Beware the Ides of March: Very Dangerous Day Is Shaping Up

March 15, 2011

Japan is under a radiation alert, as more explosions and fire at a nuclear reactor lift risk of a meltdown.  Radiation levels near Tokyo above normal.  Bank of Japan support seen too timid for the circumstances.  Only dollar/yen, off 0.3%, and JGBs (up a single basis point at 1.22%) remain comparatively stable.

Fear spreading that Japan’s natural disaster will be a game changer not just for that economy but for whole world.  Commodity-sensitive currencies hit very hard overnight, with the U.S. dollar advancing 2.2% against the Australia dollar, 1.7% versus the Canadian dollar and 1.5% against the kiwi.

The Nikkei plunged 10.6%, bringing its drop since Thursday to 17.5%, worst since 1987 global crash.  The German Dax, Paris Cac, and British Ftse are down 4.6%, 3.4% and 2.5%.  In the Pacific Rim, stocks tumbled 2.9% in Hong Kong, 2.4% in South Korea, 2.3% in Vietnam, 2.0% in Sri Lanka, 2.8% in Singapore, 1.9% in Thailand, 3.4% in Taiwan, 1.8% in China, 2.1% in Australia, 1.5% in India, 1.3% in Indonesia and 1.4% in New Zealand.

Ten-year German bund and British gilt yields dived by 13 and 10 basis points, and futures trading suggest a similar move in Treasuries.

The dollar has risen 1.0% against sterling, 0.8% versus the euro, and 0.1% against the yuan but is 0.3% weaker against the Swiss franc, which often thrives in times of risk aversion.

Oil fell 3.3% to $97.82 per barrel, and gold dropped 1.1% to $1409.60 per troy ounce.

More cities once controlled by Libyan rebels have been recaptured by troops loyal to Qaddafi.  With western governments playing the role of Hamlet, Libya is looking like another Bay of Pigs fiasco.

Surrealistically, the Bank of Japan upgraded its monthly economic assessment to “Japan’s economy is emerging from the current deceleration phase” from February’s view that “Japan’s economy is gradually emerging from the current deceleration phase.”  This improved view was made even though the report notes “the damage of the earthquake has bee geographically widespread, and thus, for the time being, production is likely to decline and there is also concern that the sentiment of firms and households might deteriorate.”

Released minutes from the Reserve Bank of Australia March meeting scaled back projected GDP growth in the near term.  Inflation was also declared to be likely lower than imagined previously to a slight degree.  Credit policy is called “slightly restrictive” and “appropriate.”  The Aussie dollar fell after the minutes were released.

Given Japan’s precarious circumstances and the turmoil in world financial markets, the FOMC, which meets today, is unlikely to curtail QE2 now.  Some market chatter has even speculated that the ECB may not go forward with a rate hike in April.

Australian motor vehicle sales recovered just 0.2% in February following a sharp January drop and were 1.5% lower than in February 2010.

Unemployment in Singapore remained low at 2.2% last quarter following a 2.1% jobless rate in 3Q10.  Retail sales in that city state were 2.9% higher than a year earlier in January, with non-auto sales surging by 15.6%.  South Korean import prices increased 3.1% on month and 16.9% on year in February.  South Korea stocks hit their lowest level in 16 months.  Filipino unemployment rose to 7.4% in January from 7.1% in December.

Chinese foreign direct investment growth accelerated to 32.2% last month from 23.4% in the year to January.

The ZEW Institute reported a drop in its ZEW German expectations index, a gauge of investor sentiment, to 14.1 in March from 15.7 in February and 15.4 in January, but the current conditions index edged two-tenths of a point higher to 85.4. 

The ZEW expectations index for all of the euro area rose to 31.0 in March from 29.5 in February and 25.4 in January.  The current conditions index was 6.4 after February’s print of 64.1.

Jobs in Euroland increased 0.1% last quarter and were 0.3% greater than in the final quarter of 2009.  German employment was 1.0% higher than a year earlier, whereas Spanish and Portuguese jobs fell by 1.3% and 1.8% during the last statement year.

French consumer price inflation slid to 1.7% in February from 1.8% in January, and core inflation was merely 0.4% last month.

Danish producer price inflation accelerated to 8.9% last month from 7.7% in January.  Norwegian consumer sentiment improved to a reading of 30.3 in the current calendar quarter from 27.7 in 4Q10.  Norway’s NOK 30.8 billion trade surplus last month was 4.3% smaller than January’s surplus.  Finland’s current account surplus in January of EUR 388 million was 62% smaller than December’s surplus.

Dutch retail sales in January were 1.5% greater than a year earlier.  Industrial output in Holland posted a 7.3% on-year increase in the same month.

The Department of Communities and Local Government in Britain released its house price measure for January, showing deterioration to a reading of 0.5% from 3.8% in December.  The U.K. index of leading economic indicators rose 0.4% in January, down from a 0.6% increase in December.

Czech producer price inflation accelerated to 5.4% in February, which is somewhat more than forecast, from 4.6% in January.  Turkish joblessness edged down to 11.0% in December from 11.2% in November.

EU finance ministers are meeting today in continuing effort to trouble-shoot the region’s sovereign debt problems.

Scheduled U.S. data today include the New York Fed’s manufacturing index, import prices, weekly chain store sales, and the Treasury monthly capital flow figures, but the major event will be the FOMC statement due around 14:15 Eastern Daylight time.  Note that the time difference between the United States and Europe is an hour less than normal since this past weekend when U.S. clocks were moved up an hour.  Canadian productivity, unit labor costs, and motor vehicle sales statistics get released today.

Copyright Larry Greenberg 2011.  All rights reserved.  No secondary distribution without express permission.

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