Stocks Down on a Busy Tuesday

April 12, 2011

Equities fell 1.7% in Japan and Taiwan, 1.5% in Australia, 1.6% in South Korea, 1.3% in Hong Kong, 1.2% in Malaysia, 0.7% in Indonesia, Singapore and the Philippines, and 1.0% in India.  In Europe, the Paris Cac, German Dax and British Ftse have lost 1.1%, 1.0% and 0.9% so far.

The dollar is mixed, with gains of 0.5% against sterling, 0.2% versus the Canadian dollar, and 0.1% against the Aussie dollar and losses of 0.6% relative to the Swiss franc, 0.5% against the yen, 0.7% versus the kiwi, and 0.1% against the euro.  The yuan is steady against the dollar.

The Fed’s Janet Yellen made typically dovish remarks that it’s too soon to start reversing the easy monetary policy.  A high Chinese officials said China wishes to help troubled euro area governments work out their debt difficulties.  This sentiment has been expressed from time to time before.

Oil and gold prices slid by 0.1% and 0.3% to $109.82 per barrel and $1464.60 per ounce.

The yields on ten-year British gilts and German bunds fell by six and two basis points, while that on JGBs edged a basis point higher.

More bad news from Japan.  The severity of the Fukushima nuclear accident was raised to the top level of seven, the same assigned to the Chernobyl disaster, and Economics Minister Yosano said repairs from Japan’s disasters would exceed the JPY 25 trillion figure estimated earlier.  Minutes from the Bank of Japan’s meeting of March 15, when asset buying was expanded, indicated some concern that doing greater quantitative easing might impair financial market functionality.  The central bank’s balance sheet shrunk to JPY 138.4 trillion on April 10 from JPY 142.9 trillion at end-March and a post-quake high of JPY 149.8 trillion on March 20.

Japanese money and credit figures for March were weak in spite of the BOJ’s stimulus.  M2 posted on-year growth of 2.7% versus 2.6% in the final quarter of 2010.  Broad liquidity was 0.1% higher than in March 2010; such rose 0.8% in calendar 2010.  Bank lending was 1.8% less than a year earlier, a similar on-year drop to that of 1.9% in the final quarter of 2010.  Japanese machine tool orders in March were 49.5% greater than a year earlier, down from a 12-month increase of 73.9% in February.

There are four central bank meetings today.

  • Bank Indonesia left its key rate at 6.75% as it had done at its March policy meeting.  Only one increase had been implemented so far, a 25-basis point move in February.  From December 2008 through August 2009, the rate was lower every month and by 300 basis points in total.
  • The Bank of Korea benchmark interest rate was held steady at 3.0%.  Four earlier 25-bp advances were done in July 2010, November, January 2011 and March.  Today’s decision was consistent with the street consensus.
  • Still to come are announcements from the Bank of Canada and Bank of Chile.

Several British economic indicators were released.

  • Some-store retail sales tumbled 3.5% on year according to the British Retail Consortium.  A 1.9.% drop in total sales was the greatest decline since at least 1995.
  • Consumer prices rose less than anticipated in March, a rare piece of encouraging inflation news.  The CPI went up 0.3%, cutting its 12-month rate of rise to 4.0% from 4.4% in February.  Inflation has exceeded the 3.0% target ceiling since the start of 2010.  Core consumer price inflation slowed to 3.2% in March from 3.4%. 
  • Retail price inflation receded to 5.3% in March from 5.5% in February and posted a monthly advance of 0.5%.  The RPIX index was 5.4% higher than a year earlier, down from a 5.5% pace in February.  RPIY inflation, which excludes indirect taxation changes,  likewise slowed to 4.0% from 4.1%.
  • The British goods and services deficit narrowed to GBP 2.443 billion in February from GBP 3.858 billion in January and a 2010 monthly average deficit of GBP 4.038 billion.  Analysts were expected a deficit of GBP 4.2 billion for the latest month.  The merchandise trade deficit of GBP 6.776 billion was likewise some 15% smaller than expected. 
  • Two house price measures arrived.  The Department of Communities and Local Governments index firmed 0.3% on month in February and was 0.7% higher than a year earlier.  Analysts were looking for almost no on-year change.  The Royal Institute of Chartered Surveyors’ house price balance of minus 23 was the best score in seven months and followed a reading of minus 26 in February.

The ZEW Institute of Germany reported an expectations index of 7.6 in April, down from 14.1 in March and 15.7 in February.  A smaller drop had been anticipated.  The current situation had a reading of 87.1, up from 85.4 in March and 85.2 in February.  The ZEW index of investor expectations toward the whole euro area printed at 19.7 in April, down from 31.0 in March and was associated with a current situation reading of 5.6 after 6.4 in March.

German consumer prices rose 0.5% in March and were 2.1% higher than a year earlier, the same on-year pace as in February but a full percentage point greater than the 1.1% increase in the year to March 2010.  The CPI rose 3.3% annualized between end-2010 and March, but non-energy prices had a more benign pace of 1.1% annualized.

Spanish consumer prices went up 0.7% last month and retained a 12-month 3.6% rate of climb.  The core Spanish CPI rate was 1.7% in March.  Hungarian consumer prices rose 4.5% in the year to March and posted a monthly gain of 1.1%.  Portuguese consumer price inflation accelerated to 4.0% in March from 3.5% the month before.  Swedish consumer prices increased 0.7% on month and 2.9% on year, up from a 2.5% 12-month pace in February. 

The French current account deficit widened 27% on month to EUR 5.2 billion in February.

U.S. and Canadian trade figures get reported today.  So do U.S. import prices and weekly chain store sales and Canadian house prices.  Two U.S. sentiment indices, the NFIB and the IBD/TIPP, are due as well, as is the monthly National Association of Home Builders housing index.

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

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