Equities Higher

March 30, 2011

Asian and European stocks made solid gains as quarter-end nears and despite S&P credit rating downgrades of Greece and Portugal.

The yen is trading heavily with a 0.8% decline to 83.11 per dollar.  The U.S. currency otherwise lost 0.7% against the Australian dollar, 0.4% versus the Canadian dollar, and 0.3% against the kiwi and sterling.  The dollar rose 0.2% relative to the euro and Swiss franc and is steady against the yuan.

Share prices advanced 2.6% in Japan, 3.0% in the Philippines, 1.7% in Hong Kong, 1.4% in Australia, Thailand and Indonesia, 1.3% in Singapore, and 0.9% in South Korea and India.  In Europe, the German Dax and Paris Cac are trading 1.5% and 0.9% higher, while the British Ftse is up just 0.4%.  Chinese stocks dipped 0.1%.

Ten-year sovereign bond yields firmed four, two, and one basis points in Great Britain, Germany, and Japan.

Oil prices slid 0.4% to $104.34 per barrel, while gold prices are 0.1% higher at $1419.20 per troy ounce.

S&P downgraded Portugal’s credit rating by a single step to BBB- from BBB, citing likely deficit overruns in coming years because of soft growth.  S&P also downgraded Greece’s rating, this time by two notches to BB- from BB+, and left the outlook on negative.  The Greek deficit in 2010 is now expected to be around 10% of GDP.

Japanese industrial production rose 0.4% last month (before the natural disasters) and by 2.8% from February 2010.  The level of January-February production was 4% greater than the fourth-quarter mean, but a drop of more than 1% in April is likely.  Officials made the following assessment: “Industrial production continues to show an upward movement.  However, it would be necessary to keep watch on the impact of the Tohoku – Pacific Ocean earthquake on production.”

The Shoko Chukin index, a gauge of small business sentiment in Japan, improved to 49.5 in March from 46.6 in February and 45.8 in January.  Manufacturing sentiment (51.1) moved above the 50 line of neutrality, but the overall index is projected to drop 2.2 points to 47.3 in April.

South Korea GDP rose 0.5% last quarter, same as the preliminary estimate, and by 4.7% from 4Q09.  GDP expanded 6.2% last year as a whole and is expected to show accelerated growth in the first quarter of 2011.

New Zealand building permits dived 9.7% last month, reversing January’s 9.1% increase and falling to a two-year low. Australian skilled labor vacancies dropped 1.7% in February, easing pressure on the central bank to resume monetary tightening.

South African M3 growth slowed to an on-year pace of 7.5% in February from 8.2% in January, while private credit accelerated from 5.0% to 5.4%.

Overall economic sentiment in the euro area fell slightly to 107.3 in March from 107.9 in February.  It was still higher than January’s 106.8 and way above the cyclical low of 69.6 in March 2009.  Industrial confidence remained at 6.6, but consumer confidence slid 0.6 to minus 10.6.  Sentiment in services fell by 0.4 to +10.8.  Retail sentiment printed at minus 1.5 after minus 0.2, and construction dropped 0.8 to minus 25.0.  The business climate index was 1.41, down from 1.46 in February.  Such had risen to 1.44 in January from 1.28 in December 2010.

The monthly survey of British retailers by the CBI produced an unexpectedly good reading of +15 in March after having plunged to +6 in February from +37 in January and +56 in December.  Analysts were looking for a score of minus two.  The U.K. monthly services index increased 1.3% in January.  The 3-month average fell 0.5%, only half as much as expected.

Spanish consumer prices posted a 3.3% harmonized on-year increase in March versus forecasts of 2.4%.  Dutch producer prices rose 2.0% last month and by 12.3% from February 2010.  Belgian CPI inflation of 3.5% in March after 3.4% in February constitutes a 29-month high according to preliminary data.  Iceland recorded a 2.7% on-year rise of producer prices last month.  Italian hourly wages rose 2.1% on year in February.  Hungarian producer price inflation slowed to 6.3% in February from 7.0% in January. 

Spanish retail sales in February were 4.8% lower than a year earlier.  The Swiss index of leading economic indicators printed at 2.24 in March, above expectations and February’s reading of 2.19.  The Irish jobless rate jumped to 14.6% in March from 13.5% in February.  Consumer confidence in Portugal was minus 48.4 in March, 0.7 points better than in February.  A 0.9% rise of Portuguese industrial production in February reversed only half of January’s loss.

Syrian President Assad plans a national address, presumably to offer some concessions to protestors. 

Bini-Smaghi of the ECB sees no likely reduction of CPI inflation this month from February’s above-target 2.4%.  An ECB rate hike next month is a virtual certainty.

U.S. mortgage applications in the week of March 25 fell by 7.5%, and the 30-year mortgage rate climbed 12 basis points to 4.92%.  The ADP estimate of private employment also gets released today at 12:15 GMT with expectations centered upon a rise of 210K.  Lots of Fed officials will be speaking today in public: Hoenig, Lacker, and Bullard.  Today is the 30th anniversary of John Hinckley’s attempted assassination of President Reagan.

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

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