Stocks in Asia and Europe Follow U.S. Rally

March 6, 2013

The Dow Jones Industrials closed at an all-time high on Tuesday of 14,254.  In the Pacific Rim, equities closed up 2.1% in Japan, 1.8% in the Philippines, 1.5% in Indonesia, 1.0% in Hong Kong and China, 0.8% in Australia, and 0.7% in New Zealand.  The German Dax leads European markets with a gain so far of 1.1%, while stocks are 0.6% higher in Italy, up 0.4% in Britain and Spain, and 0.3% in France.  This rally has been unfazed by a string of central bank policy meetings this week.

The dollar shows overnight gains of 0.4% against the Swiss franc and sterling, 0.2% versus the yen and euro, and 0.1% relative to the loonie but is down 0.3% against the kiwi and 0.1% versus the Australian dollar.  The Chinese yuan is unchanged.  Remarks by Chinese officials point to little chance of an interest rate cut this year.  A more stimulative fiscal stance was outlined yesterday, with the deficit increasing to 2% of GDP from 1.6% last year.

Ten-year sovereign debt yields have risen by 3 basis points in the United States, two bps in Japan and Germany, and a single basis point in Britain.  Spain’s yield has edged lower.

The West Texas Intermediate crude oil price is 0.3% softer at $90.59 per barrel.  Gold has edged up 0.1% to $1576.00 per ounce.

Euroland GDP growth last quarter was confirmed at negative 0.6% from 3Q and down 0.9% on year.  Real GDP, personal consumption, government spending, and business investment contracted in all four quarters of 2012.  Exports and imports each fell 0.9% between 3Q and 4Q, exerting a neutral net impact on GDP growth.  In the year between 4Q11 and 4Q12, GDP dropped 6.0% in Greece, 3.8% in Portugal, 3.0% in Cyprus, 2.7% in Italy, 1.9% in Spain, 1.4% in Finland, 0.9% in the Netherlands, 0.4% in Belgium and 0.3% in France.  German GDP rose only 0.4% due to a 0.6% decline in the final quarter of the period.

In Eastern Europe, GDP in the year to 4Q12 declined by 2.8% in Hungary and 1.7% in the Czech Republic, while firming 1.1% in Poland, 0.5% in Bulgaria, and 0.1% in Romania.  The on-year Polish growth rate, though positive, was marginally less than half the 2.3% advance between 2Q11 and 2Q12.

Poland’s central bank accordingly announce a fifth straight rate cut today and this time did a 50-basis point magnitude.  The earlier four moves had been by 25 bps each.  The central bank rate now stands at 3.25%, 25 bps lower than its level prior to January 2011.

Hugo Chavez, the cancer-stricken president of Venezuela, has died at age 58.  Vice President Madura will be the government’s leader, pending elections that are likely in about a month.

Australian GDP rose 0.6% last quarter and by 3.1% from a year before.  The sequential quarterly rise was close to analyst expectations, and on-year growth was unchanged from the prior quarter.  Private investment contracted last quarter, but net exports were a source of economic growth.

British shop price inflation accelerated to 1.1% in February from 0.6% in January but remained less than December’s 1.5%.  The Halifax index of British house prices rose 0.5% on month in February and 1.9% on year.

Germany’s construction purchasing managers index relapsed to a reading of 43.8 in February following scores of 47.7 in January and 43.3 in December.

U.S. mortgage applications jumped 14.8% last week.  The ADP estimate of U.S. private employment growth was 198K in February, about 30K more than expected.  Moreover, January’s increase was revised higher to 215K. 

The U.S. reports factory orders today, and the Fed releases its Beige Book of regional economic trends.  The Bank of Canada is not expected to change its 1.0% policy rate.  Brazil also makes an interest rate announcement today.  Tomorrow’s central bank line up includes the Bank of Japan, ECB, Bank of England, Bank Indonesia, Bank Negara Malaysia, and Bank of Serbia.

Copyright 2013, Larry Greenberg.  All rights reserved.  No secondary distribution without express permission.

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