Muted Financial Market Activity Ahead of Good Friday/Easter Holiday
April 6, 2023
Aside from 0.5-0.7% gains against the Australian and New Zealand currencies, overnight dollar movement has been scant, with 0.1% dips against the yuan, euro and sterling and 0.1% upticks relative to the yen and loonie.
U.S. stock futures are similarly very close to Wednesday closing levels. So are the prices of gold and oil.
In other equity markets, share prices closed down 1.4% in South Korea and 1.2% in Japan but are up currently by 0.6-0.9% in Italy, Spain and the U.K. and by 0.3-0.4% in Germany and France.
Ten-year sovereign debt yields (down three basis points in Switzerland, Germany and the United States and by two bps in France, Spain and Italy) have dipped amid worries about a possible recession. The price of bitcoin tokens has fallen 0.8%.
The delayed reporting of Chinese and Hong Kong March PMI surveys due to the Ching Ming Festival revealed further sharp accelerations in China’s service industries that were evidenced in sales, employment, optimism and overall activity, all of which reflect the abandonment of President Xi’s zero tolerance Covid policy. The Caixin-compiled services and composite purchasing manager indices printed at 28- and 9-month highs of 57.8 and 54.5 in March, up from 6-month lows last November of 46.7 and 47.0. Hong Kong’s private PMI reading settled back to a 2-month low of 53.5 from February’s 9-month peak of 53.9 but remained well above last September’s 48.0.
Construction activity in Europe weakened at a faster pace last month according to PMI-construction readings of 45.0 in the euro area and 50.7 in Great Britain. Construction in Euroland, Germany, and Italy contracted at their fastest pace since December. The French PMI reading rose to a 2-month high but at 45.9 represented a continuing strong rate of contraction. The British construction purchasing managers index had shown very promising improvement in February (54.6 versus 48.4 in January) but in March (50.7) conveyed a near stagnant situation. Adding to the renewed gloom, the British Halifax house price index posted only a 1.6% year-on-year rise in March, down from 12.5% last June and the smallest 12-month increase in 41 months.
Retail sales in Romania fell 0.6% on month in February after a 0.1% downtick in January, and a 10.1% year-on-year drop in Hungarian retail sales in February was the biggest such drop in 34 months. Swedish industrial production declined 0.4% between January and February.
But on a brighter note, German industrial production, which had been projected to being pretty unchanged because of declining oil output, instead jumped 2.0% in February after an upwardly revised 3.7% bounce in January. German industrial production as a consequence posted a 0.6% year-on-year advance after 12-month declines in December and January of 5.3% and then 1.6%.
Among price data out today, Austrian wholesale prices fell 0.8% on month in March, causing a dramatic shift in the 12-month rate of change from 10.2% in February to -0.4% last month, which was the first negative year-on-year change in 26 months. Cypriot consumer price inflation of 5.8% in March was down from 6.7% in February and 10.9% last July, but the 1.0% monthly CPI rise was the most since the year-on-year crest last July.
There was a central bank interest rate surprise today. The policy rate had previously been raised since May 2022 by a total of 250 basis points from a record low of 4.0% to 6.5%. That tightening had been engineered in six consecutive incremental hikes, including one of 25 basis points at the prior review in February. Analysts were anticipating a seventh move, matching the diminished size of February’s action. Instead, officials at the Reserve Bank of India by unanimous vote agreed to leave the liquidity adjustment rate unchanged at 6.5%. A released statement makes clear that the long-term priority remain inflation reduction toward the target corridor that is centered on 4.0% versus the current 12-month CPI increase of 6.4%. The monetary policy committee promised to “continue to keep a strong vigil on the evolving inflation and growth outlook and will not hesitate to take further action as may be required in its future meetings.” But with an eye on tightening lending conditions around the world, they opted to pass this time, noting that “recent financial stability concerns have triggered risk aversion, flights to safety and heightened financial market volatility.”
New U.S. jobless insurance claims fell 18k to a 5-week low of 228k last week.
In a further indication of the persistence of a tight labor market in North America, the Canadian jobless rate failed to rise in March as had been expected. a 34.7k monthly increase in jobs was more than three times greater than market expectations, and average hourly wage growth, although lower than February’s 5.4%, remained too high at 5.0%.
The U.S. Labor Department’s monthly employment situation report will be released at its usual time of 08:30 ET on Good Friday, and U.S. banks are open tomorrow. However, the U.S. stock market will be closed. A fuller holiday tomorrow will be observed in many other countries including the U.K., Canada, Australia, New Zealand, Switzerland and most of the euro area.
Copyright 2023, Larry Greenberg. All rights reserved. No secondary distribution without express permission.
Tags: Canadian labor market data, Euroland and U.K. construction PMIs, German industrial production, Reserve Bank of India
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