Spotlight on Europe: ECB Meeting and Several Indicator Releases

April 22, 2021

The weighted DXY dollar index dipped 0.1% overnight despite gains of 0.3% against the Swiss franc, 0.2% versus sterling and 0.1% relative to sterling. A new wave of Turkish lira sales also lifted the dollar 0.5% against the currency. There were modest dollar losses of 0.2% against the Mexican peso and New Zealand dollar and 0.1% versus the Canadian and Australian dollars. The yen is steady.

Ten-year U.S. Treasury and German bund yields firmed a basis points. Their Japanese counterpart dipped a basis point.

Prices for WTI oil and gold softened 0.6% and 0.3%.

U.S. stock futures point to a marginal giveback of Wednesday’s solid advance. A 2.4% advance of the Japanese Nikkei was the most notable overnight market move. Equities also closed 0.8% higher in Australia and India, the latter despite yesterday’s 300-plus thousand upsurge in new Indian cases of Covid-19. Stock markets are higher today in Continental Europe but little changed in Great Britain.

As expected, the European Central Bank left its interest rate structure, quantitative policy settings, and forward guidance unchanged at today’s review. The deposit rate will stay at negative 0.5%, and there remains a 1.85 trillion euro envelope on the Pandemic Emergency Purchase Program.

The first estimates of Euroland’s fiscal deficit-to-GDP and debt-to-GDP ratios in 2020 were reported. A 7.2% deficit ratio was the largest in 25 years and up from deficit ratios of 0.6% in 2019, 0.5% in 2018, and 0.9% in 2017. Outstanding public-sector debt in the euro area equaled 98.0% of GDP at the end of 2020, up from 83.9% a year earlier. Greek debt equaled 205.6% at end-2020.

The latest pandemic wave in France affected manufacturing and services differently. Manufacturing business sentiment rose five index points in April to 104, thus returning to its pre-pandemic level, but the services and retail sentiment indices dropped this month by 3 and 5 points to 91 and 90. Overall business sentiment, which had climbed 7 points in March thus settled back two points to a reading of 95.

The Danish and Dutch consumer confidence indices improved to 13-month highs in April. Belgian consumer confidence slipped two points to a 2-month low, but at -6 was well above readings in the second half of 2020 such as -15 in November and -26 in August.

Turkish consumer sentiment weakened from a 31-month high in March of 86.7 to a 4-month low this month of 80.2. The lira responded adversely to this news.

After rallying 19 index points to a 23-month high of minus 5 in March, the orders component of the British industrial trends survey settled back 3 points to a score of -8. A separate measure compiled by the Confederation of British Industry revealed a 60-index point advance in manufacturing confidence from -22 in the first quarter of 2021 to +38 this quarter.

Dutch unemployment declined a percentage point to an 11-month low in March, and household spending in that economy experienced its smallest on-year decline (10.4%) in three months during February.

Norwegian business confidence improved to a 9-quarter high of 8.2 in 1Q 2020 from 3.8 in 4Q 2020 and -17.4 in the year-earlier quarter.

A 17.4% year-on-year jump in Polish retail sales in March was the most in 119 months.

The Swiss trade surplus of CHF 3.881 billion in March constituted an 11-month high and resulted in a CHF 10.8 billion first-quarter surplus.

Italian industrial sales rose 0.2% on month and 0.9% on year in February. Sales in December-February were 2.4% larger than in the previous three-month period.

Irish wholesale prices jumped 1.0% on month in March, resulting in the smallest year-on-year decline (10.1%) since -5.1% last October.

Australian business confidence improved to a 45-quarter high in the first quarter of 2021.

Unemployment fell in March to a 13-month low in Taiwan and an 3-month low in Mexico.

Among U.S. data releases today, the Chicago Fed National Activity Index rose 2.9 index points to a reading of 1.71 in March, best since 2.62 last July. New jobless insurance claims dropped further last week to 547 thousand from an upwardly revised 586k in the previous week. Analysts were expecting a figure above 600k. Still to come: existing home sales, the index of leading economic indicators, and the Kansas City Fed manufacturing index.

Copyright 2021, Larry Greenberg. All rights reserved. No secondary distribution without express permission.

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