Same Broad Trends as Yesterday

March 22, 2011

Commodity-sensitive currencies continued to advance, with the New Zealand, Australian and Canadian dollars gaining another 1.0%, 0.5% and 0.2% against their U.S. counterpart.

Following yesterday’s Vernal Equinox market closure, the Nikkei jumped 4.4% despite reports of elevated radiation levels in the area surrounding the Fukushima reactor complex.  Information about the accident remains guarded. 

In other Asian markets, which advanced strongly on Monday, stocks rose by a further 0.8% in India and Hong Kong and by 0.5% in Taiwan, South Korea and China.  In Europe, the Paris Cac and British Ftse are up 0.5% and 0.4%, while the German Dax had edged 0.1% higher.

Ten-year sovereign bond yields climbed nine basis points in Britain, five bps in Germany and four bps in Japan.

Oil (down 0.1%) and gold prices (up 0.3%) are comparatively steady yet high.

The euro at $1.4222 is trading firmly but unchanged amid hardening signs that ECB officials see no reason to delay a rate hike in April.

The dollar lost 0.2% against the Swissy and 0.4% versus sterling, which was buoyed by a further acceleration of British inflation.  The dollar is 0.1% higher against the yen but 0.2% weaker relative to the yuan.

British CPI inflation climbed to 4.4% last month from 4.0% in February and an expected 4.2% pace.  The monthly gain was a frothy 0.7%.  Core consumer prices increased 0.8% on month and 3.4% on year.  RPI inflation increased to 5.5% from 5.1%.  These data make a near-term Bank of England rate hike more likely.

The U.K. public sector net borrowing of GBP 11.8 billion last month was also greater than forecast and surpassed the GBP 9.5 billion in February 2010.  Debt equaled 58.0% of GDP, up from 50.8% a year earlier.  The CBI Industrial Trends Index improved to +5 in March from minus 8 in February and minus 16 in January.

Japan’s all-industry index broke a streak of declines with an impressive 2.9% increase in January.  Alas, that was before the Sendai earthquake and thus not indicative of a reversal that will continue.  The all-industry index was 1.7% higher in on-year terms in February.

Hong Kong’s current account surplus narrowed 26% on quarter to HKD 32.6 billion in 4Q10.  Hong Kong CPI inflation rose by a tenth percentage point to 3.6% in February.  Chinese rare earth exports were just 0.3% higher than a year earlier in February.

Dutch consumer confidence worsened to minus 8 this month from minus 5 in February.  The German index of leading economic indicators rose 0.4% in January.

The Swiss trade surplus widened 22.5% in February to CHF 2.5 billion.

Canada reports retail sales and its index of leading economic indicators today.  The U.S. data calendar includes the Richmond Fed index and house prices.  All market eyes will remain on the situations in Japan and Libya as well as Europe’s sovereign debt problems.  Euroland leaders meet at the end of this week.

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



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