Several Developments Including a New Brexit Poll

May 17, 2016

According to a new British opinion poll that surveyed about 800 people by phone, the margin of people favoring continuing membership in the European Union versus leaving that group has doubled to about 15 percentage points with 55% want to stay and 40% now in support of leaving.  Sterling is 0.6% firmer against the dollar on the news.

Another currency in demand today has been the Australian dollar, up 0.4% against its U.S. counterpartMinutes from the Reserve Bank of Australia’s May 3 Board meeting that cut the official cash rate revealed the some policymakers initially favored no change and took some convincing to agree to the first cut in a year.  The minutes suggest no more reductions soon.  Australian motor vehicle sales fell 2.5% last month, reversing April’s rise of 2.2%.

British price data showed less inflation than anticipated in April.  The CPI went up just 0.1% on month, trimming the 12-month rate of rise back to 0.3% from 0.5% in March.  RPI inflation dropped to 1.3% from 1.6%.  Core CPI and core RPI inflation slowed to 1.2% and 1.4%, respectively, in April from 1.5% and 1.6% the month before.  In the year to April, producer output prices fell 0.7%, while producer input prices slumped 6.5%.  The one acceleration came in the government’s house price index, which recorded an on-year increase of 8.9% in March versus 7.7% in February.

In other price news overnight,

  • Switzerland’s PPI/import price index rose 0.3% on month in April, which sliced the on-year decline in half to 2.4%, smallest in 16 months.
  • Portuguese and Danish producer prices fell 4.3% and 2.5% in the year to April.

Investors now await U.S. consumer prices due at 12:30 GMT and industrial production and capacity usage due 45 minutes later.  FOMC minutes due tomorrow are not likely to boost currently low expectations of a June rate hike.  Speculation now centers on September, December or later.  Minneapolis Fed President Kashkari expressed satisfaction with the current level of U.S. interest rates.

The dollar is down 0.2% against the kiwi and 0.1% versus the euro in overnight trading but up 0.1% relative to the loonie and yuan and unchanged vis-a-vis the Swiss franc.

Japan’s Nikkei recovered 1.1%.  Share prices elsewhere in the Pacific Rim rose 1.7% in Singapore, 1.1% in New Zealand, 1.2% in Hong Kong, 0.9% in Taiwan, 0.7% in Australia but fell by 0.3% in China.  In Europe, there have been insignificant equity rises of 0.2% in the U.K., France, and Germany but a larger 0.6% rise in Spain.

Comex gold fell back 1.9% to $1,272.30 per ounce.  WTI crude oil edged 0.1% higher to $47.81 per barrel.

Among 10-year sovereign debt yields, the German bund and British gilt are up by two and one basis points, while the Japanese JGB is unchanged but negative at -0.12%.

Peter Praet, chief economist of the European Central Bank and a member of the Executive Board, warned that eurozone banks face a jolting shock to their earnings.

The seasonally adjusted EUR 22.3 billion trade surplus of Euroland in March was the largest since December, but exports, down 1.3% on month, fell fro the third month in the last four.  The first quarter unadjusted EUR 53.9 billion surplus was 15.3% wider than the year-earlier surplus as imports (-3.0%) fell more sharply than exports (-1.3%).

Italy’s trade surplus of EUR 5.36 billion in March was 39% bigger than the surplus in March 2015.

Czech GDP expanded 0.5% in the first quarter and was 3.1% greater than a year earlier.

The rise in Japanese industrial production in March was revised marginally higher to 3.8%, but such followed a 5.2% plunge in February.  The last three quarter-on-quarter changes in output were drops of 1.0% in 1Q16 and 3Q15 flanking a 0.1% uptick in 4Q15, and output also fell 1.3% in the second quarter of 2015.  In the year to March, production edged up 0.2%, shipments fell 0.7%, the inventory ratio to shipments advanced by 3.8%, capacity usage dropped 0.9%, and industrial capacity declined 0.8%.

Policymakers at the National Bank of Serbia left their key interest rate unchanged at 4.25%.  Chilean monetary officials are also holding a policy meeting today.

Copyright 2016, Larry Greenberg.  All rights reserved.  No secondary distribution without express permission.

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