Yen Strengthens after BOJ Meeting… European Stocks Lower

April 26, 2013

After a Policy Board meeting lasting four hours and 28 minutes, the Bank of Japan left its interest rate target at zero to 0.1% and did not initiate any new quantitative easing initiatives beyond those unveiled at the prior meeting.  The monetary base will be increased by 60-70 trillion per year, and policy easing will not be relaxed until the goal of 2% core inflation has been attained.  The BOJ released a new semi-annual Outlook for Economic Activity and Prices that revised upward both projected growth and core inflation.

The yen is 0.6% stronger against the dollar than at Thursday’s close, as market reacted to disappointing Japanese CPI figures and the lack of any further BOJ policy changes.  The dollar also slid by 0.2% versus sterling, Swissie and the kiwi and 0.1% against the yuan, loonie and Swiss franc.  The greenback is unchanged relative to the euro and up 0.1% against the Australian dollar.

European equities dropped back on end-week profit-taking and ahead of today’s release of U.S. 1Q GDP.  Share prices are down by 1.2% in Spain, 1.1% in France, 0.7% in Italy and 0.5% in Germany and Britain.  Japan’s Nikkei slipped 0.3%.  Elsewhere in the Pacific Rim, share prices fell 0.8% in China, 0.6% in India, 0.4% in South Korea, and 0.3% in Indonesia but firmed 0.7% in Hong Kong, 0.3% in Malaysia and Singapore and 0.2% in New Zealand.

Ten-year British gilt and German bund yields are three and two basis points lower.  The 6-month Italian bill yield fell to a record low of 0.5%.

WTI oil fell 0.7% to $93.03 per barrel, while gold continued its rebound, firming 0.3% to $1466.70 per ounce.

Core Japanese consumer prices fell 0.5% in the year to March, the most since April 2010 and 0.2 percentage points less than in the year to February.  Total CPI inflation was minus 0.9%.  Seasonally adjusted consumer prices fell 0.2% on month following 0.1% downticks in both January and February, but core CPI was unchanged in all three months of 1Q.

The BOJ projects GDP growth of 2.9% this fiscal year followed by 1.4% in FY2014 and 1.6% in FY2015.  Core CPI is projected to rise 0.7% this fiscal year, 1.4% in FY14 excluding the effect of a VAT increase, and 1.9% in FY15 excluding VAT.

China’s business sentiment index for April was revised down to 58.5 from a preliminary estimate of 59.3.  It had printed at 61.0 in February and 58.2 in March.

Industrial production in Singapore was a bit weaker last month than assumed, rising 6.2% on month and falling 4.1% on year.  Such had plunged 16.3% between February 2012 and February 2013.  Thai industrial output, in contrast, unexpectedly posted a rise in March of 0.5% following February’s on-year drop of 1.2%.

South Korean consumer confidence scored a 102 in April, down from 104 in March and matching the readings in both January and February.  Analysts were anticipating some improvement in the latest observation.

The New Zealand trade surplus of NZD 718 million in March was the largest since April 2011 and compared with a surplus of NZD 414 million in February.  The first-quarter deficit was just half as large as a year earlier.

Ezone money and credit growth were disappointing in March.  On-year M3 growth slowed to 2.6% from 3.1% in February and 3.5% in January and averaged 3.0% in the first quarter, down from 3.7% in the final quarter of 2012.  Loans to the private sector were 0.8% lower than in March 2012, the same contraction as in the year to February.  Marketable instruments, the difference between M3 and M2 money, plunged 13.8% in the year to March following an 8.8% drop in the year to February.

German import prices slid 0.1% in March, lengthening their on-year pace of decline to 2.3%.  Such had risen 3.1% in the year to March 2012.  Import prices excluding mineral fuels fell by 0.9% on year in the latest reported month.  Export prices edged up 0.1% on month and were unchanged on year.

French consumer confidence stagnated at a reading of 84 in April, same as in March and down from 86 in both January and February.

Switzerland’s index of leading economic indicators recovered to 1.02 in April after readings of 1.00 in March and 1.04 in February.

Sweden had a SEK 6.8 billion trade surplus last month, similar to February’s 6.7 billion kronor surplus.  Likewise, the surplus in 1Q13 was SEK 19.4 billion versus SEK 19.0 billion in the first quarter of 2012.  Swedish consumer sentiment improved to a reading of 5.2 in April from 2.8 in March.

Dutch producer prices fell by 0.9% in March from both February and a year earlier.  Irish retail sales dropped 1.9% on month in March and 3.6% from a year earlier.  Hungary’s jobless rate averaged 11.8% in the first quarter, up from 11.6% in December-February. 

Street estimates for the preliminary U.S. GDP growth rate in 1Q13, due at 12:30 GMT, hover around 3.0%.  The final U. Michigan April index of consumer confidence is due at 14:00 GMT.  Central bank decision are awaited in Colombia and Mexico later today.  Neither are likely to change policy.

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

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