Modest Market Retrenchment Ahead of ECB Announcement

April 26, 2018

The ECB Governing Council is holding a policy review to be followed by Draghi’s press conference. The Bank of Japan Board began a two-day meeting whose results will be revealed Friday. The BOJ also releases a quarterly Outlook for Economic Activity and Prices tomorrow, which will update its macroeconomic forecasts.

After meetings with U.S. President Trump, French President Macron predicted that the U.S. will soon formally abandon the Iran Nuclear Deal.

The dollar has retreated a bit today, trimming recent gains. The U.K. currency lost 0.3% against sterling, 0.2% versus the yen and kiwi, and 0.1% relative to the euro, Aussie dollar, and loonie. Likewise, 10-year sovereign debt yields retrenched by three basis points in the U.S., 2 bps in Germany and the U.K., and a single basis point in Japan.

Stock markets in Asia fell 2.8% in Indonesia, 1.4% in China, 1.2% in Hong Kong, and 0.7% in Taiwan but rose 1.1% in South Korea, 0.6% in India, and 0.5% in Japan. There’s talk that China is considering a reduction in some trade restrictions.

Equities in Europe are so far up 0.8% in Italy and Switzerland, 0.5% in France and Spain and 0.2% in the U.K. and Germany.

The Swedish Riksbank Executive Board as expected kept its repo rate at negative 0.50% but indicated a somewhat flatter path of eventual normalization, with the likely first hike not happening until close to the end of 2018 rather than soon after midyear.

German consumer sentiment slid 0.1 to a reading of 10.8 in May. While also down from 11.0 in February, this was the fifth month over the past year to yield a reading of 10.8.

Swedish consumer confidence dropped unexpectedly to a 20-month low of 100.3 in April from 100.8 in March, 104.1 in February, 105.6 in January, 107.9 in December and 108.2 last November.

Swedish PPI inflation accelerated 1.2 percentage points to 4.0% last month.

South African PPI inflation slowed a half percentage point to an 8-month low of 3.7% in March.

The BBA reported 37,570 mortgage approvals in Britain in March, down from 38,035 in February.

The Confederation of British Industry’s monthly distributive trades survey for April revealed the first upturn in the key index since November. Such remained below zero, however, at minus 2 following a score of -8 in March and +8 in February.

Spanish unemployment rose for a second straight quarter, reaching 16.74% in 1Q18 after 16.55% in the final quarter of 2017 and 16.38% in 3Q17. Last quarter’s level was nonetheless will below 18.75% in the first quarter of 2017.

Norwegian unemployment ticked down 0.1 percentage point to 3.9% in February.

Following a 0.2% contraction in the final quarter of 2017, South Korean GDP recovered 1.1% last quarter, keeping the on-year rate of growth unchanged at 2.8%.

Hong Kong’s trade deficit of HKD 130 billion last quarter was 17.8% wider than in the first quarter of 2017. Industrial production in Singapore during March exceeded the year earlier level by 5.9%.

In the year between 1Q17 and last quarter, import prices in Australia increased 2.3%, while export prices fell by 1.4%. But this discrepancy narrowed in 1Q18 when the quarterly rise of export prices (4.9%) outpaced that comparable 2.1% advance in import prices.

Just In: The ECB has left its key interest rates unchanged as expected. A statement about the decision did not reveal what will happen to quantitative stimulus after September. Up to that point, the central bank in Euroland is buying sovereign bonds at a pace of EUR 30 billion per month.

Weekly U.S. jobless insurance claims data and monthly durable goods orders get reported today.

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

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