An Important Week Starts Quietly

April 27, 2015

Very few economic indicators get released today.  Later in the week sees the release of preliminary estimates of U.S. and British first-quarter growth, each of which is likely to prove soft.  Investors await Wednesday’s FOMC policy statement, eager to learn how the continuing lull in U.S. activity might affect coming Fed policy.  Do they believe the soft numbers to be dominated by weather, or have they become more inclined to push out the first interest rate cut to end-summer from June? 

The Greek standoff with its creditors persists.  Without access to fresh funding, Greece is running out of money to pay its bills, and a default possibility is becoming more and more imaginable.  Ironically, Greek share prices are 0.4% firmer so far today in contrast to declines of 0.9% in the Paris Cac, 0.6% in the Madrid IBEX, 0.5% in Italian and Swiss equities, 0.3% in the British Ftse, and 0.1% in the German Dax.  Greece is already a mess, but if the game of debt chicken goes over the cliff, investors fear that other economies may suffer, too.

Central bank policymakers also meet this week in Japan, Sweden, New Zealand, and Russia.  The Japanese meeting coincides with the release of the BOJ’s semi-annual Outlook.  Being monthend, Japan releases a slew of key indicators, including consumer prices.  In March, the core CPI posted a zero on-year change excluding the effect of the April 2014 sales tax hike.  This week’s April report will no longer embody that special factor in year-over-year price changes.  The Nikkei today lost 0.2% and slid back under the 20K threshold.

The dollar has firmed 0.3% against the euro, yen and sterling and is 0.2% higher relative to the Swiss franc and Australian dollar.  New Zealand markets were closed for the Anzac holiday.  The kiwi and loonie edged marginally higher, while the yuan has fallen to 6.22 per dollar.

Share prices in the Pacific Rim outside of Japan showed advances of 2.2% in China, 1.3% in Hong Kong, 0.8% in Australia and 0.6% in Taiwan but losses of 3.5% in Indonesia and 0.9% in India.  News of a smaller on-year decline in Chinese profits (0.4% in March versus -8.0% in February and -2.7% in the first quarter versus 4.2% in January-February alone) helped to assuage concerns that Chinese GDP growth is slowing too rapidly.

Gold is 0.5% stronger but still below $1,200 at $1,181.20 per ounce.  The West Texas Intermediate oil prices fell 0.4% to $56.77 per barrel.

The ten-year British gilt yield is unchanged.  The 10-year German bund lost another 2 basis points to 0.14%, while the 10-year Japanese JGB edged a basis point higher to 0.29%.

German import prices rose by a greater-than-forecast 1.0% in March, and its 12-month rate of decline was cut nearly in half to 1.4%.  Non-energy import prices increased 0.9% on month, and energy jumped 1.7% (but still fell 25.4% compared with a year earlier).    Export prices climbed 0.6% on month and 1.4% on year.

The Confederation of British Industries released its April survey of industrial trends.  The overall reading nudged up from zero in March to +1, which is still quite low relative to scores of 10 in February, 4 in January, and 5 in December.  Analysts had been projecting a reading in March similar to those in December and January.

Finnish consumer confidence ticked up 0.2 points to 11.4, while manufacturing sentiment in that member of the eurozone stayed low with an unchanged reading of minus 7.

Scheduled U.S. data to be reported today are the Dallas Fed manufacturing index and Markit Economics’ estimates for the composite and service-sector PMIs in April.  The Bank of Israel holds its monthly policy meeting today.

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

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