Crimean Secession Vote Sunday Overshadows Marketplace

March 14, 2014

Japan’s Nikkei-225 plunged 488 points or 3.3% to a one month low.  Rampant risk aversion also lifted the yen by a further 0.5% to 101.27 per dollar.

In other bourses, share prices fell 1.5% in Australia, 1.0% in Hong Kong, 0.8% in South Korea and China, 0.7% in Taiwan, and 0.6% in New Zealand.  In Europe, stocks so far show losses of 2.0% in Madrid, 1.7% in Milan, 1.1% in Paris, 0.7% in Frankfurt and Zurich, and 0.5% in London.

WTI crude oil rose 0.4% to $98.59 per barrel, and gold firmed 0.2% to $1,375 per ounce.

The ten-year British gilt and Japanese JGB yields are four and one basis points lower.

Investors are in a continuing risk averse mood because of

  • Sunday’s independence vote in Crimea that is expected to be approved and could lead to the region’s annexation by Russia.  Up to the early 1950s, Crimea was part of Russia, not Ukraine.
  • Apparent tolerance of Chinese officials for economic growth as low as 7%.  They seem more interested in promoting a change in the composition of growth than in insuring that the 7.5% target is met.
  • Worries that Japanese officials are underestimating the drag of the coming consumption tax hike next month.
  • The continuing mystery over what happened to Malaysian Airlines Flight 380.  Was it an act of terrorism or something even more horrific?
  • A vacuum in global geopolitical predictability and stability as the United States will to use military force shrinks.
  • Concern over multilateral global economic problems such as excessively low inflation, impotent monetary policy, stalemated fiscal policy, income inequality, high unemployment, and internet-induced destruction of long-tested capitalist mechanisms for allocating resources and distributing output.
  • Concern that

The Central bank of Chile cut its interest rate benchmark for the fourth time since October, reducing such by 25 basis points to 4.0%.

Peru’s central bank left its reference interest rate unchanged at 4.0%, the level since a 25-basis point cut in November.

Bank Rossii, which lifted Russia’s one-week repo rate to 7% from 5.5% earlier this month after an emergency meeting, did not tighten monetary policy at today’s regularly scheduled policy meeting.

Minutes from the Bank of Japan Board meeting of January 17-18 voiced confidence in price, output, and demand trends and said the April consumption tax hike is unlikely to kill the economy’s prognosis of moderate recovery.

ECB President Draghi issued his first subtle protest against the strength of the euro, suggesting that further gains would have a greater influence over policy.

German CPI inflation was confirmed at 1.2% in February, lowest since October.  Energy prices fell 2.7% on year, while all other consumer prices rose by 1.7%.  The CPI rose 0.5% on month after falling 0.6% between December and January.

Switzerland’s combined PPI/import price index fell 0.4% in February, more than had been forecast, a recorded a 12-month 0.8% rate of decline.

According to the Conference Board, Britain’s index of leading economic indicators rebounded from a 0.1% downtick in December with a 0.7% increase in January.  The index of British coincident economic indicators was unchanged in January.

The U.K. goods and services trade deficit nearly fourfold in January to GBP 2.56 billion from GBP 668 million in December.  The 2013 monthly average had been GBP 2.15 billion per month.  The merchandise trade deficit widened 28% on month to GBP 9.79 billion as exports fell 4% while imports rose 3.4%.

Employment in the euro area edged 0.1% higher in the final quarter of 2013 but was 0.5% lower than in 4Q12.  In the year to 4Q13, jobs fell by 4.1% in Cyprus, 2.6% in Greece, 2.0% in Italy, 1.4% in the Netherlands, 1.3% in Spain and 1.0% in Finland but rose 0.6% in Germany.

Finland’s CPI showed lessening inflation of 1.3% in February after 1.6% in January.

Instead of edging marginally higher as predicted, U.S. producer prices slipped 0.1% in February, reducing the 12-month rate of increase to 0.9% from 1.2% in January.

Japanese industrial production growth in January was revised to an increase of 3.8% from 4.0% reported initially.  Capacity use went up 5.9% on month and 13.6% on year.  Capacity fell 1.0% on month and by 1.9% on year.

New Zealand’s business purchasing managers index stayed level in February at January’s reading of 56.2.  Such averaged 56.3 in 4Q13.

Wholesale price inflation in India continued to recede in February on lower fuel costs, dropping to a nine-month low of 4.7% from 5.1% in January, 6.4% in December, and 7.5% in November.  The Bank of India has recently tightened credit policy to rein in inflation.

Retail sales in Singapore rose 0.6% on month and 0.1% on year in January.

The U. Michigan/Reuters initial estimate of consumer sentiment in March arrives later today.

Copyright 2014, Larry Greenberg.  All rights reserved.  No secondary distribution without express permission.

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