Japanese GDP Growth in 4Q Beat Expectations. Ezone Inflation Negative. Awaiting FOMC Minutes

May 18, 2016

The dollar strengthened overnight by 0.7% against the Australian dollar, 0.5% relative to the kiwi and loonie, 0.4% vis-a-vis the euro, 0.3% against the yen 0.2% versus the yuan and 0.1% relative to sterling.

Gold lost 0.3% to $1,273.30 per ounce, and copper fell even more sharply.  West Texas Intermediate crude oil firmed 0.3% to $48.47 per barrel.

In China, the Shanghai Composite index sank 1.3% to a 2-month low.  Hong Kong’s Hang Seng index fell 1.4%.  Share prices elsewhere in the Pacific Rim dropped 0.7% in Australia, 0.5% in South Korea, and 0.3% in India.  Japan’s Nikkei rose only 0.3% despite news that real GDP growth there swung from an annualized 1.7% decline in the final quarter of 2015 to a rise of 1.7% annualized in the first quarter of this year.

Chinese April home prices showed more resilience than expected.  Prices increased on month in 65 of 70 measured cities.  Compared to April 2015, property prices increase in 46 cities, up from 40 cities in the year to March.

Stocks in Europe are down 0.5% in the U.K. and 0.3% in Germany and France. 

Ten-year sovereign debt yields rose two basis points in the U.K. and a basis point each in Japan and Germany.

Positive quarter-on-quarter annualized growth during 1Q16 in Japan reflected increases of 1.9% in personal consumption, 2.6% in public sector expenditures, and a 0.7 percentage point contribution from net foreign demand.  Non-residential and residential investment each fell.  Real GDP was unchanged from a year earlier and 1.0% less than the first-quarter level in 2014.  Japan’s GDP price deflator recorded a smaller on-year advance of 0.9% last quarter versus 1.5% between 4Q14 and 4Q15.

Harmonized consumer prices in the eurozone were unchanged in April compared to March and 0.2% lower than in April 2015.  Core inflation slowed to 0.7% from 1.0% the month before.  Service-sector consumer prices dropped 0.4% on month and decelerated to a 0.9% 12-month rate of increase from 1.4% in March.  On-year CPI inflation among the Ezone big four had negative readings of 1.2% in Spain, 0.4% in Italy, 0.3% in Germany and 0.1% in France.

The FOMC minutes get released today.  Lockhart and Williams, presidents of the Atlanta and San Francisco Federal Reserve districts, made hawkish remarks, suggesting a preference for two rate hikes during the balance of 2016.

British labor statistics were reported.  The claimant count of unemployment unexpectedly declined, posting a 2.4K drop during April after rising 14.7K in March.  The ILO basis jobless rate stayed at 5.1% in the first quarter.  Wages last quarter were 2.0% greater than a year earlier, and regular pay excluding bonuses was up by 2.1%.

Australian quarterly wage costs receded further in the first quarter, rising 0.4% from 4Q15 and 2.1% from 1Q15.  The labor cost index had advanced 2.2% in the year to 4Q15, 2.3% in the year to 1Q15, and 2.6% in the year to the first quarter of 2014.  Westpac’s index of Australian leading economic indicators improved to 0.24 in April from -0.10 in March.

Producer output prices in New Zealand fell 0.2% on quarter in 1Q16 and were just 0.1% higher than in the first quarter of 2015, down from an on-year rise of 2.5% in 1Q15.  Producer input prices dropped 1.0% on quarter and 0.9% on year during the first quarter of 2016.

Sanders and Clinton split yesterday’s two primaries, with Sanders getting Oregon and Clinton taking Kentucky.  Clinton has 2,291 of 2,383 delegates needed to win the nomination of the Democratic Party, yet Sanders has no intention of ceding her the victory.  In true Ralph Nader fashion, Sanders would rather hand the presidency back to the Republicans than compromise his objectives in any way whatsoever.

South African consumer price inflation slowed to 6.2% in April from 6.3% in March and an 81-month high of 7.0% in February.  Core inflation was 5.5% in April.

U.S. mortgage applications fell 1.6% last week even though the 30-year mortgage rate stayed at a lowly 3.82%.

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

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