Lots of Data and a Better Tone in Equities

April 16, 2014

Japan’s Nikkei catapulted 3.0% higher, and stocks so far in Europe are up by 2.0% in Italy, 1.1% in Spain, 0.9% in France, 0.8% in Germany, 0.5% in Switzerland and 0.3% in Britain.  In other selected markets around the Pacific Rim, stocks gained 0.6% in Australia, 0.3% in New Zealand, 0.2% in Singapore and 0.1% in China, Taiwan and Hong Kong but fell 0.9% in India.

The U.S. Treasury Department released its semi-annual foreign exchange market report yesterday and once again did not name China a currency manipulator.

The dollar is unchanged against the yuan and Australian dollar, up 0.4% versus the yen and kiwi, up 0.2% relative to the loonie, down 0.4% against sterling, off 0.2% vis-a-vis the euro and 0.1% softer against the Swiss franc.

The yields on ten-year British gilts and German bunds climbed by four and two basis points, while the Japanese JGB is unchanged.

West Texas Intermediate oil prices advanced 1.0% to $104.78 per barrel.  Gold edged 0.1% higher to $1,300.90 per ounce.

Among released Chinese data,

  • Real GDP recorded a quarterly 1.4% increase in 1Q, trimming the on-year growth rate from 7.7% in 4Q to a six-quarter low of 7.4%, which nonetheless was above whisper numbers hovering around 7.0%.
  • Industrial production grew 8.8% between March 2013 and March 2014, slightly below expectations but above the January-February pace of 8.6%.
  • Retail sales growth accelerated to 12.2% from 11.8% in the first two months of 2014.  The 12-month increase in December had been 13.6%.
  • Fixed asset investment growth slowed more than expected, posting a 17.6% 1Q14-over-1Q13 increase versus a 19.6% gain in full-2013.
  • Business sentiment improved to a reading of 51.1 in March from 50.2 the month before, and the 1Q business climate index improved 7% to 128.0 in 1Q.

New Zealand recorded lower CPI inflation last quarter than anticipated.  Consumer prices were 0.3% higher than in the final quarter of 2013 and 1.5% above a year earlier, down from a 1.6% pace in the year to 4Q13.

The Westpac index of Australian leading economic indicators stagnated in March after declines in the first two months of 2014.

The monthly drop in Japanese industrial production during February was unrevised at 2.3%.  On-year growth slowed to 7.0% from 10.6%, however.  Shipments and inventories posted February-over-January declines of 1.0% and 0.9% according to the revised report.  Capacity edged up 0.1% on month but fell 1.9% on year, while capacity use fell 2.6% on month but advanced 10.2% on year.

Bank of Japan Governor Kuroda in testimony before parliament was upbeat in expecting only a brief hit to the economy from the consumption tax hike.  While thinking the inflation goal remains a year away, he expects to see progress continue in escaping from deflation.

Euroland CPI inflation slowed to 0.5% in March, which was the same as preliminary indications, from 0.7% in February, 0.8% in January and 1.7% in March 2013.  But some members of the currency union experienced dramatic inflation shifts between March 2013 and March 2014, underlining the danger of deflation.  For example, the 12-month inflation rate in Spain collapsed from 2.6% in March 2013 to negative 0.2% last month.  Italian Inflation fell 1.5 percentage points to 0.3%.  Cypriot inflation swung from +1.3% to -0.9%.  Dutch inflation dived from 3.2% to just 0.1%.  The Finnish CPI rate halved to 1.3%, and the on-year drop in Greek consumer prices went from 0.2% to 1.5%.  Core euro area inflation was revised to 0.7% from a preliminary and expected 0.8% pace.  Core inflation was down from 1.5% in March 2013.

Euroland posted a EUR 21.9 billion seasonally adjusted current account surplus in February, down from EUR 25.4 billion in January but marginally above December’s EUR 21.5 billion result.  The unadjusted current account surplus widened from EUR 149.3 billion in the twelve months to February 2013 to EUR 244.3 billion in the ensuing one-year span of time.  Adding the current account to long-term capital inflows yields a Basic Balance of EUR 389.9 billion in the 12 months to February versus EUR 224.7 billion a year earlier.

British labor statistics were again solid.  The 30.4K March decline in the claimant count of unemployment was the 17th drop in a row and similar to the decline in February.  The associated jobless rate slid to just 3.4%, and the ILO-basis measure of unemployment in the three months to February averaged 6.9%, thus breaking below the Bank of England’s threshold.  The central bank, however, has backed away from saying that milestone would trigger an interest rate hike.  On-year growth in average earnings accelerated to 1.7% in the three months to February including bonus pay and to 1.4% when excluding such.

Czech producer prices fell 0.8% in the year to March, while Austrian consumer prices advanced 1.6% over the same time frame. Spain’s index of leading economic indicators dipped 0.2% in February.  Italy’s trade surplus widened over sevenfold on month to EUR 2.6 billion in February, enough to produce a marginal current account surplus.  The Norwegian trade surplus narrowed 5.2% to NOK 31.4 billion in March.

The crisis in Ukraine remains tense but seems to be exerting lessening market influence at least for today.  A ferry sunk off of South Korea, leaving nearly 300 people unaccounted for.

U.S. mortgage applications rose 4.3% last week.  Other scheduled U.S. releases today are housing starts and permits, industrial production and capacity usage, and the Fed Beige Book of regional trends.  Yellen, Lockhart, and Stein of the Fed speak publicly today. 

The Bank of Canada’s third policy announcement of 2014 is set for 14:00 GMT. 

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

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