Europe’s Recovery Diverges as Italy Jobless at Record -
Europe’s two-speed economy was underscored in data today showing strengthening in the German labor market just as Italy’s jobless rate reached a record.
In Italy it rose to 13 percent, while inGermany the locally defined jobless rate for March stayed at the lowest in at least two decades.
“While we might be seeing a recovery more generally in the euro area, the pace of that expansion is unlikely to be sufficiently strong to make a serious dent on the unemployment picture,” said Timo del Carpio, an economist at RBC Capital Markets in London.
International investors are returning to the euro, including to nations that received bailouts in the depths of the crisis. U.S. exchange-traded funds show net inflows of $634 million into Spain this year, marking an increase of 71 percent, according to data compiled by Bloomberg. Flows into Greece have increased 77 percent to $102 million.
Still, Europe’s fragile labor market remains a concern for its leaders with February unemployment rates varying from a low of 4.8 percent inAustria to 25.6 percent in Spain. Greece, which last reported in December, had a jobless rate of 27.5 percent. Among people under the age of 25, unemployment in the 18-nation currency bloc stands at 23.5 percent. — (Bloomberg)
Markit France Manufacturing PMI -
Reported Apr 1st:
Suggests further strength ahead over the immediate term. Firms still are waiting to see if the recovery has legs, caution reflected in only marginal increases in employment. Nonetheless it’s a step in the right direction.
In other news, Italian export orders seem to be rising smartly as per the country’s Markit/ADACI PMI indicator.
Markit Spain Manufacturing PMI -
Reported Apr 1, 2014
New orders rose as well as output. Manufacturing expanded at its quickest pace since 2010. Europe’s recovery continues.
U.S. Treasury says it is looking closely at weaker Chinese Yuan. -
U.S. Treasury says it would be concerned if China retreats from easing control of the Yuan.
Yellen Assures Markets on Interest Rates -
CHICAGO—Federal Reserve Chairwoman Janet Yellen offered new assurances the Fed intends to keep interest rates low, describing in unusually personal terms why the economy needs these policies to support a weak job market.
"She doesn’t want to get the market overly concerned that she’s going to tighten anytime soon, because she’s not," said Doug Cote, chief market strategist at ING Investment Management. "She said she has an extraordinary commitment to boost the economy in a still-struggling labor market. I think it put the market at ease."
While Ms. Yellen’s underlying message on Fed policy was unchanged, her delivery was striking. Central bankers tend to speak in terms of economic theory and statistics, in jargon better understood by investors and other economists than the broader public. Ms. Yellen instead exhibited a personal touch Monday by coloring her comments with experiences of three people who had struggled to gain full-time work.— (WSJ)
I do like the personal touch she brings. Makes me think that they have some idea what the regular person is going through. It ain’t fun, that’s for damn sure.
The Euro Zone Economy Is Feeling Frost In The Spring -
Despite the crisis in Ukraine, euro-zone surveys of confidence and activity in the first three months of 2014 have been encouraging. The European Commission’s economic-sentiment indicator, based on what both businesses and consumers are reporting, rose in March to 102.4, the highest since July 2011 and a little above the long-term average of 100 since 1990; at the worst of the recession in late 2012 it had fallen to 85.8. The indicator tends to track growth, which suggests that it is picking up. That chimes with surveys of manufacturing, compiled by Markit, a data provider, which show the sector in the first quarter at its healthiest since the spring of 2011. - (The Economist via Business Insider)
Eurozone still faces a s*&^load of problems, but at least we are continuing to see signs of firming growth. Furthermore, periphery yields just keep plunging and is a testament to investors’ confidence that the project will not fall apart.
Japan Current Account Rebounds to First Surplus in 5 Months -
Japan’s current account rebounded into surplus in February from a record deficit the previous month as income from overseas investments outweighed deficits in trade and services.
The 613 billion yen ($5.9 billion) surplus was the first in five months, the Ministry of Finance reported in Tokyo today. The median forecast in a Bloomberg News survey of 29 economists was for an excess of 618.1 billion yen.
Japanese officials are assessing the strength of the economy after a sales-tax increase on April 1 that is projected to trigger a contraction this quarter. The Bank of Japan is forecast to refrain from adding to its unprecedented monetary easing at a two-day meeting ending today, waiting to see the extent of the blow to consumption.
“The increase in imports from front-loaded demand before the sales-tax hike has worn off,” Koya Miyamae, an economist at SMBC Nikko Securities Inc. in Tokyo, said before the report. “The current-account will stay in surplus for the next few months as domestic consumption weakens and exports are expected to keep rising.”
The weaker yen and shuttering of nuclear power plants has pushed up energy import costs, causing a 20th straight monthly trade deficit in February. For the current account outlook, Japan needs to watch energy price and foreign exchange moves, Finance Minister Taro Aso told reporters today in Tokyo.
