Softer Dollar, Lower Bond Yields, and Equities Recover Further
March 30, 2023
Risk-on trading continued overnight. The dollar fell 0.4% against the Swiss franc, 0.3% relative to the euro and yen, 0.2% versus the Australian dollar and sterling and 0.1% vis-a-vis the Canadian dollar, kiwi, and Mexican peso. Ten-year sovereign debt yields dipped 3 basis points in the U.K., 2 bps in Germany and a basis point in the United States. Bitcoin tokens cost 1.0% more than yesterday, and oil firmed 0.7%. The weighted DXY dollar index is 3.1% below its first-quarter high but just 1.2% above the bottom of the quarter’s trading range.
U.S. equity futures just prior to the release of U.S. data had strengthened around 0.5%. The S&P 500 is roughly in the middle of its 52-week corridor and 16.8% above its lowest point in the past year. Share prices closed up today by 1.6% in New Zealand, 1.0% in Australia and 0.7% in China. The German DAX and Paris CAC are up 1.3% so far today. Investor optimism stems from the belief that the Fed tightening cycle will pause and growing hope that there will be a rate cut before the end of this year.
Price data were reported by several economies today.
- German consumer price inflation fell to a 7-month low of 7.4% in March from 8.7% in February and a peak of 8.8% last October-November. Inflation was almost as low as the 7.3% reading in March 2022. The latest 12-month increase in the energy component imploded to 3.5% from 19.1% in the prior month, but food and service price inflation accelerated further to 22.3% and 4.8%.
- Spanish consumer price inflation sank to a 19-month low of 3.3% in March from 6.0% in February and a 37-year high of 10.8% last July.
- Bulgarian CPI inflation ticked 0.1 percentage points above February’s 1-year low to 6.7%.
- Italian producer price inflation declined to a 20-month low of 9.6% in February from 11.1% in January and last September’s peak of 41.7%.
- Greek PPI inflation of 4.7% in February was the lowest in two years and down from 35.4% last October.
- Filipino producer price inflation of 3.6% in February was at a 14-month low.
- South African producer price inflation slowed half a percentage point in February to an 11-month low but still printed at a double-digit pace of 12.2%. Such crested at 18.0% last July.
- Austrian PPI inflation of 11.8% last month was at a 17-month low, down from 14.2% in January and 22.1% last September.
Euroland’s economic sentiment index weakened modestly in March to a 3-month low, printing at 99.3 versus a record high reading in October 2021 of 118.7. Sectoral breakdowns of the data also put services, retail, industry, and the labor market at their lowest levels since December 2022.
Business sentiment in Switzerland where Credit Suisse had to be rescued by UBS also slid a tad in March but at 98.2 was well above last November’s 28-month low reading of 89.2.
Business confidence in the Netherlands, Spain and Portugal improved to 7-, 9- and 10-month highs this month.
Spanish and Portuguese retail sales posted month-on-month declines in February but were 4.0% and 0.4% above their year-earlier levels.
South Korean business confidence rebounded to a 3-month high in March, but the latest reading was still 13 index points below its year-earlier level.
U.S. real GDP growth last quarter relative to the prior quarter and expressed at an annualized rate has been revised marginally lower to 2.6% from 2.7% reported a month ago. By comparison, GDP growth on a similar basis in 4Q 2022 was virtually stagnant in the euro area, Japan, Great Britain, Canada, Switzerland, Hong Kong and even China. Quarterly growth in each of these countries fell between +0.1% and -0.1%.
America’s relatively buoyant growth in the final quarter of 2022 has been associated with a labor market that continues to be very tight according to numerous measure. There were only 198k new jobless insurance claims made last week, marking the third straight sub-200k reading and the tenth time in the past eleven weeks when claims made were below that key threshold.
Copyright 2023, Larry Greenberg. All rights reserved. No secondary distribution without express permission.
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