Lessening Inflation in Europe and Some Significant Meetings

April 18, 2018

Japanese Prime Minister Abe and President Trump are meeting in Florida.

CIA Director Pompeo, who has been nominated by Trump to be Secretary of State, met secretly with North Korean President Kim Jong-Un, to decide arrangements for Kim’s historical talks next month with Trump. Investors perceive lessening geopolitical tension.

British CPI inflation in March fell more than expected to a 1-year low of 2.5%. Core CPI dropped to 2.3%, and producer price inflation also undershot expectations. The data suggest that the Bank of England may be less quick to raise interest rates. Sterling fell 0.6% against the dollar overnight, and the 10-year British gilt yield declined 4 basis points to 1.39%. The Ftse is 0.7% higher.

Euro area CPI inflation in March was revised downward by 0.1 percentage point to 1.3%. Core CPI of 1.0% was the same as in January and February.

The dollar is unchanged against the euro but 0.2% softer against the yen.

Stocks in Asia advanced 1.4% in Japan, 1.1% in South Korea, 1.9% in Singapore, 0.8% in China and 0.5% in Hong Kong. Little change in the German Dax.

West Texas Intermediate crude oil (+0.9%) and non-industrial metal prices strengthened overnight. Gold dipped 0.1%.

Construction output in Euroland fell 0.5% on month, cutting the 12-month rate of increase to 0.4% from 0.9% in January and 2.7% in the second half of 2017.

The Japanese customs trade surplus printed in March at JPY 797 billion, a bit more than JPY 603 billion a year earlier on export growth of 2.1% and a drop of 0.6% in imports. The seasonally adjusted trade surplus was only JPY 119 billion, however, as both exports and imports fell. A smaller surplus of JPY 2.456 trillion was recorded in fiscal 2017 than the surplus of JPY 3.973 trillion in fiscal 2016.

In the 12 months to March, consumer prices rose 3.8% in South Africa, 1.9% in Austria, and 1.3% in Malaysia. Producer prices edged up just 0.1% in the Czech Republic and 0.8% in Portugal.

The latest IMF World Economic Outlook projects 3.9% global GDP growth both this year and in 2019, same as before. Projected 2018 growth in the U.S. of 2.9% and Euroland of 2.4% was revised up 0.2 percentage points, but the expected Japanese growth (1.2%) was unrevised. 2018 growth forecasts for Britain and Canada are put at 1.6% and 2.1%. Among emerging economies, growth in India of 7.4% in 2018 and 7.8% next year is higher than in China (6.6% and 6.4%). Growth this year in Russia of 1.7% and Brazil of 2.3% is positive.

The Bank of Canada is holding a monetary policy review today and will publish a quarterly Monetary Policy Report.

Copyright 2018, Larry Greenberg. All rights reserved. No secondary distribution without express permission.

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