Lots of Data and an FOMC Meeting to Digest
April 29, 2020
Even with Japanese markets shut for the first of several “Golden Week” holidays, today is a very active day. Euroland economic sentiment, U.S. GDP, and several price statistics head a long list of data releases. Also, the FOMC will announce the conclusions of a scheduled review of monetary policy, which will be followed by a one hour Chairman Powell press conference.
The rollercoaster ride of oil prices continued overnight, with West Texas Intermediate crude soaring 16.5% and moving back above $14 per barrel. Gold rose 0.2%.
Many stock markets responded positively to the rebound in oil. Those in the Pacific Rim closed up 1.9% in India, 1.5% in Taiwan and Australia, 0.8% in Indonesia, and 0.7% in South Korea. Share prices have risen 0.8% in the U.K. and Spain.
The dollar is mostly lower, with declines overnight of 0.8% against the Australian dollar, 0.7% versus the yen and Mexican peso, 0.6% vis-a-vis the kiwi and loonie, and 0.1% relative to the euro, Swiss franc and Chinese yuan.
Ten-year U.S. Treasury and German bund yields slipped two basis points.
Japan is observing Showa Day, which commemorates the birthday of former Emperor Hirohito.
Despite getting a 1.8 percentage point positive contribution from net foreign demand and inventory building, U.S. real GDP slumped 4.8% at an annualized rate last quarter and was a mere 0.3% higher than in the first quarter of 2019. This result was even worse than analyst expectations. Among the main components of final domestic demand, personal consumption plummeted 7.6% and non-residential business investment collapsed 8.6% on quarter. Net exports had a positive influence on the growth rate only because a 15.3% dive in imports eclipsed the severe 8.7% drop in exports. The only bright spot was a 21% advance in residential construction. The on-year rise in the total and core personal consumption price deflators of 1.6% and 1.8% were 0.2 percentage points more than in the final quarter of last year, but with the huge recent drop in oil prices and economic growth, inflation is not a policy priority.
Euroland’s economic sentiment index fell to a reading of 67.0 in April from 94.2 in March and 103.4 in February. This was the largest month-to-month drop ever and left the index just marginally above its all-time low of 65.5 in March 2009. Service sector sentiment did drop to a record low, and consumer confidence at -22.7 was close to its Great Recession trough of -23.9.
German CPI inflation decelerated 0.6 percentage points to a 41-month low of 0.8% in April.
German import prices dropped 3.5% on month and 5.5% on year (most in 46 months) in March. Even when excluding the cost of oil products, import price inflation was negative 2.2%.
Italian producer prices fell 1.0% on month and 3.6% on year, the biggest 12-month rate of drop in 46 months.
Australian quarterly CPI inflation accelerated to 2.2% in 1Q from 1.8% in the final quarter of 2019, but core inflation remained slightly below the 2% level.
British shop prices were 1.7% lower in March than a year earlier, their greatest 12-month decline in 38 months.
Icelandic CPI inflation rose 0.1 percentage point to a 2-month high of 2.2% this month.
Hungarian PPI inflation of 4.3% in March was 0.5 percentage point above February’s level and the most in 15 months.
PPI inflation in Singapore of negative 9.4% was the most sub-zero pace in 46 months.
Spanish retail sales plunged 15.3% in March and were 14.1% fewer than a year earlier.
South Korean retail sales fell 1.0% on month and 8.0% on year (most in over two decades) in March.
Portuguese consumer confidence and business sentiment in April dropped to 77- and 67-month lows.
South Korean manufacturer sentiment weakened somewhat further in April to a 134-month low.
The reading for Spanish business sentiment deteriorated to -35.1 in April from -7.1 in March and -3.9 in February. This was the lowest outcome in just over 11 years.
Turkish economic sentiment collapsed to a record low of 51.3 this month from 91.8 in March.
Dutch business sentiment of -28.7 in April was the lowest ever in this 35-year-old data series.
Danish manufacturer sentiment hit a 131-month low in April.
The National Bank of Georgia‘s monetary policy rate was cut a half percentage point today to 8.5%, reversing an increase made in December.
On-year M3 money growth in the euro area accelerated two percentage points to 7.5% in March, mainly reflecting a 10.3% rise in the narrowest M1 aggregate. M3 growth averaged 6.0% last quarter compared to a 5.4% on-year pace in the final quarter of 2019. Credit growth also has picked up in response to European Central Bank easing.
Investors now await the FOMC policy statement at 14:00 EDT, followed by a press conference by Chairman Powell.
Copyright 2020, Larry Greenberg. All rights reserved. No secondary distribution without express permission.
Tags: Euroland economic sentiment, German CPI, U.S. GDP growth
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