Marking Time Ahead of U.S. Data Releases

March 27, 2012

Remarks by Fed Chairman Bernanke on Monday reaffirming no predisposition to abort the ultra-easy policy stance sooner than implied previously had an electrifying impact on financial markets, boosting the commodities and equities and dampening the dollar and bond yields.  The S&P closed at its best level since mid-May 2008.

Overnight in the Pacific Rim, share prices rode that merry-go-round.  Stocks jumped 2.4% in Japan, 1.6% in Thailand, 1.5% in Singapore, 1.2% in Pakistan, Indonesia and India, 1.0% in South Korea and The Philippines, 0.9% in Australia, and 0.8% in Taiwan. 

But in Europe, the mood has become more guarded, as investors await U.S. figures on house prices and consumer confidence.

  • The dollar on balance is unchanged against the euro, Swissie, and sterling.  The greenback has edged up 0.1% versus the yen, Aussie dollar, and loonie while sliding 0.2% against the kiwi and 0.1% relative to the yuan. 
  • The German Dax advanced 0.6%, but the Paris Cac and British Ftse are only 0.2% firmer on net.
  • Gold and oil prices have climbed another 0.5% to $1696.80 per ounce and $107.34 per ounce.
  • German bund and British 10-year gilt yields are three and four basis points lower.

Currency warfare continues.  Chinese President Hu expressed dissatisfaction with foreign calls for the yuan to rise more quickly. Reserve Bank of Australia Deputy Governor DeBelle said the elevated Aussie dollar is dampening growth.  ECB President Draghi reiterated that the policy ball in now in the court of European governments, which ought to take advantage of the more liquid money markets to enact fiscal restraints and other structural reforms.

Japan’s Shoko Chukin index of small business sentiment improved 3.4 points to 48.7 in March from 45.3 in February and 45.7 in January.  But corporate service prices posted their largest on-year decline (0.6%) in eight months in February.  The real estate component of the index dropped 3.4% on year and 0.5% on month.

Scheduled U.S. data today include the Case Shiller house price index, the Conference Board index of consumer confidence, The Richmond Fed manufacturing index and weekly chain store sales.

The British CBI monthly survey of retailers produced a reading in March of zero, slightly improved from minus 2 in February, well above January’s negative 22 score but still below December’s +9 reading.

German consumer confidence dipped back to 5.9 in April from a 12-month high of 6.0 in March.  German import prices climbed 1.0% in February after a 1.3% increase in January, but the 12-month rate of increase eased to 3.5% from 3.7% and was well below a jump of 11.9% in the previous year to February 2011.  Non-oil import price inflation eased to 1.4% from 1.6% in January and 2.1% in December.

French consumer confidence improved five points to 87 in March following back-to-back 82 readings in January and February and scores of 80 in December and 81 in November.

Finnish consumer confidence slid to 8.0 in March from 8.3 in February.  Finnish business sentiment posted a reading of minus 4, which was worse than expected.

Swedish producer prices in February rose 0.4% on month and 0.5% on year, marginally less than assumed.  Import prices went up 2.7% on year.  Sweden’s trade surplus of SEK 5.9 billion in February was 42% smaller than a year earlier, but the January-February surplus of SEK 16.7 billion compared to SEK 14.0 billion a year before.  Imports in February were 5.2% greater than a year earlier, whereas exports edged just 0.3% higher.

Dutch GDP growth was revised to a drop of 0.6% last quarter from minus 0.7% reported initially.  GDP was also 0.6% lower than in 4Q10.

The UBS Swiss consumption indicator printed lower at 0.87 in February after readings of 0.93 in January and 0.94 in December.

Greece’s trade deficit of EUR 1.04 billion in January was 29.3% smaller than a year before, reflecting a 15.6% plunge in imports.

Consumer confidence in South Korea edged a point higher to 101 in March, lending further support to the won.  Hong Kong recorded a considerably larger-than-expected trade deficit in February of HKD 45.8 billion versus HKD 25.1 billion a year earlier.  Trends have been distorted by an early Chinese New Year holiday.  Taiwan’s index of leading economic indicators rose 0.9% last month even as the index of coincident indicators fell by another 0.7%.

Central banks policymakers are meeting in Turkey and Hungary with interest rate decisions due shortly.  Markets may move today on rhetoric as well as the U.S. data releases.  Quite a few Fed officials speak publicly today: Rosengren, Dudley, Duke, and Fisher.  In Britain, Broadbent, Fisher, and Dale of the Bank of England also speak today.  So too will German Chancellor Merkel.

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

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