Several Events to Watch Today

March 21, 2012

British Chancellor of the Exchequer George Osborne delivers a 2012-13 budget today that will press onward with substantial austerity yet manage to offer some tax reductions.  At stake is whether the economy can retain its top AAA credit rating.

Fed Chairman Bernanke testifies in Congress on Europe.  The gist of his remarks surfaced earlier.  He will urge support for European banks and warn of risks to the U.S. banking system should the debt crisis deteriorate again.

More U.S. housing market figures are being released:  weekly mortgage applications and monthly existing home sales. 

The Oaxaca region in southwest Mexico was shaken by a 7.5 magnitude earthquake yesterday.

The dollar has firmed 0.2% against the yen and yuan but is otherwise somewhat lower with declines of 0.3% versus the euro, loonie, and Swiss franc, 0.2% against the kiwi, and 0.1% vis-a-vis the Australian dollar and sterling.

Japan reopened after Tuesday’s holiday with a 0.6% drop of the Nikkei.  In other Pacific Rim bourses, share prices rose 1.7% in India, 0.9% in Thailand, 0.4% in Indonesia and 0.1% in China but fell by 1.3% in The Philippines, 0.7% in South Korea, 0.6% in Sri Lanka, 0.5% in Australian, and 0.2% in Hong Kong.  Small gains in Europe have been recorded of 0.5% in Paris, 0.3% in Frankfurt and 0.2% in London ahead of that country’s budget.

After getting hammered yesterday, gold prices recovered 0.5% to $1655.70 per ounce. Oil prices are 0.6% firmer at $106.68 per barrel.

The ten-year German bund and British gilt yields each rose two basis points, while the 10-year JGB slid two basis points.

Iceland’s central bank unexpectedly raised its 7-day collateralized lending rate by 25 basis points to 5.0%, citing a somewhat softer krona and slighly higher short-term inflation prospects than projected earlier.

The Bank of Thailand made no further reduction in its 3.0% benchmark interest rate.  After having raised such between July 2010 and August 2011 from 1.25% to 3.5%, monetary officials had implemented cuts of 25 bps each on November 30 and January 25 to support recovery from devastating floods and rising global downside risks.  In not easing further today, a released statement noted that external risks had subsided somewhat and that domestic recovery was gathering momentum.  The 3.0% key rate was called appropriate.

Minutes were released from the Bank of England’s March 7-8 policy meeting and showed identical votes to those cast in February.  The 9-person Monetary Policy Committee voted unanimously to keep the 0.5% Bank Rate, which has been in place for the past three years.  The majority had voted in February to extend the asset purchase program by GBP 50 billion to GBP 325 billion over the objection of David Miles and Adam Posen who wanted a GBP 75 billion increase.  This month the 7-person majority stuck with the new target and warned that near-term inflation might prove higher than assumed because of energy pressures.  Miles and Posen dissented in favor of a GBP 25 billion increase of asset buying to ensure that the weak economy doesn’t sap growth in capacity.

British public finance data for February released prior to Osborne’s budget message underscored the difficulty of applying austerity to a weak economy.  Lower tax revenues and higher spending caused February’s deficit of GBP 15.2 billion to be 71% larger than a year earlier. 

Japan’s all industry index, a supply-side monthly measure of all activity, fell 1.0% in January, more than analysts were anticipating, and posted a 0.1% on-year dip.  This was the second 1.0% decline in three months, sandwiched around a 1.6% rebound in December.  A 1.7% slump in services was the key depressant.

Germany’s index of leading economic indicators rose 0.3% in January.  The coincident index did likewise.  Swiss M3 growth slowed to a 12-month 6.4% increase in February from 7.3% in January.

Australia’s index of leading economic indicators advanced 0.6% in January after a 0.7% increase the month before.  New Zealand’s NZD 2.76 billion current account deficit last quarter was very close to analyst expectations and 42% smaller than the shortfall in the third quarter.

Thailand’s current account surplus was 60% smaller in January than in December.

The Illinois Republican primary in the United States yesterday was won by Romney with 47% to Santorum’s 35% of votes cast.  U.S. existing home sales data get released today, while Canada will be reporting retail sales and its index of leading economic indicators.  Mexico releases wholesale turnover and retail sales.

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

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