Bond Yields Drop Further but Stocks and Dollar Trim Recent Move

March 12, 2015

Ten-year British gilt and Japanese JGB yields dropped another six and three basis points.

The dollar’s uptrend has been interrupted by overnight losses of 2.2% against the New Zealand kiwi, 1.2% versus the Australian dollar, 0.7% vis-a-vis the Swiss franc, 0.6% relative to the euro and loonie, 0.5% against sterling and 0.3% versus the yen.

Share prices increased 1.9% in China, 1.4% in Japan, 1.0% in Australia and India, and 0.8% in Taiwan.  Despite a surprise interest rate cut by the Bank of Korea, the Kospi index lost ground, however.  In Europe, equities so far are up 0.8% in the U.K., 0.2% in Germany, Italy and Spain, and 0.1% in Switzerland.  But the French and Greek markets are unchanged.

Comex gold and West Texas Intermediate oil climbed by 0.7% to $1,159.10 per ounce and 0.8% to $48.56 per barrel.

The Bank of Korea’s seven-day repo rate was cut unexpectedly by 25 basis points to a record low of 1.75%.  Three earlier such cuts were undertaken in March 2013, August 2014 and October 2014.

The Reserve Bank of New Zealand retained a 3.5% official cash rate.  The kiwi rose strongly overnight despite a dovish statement that asserted a need for a substantial additional depreciation of the exchange rate to secure a more sustainable external account footing.

Further gun violence occurred overnight in Ferguson, Missouri, where two police officers were seriously wounded.

Australian unemployment slipped back from January’s 6.4% high for the move to 6.3% in February, and job gains last month of 15.6K fully reversed January’s decline of 14.6K.  Two-thirds of February’s rise in employment involved full-time positions.  A separate Australian data release revealed a significant decline in expected inflation.

Several Japanese indicators were reported.  Japan’s tertiary index, a gauge of service sector activity, jumped 1.4% in January to its highest level in ten months, but activity was still 2.7% lower than last March before the sales tax hike.  The tertiary index also was 1.5% lower than a year earlier.  Japanese consumer confidence improved 1.6 points to a reading of 40.7 in February, best in six months and 3.0 points above November’s recent low.  The Ministry of Finance reported a decline in business sentiment to 1.9 among all large firms in the first quarter from 5.0 in 4Q14.  Such is expected to slide somewhat additionally in the second quarter of 2015 but rebound after midyear.  Finally, Japanese stock and bond transactions last week generated a minuscule 54 billion yen outflow, merely a tenth as much as in the prior week of February 27.

Industrial production in the eurozone only slid in January by 0.1%, which was less than expected.  Output was supported by a 0.9% monthly gain in energy.  Industrial production was 1.2% above its year-earlier level.

German consumer prices in February were confirmed to have risen 0.9% on month (due partly to seasonal developments) and to have been 0.1% higher than in February 2014.  Energy fell 7.3% on year, while other consumer prices collectively rose 1.0%.  Bundesbank President Weidmann predicted that German growth would surpass expectations in 2015.

French consumer prices rose 0.7% on month in February but dropped 0.3% on year.  A 0.4% on-year decline in January had been the greatest fall since September 2009.

Spanish consumer prices firmed 0.2% last month but were still 1.1% lower than in February 2014.

British trade figures were better than expected.  In the biggest month-on-month decrease in the past year, the goods and services deficit narrowed 71% to just GBP 616 million in January.  Merchandise imports posted their biggest on-month decrease in 102 months, and the traded goods deficit fell to GBP 8.412 billion.  Separately, the Royal Institute of Chartered Surveyors U.K. housing index improved to 14% in February from 7% in January.

New Zealand home prices rose 0.8% on month but posted a smaller on-year advance of 6.1% in February. 

Malaysian industrial production fell 1.0% in January but exceeded its year-earlier level by 7%. 

Greek industrial production fell 4.7% in January and was little changed on year.  Industrial output in Hungary grew 7.7% in the year to January.

The Greek jobless rate rose to 26.1% last quarter form 25.5% in 3Q14.  Swedish joblessness ticked up to 7.9% last month from 7.8% in January.

Irish GDP growth of 4.8% in 2014 led all European Union members.

U.S. retail sales, import prices and weekly jobless insurance claims data get released shortly.  Canada reports housing prices and quarterly capacity usage.  Peru’s central bank reveals its latest monetary policy decision.

Copyright 2015, Larry Greenberg.  All rights reserved.  No secondary distribution without express permission.

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