Kiwi Stronger

April 24, 2013

The New Zealand dollar, known as the kiwi, got a lift from the central bank policy statement.  Although the Official Cash Rate was left at 2.5% and the monetary policy outlook predicting the OCR will likely remain at that low level all year was also not changed, investors reacted to an upgraded assessment of New Zealand’s economic recovery.  The kiwi is 0.6% firmer against its U.S. counterpart.

The U.S. dollar otherwise has risen by 0.2% against the yen and 0.1% versus the Australia dollar but is down 0.3% against sterling and 0.1% relative to the loonie and euro.  The Swiss franc and Chinese yuan are unchanged.

Yesterday’s stock market rally in North America continued overnight in other bourses.  Japan’s Nikkei jumped 2.3% to a new 5-year high, closing at 13,843.  Stocks rose 1.7% in Australia and Hong Kong, 1.9% in China, 1.0% in Taiwan, 0.9% ion South Korea, 0.7% in Indonesia and 0.5% in New Zealand.  The market in India was shut for the Mahavir Jayanti holiday that commemorates his birth.  In Europe, share prices have climbed 0.6% in Spain, 0.5% in Germany, 0.4% in France but just 0.1% in Britain where the Bank of England announced an extension of the Funding for Lending Scheme from end-2014 to end-2015.  The program was first introduced in August 2012.

U.S. stock futures are up somewhat.  Apple earnings were below expectations.  The firm plans a $60 billion buyback of shares and a 15% dividend increase.

Gold and oil prices increased by 0.9% to $1421.30 per ounce and 0.7% to $89.83 per barrel.

Sovereign debt prices are down.  The ten-year British gilt yield is up two basis points, and the 10-year German bund and Japanese JGB yields edged a basis point higher.

Disappointing German IFO index results further confirmed a significant relapse in that economy.  The business climate index sank 2.3 points to a 104.4 reading in April.  That’s a three-month low.  Such had crested at 107.4 in February.  Street estimates for April had hovered slightly above 106.  The current situation was viewed more cautiously with a reading of 107.2, down from 109.9 in March and 110.2 in February.  Expectations fell by 2.0 points to 101.6.  Wholesale activity clocked in at negative 5.2, a substantial turnaround from +6.2 in February.  Manufacturing was at 3.4 versus 9.6 in February.  Retail showed some resilience.

The IFO German services climate index also deteriorated, with a reading in April of 12.4 after 20.4 in March.  The Conference Board reported slight increases of 0.3% in Germany’s index of leading economic indicators and 0.1% in its coincident index of economic indicators.

Australia first-quarter consumer price inflation data were a touch lower than anticipated, depressing Aussie bond yields.  The CPI rose 0.4% on month but by just 0.1% from 4Q12 on a seasonally adjusted basis.  On-year inflation of 2.5% was up from 2.2% in the final quarter of 2012 but lower than analyst forecasts of 2.8%.  Australia has two measures of core inflation, one of which showed a 2.2% 12-month increase and the other of which was 2.6% higher.  Inflation remains in target, giving the central bank flexibility to cut its interest rate in the future if growth fails to show sufficient pep.

Japanese corporate service prices increased 0.7% in March because of a seasonal jump in advertising costs, but the 12-month comparison returned to January’s negative 0.2% from zero in February.

The Reserve Bank of Australia plans to hold about 5% of its forex reserves in Chinese renminbi according to a deputy governor of the central bank.

Italian retail sales slid 0.2% on month and fell 4.8% on year in February.  Dutch business sentiment weakened 0.8 points further to negative 5.6 in April.  Austrian industrial output fell 1.4% on month and posted a smaller 1.4% 12-month increase in February.  Spanish home mortgages slumped 7.5% in the year to February.  The UBS Swiss consumption indicator edged up 0.01 points to 1.25 in March.  And Czech economic sentiment deteriorated by 2.9 points to minus 5.3 in April, with consumer confidence dripping three points and business sentiment sliding 2.9 points.

Finnish producer prices were unchanged from a year earlier in March.  Spanish producer prices were 0.5% higher on the same time comparison.

The Confederation of British Industries index of distributive trade activity ticked down a point into negative territory (-1) in April, marking its weakest reading since last August.  In between, such had improved to +33 in November.  The British Bankers Association reported 31,227 mortgage approvals in March, slightly better than the February total of 30,579 but marginally lower than analyst expectations.

U.S. mortgage applications rose 3.9% in the week of April 19.  The 30-year fixed-rate mortgage eased for a fifth week in a row, dipping two basis points to 3.65%.  Statistics for U.S. durable goods orders will be released later today.

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

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