BOE and ECB Meetings on U.S. Independence Day

July 4, 2013

Egyptian President Mursi was pushed out by the military.

U.S. markets are closed today for Independence Day, marking the 237th anniversary of the Declaration of Independence signing.  The absence of U.S. market leadership may dull market activity today despite central bank policy announcements at the Bank of England and European Central Bank.

The U.S. dollar has lost 0.6% and 0.4% against the Australian and New Zealand dollars.  The greenback otherwise is unchanged against the euro, up 0.2% versus sterling and 0.1% against the loonie and Swissie, and down 0.1% relative to the yuan and 0.2% against the yen.

Share prices climbed 1.6% in Hong Kong, 1.2% in India, 0.8% in South Korea and China, and 0.6% in Singapore.  Japan’s Nikkei, in contrast, dipped 0.3%.  In Europe, strength has prevailed in equities, which show gains of 1.1% in Britain, 0.8% in Spain and France, 0.6% in Germany and 0.4% in Italy.

Ten-year sovereign debt yields have edged up two basis points in Britain and a basis point in Japan and Germany.  Concern has lessened today over Portuguese political instability.

Gold and oil prices slipped 0.2% to $1249.90 per ounce and 0.3% to $100.85 per barrel.

The Bank of England left its policy settings unchanged as expected but released a statement heralding potentially significant changes in policy form.  The statement protests the recent rise in market rates, declaring that “the implied rise in the expected future path of Bank Rate was not warranted by the recent developments in the domestic economy.”  The statement also indicates that the Monetary Policy Committee under the new leadership of Governor Mark Carney is considering the adoption of “some form of forward guidance, including the possible use of intermediate thresholds.”

The ECB decision, most likely not to change its rates, is due at 11:45 GMT and will be followed by Pdt Draghi’s monthly press conference at 12:30 GMT.

Governor Kuroda of the Bank of Japan spoke ahead of the central bank quarterly branch managers meeting.  He was upbeat, taking credit for Japan’s improved economic outlook and promising to maintain stimulus until 2% inflation is secured.

The third and final estimate of Euroland and EU-27 GDP were released.  Ezone GDP was revised down 0.1 percentage points to a contraction of 0.3% from 4Q12 and 1.1% from the first quarter of 2012.

Sovereign debt auctions in Spain, France, and Japan resulted in higher yields than those at the respective previous auctions.

Hong Kong’s purchasing managers index held below the 50 no-change threshold for a third straight month in June and reflected the quickest rate of contraction since November 2011.  Such printed at 48.7, down from 49.8 in May and 49.9 in April.

Germany’s construction PMI jumped to a 15-month high of 54.5 in June from 50.6 in May.  As recently as March, such printed at a 13-month low of 41.9.

The JPMorgan composite and service-sector global PMI indices each showed a diminishing rate of expansion last month.  The services PMI fell to 51.3 from 53.4, while the composite all-activity PMI slipped to 51.4 from 52.9.

It was reported late Tuesday that U.S. motor vehicle sales were 9.2% higher in June than a year earlier.

The British Halifax house price index increased 0.6% in June, a bit more than expected, and this accelerated the on-year pace of climb to 3.7% in 2Q from 2.6% in March-May.

Australian building permits fell 1.1% on month and 3.2% on year in May.

Dutch consumer prices in June dipped 0.4% on month and posted a 2.9% on-year increase.

Japanese stock and bond transactions generated a JPY 1.746 trillion net capital inflow last week, substantially more than the inflow of JPY 293 billion in the previous week.  Japanese sold JPY 916 billion of foreign bonds, whereas foreigners purchased JPY 742 billion of Japanese stocks and bonds.

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

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