The income surplus is the portion of the current account that includes earnings from overseas trading of equities, bonds and debt securities. This tends to be higher in February and March due to the repatriation of payments before the March 31 end of the fiscal year, according to Tsutomu Saito, an economist at Daiwa Institute of Research Ltd. in Tokyo.
The excess in income is staving off the risk of deficits that could undermine confidence in a nation with the world’s largest debt burden.- (Bloomberg)
Japan to Speed Up Spending as Consumers Flash Warning: Economy -
Finance Minister Taro Aso told reporters that data showing a slump in household expenditure two months before the first sales-tax increase since 1997 was a problem, and Prime Minister Shinzo Abe’s administration will pour 40 percent of outlays for the next fiscal year into the April-June quarter. He’d already pledged to fast-track stimulus spending.
For all intents and purposes this report is a stake in the heart of Abenomics. Stimulus will need to be deployed to salvage economic growth. Stimulus, both fiscal and monetary, are on the horizon. What makes the situation more alarming is that this plunge (by the most in more than 2 years mind you) is occurring just in time for the sales tax hike. Where….
Nearly 70% of Japan household to cut spending post-tax hike: BOJ - (The Star Online)
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Events continue to occur inline with my Thesis bit: “Japan: Are the clouds parting, or is it The Calm Before the Storm?”
Oklahoma Swamped by Surge in Earthquakes Near Fracking -
There have been more earthquakes strong enough to be felt in Oklahoma this year than in all of 2013, overwhelming state officials who are trying to determine if the temblors are linked to oil and natural gas production.
The state on April 6 experienced its 109th earthquake of a magnitude 3 or higher, matching the total for all of 2013, according to Austin Holland, a research seismologist with the Oklahoma Geological Survey. More quakes followed, including a magnitude 4 near Langston about 40 miles (64 kilometers) north of Oklahoma City.
A surge in U.S. oil and gas production by fracturing, or fracking, in which drillers use a mix of water and chemicals to coax liquids from rock formations, has generated large volumes of wastewater. As fracking expanded to more fields, reports have become more frequent from Texas to Ohio of earthquakes linked to wells that drillers use to pump wastewater underground.
“We certainly likely have cases of earthquakes being caused by different oil and gas activity,” Holland said in an interview. “Evaluating those carefully can take significant amounts of time, especially when we’re swamped.”
Within the past year, earthquakes thought to be tied to wastewater disposal wells were recorded in Azle, Texas; Jones, Oklahoma; and northeastern Ohio, according to Art McGarr, a geophysicist with the U.S. Geological Survey in Menlo Park, California.
Pumping fracking wastewater underground has been linked to a sixfold jump in quakes in the central U.S. from 2000 to 2011, according to the science agency, part of the Interior Department. — (Bloomberg)
UPDATE 1-Euro zone private sector loans contract further in Feb -ECB -
(Reuters) - FRANKFURT: Lending to households and firms in the euro zone shrank further in February and money supply growth remained subdued, adding to the European Central Bank’s
The ECB has cut interest rates close to zero, pumped extra liquidity into the banking system and announced a fresh government bond purchase programme, but the measures have so far not managed to unclog lending to the real economy.
The ECB’s health check of the euro zone’s largest banks’ balance sheets before it takes over banking supervision in November is exacerbating the situation, with lenders reluctant to take on more risk and trying to slim their loan books instead.
Bank balance sheets declined by around 20 percentage points of gross domestic product last year, partly in anticipation of the health check, ECB President Mario Draghi said on Tuesday.
And more is to come this year.
UniCredit, for example, posted a record 14 billion-euro loss this month due to huge writedowns on bad loans and past acquisitions as it moved to clean up its balance sheet.
The ECB welcomed the move and encouraged other banks to not to wait with any corrective measures until the review’s results are released in October.
Loans to the private sector fell by 2.2 percent in February from the same month a year earlier, ECB data released on Thursday showed. That compared to a contraction of 2.3 percent in January.
"The fall in bank lending to businesses has clearly reflected an ongoing combination of limited supply and muted demand," said Howard Archer, economist at IHS Global Insight.
Corporate borrowing in the euro zone overall declined by 2.9 percent compared with a 3.0 percent decline on the year in the previous month. - (Reuters)
Despite continued contraction in loan growth, a look at the YoY chart shows a carving of a bottom. Things are getting better.
Analysis: France Consumer Confidence Rises To July 2012 High | MNI -
March 27, 2014
PARIS (MNI) - French consumer confidence rose to its highest level since July 2012 in March as households were more optimistic about their future financial situations and less worried about unemployment, the national statistics institute Insee said Thursday.
