sector sentiment all dropped three points each to minus 18, plus 3, and minus 28.  Retail sentiment worsened four points to minus 5, but industrial sentiment firmed a point to minus six.  The business climate index rose to 0.34 from 0.28 in April, minus 0.15 in March and a low in March 2009 of minus 3.62.

Trichet would not comment on the Fitch downgrade of Spain’s credit rating but defended bond buying as a step to fortify market functionality and not a shift in monetary policy.  He called the euro a “credible currency.”  To feel compelled to say as much underscores how eroded the currency’s image has become.

Sweden’s economy tendency index improved to 110.0 in May from 104.6 in April. Norwegian retail sales firmed 0.2% on month in April but swung to a drop of 5.1% on year from a rise of 13.3% in March.  Easter was a distorting factor.  Greek retail sales growth accelerated to 14.9% on year in March from 4.5% in February.  German real plant and equipment orders were 36% greater in April than a year before.  Spain’s current account deficit narrowed 35% on month to EUR 4.3 billion in March. Italian consumer price inflation was 1.4% in May using national data and 1.6% on the harmonized CPI basis.  Italy’s PPI accelerated to 3.1% on year in April from 1.7% in March.

Polish on-year GDP growth in the first quarter was 3.0%.  Hungarian producer prices jumped 1.6% on month in April, trimming the on-year drop to just 0.1%.  The British Hometrack house price index firmed 0.2% on month and rose 2.0% on year in May.  Danish GDP rose 0.6% last quarter but remained 0.4% below its year-earlier level.

Indian on-year GDP growth accelerated to 8.6% in the first quarter from 6.5% in 4Q09.

Australia’s current account deficit narrowed to AUD 16.55 billion last quarter from AUD 18.47 billion in 4Q09.  New home sales in Australia leaped 6.2% on month in April.  This strength was concentrated in Victoria and followed a 0.9% increase in March.  Net foreign demand exerted a drag of 0.5 percentage points (ppts) last quarter on GDP growth, which was much less than in 4Q09 but greater than had been forecast.  Private credit grew 0.2% on month in April and posted a 2.1% on-year increase, the same as in March.

New Zealand business sentiment worsened to 48.2 in May from 49.5 in April, making a central bank rate hike there even more elusive.

South African private credit fell on year by 0.9% in April after a drop of 0.7% in the year to March.  M3 expanded 1.7% on year, less than assumed, and only a tenth more than its 1.6% increase in the year to March.

Thailand posted a USD 423 million current account deficit in April.  Industrial production was 21.3% greater than a year before in April, and business sentiment worsened to 46.0 from 55.7 in March.

At 13:30 GMT, Canada will be releasing March and first-quarter GDP, producer prices, and raw material prices. Hungary’s central bank announces an interest rate decision today.  It had been reducing its key rate but is not expected to do so again at this time.

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



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