Some Bounceback Wednesday but Investors Remain on Edge
March 16, 2011
The Nikkei recovered 5.7% after slumping some 20% in the wake of Friday’s earthquake. Stocks also climbed 1.8% in South Korea, 1.1% in India, 1.4% in China, 0.9% in Singapore and 0.7% in Australia. However, the German Dax and Hong Kong market edged just 0.1% higher, and stocks in France and Britain have lost a further 0.8% and 0.6%.
After rising above $1.4000 yesterday, the euro fell back 0.4% and is at 1.4945. Moody’s cut Portugal’s credit rating by two notches to A3, and the Portuguese prime minister gave the strongest hint yet that Portugal may have to seek outside aid. The dollar otherwise is up 0.1% against the Swiss franc and sterling, unchanged versus the yuan, yen, and Aussie dollar, off 0.1% against the kiwi, and down 0.2% relative to the Canadian dollar.
The yields on 10-year German bunds and British gilts are one and two basis points lower, while that on 10-year JGBs edged up one basis point.
Japan’s humanitarian crisis remains enormous. Rebuilding costs are now seen exceeding those of the 1995 Kobe earthquake by more than twofold. Problems at Japan’s nuclear reactors are still not contained.
Middle Eastern tensions continue. Qaddafi troops seem close to retaking the rebel command center in the east. Bahrain has a state of emergency following the influx their of Saudi military forces.
Hong Kong’s Monetary Authority left its base rate unchanged at 5.0%. HKMA interest rate policy moves in lockstep with the Fed funds rate.
The Icelandic central bank also announced that its key rate will remain at the current level, which happens to be 4.5%.
Interest rate decisions today are still awaited in Norway and Hungary.
Japan’s Ministry of Finance released results of its quarterly business survey, which was taken before the earthquake. Business sentiment at large firms improved to a reading of minus 1.1 this quarter from minus 5.0 in 4Q10. Such was projected to keep improving to +1.5 next quarter and +6.2 in 3Q11. Firms expect sales to expand 1.1% next fiscal year and profits to climb by 6.4%.
Dwelling starts in Australia fell 5.3% on quarter in the final quarter of 2010. Housing starts dropped 8%, while non-residential ones went up 4.2%. Australia’s index of leading economic indicators suffered its first drop, a dip of 0.1% in January, since last August, reflecting the flooding in the country’s northeast. In New Zealand, consumer confidence weakened to 101.4 this quarter, reflecting the Christchurch earthquake, from 108.1. The Reserve Bank of New Zealand has already cut its cash rate by 50 basis points, matching the cyclical low of 2.5%.
South Korea’s jobless rate rose to 4.0% last month from 3.6% in January. China’s index of leading economic indicators rebounded 0.3% in January, and the coincident index advanced by 1.4%. Unemployment in the Philippines increased by three-tenths to 7.4% last quarter.
Hourly labor costs in the euro area were 1.6% higher last quarter than in 1Q09, accelerating from a 0.9% on-year increase in 3Q10. Such had risen 1.5% in the year to 2Q10. Euroland consumer prices were confirmed to have risen 0.4% on month and 2.4% on year in February, triple the 0.8% advance posted in the prior year to February 2010. However, core CPI (excluding unprocessed food and energy) dipped back to December’s 1.1% from January’s 1.2%. Energy prices increased 13.1% in the latest statement year versus 3.3% in the year to February 2010.
British monthly labor statistics were released. The claimant count of unemployment fell by 10.2K workers following a revised 1.5K increase in December and drops of 3.2K in October and 3.4K in November. The ILO-basis rate of joblessness was 8.0% in November-January, most in over 10 years, after 7.9% in August-October and 7.8% in May-July of 2010. The growth of average wage earnings in November-January — 2.2% for regular pay and 2.3% including bonuses — surpassed expectations. Private-sector regular pay in January alone was 3.8% greater than a year earlier, after on-year increases of 1.1% in December and 2.0% in November.
Italian consumer prices rose 0.3% in February and 2.4% on year, confirming the preliminary indication. Non-energy CPI inflation picked up to 1.8% from 1.5% in January. Spain’s index of leading economic indicators improved 0.9% in January. Czech retail sales rose 5.1% on year in January. Turkish consumer confidence improved to 93.66 in February from 91.29 in January.
Several U.S. indicators will be released today: producer prices, housing starts, the current account, and weekly oil inventories. Canada reports results of its latest monthly survey of manufacturing.
Copyright Larry Greenberg 2011. All rights reserved. No secondary distribution without express permission.