April 15 2013

Apr. 15, 2013 (Allthingsforex.com) – The G20 meeting and notable economic data from Japan will place the yen in the center of the market’s attention as “currency wars” once again becomes a hot topic for discussion in the week ahead.

In preparation for the new trading week, here is the outlook for the Top 10 spotlight economic events that will move the markets around the globe.

1.    CNY- China GDP- Gross Domestic Product, the main measure of economic activity and growth, Sun., Apr. 14, 10:00 pm, ET.

The world’s second-largest economy was expected to hum right along with 8.0% q/y expansion in the first quarter of 2013, after growing by 7.9% q/y in the final quarter of last year. However, the GDP report disappointed with slower pace of growth by 7.7% q/y in Q1 2013. The weak Chinese data brought down commodity prices and dragged lower the higher-yielding commodity currencies, the AUD and NZD.

2.    GBP- U.K. CPI- Consumer Price Index, the main measure of inflation preferred by the Bank of England, Tues., Apr. 16, 4:30 am, ET.

Inflationary pressures in the U.K. are forecast to remain at 2.8% y/y in March, same as the 2.8% y/y reading in the previous month. If the threat of a triple-dip recession in the U.K. materializes, inflation will not be an obstacle for the Bank of England to ease monetary policy further in upcoming months.

3.    EUR- Euro-zone ZEW Economic Sentiment Index, a leading indicator of economic conditions measuring the outlook of financial experts, Tues., Apr. 16, 5:00 am, ET.

After a few months of improvement in the economic outlook, the ZEW index is expected to pull back with a reading of 45.6 in April compared with 48.5 in the previous month. A new sign that economic conditions in the euro-area are deteriorating could weigh on the EUR as the market begins to price expectations that the European Central Bank might start to play “QE catch-up” with the Fed and the Bank of Japan as early as the next meeting on May 2.

4.    USD- U.S. Housing Starts, an important gauge of housing market activity measuring new home construction, Tues., Apr. 16, 8:30 am, ET.

Housing starts for the month of March are expected to be a bit higher to 924K from 917K in February. The report carries a risk of a negative surprise following another leading indicator of housing market activity, the National Association of Home Builders/Wells Fargo index, which fell to 42 in April from 44 in March, the third consecutive month of decline.

5.    USD- U.S. Industrial Production, the main gauge of industrial activity measuring the output of factories, mines and utilities, Tues., Apr. 16, 9:15 am, ET.

Industrial production is forecast to increase for another month, but at a slower pace, by 0.3% m/m in March, after rising by 0.8% m/m in February.

6.     GBP- Bank of England Meeting Minutes, a detailed report of the bank’s latest meeting containing an outlook on monetary policy and the economy, Wed., Apr. 17, 4:30 am, ET.

Bank of England sat on the sidelines at its April meeting and has made it clear in recent months that policy makers are not in a hurry to do more easing. However, the GBP could see pressures rising if the minutes reveal that more Monetary Policy Committee members, including the Governor Mervyn King, voted for an increase of the Asset Purchase Program from 375 billion to 400 billion pounds, and if the option of additional rate cuts was once again placed on the table.

7.    CAD- Bank of Canada Interest Rate Announcement, Wed., Apr. 17, 9:00 am, ET.

With the U.S. and China, the world’s two largest economies, starting to show signs of a slowdown, the Bank of Canada will not be in a position to make any changes to its existing monetary policy and will more than likely leave the benchmark rate at the current 1.0% level. Compared with the rest of the major central banks, the Bank of Canada still remains as the most likely candidate to tighten monetary policy. However, with the world in the midst of a “currency war” as competitive currency devaluation heats up, the decision to call the end of the accommodative monetary policy would probably be pushed further into 2014/2015.

8.    JPY- Japan Trade Balance, an important gauge of economic activity measuring the difference between imports and exports, Wed., Apr. 17, 7:50 pm, ET.

Despite of the yen’s weakness, the consensus forecasts point to another month of trade deficit by 494 billion yen in March from a deficit of 777 billion yen in February. Signs that the Japanese economy is not improving will keep the yen under pressure on expectations that the government and the Bank of Japan could step up their efforts to devalue the currency and to spur export growth.

9.    USD- U.S. Jobless Claims, an important gauge of labor market conditions measuring claims for unemployment benefits, Thurs., Apr. 19, 8:30 am, ET.

Recovering after the unexpected spike, the U.S. jobless claims are forecast to remain in a range with a reading of 447K, close to last week’s 446K. If the forecast is accurate, the spike to 388K could be dismissed as a one-off event. On the other hand, another surprising increase could trigger concerns that a new trend of rising claims for unemployment benefits could be in its early stages of development.

