The Germany Ifo business climate index has risen unexpectedly according to the latest release published this morning. German manufacturing and services activity is expanding at near the fastest pace since 2011. The Ifo Business Climate Index for industry and trade in Germany rose in April to 111.2 points from 110.7 points last month.
Asian equities trading was mixed in the overnight-early morning trading session, with Japanese markets selling off sharply as earnings season begins in Japan. Big names including Canon, Panasonic, Honda are scheduled to report results in the next few days, some analysts have voiced concerns that Japan’s recent increase in the sales tax, which is damping business sentiment, may cloud companies’ outlooks for earnings in 2014.
The US Fed is highly likely to slow its asset purchases by another $10bn next week as the economy shakes off its winter slowdown. Retail sales, industrial production and payrolls growth were all robust in recent weeks, adding to evidence of accelerating growth, after a cold winter led to fears for the economic outlook.
Bank of Spain Estimates Q1 GDP growth at 0.4%
In 2014 Q1, Spanish economic activity continued on a path of gradual recovery in a setting marked by further progress in the normalisation of financial markets and the gradual firming of the improvement in the labour market. On the as-yet incomplete information available, GDP is estimated to have increased by 0.4% quarter-on-quarter (compared with 0.2% in 2013 Q4), which would place the year-on-year rate in positive territory (0.5%) too for the first time following nine consecutive quarters of negative year-on-year rates. The quarter-on-quarter rate of national demand increased slightly (0.2%).
German Ifo Business Climate Index Rises
The Ifo Business Climate Index for industry and trade in Germany rose in April to 111.2 points from 110.7 points last month. Assessments of the current business situation, which were already favourable, improved somewhat. Companies are also more confident about future business developments. Despite the crisis in Ukraine, the positive mood in the German economy prevails. The business climate index in manufacturing rose to its highest level since July 2011. Although manufacturers fractionally scaled back their very good assessments of the current business situation, they were far more optimistic about their business outlook.
Conference Board LEI for China increased in March
The Conference Board Leading Economic Index® (LEI) for China increased 1.2 percent in March. The index stands at 285.7 (2004 = 100), following a 0.9 percent increase in February and a 0.3 percent increase in January. Four of the six components contributed positively to the index in March. [quote]The rise in the Leading Economic Index for China accelerated in March from February.[/quote] said Andrew Polk, resident economist at The Conference Board China Center in Beijing. [quote]However, its six-month growth rate remains moderate, which suggests that the improvement has not firmed up yet. The environment for real estate investment is dismal.[/quote]
Reserve Bank raises OCR to 3 percent
Statement issued by Reserve Bank Governor Graeme Wheeler: The Reserve Bank today increased the OCR by 25 basis points to 3 percent. New Zealand’s economic expansion has considerable momentum, with GDP estimated to have grown by 3.5 percent in the year to March. Growth is gradually increasing in New Zealand’s trading partners, but inflation in those economies remains low. Global financial conditions continue to be very accommodating. Prices for New Zealand’s export commodities remain very high, though auction prices for dairy products have fallen by 20 percent in recent months.
Market snapshot at 10:00 am UK time
The ASX 200 closed up 0.24%, the CSI 300 closed down 0.19%, the Hang Seng closed up 0.12%, the Nikkei sold off sharply closing down 0.97%. In Europe the main bourses have opened up in positive mood with the euro STOXX index up 0.43%, CAC up 0.53%, DAX up 0.43% and the UK FTSE up 0.45%.
Looking towards the New York open the DJIA equity index future is up 0.19%, the SPX future is up 0.33% and the NASDAQ up 1.17%. NYMEX WTI oil is up 0.25% at $101.69 per barrel with NYMEX nat gas up 1.33% at $4.79 per therm. COMEX gold is up 0.37% at $1285.00 per ounce with silver up 0.28% at $19.42 per ounce.
Forex focus
Japan’s currency advanced 0.2 percent to 102.37 per dollar early in London from yesterday, poised for the biggest gain since April 10th. It added 0.2 percent to 141.44 per euro. The euro was unchanged at $1.3817, after rising 0.2 percent in the last two days. New Zealand’s kiwi climbed 0.4 percent to 86.21 U.S. cents, and appreciated 0.2 percent to 88.22 yen.
The yen strengthened versus the dollar on speculation data tomorrow will show Tokyo inflation quickened the most in more than two decades, dimming prospects the Bank of Japan will expand stimulus. New Zealand’s dollar strengthened against all its major peers after the central bank raised its benchmark rate for the second time in two months and increased its growth estimate.
Bonds briefing
Benchmark 10-year yields were little changed at 2.69 percent early in London. The price of the 2.75 percent note due in February 2024 was 100 15/32. Seven-year notes, with a yield of 2.28 percent, have returned 2.1 percent this year, according to Bank of America Merrill Lynch indexes. Thirty-year bonds yield 3.48 percent and have returned 10 percent.
Yields were little changed in Japan at 0.615 percent and in Australia at 3.96 percent. New Zealand increased its main interest rate by a quarter point to 3 percent. The difference between 7- and 30-year Treasury yields was close to the smallest level since 2009 before the U.S. sells $29 billion of 2021 debt today.
