Stock Market Slide Pauses in European Session

April 19, 2011

Following the share price slide Monday in Europe and North America, stocks fell by 1.2% in Japan, 1.3% in Hong Kong, 1.9% in China, 1.4% in Australia, and 0.6% in the Philippines, South Korea and Singapore.  But in Europe, the Paris Cac, British Ftse and German Dax have recovered 0.7%, 0.5%, and 0.4% on good earnings and Euroland’s better-than-expected April preliminary PMI readings.

The dollar is mixed, with gains of 0.4% against the kiwi, 0.3% versus the Swiss franc, and 0.2% against the Australian dollar but losses of 0.3% against the euro, 0.2% relative to sterling and 0.1% against the yen and Canadian dollar.  Dollar/yuan is steady.

The ten-year German bund yields rose three basis points, while its Japanese counterpart slid by two basis points.  British gilts are steady.

Gold edged up 0.1% and closer to $1500 at $1494.80 per ounce.  Oil fell 0.9% to $106.18 per barrel.

Bank of Italy Governor Draghi is reported to have the support of both the German and French finance ministers to follow Trichet as president of the ECB, but German Chancellor Merkel is said to have some reservations about that candidate.

Euroland’s purchasing manager survey readings imply that underlying GDP growth of about 0.8% in 1Q continued at that pace into the early part of the second quarter.

  • Euroland’s composite PMI score of 57.8 was up from 57.6 in March.  Since June 2007, only February’s reading of 58.2 has been greater.  The manufacturing index was at 57.7, second best since June 2006 and up two-tenths on month.  The services index fell back to 56.9 after posting its best score in March since August 2007.
  • The composite reading of the French purchasing managers survey, 62.4, was the best score since September 2000.  The same was true of the services component, which improved by 3.0 to 63.4.  French manufacturing output advanced four points to 60.3.
  • In Germany, by contrast, the services index dropped 2.4 points to a six-month low of 57.7, but the manufacturing component rose to 61.7 from 60.6 in March.  Prices charged by manufacturers advanced at the fastest pace since at least September 2002.
  • Jobs grew in the euro area at the best pace since late 2007.
  • Euroland continues to experience a two-speed economy.  Domestic demand weakened outside of France and Germany.

According to the HSBC preliminary manufacturing purchasing managers survey for China, growth remains in a slower mode, as the index printed at 51.8 for a second straight month following 51.7 in February and an average reading of 54.8 in November-January.

Construction output in the euro area fell back 0.7% in February after increasing 3.6% in January.  Production in January-February was 0.8% greater than the average level in 4Q10.  Construction was 3.5% higher than in February 2010 but had contracted by 2.3% in 4Q10 and by 5.5% in 3Q10. 

According to a preliminary estimate, consumer confidence in Euroland weakened to minus 11.4 in April from minus 10.6 in March and minus 10.0 in February.

The impact of the Sendai earthquake was reflected in a 38.3 reading for Japanese consumer confidence in March, down from 40.6 in February and 41.1 in January. 

Euroland’s seasonally adjusted current account deficit totaled EUR 7.2 billion in February after shortfalls of EUR 5.6 billion in both November and January and of EUR 8.0 billion in February.  The deficit is insignificant as a share of GDP (less than 0.5%), but that masks vast differences among the region’ national economies.  The unadjusted current account deficit in the twelve months through February of EUR 49.1 billion was 129% wider than during the previous twelve months. 

New car registrations in the European Union posted a 5.0% on-year drop in March.  Such had been 0.9% greater in February than a year before.

Canadian CPI inflation accelerated sharply to 3.3% last month, highest since September 2008, from 2.2% in February.  Energy prices were 12.8% higher than in March 2010, while all other consumer prices recorded an on-year advance of 2.4%.  Seasonally adjusted consumer prices increased 0.8% between February and March.  Core inflation of 1.7% in the latest month remained below the Bank of Canada’s 2.0% target.  U.S. consumer prices reported last Friday rose 0.5% on month and 2.7% in the year to March.  U.S. core inflation printed at 1.2% in March.

Minutes from the April 5 meeting of the Reserve Bank of Australia Board point to a continuing 4.75% Official Cash Rate for the time being.  Officials saw absolutely no reason to tighten further now and observed that lending rates are presently a little above their long-term averages.

Hong Kong unemployment slid more than forecast to 3.4% in the first quarter.  That was the lowest three-month average since June-August 2008.

Singapore will be holding elections on May 7.

Portuguese producer prices advanced 0.9% last month and accelerated to a 12-month 7.0% rate of increase from 6.4% in the year to February.

U.S. weekly chain store sales and monthly housing starts and permits data will be released today. Canada’s index of leading economic indicators and wholesale turnover statistics get reported as well. 

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

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