10.     JPY- G20 Meeting, Thurs., Apr. 18, and Fri., Apr. 19, two-day event.

Finance ministers and central bankers from the 20 most-developed industrialized nations in the world will gather as traders pay close attention to any statements or agreements that could be made during the G20 meeting on the issues of “currency wars” and competitive currency devaluation. The G20 did not directly criticize Japan at the last meeting. However, with the yen depreciating rapidly due to the unprecedented measures taken by the Bank of Japan, it would be interesting to see if the efforts of Japanese officials to weaken their currency will be criticized by their G20 colleagues this time around. The JPY negative trend is still intact, but we could see some unwinding of short yen positions ahead of the meeting.


Gold hits levels last seen in April 2011. 3.5% fall to $1,410 following 5.8% fall on Friday. China GDP at 7.7% versus 8% expectations. Industrial production 8.9% against expected 10.1%. Brent crude hits nine-month low. US housing data disappoints…


Powered by Guardian.co.ukThis article titled “Eurozone crisis as it happened: Gold slumps to a two-year low as China data disappoints” was written by Simon Neville and Nick Fletcher, for theguardian.com on Monday 15th April 2013 13.34 UTC

5.27pm BST

European markets fall as gold tumbles

With gold on the slide again – thanks to disappointing Chinese growth and fears of countries flooding the market by selling their reserves to boost their finances – stock markets were also under pressure. Michael Hewson, senior market analyst at CMC Markets UK, said:

Anyone hoping for a quiet start to the week in the lead up to this week’s G20 and IMF meetings got a rude awakening as European markets dropped sharply on the open in the wake of disappointing Chinese economic data which showed that economic growth for the first quarter only came in at 7.7%, well below expectations of a rise to 8%.

Mining stocks and commodity prices have got absolutely battered with gold prices falling though a key technical support level and silver prices also doing the same thing.

But by the close, many European markets had come off their worst levels:

• The FTSE 100 finished down 40.79 points at 6343.60, a 0.64% fall

• Germany's Dax dropped 0.41%

• France's Cac closed 0.5% lower

• Italy's FTSE MIB lost 0.96%

• Spain's Ibex fell 0.33%

• The Athens market dipped 0.11%

And with downbeat US manufacturing and housing data, the Dow Jones Industrial Average is currently down around 120 points.

On that note, it's time to close up for the evening. Thanks for your comments and we'll be back tomorrow.

5.23pm BST

Recently appointed Cypriot finance minister Haris Georgiades insists there is no anti-EU feeling in the country despite criticisms of the bailout terms.

In an interview with the Financial Times he said there was frustration at the remedy offered, but also a realisation that the problems were self-inflicted rather than coming from outsiders.

Cyprus's finance minister Haris Georgiades.  Photograph:  AFP/Getty Images/Yiannis Kourtoglou
Cyprus’s finance minister Haris Georgiades. Photograph: AFP/Getty Images/Yiannis Kourtoglou

Updated at 5.24pm BST

3.38pm BST

Portugal’s banks unlikely to need more capital says banking head

Portuguese banks may not need extra capital despite what a leading ratings agency suggested, according to the head of the country's Banking Association.

Moody's warned last week the country's banks might need an extra €8bn as non-performing loans had risen more than expected.

But Fernando Faria de Oliveira told Reuters that "nothing points to those figures" and at the moment there was no need for more capital. He said:

I respect Moody's but I don't believe we will need to raise such [an] amount of capital at all. We are confident about the solidity of Portuguese banks.

3.26pm BST

US housing data disappoints

The latest US data has added to the gloom engendered by disappointing Chinese growth figures and the continuing pressure on the gold price.

Following worst than expected New York manufacturing figures comes a downbeat US housing survey. The National Association of Home Builders/Wells Fargo index fell to 42 in April from 44 in March, the third dip in a row. Analysts had been expecting a small rise to 45. Builders reported increasing costs of materials and worries about the supply chain.

With that, the Dow Jones Industrial Average has added to opening losses and is now down nearly 100 points or around 0.7%.

3.15pm BST

More from Draghi:

3.09pm BST

There is not much new in Draghi's comments, according to Annalisa Piazza at Newedge Strategy:

In a nutshell, Draghi hasn't added much to what suggested in early April. The ECB is widely aware with problems with SMEs but it looks like it has no "magic wand" to solve the lack of transmission. Comments by Draghi suggest that some step in the direction of repairing SMEs lack of competitiveness have been made but it's not just the ECB policy that can work its way through the economy.

