Monday Focus on Japan and China

April 8, 2013

Weekend coverage of the Bank of Japan’s stimulus continued to emphasize that such exceeded all expectations and enjoyed the approval of almost the entire central bank Board.  In this euphoria, Japan’s Nikkei closed up 2.8% at 13,193, its best closing level since August 12, 2008 (exactly a month before the Lehman Brothers collapse).  The yen hit fresh lows of 99.01 per dollar, weakest since May 8, 2009, and 128.87 per euro, weakest since January 21, 2010.  The ten-year JGB slipped a basis point to 0.52, still about 9 bps above last week’s trough, which had matched the June 2003 low.

Japan’s current account posted an unadjusted surplus of JPY 637 billion in February, the first surplus since October but 47% smaller than the seasonally unadjusted surplus in February 2012.  The Basic Balance (current account plus long-term capital flows) showed a JPY 4.6 trillion surplus because of a JPY 4.4 trillion net portfolio investment inflow.  The seasonally adjusted current account showed a marginal JPY 0.1 billion deficit, down from a January surplus of JPY 365 billion.  Between January and February, exports fell 2.7%, while seasonally adjusted imports expanded by 5.6%. 

Japanese stock and bond transactions in March generated a JPY 2.375 trillion net capital inflow.  Foreigners were net buyers of JPY 1.669 trillion of Japanese equities, whereas Japanese residents unloaded JPY 1.611 trillion of foreign stock holdings ahead of the end of the fiscal year.

Japan’s economy watchers index, a gauge of perceptions by service sector workers, improved 4.1 points to a reading of 57.3 in March.  Such as as weak as 45.8 in December when the Abe government was elected and troughed recently at 39.0 last October.

Bankruptcies in Japan were 20.0% fewer in March than a year earlier.  The Bank of Japan’s balance sheet had assets totaling JPY 164.3 trillion at end-March, which corresponds to the end of the fiscal year.  BOJ Governor Kuroda aims to lift the balance sheet substantially over the coming 21 months.

More cases of bird flu turned up in China, where investors also are concerned about the government’s restraints on the property market.  Stocks fell by 0.5% in China, 2.4% in Taiwan, and 0.6% in Indonesia.  Nervousness about North Korea depressed the South Korean Kospi index by 0.4%.  Equities also fell 0.8% in New Zealand, but rose 0.3% in Australia.  In European markets, share prices show gains of 0.6% in France, 0.4% in Italy, 0.3% in Spain and Germany, and 0.2% in Britain.

The dollar shows gains since Friday’s close of 1.0% against the yen but just 0.2% versus sterling and the Swiss franc and 0.1% relative to the loonie.  The dollar has dipped 0.1% against the euro and kiwi and is unchanged against the yuan and Australian dollar.

The yields on 10-year British gilts and German bunds have risen by five and two basis points.

The price of West Texas Intermediate oil is 0.8% higher at $93.43 per barrel.  That on gold is unchanged at $1576.60 per ounce.

German industrial production rose 0.5% in February, reversing a 0.6% drop in January.  January-February output together averaged 0.3% less than the 4Q12 level.  February saw a big 3.9% monthly rise in energy but a 2.7% slump in construction.  Manufacturing output expanded 0.5%, led by a 2.4% increase in capital goods.  Industrial production was 1.8% lower than a year earlier.

Swiss industrial production was 1.7% higher in 4Q12 than in 4Q11, while industrial orders sank by 2.4%.

The Sentix gauge of investor sentiment toward the euro area fell by 6.7 points in April to a five-month low of minus 17.3.

Danish industrial production fell between January and February by 4.8% in value and 2.2% on a volume basis.  Czech industrial output was 5.7% weaker than a year earlier in February.  Norwegian industrial output decreased 1.9% on month and 10.7% on year during February. 

The Czech trade surplus of CZK 28.7 billion in February was 10% smaller than in January. Hungary’s EUR 673 million trade surplus was 113% wider than in the prior month.  Finland posted a tiny 85 million euro trade deficit in February. 

Taiwanese consumer price inflation of 1.4% in March was just half as much as recorded in February.  Taiwan also experienced a $3.2 billion trade surplus in March.  Turkish industrial production grew 1.5% on month and 4.4% on year in February.

Australia’s construction purchasing managers index suffered a relapse to 39.0 in march after improving to 45.6 in February from 36.2 in January.  Australian job ads fell 1.5% last month.

There are no meaningful U.S. data releases today, but Treasury Secretary Lew is in Europe trying to persuade governments there to lessen their fiscal austerity.  President Obama’s 2014 budget goes to congress, and Fed Chairman Bernanke speaks publicly later in the day.  The Bank of Canada will be publishing results of the latest quarterly business outlook survey in Canada.

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

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