May Ending in a Risk Averse Mood

May 31, 2013

Commodity-sensitive currencies had a difficult session.  The New Zealand dollar dipped below $0.8000 for the first time since September 6, 2012.  It fell as low as USD 0.7973 and is 1.0% weaker on balance.  The Australian and Canadian dollars have slipped 0.8% and 0.5% against the greenback, which also has appreciated by 0.4% against the euro, 0.2% versus sterling and 0.1% relative to the yuan.  The Swiss franc kept pace with the dollar, and the yen has edged 0.2% stronger.

Share prices in the Pacific Rim fell by 2.3% in India after disappointing Indian GDP data and by 1.2% in Indonesia, 1.1% in China, 0.7% in Singapore, 0.4% in Hong Kong, 0.3% in Malaysia and 0.1% in Australia.  Stocks rose 1.4% in Japan, 1.0% in the Philippines and 0.9% in New Zealand where officials for some time have called the kiwi overvalued and where RBNZ Governor Wheeler recently signaled a readiness to intervene more forcefully in currency markets.

Equity trading turned uglier in Europe where stock prices have fallen 1.2% in Italy, 1.0% in France, Britain and Spain and 0.8% in Germany.

The ten-year Japanese JGB yield fell by 4 basis points, while the 10-year German bund and British gilt yields are 2 bps lower.

Gold rebounded 0.6% to $1399.10 per ounce, but oil is off 0.7% at $92.47 per barrel ahead of a meeting in Vienna of Opec oil ministers.  Imposed limits on production are not expected to be changed.

The rumor of the day is that China’s manufacturing purchasing managers index will show a dip into contractionary territory below a reading of 50.  This has weighed on investor psychology in today’s session.  Markets are also digesting the usual end-of-month cornucopia of released data.

Japanese industrial production jumped 1.7% in April, their fifth consecutive advance and twice as much as analysts were predicting.  Shipments rose 1.1%, and inventories climbed by 0.6%.  Officials at the Ministry of Economics, Trade and Industry did not upgrade their assessment of “picking up at a moderate pace” and released forecasts that show production likely to be flat in May and 1.4% weaker in June.  Motor vehicle production was 6.5% lower than a year earlier after dropping by 16.4% in the year to March.

Core Tokyo CPI inflation edged above zero for the first time since mid-2011, albeit to 0.1% from -0.5% in April.  Japanese core consumer prices rose 0.1% seasonally adjusted in April and posted a slightly smaller 0.4% on-year drop.  If energy as well as fresh food prices are deleted, what’s left of the CPI recorded a 0.6% 12-month rate of decline.

Japan’s manufacturing purchasing managers index rose another 0.4 points to 51.5 in May, highest since August 2011 and up significantly from a recent low in December of 45.0.  This was the third straight reading above 50, connoting resumed expansion.

Japan’s jobless rate held steady in April at 4.1%, but the job offers to applicants ratio improved by a larger-than-anticipated increment to 0.89 from 0.86 in March and 0.85 in February.  Employment posted a 0.6% on-year increase after 12-month gains of 0.5% in March and 0.3% in February.

Real household spending in Japan dived 4.6% on month in April after month-on-month advances of 1.9% in January, 2.2% in February and 2.0% in March.  The 12-month rate of increase slowed to 1.5% from 5.2% in the year to March.

Japanese housing starts and construction orders recorded on-year growth in April of 5.8% and 2.0%.  In the first quarter, starts were 5.1% higher than a year before, and orders were up 3.1%.

The MNI gauge of Chinese business sentiment declined further to a reading of 56.7 in May from 57.1 in April, 58.2 in March and 61.0 in February. 

On-year GDP growth in India was just 4.8% last quarter, a mere tenth percentage point above the 4.7% in the year to 4Q12 which was the lowest since early 2009.

Analysts were also disappointed to learn that South Korean retail sales had dropped 0.5% in April.  An uptick following March’s 1.6% increase was forecast.  Business sentiment in Thailand weakened 5.6 points to a reading of 48.8 last month.  Turkey posted a larger $10.3 billion trade shortfall in April, and Malaysian PPI deflation widened to 4.9% in April.

New Zealand reported its first quarterly rise of the terms of trade (export/import price ratio) since 2Q11.  The Reserve Bank of New Zealand also published the latest reading of its business sentiment index, showing a significant improvement to 41.8 in May from 32.3 in April and 34.6 in March.

Credit to the Australian private sector posted a fifth straight rise in April, a gain of 0.3% on month and 3.1% on year.

Key European data released today revealed that

  • Ezone unemployment had edged up another tenth percentage point to 12.2% in April, a new record high and up from 11.2% a year earlier.  Spain and Greece topped the leader board with depressionesque jobless rates above 25%.  Italian unemployment rose to 11.9% in the first quarter from 11.2% in 4Q12.  Belgian unemployment ticked up 0.2 percentage points to 8.4%.
  • CPI inflation in the euro area backed up to 1.4% in May from 1.2% in April but well below the ECB target and down from 1.7% in March and 2.4% in May 2012.  Core inflation was 1.2%.  Energy prices were 0.2% lower than a year before, but food was 3.3% higher.
  • German retail sales volume fell by 0.4% in April.  Analysts looked for a small uptick.  Sales were 1.8% higher than in April 2012 but 0.7% below the first-quarter average level.
  • French consumer spending dipped 0.3% in April and was merely 0.2% higher than a year earlier.
  • French producer price inflation slowed to 0.6% in April from 1.9% in May.
  • British consumer confidence of minus 22 in May was five points better than the April reading and the best score since November.
  • British M4 money growth remains anemic at minus 0.1% on year in April.  Mortgage approvals stayed at 53.7K, the level in March.
  • Greek retail sales recorded a smaller 5.6% on-year drop in March following plunges of 16.8% in January and 14.1% in the year to February.
  • Danish GDP grew 0.2% last quarter, about as expected, but was also 0.7% below its year-earlier level.
  • The Swiss index of leading economic indicators improved more than forecast to a reading in May of 1.10 from 1.04 in April.
  • Spain’s current account swung to a EUR 1.4 billion surplus in March from a EUR 1.3 billion deficit the month before.
  • Sweden recorded a SEK 67.9 billion current account surplus last quarter, 7.8% larger than in the final 2012 quarter.
  • Iceland’s revised ISK 4.85 billion trade surplus in April was about half the size of the surplus in March.
  • Cypriot PPI inflation slowed to 0.7% in April from 1.3% in March, and Hungarian PPI inflation of 0.7% was a third as much as in March.

Scheduled North American data today include Canadian monthly and quarterly GDP, U.S. personal income and spending, the U. Michigan consumer sentiment index, and the Midwestern PMI reports from Chicago and Milwaukee.

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

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