Sharp Drop this Month in Euroland Economic Sentiment

April 29, 2019

Economic sentiment in the euro area recorded the steepest month-to-month deterioration since December, printing at a 31-month low of 104.0 versus 105.6 in March and 111.8 last June. The biggest hit was absorbed by industrial sector sentiment, which fell by 2.5 points to -4.1. Construction, retail, and consumer confidence also lost ground in April, while service sector sentiment stayed at March’s level. The business climate index fell to a 32-month low.

EUR/USD is nonetheless unchanged from Friday’s closing level, and share price losses of 0.3% in Germany, France and Italy have been comparatively muted.

The dollar is also trading unchanged relative to the yuan, peso and sterling. The U.S. currency has edged 0.1% higher against the yen, loonie, and Swiss franc but slid 0.2% vis-a-vis the Australian dollar and 0.1% against the kiwi.

Japanese markets will be shut all week for Golden Week observances as well as the accession ceremony to emperor of Naruhito.

In other stock market action, share prices rose 1.7% in South Korea, 1.5% in Singapore, and 0.9% in India and Hong Kong but fell 0.8% in China and 0.4% in Australia. The British Ftse has dipped by a marginal 0.1%.

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

Among commodities, the prices of WTI oil and Comex gold have declined by 0.5% and 0.4%.

In Spain’s general election yesterday, the Socialists increased 38 seats to secure a 158-seat majority alliance, making Pedro Sanchez the incoming prime minister. But the election also saw a surge in the far-right VOX Party, which took 24 seats, as the previously ruling People’s Party suffered heavy losses. Spain’s stock market reacted as most do to the Socialist victory, falling 0.9%.

India is also holding elections, but the result will not be known until the second half of May.

Spanish business sentiment, meanwhile, dropped 1.4 index points to a 2-month low in April of minus 3.8.

An acceleration of on-year M1 money growth in the euro area to 7.4% in March from 6.6% in February and 6.2% in January, lifted M3 money growth to 4.5% last month. In the first quarter, M3 was 4.2% greater than a year earlier compared to an on-year 3.9% advance in the final quarter of 2018. But lending to both non-financial corporations and to households slowed in the latest month.

Italian producer price inflation decelerated 0.2 percentage points to 2.9% in March, lowest since last June when such also was 2.9%. In between, PPI inflation had crested in October at 5.8%.

Icelandic CPI inflation rose 0.4 percentage points in April to a 3-month high of 3.3%.

Sweden recorded a SEK 7.0 billion trade surplus in March, up form SEK 1.6 billion a year earlier, and exports grew twice as fast as imports. The first-quarter surplus of SEK 16.6 billion was four times greater than the year-earlier surplus.

Portuguese consumer confidence improved to a 2-month high in April, whereas Finnish consumer sentiment dipped to a 2-month low, albeit remaining above its long-term average.

Despite a 0.8% monthly drop, Irish retail sales growth in year-on-year terms accelerated to a 5-month high of 4.9% in March.

Producer prices in Singapore jumped 1.9% on month in March and to a 3.5% 12-month rate of increase, most since 5.1% last November.

U.S. personal income, personal spending and the monthly PCE price deflator will be reported later this morning. The Dallas Fed manufacturing survey also gets published today. There’s an FOMC meeting Tuesday and Wednesday, and Friday sees the release of the monthly Labor Department’s U.S. jobs report.

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

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