Market Tone Set by Weaker Yen

April 19, 2013

Japan’s delegation got its spin of the Group of Twenty talks out first.  Finance Minister Aso said no objection was made to Japan’s reflationary policies, which are meant to end deflation.  It’s not a policy to devalue the yen, he said.  Bank of Japan Governor Kuroda said much the same, and Prime Minister Abe gave broadly loose indications of a third dimension of the policy change, structural reform to promote freer trade, deregulate labor markets, and channel public and private investment funds to emerging growth industries.

The yen is 1.0% weaker against the dollar in response after touching overnight lows of 99.36 per dollar and 130.08 per euro.

Other financial market action has cued off the weak yen.

  • The dollar is generally softer with losses of 0.7% against the kiwi, 0.4% versus the Aussie dollar and sterling, 0.3% relative to the euro and Swissie, 0.2% relative to the Canadian dollar, and 0.1% against China’s yuan.
  • Share prices recovered 2.8% in China, 2.3% in Hong Kong, 1.8% in Taiwan, 1.5% in India and the Philippines, and 0.7% in Japan. 
  • European bourses are also up by 1.5% in Spain, 2.1% in Italy, 1.3% in France and 0.6% in Germany and Britain.
  • Gold and oil prices rebounded 1.4% to $1412.60 per ounce and 1.1% to $88.66 per barrel.
  • In contrast to a one-basis point downtick in the 10-year Japanese JGB yield to 0.58%, 10-year British gilts are four basis points higher, and German bunds have risen by two bps.

Japan reported a 97.6 February reading on the index of leading economic indicators, 2.6 points better than in January and its best level since October 2007.  The coincident index rose 3.4 points to a nine-month high.

Japan’s all-industry index, a supply-side gauge of GDP, went up 0.6% in February but was still 2.5% lower than in February 2012 and below the end-2012 level as well.  The rise in February was led by gains of 1.7% in construction and 1.1% in services.  Industrial production recorded a 0.6% advance, matching the all-industry measure.

The Bank of Japan’s quarterly senior loan officer survey was also released, showing improved loan demand from companies and households in 1Q13.

The Conference Board measure of China’s index of leading economic indicators was unchanged on month in March, while the index of coincident indicators dipped 0.2%, further suggesting a loss of momentum in the world’s second largest economy and main growth locomotive.  But Chinese business sentiment, according to the MNI measure, improved 1.1 points to a score of 59.3 in April.

The incoming Bank of England governor (effective July) and outgoing Bank of Canada governor (same person) gave an interview supporting forward guidance of monetary policy such as the Fed has been doing. 

The euro area’s current account posted a seasonally adjusted EUR 16.3 billion surplus in February, up from EUR 13.8 billion in January and EUR 13.0 billion in December.  The unadjusted surplus widened to EUR 135.3 billion in the twelve months to February from just EUR 21.1 billion in the previous statement year.  Euroland experienced a net inflow on long-term capital and the current account of EUR 174.6 billion in the past twelve months versus EUR 81.3 billion during the previous twelve months.

Dutch consumer confidence improved six points to a score of negative 35 in April.  Belgium’s consumer confidence index is due later today.

Italian industrial orders fell 2.5% on month and 7.9% on year in February following a 1.4% drop in January.  Industrial sales declined by 1.0% in the latest month.  Spain’s trade deficit of EUR 1.2 billion in February was just a third as big as the January shortfall.

No U.S. data are scheduled for release today. Canada reports consumer prices, and Mexican unemployment data are due.

The Boston suburbs of Watertown and Cambridge had a night of violence as law enforcement officers pursued the marathon bomber suspects, one of whom was killed.  One unconfirmed news report claims the bombers are brothers from near Chechnya.

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

Tags: , ,


Comments are closed.