Several Themes Affecting Markets

April 28, 2015

Most European stock markets are lower with a notable exception of Greece.  The Greek debt negotiating team was changed, but Prime Minister Tsipras made remarks that failed to signal enhanced prospects for an agreement.  He implied that any deal involving more austerity may be subject to approval by a referendum of Greek voters, and he was highly critical of actions by the European Central Bank.

Today is the first of a two-day FOMC policy meeting.  Analysts are leaning more heavily against a June start to a rising federal funds rate.  Several key U.S. indicators also get released today:  the monthly Case-Shiller house price index, Conference Board consumer sentiment index, Richmond Fed manufacturing index, and Redbook’s weekly chain store sales.

British GDP last quarter grew only 0.3% versus 4Q14, half as fast as growth in the second half of 2014 and the slowest quarterly result in nine quarters.  GDP growth in on-year terms slowed to 2.4% from 3.0%.  Between 4Q and 1Q, production edged down 0.1%, construction plunged 1.6%, and services went up 0.5% compared to a 0.9% in the prior quarter.

Disappointing Japanese retail sales and small business sentiment data were reported today.

  • Total retail sales fell 1.9% on month in March.  That was the fourth negative month-on-month change in five months, a period over which sales dropped by 3.7% cumulatively.  Total sales were 9.7% lower than in March 2014, a base which had been elevated ahead of the April 2014 sales tax hike.  Total sales in the first quarter of 2015 were 4.8% below their year earlier level.
  • Large store retail sales sank 13.0% on year in March and by 4.6% between 1Q14 and 1Q15.
  • The Shoko Chukin index of small business sentiment, which had risen 3.3 points to 49.8 in February, relapsed to a reading of 47.4 in April, which was hardly better than the mean score of 47.3 in the final quarter of 2014.  The Bank of Japan releases its semi-annual Outlook on Thursday, which is expected to show reduced forecasts for both growth and inflation.

The dollar is mostly softer, with overnight declines of 1.2% against the Australian dollar, 0.6% relative to the kiwi, 0.5% vis-a-vis the euro, 0.4% against sterling, and 0.2% relative to the yen, loonie and yuan.  The dollar, in contrast, firmed 0.2% against the Swiss franc.

Share prices in the Pacific Rim dropped 1.4% in China, 0.6% in Australia and Singapore, and 0.5% in South Korea but closed up 0.4% in Japan and 0.8% in India.  In Europe, equities have fallen by 1.5% in France, 1.2% in Germany, 1.0% in Great Britain, where parliamentary elections are just nine days away, 1.1% in Switzerland, 0.7% in Italy, and 0.4% in Spain.

Ten-year sovereign debt yields dipped two basis points in the U.K. and a basis point in Germany (to 0.15%) but rose a basis point in Japan.

Among commodities, Comex gold slipped 0.2% to $1,201.10 per ounce, and WTI oil declined 0.5% to $56.73 per barrel.

The index of French consumer confidence printed at a 63-month high of 94 in April, up from 93 in March and 92 in February.

Released Swedish economic statistics were mixed.  Retail sales growth of 0.7% on month and 4.6% on year surpassed expectations, PPI inflation accelerated to a 7-month high of 2.3%, but economic sentiment including manufacturing and consumer confidence slumped 2.2 points to an 11-month low.

According to the British Bankers Association, mortgage applications of 38,751 in March represent a six-month high.

Norwegian business sentiment weakened 1.4 points to a reading of -3.0 last quarter.  Such had posted a 6.4 score in the first quarter of 2014.  Norway is an energy exporter.

The Conference Board reported that Australia’s index of leading economic indicators rose 0.5% in February and was accompanied by a 0.4% increase of the index of coincident economic indicators.  Both grew more sharply than in January.

Hong Kong’s trade deficit widened 29% on month to HKD 46.21 billion in March as exports unexpectedly fell.  Imports also declined on year.  Thailand recorded a USD 1.495 billion trade surplus in March after a surplus of just $390 million the month before and a deficit of $457 million in January.

Maryland’s national guard was called out to quell accelerating street violence in Baltimore, which is less than 50 miles away from the nation’s capital.

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

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