Festering Concerns

April 15, 2014

Russia appears to be doing to Eastern Ukraine what it did in Crimea, and the West seems powerless to resolve the crisis.

A day ahead of China’s release of first-quarter GDP, analysts anticipate a sub-7.5% growth rate.

The ZEW Institute measures of investor sentiment toward Germany and the euro area fell in March.

Investors await a bunch of U.S. data reports covering consumer prices, the housing market, manufacturing in the New York region, capital flows with the rest of the world, and weekly chain store sales.  A number of Federal Reserve officials including Janet Yellen have public speaking engagements today.

The dollar is unchanged against the yen, yuan and sterling.  The greenback rose 0.4% relative to the kiwi, 0.3% versus the Canadian and Australian dollars, and 0.2% vis-a-vis the euro and Swiss franc.

Equities dropped 1.7% in China, 1.6% in Hong Kong, 0.6% in India and 0.2% in South Korea but rose by 1.0% in Singapore, 0.7% in Taiwan, 0.6% in Japan and Australia and 0.3% in New Zealand.  Trading direction has been one-sided in Europe, with looses ranging from 1.1% in Italy to 0.5% in Germany, 0.2% in Spain and Britain, and 0.1% in France and Switzerland.

The yields on 10-year German bunds and Japanese JGBs are unchanged, but the 10-year gilt yield is two basis points higher.

Commodities have experienced selling pressure, with gold off 1.7% at $1,304.40 per ounce and oil down 0.9% to $103.12 per barrel.

The ZEW investor expectations index for Germany fell by 3.4 points to 43.2 in March, weakest since last August, even though investor perceptions about current conditions climbed 8.2 points to 59.5, best since July 2011.  The ZEW expectations index for the whole euro area slid 0.3 points to a six-month low of 61.2 in spite of a 6.2-point improvement in the current conditions sub-index.

Euroland’s seasonally adjusted trade surplus of EUR 15.0 billion in February was at a 3-month high, and exports grew 1.2% on top of a 1.3% increase between December and January.  The unadjusted February surplus of EUR 13.6 billion compared to EUR 9.8 billion in February 2013, as exports recorded on-year growth of 2.9% versus a 0.4% gain in imports.

Britain released consumer prices, retail prices, producer prices and the ONS house price index.  A consistent southerly inflation direction gives the Bank of England maneuvering room to delay any tightening of policy.

  • Sub-2.0% CPI inflation occurred for a third straight month.  The 12-month rate of increase in total consumer prices slid to 1.6% in March from 1.7% in February and 1.9% in January.  Core CPI inflation fell to 1.6% from 1.7%.
  • Retail price inflation eased to 2.5% from 2.7% in February and 2.8% in January.  Core RPI declined to 2.5% from 2.7%.  Excluding mortgage and interest payments, the so-called RPIX dropped to 2.3% from 2.7% in February.
  • Producer output prices edged up 0.2% in March, trimming its 12-month increase to 0.5% from 0.6% in February and 0.9% in January.  Core PPI-O slowed 0.1 percentage point to just 1.0%.  The producer input price index posted a larger 6.5% on-year decline after falling 5.8% between February of 2013 and 2014.
  • The ONS house price index, formerly known as the DCLG measure, posted a larger 9.1% 12-month rate of increase versus 6.8% in February.

Same-store U.k. sales according to the British Retail Consortium fell by a larger 1.7% between March 2013 and March 2014 after a 1.0% drop in February.

The Swiss PPI/import price index was unchanged on month and 0.7% lower than a year earlier in March.  Domestic PPI inflation was at negative 0.4%.  The data were roughly as analysts were expecting.  Danish producer prices were unchanged over the year to March.

Minutes from the Reserve Bank of Australia’s April 1st Board meeting defended a wait-and-see stance.  GDP will expand somewhat more slowly than trend.  The minutes again protested the strength of the Aussie dollar.

Chinese bank loans revived to show an increase of 1.050 trillion yuan in March after rising CNY 644.5 billion in February, CNY 1.32 trillion in January and CNY 483 billion in December.  M2 growth slowed, however, to 12.1% on year from 13.3%, and M1 also advanced more slowly (5.4% versus 6.9% in February).

Singapore retail sales rose 3.0% but fell 9.5% on year in February.

Indian WPI inflation rebounded to 5.7% in March from 4.7% in February.

Turkish unemployment of 9.1% in January was a bit lower than 9.4% at end-2013.

Fed officials slated to speak publicly today are Rosengren, Lockhart, Yellen, and Plosser.

Besides consumer prices, U.S. data releases today include Treasury-reported international capital flows (TIC), the National Association of Home Builders housing market index, the Empire State manufacturing index, and weekly chain store sales. Canada releases existing home sales and the monthly survey of manufacturing shipments, orders and inventories.  Brazilian retail sales figures arrive, too.

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

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