Somewhat Softer Dollar

April 29, 2013

With holiday closures in Japan for Showa Day (commemorating the era of former Emperor Hirohito) and China for Labor Day, the dollar had declined 0.7% against the kiwi, 0.6% versus the Australian dollar, 0.4% relative to the euro and Swiss franc, 0.3% against the loonie and sterling and 0.1% vis-a-vis the yen.  The yuan is steady.

Agreement on a governing coalition in Italy headed by Prime Minister Enrico Letta of the center-left but with strong representation of the center-right led by former Prime Minister Berlusconi was marred by violence outside the PM’s residence, where an unemployed worker killed two policemen.

Despite disappointing data were released in Euroland covering economic sentiment and retail purchasing manager indices, European stocks have firmed 1.4% in Italy, 1.1% in Spain, 0.6% in France and 0.4% in Germany.  Equities climbed 0.7% in New Zealand, 0.6% in Australia, 0.5% in India and 0.4% in Indonesia and Singapore.  The British Ftse is unchanged.

The strength of Aussie and New Zealand markets reflects commodities.  Gold climbed 1.2% to $1471.30 per ounce.  Oil advanced 0.4% to $93.34 per barrel.

10-year German bund and British gilt yields edged up a basis point each.  Italian auctions of 5- and 10-year notes resulted in the lowest yields in 2-1/2 years.  Analysts expect the European Central Bank to cut interest rates this Thursday.  The FOMC meets this week, too, and both Draghi on Thursday and Bernanke on Wednesday will be holding press conferences to explain the latest thinking on their policies.

Euroland’s indices of leading and coincident economic indicators fell in March by 0.4% and 0.1% according to the Conference Board.

The Ezone economic sentiment index dropped by a greater-than-forecast 1.5 points to a six-month low of 88.6 in April.  Consumer confidence printed at minus 22.3, matching the preliminary indication and 1.2 points better than March’s reading.  Industrial sector sentiment fell by 1.5 points to negative 13.8, weakest since December.  Service-sector sentiment slumped 4.1 points to a 5-month low of minus 11.1.  Retail sentiment dropped a full point to a 7-month low of minus 18.1, and construction was down another 1.4 points to minus 31.8, weakest since December.  The overall business climate index sank 0.18 points to a five-month low of minus 0.93.

Euroland’s retail purchasing managers index rose 0.5 point to a two-month high of 44.2 from a ten-month low hit in March.  44.2 still connotes a rapid pace of contraction, and Italy’s 37.2 reading was at a four-month low after a score of 40.3 in March.  The French retail PMI recovered 3.6 points to 43.7 from a record low in March, while Germany’s retail PMI fell by 0.2 points to a two-month low of 49.7.

Austria, the first European economy to have a reported manufacturing PMI for April, saw such dip another 0.3 points to a sub-50 reading of 47.8.  50 is the threshold between expansion and contraction.

The 12-month rate of decline in Greek producer prices was 1.5% in March, a turnaround form a 0.8% on-year rise in February.  The PPI fell 1.1% on month.

Five German states — North Rhine Westphalia (1.2%), Saxony (1.3%), Hesse (0.9%), Baden-Wuerttemberg (0.9%) and Brandenburg (1.0%) — reported lower CPI inflation in April than in March.

Spanish CPI inflation slowed sharply to 1.4% in April and to 1.5% on a harmonized basis.  Adjusted for variations in the number of working days, Spanish retail sales were 8.9% lower than a year before in March.  Italian wage inflation remained steady at 1.4% in March, but business sentiment in Italy fell to 87.6 in April from a reading of 88.9 in March. Icelandic CPI inflation of 3.3% this month was down from 3.9% in the year to March.  Finnish consumer confidence weakened 3.8 points to a 6.4 score in April. 

Swedish retail sales fell 0.4% on month in March, nearly halving the 12-month increase to 1.8%.  Minutes from the Swedish central bank nonetheless expressed satisfaction with the existing policy, which is already quite accommodative.

South Korea’s unadjusted current account surplus of $4.98 billion last month was 68% wider than a year before, but the seasonally adjusted of $4.36 billion was very similar to that in February.

Consumer confidence in Turkey rose 0.7 to a reading of 75.6 in April.  Producer prices in Singapore dropped by 1.1% on month in March and by 7.2% from a year earlier.

U.S. personal income, personal spending, pending home sales and the Dallas Fed Manufacturing Index arrive today.  Labor statistics are due at the end of this week that connects the end of April with the start of May.  Can’t trust Mondays on weeks packed with data.

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

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