Quiet Start to Week in Financial Markets

April 8, 2019

The dollar is unchanged from Friday closing levels against the Swiss franc, Australian dollar, Chinese yuan and Mexican peso. The U.S. currency has slipped 0.2% against the yen and sterling and has edged down 0.1% relative to the euro and Canadian dollar.

Ten-year U.S. Treasury, British gilt and German bund yields are unchanged, while the 10-year Japanese JGB yield has slid a basis point.

Stock markets in the Pacific Rim rose 0.9% in Hong Kong and Taiwan and by 0.7% in Australia but fell 0.8% in Indonesia, 0.5% in New Zealand, 0.4% in India, 0.2% in Japan and Singapore and 0.1% in China. Equities so far in Europe have traded down 0.6% in Spain, 0.4% in Germany, 0.2% in the U.K., and 0.1% in France and Italy.

WTI oil and Comex gold have risen by 0.5% and 0.4%.

Several Japanese economic indicators were reported:

  • The JPY 2.677 trillion current account surplus in February was at an 11-month high and 25% wider than a year earlier. The seasonally adjusted current account surplus of JPY 1.958 billion rose 6.8% on month, thanks to a 3.2% rebound in exports. Compared to a year earlier, however, both exports and imports were more than 1.0% weaker.
  • Consumer confidence dropped a full point to a 37-month low of 40.5 in March.
  • Japan’s economy watchers index, which reflects perceptions from service sector workers, slumped 2.7 points to a 30-month low of 44.8 in March.
  • There were 16.1% fewer bankruptcies in March than a year earlier.
  • At the Bank of Japan’s quarterly meeting of branch managers, the economic assessments were cut for three of the countries nine regions.

Speaking at the BOJ branch managers meeting, Governor Kuroda strongly defended the need to continue the central bank’s program of quantitative and qualitative stimulus with yield curve control. He predicts current very low interest rates will be maintained for an extended period and that the monetary base will be expanded until CPI inflation is stably above the 2.0% target.

The German current account surplus of EUR 16.3 billion was 16.4% smaller in February than a year earlier. Seasonally adjusted merchandise exports and imports fell on month by 1.3% and 1.6%, keeping the trade surplus unchanged at 18.6 billion euros and very close to the monthly average trade surplus of EUR 18.7 billion in the final quarter of 2018.

Although the monthly Sentix gauge of investor sentiment toward the euro area recovered 1.9 points to -0.3, which matched December’s reading and was the best since November, it was noted that Germany’s economy is still slowing and that investor hope rests on the improved condition of non-Japan Asia.

Middle Eastern non-oil purchasing manager surveys for March released today revealed a 15-month high of 56.8 in Saudi Arabia, a 7-month high of 49.9 in Egypt, and a 2-month high of 55.7 in the U.A.E. after a 28-month low set in February.

Ireland’s construction purchasing managers index slipped 0.6 points to a 2-month low of 55.9, a level that still connotes strong expansion.

Chinese international reserves rose $9 billion to $3.099 billion in March.

Still ahead: U.S. factory orders and the Conference Board’s U.S. employment trends index get reported later today, as do Canadian housing starts and building permits. The Bank of Israel is holding a policy review meeting.

The Bank of Israel as expected subsequently announced no change in its 0.25% benchmark interest rate. Its been at that level since a 15-basis point rate hike last November and was at 0.10% previously since a 15-basis point cut in February 2015. For four years prior to mid-2014, CPI inflation was below the lower boundary of the central bank’s 1-3% target range, and inflation even now is only 1.2%. When officials tightened in November, they said that policy is still accommodative and needs to be so in order to support eventual convergence on the target midpoint. Today’s statement a”assesses that the rising path of the interest rate in the future will be gradual and cautious” and restates twin goals of inflation stabilizing eventually around the 2% target middle while also supporting economic growth.

Copyright 2019, Larry Greenberg. All rights reserved. No secondary distribution without express permission.



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