Insee’s consumer climate indicator rose to 88 in March from 85 in February, above the MNI survey median of 85. The index is up from a low of 80 in May and June but remains below its long-term average of 100.
Confidence rose in March as indexes measuring sentiment on future family finances, the ability to save, the outlook for quality of life all turned more positive.- (MNI Deutche Borse)
Weak corporate earnings could put pressure on stock prices -
The stock market is hitting new highs — just as corporate profit growth is slowing to a crawl.
Rising earnings helped drive share prices to a series of record peaks in the last few years. But that dynamic could be tested this week when companies such as Alcoa Inc. and JPMorgan Chase & Co. begin releasing first-quarter results.
Quarterly profits are expected to drop for just the second time in four years.
The decline would be relatively small: 1.2% for companies in the Standard & Poor’s 500 index, according to FactSet Research Systems. Wall Street hopes that it will be nothing more than a blip caused by frigid temperatures that gripped the country in January and February.
Still, that’s a big change from the 4.3% jump that analysts expected at the start of the year.
Earnings will get close scrutiny given that the bull market is in its sixth year, which is fairly long by historic standards. A longer or more pronounced bout of weakness could put pressure on stock prices whose valuations are a bit stretched.
Of the 111 companies that have made first-quarter pre-announcements, 93, or 84%, have warned that results will disappoint, according to FactSet.
That far exceeds the 65% average over the last five years. And it’s just shy of the record 95 warnings in the fourth quarter of last year.
Italian Consumer confidence -
The increase is explained by all components: economic, personal, current, and future that increased from 96.9 to 107.6, from 98.3 to 98.8, from to 96.7 to 97.9 and from 99.1 to 105.5 respectively.
The balance concerning expectations on unemployment decreased from 64 to 44.
Weidmann's comments put the ECB a step closer to a stimulative policy -
The ECB über-hawk Jens Weidmann was yesterday quoted saying “Quantitative Easing is not out of the question”. This comment puts the ECB a notable step closer to pulling the trigger on significant stimulative policy. — (FXStreet)
Note however that the ECB decided not to take any action in the latest policy meeting on Apr 3, BUT it did say it remained vigilant on “lowflation” persisting.
European stock markets pared earlier losses to close higher on Thursday, as European Central Bank (ECB) President Mario Draghi used “ultra-dovish talk” in defending the bank’s decision to keep monetary policy unchanged.
Shares recovered their morning losses as Draghi stated that the central bank was committed to using unconventional measures if necessary, to ensure low inflation does not take hold for too long. He confirmed that all measures - including quantitative easing - were discussed by the Governing Council.
The lack of action by the ECB came despite figures this week showing inflation had slipped to 0.5 percent in the euro zone.
While Ishaq Siddiqi, a market strategist at ETX Capital, said: “Super Mario again proves he is a master wordsmith by shaking up financial markets with rhetoric about talk at the ECB over the possibilities of employing unconventional easing measures including QE.”
"Draghi is relying on his words as a form of action," he added.
The term for the last part is called “Moral suasion” or “jawboning.”
European officials line up against French deficit reprieve -
BERLIN (Reuters) - The top conservative candidate for European Commission president and the head of the German Bundesbank have come out against granting France more time to cut its deficit, warning such a move would set a dangerous precedent for other EU states.
Jean-Claude Juncker, the former prime minister of Luxembourg and long-time head of the Eurogroup forum of euro zone finance ministers, said in Berlin that France should not receive “special treatment” again after it was given two extra years to reach deficit targets only last year.
France, whose deficit stood at 4.3 percent of gross domestic product (GDP) in 2013, has signalled it wants to renegotiate the existing deadline of 2015 for bringing it down to 3 percent.
French Finance minister Michel Sapin is due to travel to Berlin on Monday to make the case for more leeway.
"France must stick to the same rules as Cyprus, as Malta, as all the others," Juncker, the centre-right candidate for the top job at the European Commission after EU parliamentary elections in May, told reporters at a congress of Chancellor Angela Merkel’s Christian Democrats (CDU) in Berlin.
Bundesbank President Jens Weidmann, speaking in the Frankfurter Allgemeine Zeitung (FAZ), called the request for more leeway a “serious act”, coming from a country that should be setting an example in Europe.
"We should be making clear to France what its responsibilities are," Weidmann said, echoing tough comments from Olli Rehn, the European commissioner for economic and monetary affairs, who told the same German newspaper that deficit rules did not exist to be "fiddled about with".
German Finance Minister Wolfgang Schaeuble, who will meet with Sapin on Monday, has voiced support for Rehn’s tough line, though stopped short of ruling out some flexibility.
Martin Schulz, the Social Democrat (SPD) president of the European Parliament and leftist rival to Juncker for the top European Commission job, has signalled that both France and Italy should be given more time to meet deficit goals if they need it. — (Reuters)