Awaiting FOMC Statement

March 13, 2012

Stocks showed a better tone in the Pacific Rim and Europe today.  Equities gained 1.3% in India and Taiwan, 1.2% in Australia, 1.1% in South Korea, 1.0% in Hong Kong and China, and 0.9% in Singapore.  The Paris Cac, German Dax, and British Ftse so far have climbed by 1.0%, 0.9% and 0.8%.  A laggard was Japan’s Nikkei-225 index, which only edged 0.1% higher.

The dollar gained 0.5% against the yen and 0.3% versus the euro and Swiss franc, but it fell by 0.4% relative to the kiwi, 0.3% vis-a-vis the loonie, 0.2% against the Australian dollar and 0.1% against sterling.  The yuan is steady against the greenback.

Gold and oil prices are narrowly mixed, the former easing 0.3% to $1694.40 per ounce and the latter firming 0.4% to $106.80 per barrel.

Ten-year yields on British gilts and German bunds are two and one basis points higher.  Japanese JGBs are unchanged from Monday.

The ZEW Institute expectations index for Germany made further improvement in March, with a reading of +22.3, up from 5.4 in February, negative 21.6 in January and minus 55.2 last November.  Current conditions slid 2.7 points to 37.6.  The ZEW expectations index for the whole euro area rose 19.1 points to 11.0 and was 70.1 points better than last November’s reading of minus 59.1.  Current conditions rose just 0.7 points to minus 48.4.

The Bank of Japan’s Board had an unusually long two-day policy meeting of 7 hours and 54 minutes after which officials revealed a unanimous vote to retain a target range for the uncollateralized overnight money rate of zero to 0.1% and an 8-1 vote rejecting Miyao’s proposed JPY 5 trillion increase of the asset purchase ceiling to JPY 70 trillion.  Members did agree to raise a targeted growth-supporting loan facility introduced in June 2010 by JPY 2 trillion to JPY 5.5 trillion and extended the deadline for arranging such loans by two years to March 2014.

Japan’s tertiary index, a gauge of service sector activity, sank 1.7% in January, thus reversing December’s 1.8% increase.  The tertiary index was just 0.1% higher than in January 2011 and 0.7% lower than the 4Q11 average level. 

Britain’s goods and services trade deficit widened to GBP 1.76 billion in January from GBP 1.22 billion in December.  The merchandise goods trade deficit widened to GBP 7.53 billion from GBP 7.18 billion in December.  The U.K. index of leading economic indicators rose 0.9% in January, reversing a 0.5% drop the month before, but the coincident index was unchanged in the latest month.

A couple of U.K. housing market measures were reported.  The Royal Institute of Chartered Survey’s house price balance posted a smaller on-year drop in February of 13% after declining 16% in the year to January.  Such was the best result in 19 months.  And the Department of Communities and Local Government housing index for January was 0.2% higher than a year before after a 0.1% increase in December.

Lots of price data were released overnight.  The Swiss PPI/import price index increased by 0.8% last month, trimming the 12-month decline to 1.9% from 2.4% in the year to January.  Swedish consumer prices rose 0.7% in February and retained a 1.9% on-year pace. French consumer prices rose 0.4% in February, leaving the 12-month pace unchanged at 2.3%.  Italian consumer prices went up 0.4% as well and clocked a 12-month increase of 3.3% last month. Spain’s CPI edged up 0.1% on month and 2.0% on year in February.  CPI inflation in Hungary picked up 0.4 percentage points to 5.9% in February.  Greek import prices climbed 2.2% in January and accelerated to an 8.7% year-on-year pace.

Greek industrial production fell 0.4% on month in January following a 4.3% plunge in December.  Finnish retail sales were 9.0% greater than a year earlier in January, with a 5.4% rise in volume terms.  Czech industrial output fell 0.6% on month but rose 3.2% on year in January.  The Dutch trade surplus of EUR 4.07 billion in January was practically the same size as December’s surplus.  The French current account deficit in January of EUR 4.2 billion was 50% wider than December’s imbalance.  Ireland’s construction purchasing managers index slid by 0.6 points in February to a sub-50 reading of 45.8.

Australian mortgage loans dropped 1.2% in January, twice as much as forecast, while investment lending sank by 7.1%.  According to indices compiled by the National Australian Bank, business conditions improved a point to a reading of +3 in February, but business confidence fell three points to a 5-month low of +1.  New Zealand food prices rose 0.6% last month and by 1.5% on year.  Home prices and housing sales in New Zealand respectively rose 0.8% and 37% in February.

The FOMC’s second scheduled policy statement of 2012 will be released at 14:15 EDT (18:15 GMT).  No press conference will be held.  U.S. data arriving today features the highly awaited monthly retail sales report and includes the NFIB small business sentiment index, the IBD/TIPP optimism index, business inventories, and weekly chain store sales.

Copyright 2012, Larry Greenberg.  All rights reserved.  No secondary distribution without express permission.

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