Watching G20 Talks and French Election

April 20, 2012

Finance ministers and central bank leaders from the Group of Twenty meeting in Washington are talking mostly about the euro debt crisis.

The first round of French Presidential elections on Sunday is expected to set up a run-off contest on May 6 between the incumbent center-right Sarkozy and the Socialist candidate, Francois Hollande.  The term is for five years, and Hollande commands a fairly comfortable lead in opinion polls.

Germany business climate unexpectedly edged higher in April according to the IFO Institute.  Such was the sixth straight improvement and concentrated in manufacturing.  The index rose to 109.9 in April from 109.8 in March, 109.7 in February and a trough of 106.5 last October.  Conditions ticked up by 0.1 points, while expectations remained steady.  The manufacturing index rose 1.4 points to 15.4.  Construction fell by 6 points to minus 3.8. Wholesale slid 0.1 points, while retail edged 0.1 higher.

There was good news from Britain, too, where retail sales volume jumped 1.8% in March and 3.3% from a year earlier.  Only a fractional monthly increase had been forecast.  Sales volume in the first quarter increased 0.8% from 4Q and by 1.9% from the first quarter of 2011.

From China, there is some hope that the central bank will ease its policy stance possibly as soon as this weekend.

Market signs reflect cautious risk taking.

  • The yen slid 0.2% against the dollar, which otherwise fell by 0.4% against the Swissie and euro and 0.3% relative to the loonie and sterling.
  • The kiwi and Aussie dollar are steady, and the Chinese yuan has dipped 0.1% against the dollar.
  • The German Dax, Paris Cac and British Ftse have risen 0.8%, 0.5%, and 0.2%.  In the Pacific Rim, share prices rose 1.2% in China, 0.4% in Indonesia, and 0.1% in Australia and Hong Kong, but stocks fell by 1.5% in Taiwan, 1.3% in South Korea, 0.7% in India, and 0.3% in Japan, The Philippines, Malaysia, and Vietnam.
  • Ten-year British gilt and German bund yields are up by five and two basis points.  The Japanese JGB yield is unchanged.
  • Oil and gold prices climbed by 0.7% and 0.2% to $102.95 per barrel and $1643.90 per ounce.

Japan’s tertiary index, a gauge of service sector activity, was unchanged in February and just 0.2% higher in January-February than the 4Q11 mean.  Analysts were expecting the tertiary index to post an increase of 0.5-0.8%.  The index was 2.4% higher than a year ago.

Australia’s export-import price ratio fell last quarter.  Export prices tumbled 7.0% from 4Q11, even exceeding the projected 5% decline, while import prices fell 1.2%, their first decrease in a year.

According to the Bank of Japan’s loan officer survey, the corporate loan demand index improved 8 points to a reading of +6 in the first quarter of 2012.  Bank of Japan Governor Shirakawa made remarks that will not dissuade market expectations that the BOJ will ease policy on April 27.  New macroeconomic forecasts will be unveiled then, and the BOJ leader admitted it may be necessary to ease further in the future.

Malaysian consumer prices were unchanged for a second straight month in March and 2.1% higher than a year earlier.  South Korea’s index of leading economic indicators rose 2.8% in February.

German producer prices rose 0.6% in March and posted a 12-month increase of 3.3%.  The results were a tad above analyst forecasts.  Non-energy producer prices went up 0.3% on month and 1.6% on year, down from a 2.0% 12-month pace in December 2011.

The IFO index for German services remained unchanged in April, printing at 22.4, as better current conditions offset somewhat lower expectations.

Dutch consumer confidence improved seven points to a reading of minus 32 in April and was also stronger than February’s minus 36 score.

No U.S. economic indicator releases are scheduled today.  Canada will be reporting consumer prices and the index of leading economic indicators.  Mexican unemployment also arrives today.  In Washington, D.C., G20 officials are meeting to mostly discuss the euro debt crisis and implore Euroland leaders to fully address the problem, lest it take another nasty turn for the worse. 

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

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