Concerns about Euro Debt and Chinese Growth

April 16, 2012

The euro fell 0.4% on balance against the dollar and dipped as low as $1.2995, the first sub-$1.3000 reading since February 16.

Share prices in Japan tumbled 1.7% in Japan to the lowest session closing level since February 21.  Speculation persists that the BOJ will extend quantitative easing later this month.  However, Japanese department store sales in March were 14.1% higher than a year earlier, surpassing analyst expectations.

The People’s Bank of China doubled the yuan’s daily trading band width to 1.0%, the first change of such in nearly five years.  The dollar climbed 0.2% relative to the yuan.  Investors are still digesting last Friday’s news of weaker-than-assumed Chinese GDP growth in 1Q12.

Spanish 10-year bond yields climbed further above 6.0%, extending their spread against German bunds by 17 bps to 441 bps.  Investor anxiety about Spain and Greece has been fanned by adverse weekend developments.

The dollar is up 0.4% against the Swiss franc, which remains marginally weaker than the SNB’s 1.2000 per euro target ceiling.

New Zealand Prime Minister Key expressed concern about the NZD’s appreciation.  This verbal intervention helped depress the kiwi by 0.6% against the greenback.  The U.S. dollar also rose 0.2% against the Australian dollar, but slid 0.2% relative to the yen and by 0.1% versus the loonie.  Sterling is unchanged.

Equities fell by 0.8% in South Korea and Taiwan, 0.5% in Australia, 0.4% in Hong Kong, Malaysia, and New Zealand, and 0.3% in China and Indonesia.  After a wobbly start, the German Dax and British Ftse are 0.7% higher, while the Paris Cac has risen 0.8%.

The yields on 10-year Japanese JGBs, British gilts and German bunds are each a basis point lower.

Gold slipped 0.5% to $1651.40 per ounce.  Oil edged down 0.1% to $102.69 per barrel.

The euro area trade balance continued to run in surplus in February on a seasonally adjusted basis, printing at EUR 3.7 billion after surpluses of EUR 7.1 billion in December and EUR 5.3 billion in January.  Exports advanced 8.6% (28% annualized) over the four between October and February.  The unadjusted trade deficit in January-February of EUR 5.2 billion was more than 70% smaller than the shortfall of EUR 19.0 billion in the first two months of 2011.

Italy posted a EUR 1.1 billion trade gap in February.  Norway, an energy producer, saw its trade surplus widen to a record of NOK 46.42 billion in March, 46% wider than in March 2011.

Britain’s Rightmove house price index showed an improving housing market in April, recording a 3.4% on-year advance after 2.2% in March.

The Swiss PPI/import price index rose by a smaller-than-projected 0.3% last month and was 2.0% lower than a year earlier.  Danish producer price inflation slowed to a 2.7% 12-month increase in March.  Czech PPI inflation also slowed in March, dropping 0.3 percentage points to 3.0%.

Wholesale prices in India ticked down to a 12-month increase of 6.9% in March from 7.0% in February.  There is some speculation that the Reserve Bank of India will ease monetary policy tomorrow.

New Zealand’s service-sector performance index fell 1.9 points in March to 53.9.  Food prices dropped 1.0% in March and to a 12-month increase of just 0.2%.

Turkish consumer confidence increased to 93.9 last month from 93.2 in February. 

The United States releases a slew of economic indicators today: notably retail sales, but also business inventories, the Empire State manufacturing index, the National Association of Home Builders index, and the Treasury TIC figures on international capital flows.  Bullard and Pianalto of the Federal Reserve have speeches to give.  Canada releases security transaction flows with non-residents.

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

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