Last Day of the First Quarter

March 31, 2014

The dollar advanced 0.4% against the yen and 0.2% against the Australian and New Zealand dollars, but it is 0.3% softer versus the euro and Swiss franc and off 0.1% relative to sterling.  The loonie and yuan are steady.  The boost to risk aversion from the Ukraine situation seems to be fading, but rising tensions between North and South Korea are providing a fresh source of investor caution. 

Victory in municipal Turkish elections for Prime Minister Erdogon’s party lifted the Turkish lira to a 3-month high.  The Russian ruble also traded higher.

Share prices climbed in Pacific Rim markets by 1.0% in Indonesia, 0.9% in Japan and Taiwan, 0.5% in Singapore and Australia, 0.4% in Hong Kong and 0.2% in South Korea and Indonesia, but there was a 0.3% dip in China.  In Europe, equities are up 0.9% in Switzerland, 0.6% in Italy, 0.2% in Spain and 0.1% in the U.K. but down 0.2% in France and 0.1% in Germany.

Ten-year British gilt and Japanese JGB yields have slid three and two basis points, whereas the German bund is unchanged.

Gold is steady at $1,293.60 per ounce, while WTI oil slipped 0.4% to $101.24 per barrel.

Japanese industrial production in February and the manufacturing purchasing managers index in March showed further evidence of a growth slowdown prior to tomorrow’s consumption tax hike to 8% from 5%.

  • Industrial production fell 2.3% on month and posted a smaller 6.9% 12-month increase.  Inventories dropped 0.8%, and shipments declined 1.0%.  Officials retained an assessment that output continues to show upward movement and predicted a 0.9% increase in March.
  • Nomura reported a 1.6-point decline in the PMI to a six-month low of 53.9, indicating a slower but positive rate of expansion.
  • On-year growth in housing starts slowed to 1.0% in February from 12.3% in January and 18.0% in December.
  • On-year growth in construction orders edged down to 12.3% from 15.2% in January but was still much better than the November or December results.

On-year euro area CPI inflation decelerated from 0.7% in February to a four-year and four-month low of just 0.5% in March, but Bundesbank President Weidmann blamed such on cyclical factors that are turning and asserted that a slide into deflation (negative inflation) is not in the offing.  Core CPI also eased, reaching 0.8% after 1.0% the month before.

Italian CPI inflation also fell, reaching just 0.4% in March.  Dutch GDP went up 0.9% on quarter and 0.8% on year according to revised 4Q13 data.

French real GDP grew 0.3% last quarter after a 0.1% dip in 3Q13.  GDP was 0.8% greater than in 4Q12, but the full-2013 average growth rate was merely 0.3, with positive contributions of 0.2 percentage points (ppts) from domestic demand and 0.1 ppts from inventories.  Net foreign demand had no effect on 2013 GDP.

German retail sales volume continued to revive (and unexpectedly so), gaining 1.3% in February after a 1.7% January-on-December increase.  Sales had fallen 0.2% in the fourth quarter of 2013 but were 2.0% higher in February than a year earlier.

Britain’s Hometrack house price index rose 0.6% in March and posted a bigger 5.7% on-year increase versus 5.4% in February.  According to figures released by the Bank of England, M4 money was 0.7% greater in February than a year earlier.  Mortgage applications amounting to 70.3K were about 6.5% less than forecast and 8.4% fewer than in January.

Between February 2013 and February 2014, Portuguese industrial production and retail sales advanced by 3.8% and 1.8%, somewhat less than the 12-month increases recorded in January.

In other European data news, Danish GDP contracted 0.6% in the final 2013 quarter and was just 0.5% above a year earlier.  The Swiss current account surplus dropped 39% on quarter to CHF 14.1 billion in 4Q13.  Switzerland’s index of leading economic indicators fell 0.04 points to a reading of 1.99 in March.  Norwegian retail sales increased by 0.6% in February but was just 0.5% higher than a year before.  Despite a second straight monthly rise of 0.7% in Hungarian producer prices, there was a 12-month increase of merely 0.2%.  Hungarian industrial production meanwhile posted a 2.1% drop in the same 1-year interval. 

In Australia, private-sector credit growth accelerated to 4.3% in February from 4.1% in January, and new home sales jumped 4.6% on month after just a 0.5% increase in January.  M3 growth picked up to 7.3% on year from 6.9%.

In New Zealand, building consents dropped 1.7% on top of January’s 8.6% slump.  Business sentiment fell back to a reading of 67.3 in March from 70.8 in February, and M3 grew 6.9% in the year to February.

Malaysian PPI inflation stayed at 2.6% in February.  Turkish GDP increased 4.4% between 4Q12 and 4Q13, a bit more than last year’s average growth rate of 4.0%, which was twice as much as the 2012 result.  Turkey recorded a narrower $5.1 billion trade deficit in February to give a two-month total of nearly $12 billion.

South Africa’s trade balance swung to a ZAR 1.7 billion surplus in February from a ZAR 16.9 billion deficit in the first month of 2014.  South African M3 money was 6.0% higher than a year earlier in February.

Scheduled U.S. data today are the Dallas Fed manufacturing index and mid-western regional manufacturing PMI results for March.  Canadian monthly GDP and average weekly earnings arrive, too.  Fed Chair Yellen speaks publicly.

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

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