Muted Market Reaction to Bin Laden’s Death

May 2, 2011

A tactical U.S. military team killed Osama Bin Laden  and others in his compound in Abbottabad, Pakistan.  The war on terrorism continues.  Reprisals are a risk.

A 1.8% drop in oil prices has been the most pronounced market reaction to the news.  Gold is 0.1% firmer.  Silver is lower.

The dollar slid 0.3% against the euro but has advanced 0.5% relative to the yen, 0.4% against the Canadian dollar, 0.2% versus the kiwi, Swissy and sterling and 0.1% against the Australian dollar.  The yuan is steady and trading more strongly than the key 6.50 per dollar level.

Some markets are closed for May Day, including China, Taiwan, Britain, Hong Kong, Singapore and Malaysia.  Japan’s Nikkei advanced 1.6%, closing above 10K for the first time since March 11.  Stocks rose 1.7% in South Korea and 0.8% in Indonesia but have fallen by 0.7% in India, 0.6% in New Zealand, and 0.2% in Pakistan.  In Europe, the German Dax and Paris Cac so far show gains of 0.8% and 0.3%.

Factory sector purchasing manager surveys for the month of April were reported for many economies.

  • Euroland’s PMI was revised up to 58.0, the second best reading since August 2000, from a flash estimate of 57.7 and a March score of 57.5.  The record high in February was 59.0.  Sub-indices for orders and production were revised upward as well.  The data showed near-record output price inflation and widening gap between the core economies and the struggling peripherals.
  • The German reading of 62.0 was the second best score since at least April 1996.  The preliminary reading for April had been 61.7, and the readings for February and March were 62.7 and 60.9.
  • The French PMI in manufacturing of 57.5 in April was 0.6 points better than the flash estimate and constituted a five-month high.  Jobs grew at their fastest pace since October 2000 in France.
  • Greece scored a sub-50 reading of 46.8, connoting a contraction.  But that was the slowest rate of decline since January 2010.
  • Spain’s reading of 50.6 , weakest since 50.0 in November, signified that activity in Euroland’s fourth largest economy is barely expanding.
  • The Italian index slid to 55.5 from 56.2 in March and 59.0 in February.  Orders growth is at a four-month low.  Capacity pressure was evident.
  • The Dutch index was 59.2, its third best score ever and up from 58.1 in March.  The Netherlands experiences high input price inflation and record inventory-building.
  • The Swiss PMI settled back to 58.4, a robust rate of expansion but not quite as much so as in February and March when the readings were at 63.5 and 59.3.
  • The Swedish score improved to 59.8 from 58.6 in March.  Such had exceeded 60.0 in November through February.
  • Norway’s PMI of 55.6 was down from 57.4 in March and 58.6 in February, which had been the best reading since October 2007.
  • Hungary’s PMI reading was 56.9 in April, up from 53.9 in March and identical to the reading in February.
  • The Czech index improved to 59l.0 in April from 58.6 in March.  Such had been 60.5 in January and 59.8 in February.
  • South Korean manufacturing growth slowed to a five-month low of 51.7 from 52.8 in March.
  • An improved and high Indian reading of 58.0 after 57.9 in each of the prior two months seemingly points to more monetary tightening in that economy.
  • In Turkey where an unorthodox approach to monetary tightening has been attempted, the strategy seems to be working as the manufacturing PMI showed significantly slower growth with a reading of 52.7, down from 56.1 in March and a record high of 58.5 in February.
  • China’s index slid to 52.9 from 53.4 and was below its long-term average reading.
  • Australia’s reading was below 50 for a second straight time and fifth month out of the past six.  After falling to 47.9 in March from 51.1 in February, such was at 48.4 in April.

Australia had other disappointing data to report.  House prices sank 1.7% in the first quarter, some three times more than forecast and were 0.2% lower than a year earlier.

April commodity prices in both Australia and New Zealand were released.  Australia’s index rose 7.6% in SDR terms and 32% on year.  The New Zealand index was 1.6% higher.

A 0.4% drop in Japanese cash earnings in March was the first on-year decline in 13 months.

Swiss retail sales volume rose 0.3% in March after soaring 3.8% in February and was 0.2% lower than a year earlier.  Danish retail sales slid 0.2% on month and fell 7.8% between March 2010 and March 2011. 

Italian hourly wages firmed 0.2% in March and were 2.0% higher than a year earlier.

Portuguese industrial production rose 0.4% in March but was 2.4% lower than a year before.

South Korean consumer prices were unchanged in April and recorded a slightly smaller 4.2% 12-month rate of increase after climbing 4.7% in the year to March.  Core CPI stood at 3.2%.  Indonesian consumer prices dipped 0.3% in April but posted a 12-month advance of 6.2%.

India’s trade deficit narrowed to USD 5.61 billion from USD 8.1 billion in February.  The fiscal 2010/11 deficit of $8.7 billion per month was 4.4% narrower than a year before and showed export growth of 36.6%.

ECB President Trichet made some remarks but broke no new ground.  He affirmed that expected inflation remains anchored.  Constancio and Wellink of the ECB speak today.  So does Bank of England Governor King.

Scheduled U.S. data releases include the April manufacturing PMI survey results and construction spending.  Canada reports producer prices and raw material prices.

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

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