ECB president Mario Draghi addresses students at the University of Amsterdam. Photograph: AP/Peter Dejong
ECB president Mario Draghi addresses students at the University of Amsterdam. Photograph: AP/Peter Dejong

2.34pm BST

ECB Draghi speech in full

The European Central Bank has published a full copy of President Mario Draghi's speech. After a whimsical journey through Amsterdam's history and the crisis of 1763, he gave a stark warning:

In providing liquidity to our banking counterparties, we cannot and do not want to subsidise banks that are failing. Our liquidity support is not and should not be equity support. Likewise, in pricing out break-up risk in sovereign debt securities, we cannot and do not want to subsidise governments.

He added:

Unlike economies with a single fiscal authority or with a fully-fledged federal structure, the euro area comprises multiple sovereign states. The debt of each of these states has different liquidity and risk characteristics. In such a set-up there is no uncontroversial way to define the term structure of the risk-free rate. As a matter of fact, this means that there is no univocal measure of the term premium for the euro area as a whole.

The banking sector and the financial market of the euro area has become fragmented. This is harmful as the euro area is a bank-based economy. Around three quarters of firms’ financing comes from banks. So if banks in some countries will not lend at reasonable interest rates, the consequences for the euro area economy are severe.

And with that, I'm handing over to my colleague Nick Fletcher.

Updated at 3.10pm BST

2.23pm BST

More from Draghi's Amsterdam speech.

He says financial sector fragmentation in the eurozone has been receding but problems in the euro area's economic landscape still "loom large".

Mario Draghi met De Nederlandsche Bank President Klaas Knot (2nd L), Dutch PM Mark Rutte (centre L) and Eurogroup President Jeroen Dijsselbloem (2nd R) in The Hague today. Photograph: REUTERS
Mario Draghi met De Nederlandsche Bank President Klaas Knot (2nd L), Dutch PM Mark Rutte (centre L) and Eurogroup President Jeroen Dijsselbloem (2nd R) in The Hague today. Photograph: REUTERS

2.16pm BST

Draghi speech in Amsterdam – failing banks should not be supported

Over at the University of Amsterdam, ECB president, Mario Draghi, is giving a speech.

He said:

We do not want to support banks that are failing

Suggesting he has moved away from his position of unlimited funding to bolster struggling markets.

Here are tweets coming from the room

1.57pm BST

EU officials to give upbeat assessment to G20

EU officials are expected to tell the G20 finance ministers in Washington this week:

The euro area has made further progress in the implementation of its comprehensive crisis-response strategy.

With a

mild recovery setting in toward mid-2013 and strengthening in the second half of 2013 and in 2014.

That's according to Bloomberg who have seen a draft statement left over from a similar meeting in Dublin last Friday.

1.37pm BST

New York manufacturing data released

The pace of growth in manufacturing in New York state – an early indicator for the rest of the country – slowed more than expected.

The New York Federal Reserve's "Empire State" general business conditions index fell to 3.05, from 9.24 in Larch, short of forecasts of 7.

New orders dropped to 2.2 from 8.18, inventories improved to -4.55 from -5.68.

11.37am BST

Wealth tax to pay for EU bailouts?

The Telegraph has reported comments from Professor Peter Bofinger, an adviser to Angela Merkel, that he made in Der Spiegel.

In it, he suggests the rich in struggling eurozone countries, such as Spain and Italy, should face new property taxes instead of any future raids on depositors savings, as in Cyprus.

He told the German magazine:

The resourceful rich just move their money to banks in northern Europe and avoid paying.

Instead of taxing cash, European Union governments should in future target property and other, less mobile assets, he said.

For example, over the next 10 years, the rich should give up a portion of their assets.

The argument goes that the taxes should be used to fund future bailouts rather than relying on cash injections from the Troika. However, Merkel has yet to endorse the ideas put forward by Bofinger.

11.18am BST

10.54am BST

Eurozone trade surplus boost

The eurozone's trade surplus grew in February, but the positive balance was helped by lower demand for imports rather than export growth.

The trade surplus with €10.4bn in February, unadjusted, beating expectations of €3bn, and up from a €1.3bn surplus in February last year.

Eurozone exports were down 1.1% year-on-year in February, while imports were down by 7.1% year-on-year.
Seasonally-adjusted data show the trade surplus improved to €12bn in February, after dipping to €8.7bn in January from €10bn in December.

Howard Archer at IHS Global Insight said:

The eurozone is likely to have needed all the help it could get from net trade in the first quarter of 2013 as it looks highly likely that domestic demand contracted overall.
The eurozone will be fervently hoping that global growth improves as 2013 proceeds, thereby boosting exports and facilitating the single currency area’s exit from recession.

