Market Tone Aided by Some Supportive Data

June 4, 2013

Data released by the Bank of Japan reflect this quarter’s intensifying monetary easing.

  • The central bank balance sheet had expanded to JPY 184.3 trillion by end-May from JPY 174.7 trillion at end-April and JPY 164.3 trillion at end-March.
  • On-year growth in Japan’s monetary base (MB) accelerated to 31.6% in May from 23.1% in April, 15.2% in 1Q, and 2.6% in the second quarter of 2012.
  • The portion of the MB controlled directly by monetary policy, current account balances, were 108% greater in May 2013 than May 2012.  The plan is to double the size of the MB within two years.

Japanese labor cash earnings swung from an on-year 0.9% decline in March to a 0.3% increase in the year to April.

Prime Minister Abe of Japan is reportedly poised to unveil his plans for deregulation and hopes to get cabinet approval for such within ten days.

While the Reserve Bank of Australia left its Official Cash Rate unchanged at 2.75%, a statement was released that said the Aussie dollar remains excessively high, inflation is contained, and further cuts in the OCR are possible.

Australia in 1Q13 recorded the smallest current account deficit, A$ 8.51 billion, since 3Q11.  Such followed a A$ 14.759 billion deficit in the final quarter of 2012.

In Europe, Britain’s construction purchasing managers index printed above the 50 no-change level in May (50.8 to be precise) for the first time since October and only the second time since August 2012.  The reading in May was 1.4 points above that in April and 4.0 points better than the score of 46.8 in February.

British same store retail sales recovered to an on-year advance of 1.8% in May from a drop of 2.2% in April according to the British Retail Consortium.

Benefiting from the hiring of summer tourism industry workers, unemployment in beleaguered Spain fell more than expected in May.  The drop of 98.3K workers to a 4.89 million outstanding total exceeded forecasts and was the third monthly improvement in a row.

Ireland’s manufacturing purchasing managers index improved to 49.7, a three-month high, from a 19-month low of 48.0 in April.  The orders component still had a sub-50 reading, and survey results on the whole were uninspiring.

Producer prices in the euro area fell by 0.6% in April.  Such were 0.7% lower than the first-quarter average level and down 0.2% from April 2012.  Lower energy prices, off 1.6% from March, continue to be a major disinflationary force, but non-energy producer prices also were lower in April (off 0.2%) than March.

After a poor initial start, Japan’s Nikkei-225 index closed with a daily rise of 2.1%. In other Pacific Rim markets, share prices rose by 1.0% in Indonesia, 0.6% in Malaysia, and 0.3% in Australia, but they fell 1.4% in China, 1.3% in the Philippines, 0.8% in New Zealand, and 0.3% in India.  A less mixed picture has developed in Europe, where stock prices so far are up 0.9% in Spain, 0.7% in Italy, 0.6% in Britain, and 0.4% in Germany and France.

The dollar is back above 100 yen and up 0.6% on balance against Japan’s currency after dropping below on Monday.  The dollar also has elevated 1.1% against the Australian dollar, 0.9% versus the kiwi, and 0.2% relative to the Swiss franc and sterling.  The greenback is unchanged against the euro but down 0.4% against the loonie and 0.2% versus the yuan.

Gold and oil prices have dropped by 0.9% to $1399.70 per ounce and $92.95 per barrel. 

The 10-year British gilt yield is four basis points firmer, and the German bund has risen two bps.  But the 10-year Japanese JGB is off two basis points.

Czech GDP contracted 1.1% last quarter and was 2.2% lower than a year earlier.  These results were worse than forecast.

German new car sales in May were 9.9% lower than in May 2012.

Business sentiment in South Africa slipped 2.1%.

According to the index compiled at J.P. Morgan, the global manufacturing purchasing managers index edged up 0.2 points to 50.6 in May, conveying continuing stagnation for the most part.

Scheduled U.S. data releases today feature the trade deficit and include weekly chain store sales and the monthly NAPM index and IBD/TIPP optimism index.  The Canadian trade figures and Mexican index of consumer confidence also arrive.

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

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