In the overnight session very positive news came courtesy of the New Zealand’s stats office as the economy enjoyed a 0.9% rise over the quarter up to December 2013. In Europe Germany published its latest producer prices showing a fall of 0.9% year on year. As the Swiss central bank announces no change to its Libor rate a reading of 2.6 bn fr was registered as the monthly trade surplus for the month of February. Exports from Switzerland rose by a real 8.0 percent in February to 17.0 billion Swiss francs, the Federal Customs Office said on Thursday.
Asian markets fell sharply after Janet Yellen, in her first meeting as chairwoman of the US Federal Reserve, sent signals pointing to earlier rises in interest rates. Following a brief plunge in US markets, when Ms Yellen implied rates could rise six months after the Fed stops buying assets, Asian currencies and equity markets opened lower.
The Federal Open Market Committee discarded a jobless-rate threshold for considering when to increase borrowing costs and said it will look at a wider range of data. Policy makers also reduced monthly bond-buying by $10 billion to $55 billion and said in a statement it will slow purchases in “further measured steps.”
George Osborne on Wednesday unveiled a Budget aimed at savers and the grey vote that sent shares in insurance companies into a tailspin. The chancellor stunned the pensions industry by announcing plans to give people more freedom to choose what they do with their pension pot, outlining plans to change rules which effectively force people to buy an annuity at retirement.
The People’s Bank of China has fixed the onshore renminbi rate at its weakest level since November, indicating the currency will continue to depreciate. The central bank fixed the rate at 6.146 per dollar, or 0.18 per cent weaker than the 6.1351 rate it chose on Wednesday.
NZ GDP up 0.9 percent
Strong growth in manufacturing saw gross domestic product (GDP) rise 0.9 percent in the December 2013 quarter, Statistics New Zealand said today. Manufacturing activity grew 2.1 percent, driven by increases in food, beverage, and tobacco, and machinery and equipment manufacturing. Manufacturing activity is now at its highest level since March 2006. Dairy farming and dairy product manufacturing both fell this quarter, after strong increases last quarter, when production rebounded from the drought earlier in 2013.
German Producer prices in February 2014: –0.9% on February 2013
In February 2014 the index of producer prices for industrial products fell by 0.9% from the corresponding month of the preceding year. While prices of consumer non-durable goods increased by 1.3% prices of intermediate goods were 1.9% low and energy 2.6% low compared with February 2013. In January 2014 the annual rate of change all over had been –1.1%. Compared with the preceding month the index remained unchanged in February 2014 (+0.1% in December 2013 and –0.1% in January 2014).
Swiss trade surplus widens to 2.6 bln sfr in Feb
Exports from Switzerland rose by a real 8.0 percent in February to 17.0 billion Swiss francs, the Federal Customs Office said on Thursday. Overall Switzerland ran a merchandise trade surplus of 2616 million Swiss francs in February.
SNB Monetary Policy Assessment
The Swiss National Bank (SNB) is maintaining its minimum exchange rate of CHF 1.20 per euro. The Swiss franc is still high. The SNB stands ready to enforce the minimum exchange rate, if necessary, by buying foreign currency in unlimited quantities, and to take further measures as required. With the three-month Libor close to zero, the minimum exchange rate continues to be the right tool to avoid an undesirable tightening of monetary conditions in the event of renewed upward pressure on the Swiss franc. The SNB is leaving the target range for the three-month Libor unchanged at 0.0–0.25%.
Market snapshot at 10:00 am UK time
The ASX 200 closed down 1.15%, the CSI 300 down 1.60%, the Hang Seng down 1.79%, with the Nikkei down 1.65%. In Europe the main bourses are in the red; euro STOXX down 0.64%, CAC down 0.59%, DAX down 0.72%, FTSE down 0.77%. The DJIA equity index future is down 0.04%, SPX up 0.11%, NASDAQ up 0.06%. NYMEX WTI oil is down 0.16% at $100.21 per barrel with NYMEX nat gas down 1.49% at $4.42 per therm. COMEX gold is down 0.69% at $1332.20 per ounce with silver down 2.-9% at $20.40 per ounce.
Forex focus
The dollar was little changed at $1.3833 per euro after climbing 0.7 percent yesterday. It traded at 102.41 yen following a 0.9 percent advance in New York. The yen was at 141.68 per euro from 141.54 yesterday. The dollar was about 0.2 percent from a three-week high versus a basket of its peers after Federal Reserve policy makers signaled they will probably raise interest rates by the middle of next year.
The yuan touched 6.2334 per dollar, the weakest since February 2013, before trading 0.5 percent lower at 6.2278. The People’s Bank of China lowered the daily fixing today to the weakest level since Nov. 6th. The yuan has dropped 1.3 percent this month, after February’s record 1.4 percent slide.
The New Zealand dollar weakened after data showed gross domestic product increased 0.9 percent in the fourth quarter from a revised 1.2 percent in the July-September period. The kiwi fell 0.3 percent to 85.33 U.S. cents after dropping 0.7 percent yesterday. Australia’s dollar declined 0.2 percent to 90.22 U.S. cents.
Bonds briefing
The central bank has lowered monthly bond purchases under its quantitative-easing stimulus strategy from $85 billion last year after undertaking three rounds of bond buying since 2008. Treasury two-year yields increased as much as 10 basis points yesterday, the most since 2011. The prospects for rising borrowing costs damped demand for higher-yielding assets, with the MSCI Asia Pacific Index of shares sliding 2 percent today.
The benchmark 10-year note yield fell three basis points to 2.74 percent early in London following a 10 basis point advance yesterday. The 2.75 percent note due in February 2024 rose 1/4, or $2.50 per $1,000 face amount, to 100 1/32. The yield spread over Group-of-Seven peers was 0.62 percentage points yesterday, the most since April 2010. The two-year note yield was little changed at 0.42 percent after gaining seven basis points yesterday, the most since 2011. The gap over similar-maturity Japanese notes rose to 35 basis points yesterday, the widest since Sept. 10.
