Further European Disinflation and Worrisome Chinese Trade Figures

April 10, 2014

A slew of European price data releases struck a theme of disinflation.

  • Harmonized Greek consumer prices were 1.5% lower in March than a year earlier.  The Greek jobless rate in January (26.7%) again surpassed 25%.
  • The 12-month decline in Spanish consumer prices widened to 0.4% in March from 0.1% in February.
  • Danish harmonized CPI inflation in March was a mere 0.1%.
  • Swedish consumer prices fell twice as much in the year to March (0.6%) as analysts were anticipating.
  • Portuguese consumer prices posted a 0.4% on-year drop in March after dipping 0.1% in the year to February.
  • While Norwegian consumer price inflation of 2.0% in March was regionally high, Norway’s PPI plunged 2.9% on month in March, which depressed the 12-month increase to just 0.1%.
  • Romanian consumer price inflation edged 0.1 percentage point lower to 1.0% in March.
  • Dutch harmonized consumer prices were 0.1% higher than a year earlier in March.
  • Irish consumer prices rose 0.2% between March 2013 and March 2014.

An 11.3% on-year plunge in Chinese imports swung the trade balance from a rare $22.98 billion in February to a $7.71 billion surplus in March.  Exports also recorded a year-over-year decline, that being 6.6% after February’s 18.1% on-year drop. 

The first Greek sovereign debt sale since 2010, EUR 3.0 billion at 4.95%, was successful.  Auctions of Spanish and Irish bonds also were well-received.  The ten-year British gilt, German bund, and Japanese JGB yields fell by 7, 3, and 1 basis points, respectively.

The Bank of England as expected left its interest rate at 0.5%, the level since March 2009, and the size of its asset purchase program at GBP 375 billion where such as been since an increase announced in July 2012.  The accompanying statement, as per custom, shed no enlightenment on the monetary policy committee’s discussion during this week’s two-day meeting.

The Bank of Korea’s one-week repo rate of 2.5% was also not changed, matching analyst expectations.  It has been at that level since a 25-bp cut in May 2013.

The dollar weakened overnight by  0.5% versus the Aussie dollar, 0.4% relative to the yen, 0.2% vis-a-vis the Swiss franc and 0.1% against the euro.  Australia announced stronger-than-expected labor statistics, and the yen has been strengthening on the Bank of Japan’s decision not to ease policy further in the near term.  The dollar is unchanged against the loonie and kiwi and 0.2% higher versus the yuan after the disappointing Chinese trade numbers.

Another weak currency today has been the Swedish krona, which crossed over 9 per euro to a nearly four-month low of 9.0668.

In stock market action overnight, Indonesia’s bourse sank 3.2% in reaction to troublesome parliamentary election results.  However, share prices rose by 1.6% in China, 1.5% in Hong Kong, 1.0% in New Zealand, 0.5% in South Korea, and 0.3% in Australia.  Japan’s Nikkei was flat after the government’s assessment of business spending was downgraded to sputtering.  In European trading, the Spanish IBEX flopped 1.0%, and equities fell by 0.4% in Italy, 03% in France, and 0.2% in Germany.  The British Ftse edged up 0.1%, however.

The price of gold leaped 1.4% higher to $1,323.10 per ounce.  West Texas Intermediate oil is 0.1% softer but comfortably above the $100 threshold at $103.48 per barrel.

Japan reported slower on-year growth in bank lending during March of 2.1% and 2.3% excluding trusts.  Both increases were a shade lower than 1Q14-over-1Q13 average advances.  Machine tool orders in Japan recorded accelerated on-year growth in March of 41.8%. Revised core machinery orders for February posted a larger-than-anticipated monthly drop of 8.8%.  Their on-year increase was more than halved to 10.8%.  Foreign orders for machinery rose 2.4% on month and 31.9% on year.  Japanese stock and bond transactions last week generated a JPY 533 billion net capital inflow, which was 3.3 times greater than in the final week of fiscal 2013.

Australian unemployment dropped 0.3 percentage points to 5.8% in March.  Jobs rose 18.1K, more than three times the expected increase.  Employment had risen 48.2K in February.  Expected Australian inflation accelerated from a 3-month low of 2.1% in February to 2.4%.

New Zealand’s business purchasing managers index improved 1.9 points to a reading of 58.4 in March.

French industrial production edged up 0.1% in February but slid 0.1% from a year earlier.

Italian industrial production was also weaker than hoped, dropping 0.5% on month and rising just 0.4% from February 2013.

In other industrial production data released for the month of February today, Finnish output went up 0.2% but fell 5.4% on year; Romanian production dropped 1.3% on month but climbed 9.2% on year; and Malaysian output was 2.9% higher than in January and 6.7% greater than in February 2013.

Scheduled U.S. data are import and export prices, chain store sales, weekly jobless claims, and the monthly federal budget.  Canada releases new home prices, while Peru’s central bank will unveil its latest interest rate decision at the end of today.

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

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