10.26am BST

Greek heart attacks increase

A new major study in Greece has found that heart attacks have increased during the economic crisis, giving an insight into the effects beyond monetary ones.

Open Democracy, which reports the findings, said heart attacks increased 29% after the crisis hit, compared with before, with women suffering hardest hit – up 39%. The researchers point out the unemployment rate for women is higher than men

Dr Emannouil Makaris, presenting his findings at a research talk at the American College of Cardiology’s annual meeting, said

Greek women have a higher unemployment rate than men, they are responsible for child care, and they also work outside the home – a formula for stress.

Unemployment is a stressful event and stress is connected with heart disease, but other issues also come with financial difficulties. In these times a lot of people do not have money to buy medications or go to their primary care doctor. The cost to society is high.

10.14am BST

Silver getting hit

10.11am BST

Sticking with gold, Pawelmorski has written an excellent blog post on the precious metal.

Here's an extract:

Gold – unlike bank deposits, equity or bonds, or even banknotes – it’s separate from the real economy; it’s what you invest in when you want to take a breather from what’s happening in the real economy. That’s actually only a sensible thing to do in pretty extreme circumstances. Gold returns are utterly crushed by equity markets in the long term – to a really astonishing degree for those economies where we have continuous equity markets. Compared with shares in pre-revolutionary China or pre-war Poland, gold returns look pretty good. Gold is less an index of how confident we are that our leaders a) want to b) know how to do the right thing as it is an index of how sure we are that they won’t completely and utterly screw the pooch.

So what can go wrong?

I’m sick of hearing about hyperinflation. The case for gold often starts off with a chart of narrow money or the Central Bank balance sheet, and skips over the (dead-in-the-water) dynamics of broad money. Economists like to use the parable of “helicopter money” (banknotes thrown from a helicopter), and sadly some people appear to be scanning the skies for scrip-dispensing helicopters. What’s actually happened is that the helicopter pilot suffered some nasty losses on US subprime debt and Greek Government bonds and is hoarding the new money, so it’s not having a lot of inflationary impact.

If inflation is always and everywhere a monetary phenomenon, hyperinflation is a political one. Without the political conditions – usually an-even-more-than-normally unpopular and illegitimate government – usually the harder choices do in fact get taken. Argentina and Russia (and Jamaica for that matter) defaulted on debt in local currency debt that they could print rather than face hyperinflationary consequences. Argentina and Iceland both imposed capital controls for similar reasons.

10.04am BST

10.01am BST

Gold reaction

So what has caused gold to fall 3% today, after a 5.3% fall on Friday?

Hitting a two-year low, gold, along with other commodities, have slumped.

Usually gold is invested in to hedge against inflation. Some bearish analysts have warning the past that it would be a good bet because of the fears of hyperinflation.

However, these haven't panned out.

Michael van Dulken at Accendo Markets said:

Gold took another leg down from its Friday weakness, although off its worst levels of 25 (2-year lows). Having decisively broken 18-month lows of 20 on Friday, this level could well revert to resistance on any rally attempt. Broker bearishness (optimistic on economic growth), uncertainty over duration of US Fed’s QE3 (again optimism on econ growth), ETF outflows and fears of Eurozone nations selling the metal to pay for bailouts all spooking markets.

A reminder – Cyprus said on Friday it would try and sell €400m-worth of its gold, leading to fears that other countries could turn to a gold selloff to fund its needs.

As RANSquawk points out, poor GDP numbers from China will temper inflation (as well as knock other commodity prices).

While, bad retail figures from the US last week, and a more determined effort by the eurozone to keep an eye on inflation means the need to hedge with gold looks less important by the day.

Joe Weisenthal wrote over at Business Insider:

So the collapse in gold is not about gold, but about vindication for a large corpus of belief and economic research, which has largely panned out. It's great that our economic elites know what they're talking about, and have the tools at their disposal to address crises without creating some new catastrophe.

Things aren't great in the economy, but the collapse/hyperinflation fears haven't panned out, and the decline in gold is a manifestation of that.

8.44am BST

Troika statement on Greek deal

The Troika group of lenders – the European Commission, ECB and IMF – have put out a statement on the agreement reached with Greece this morning.

You can read the statement in its entirety here, but in short, it's very much steady-as-she-goes missive.

The mission and the authorities agreed that the economic outlook is largely unchanged from the previous review, with continued prospects for a gradual return to growth in 2014, supported by inflation well below the euro area average and improved wage flexibility, which are helping to restore the competitiveness of the Greek economy.

It says debt reduction has been achieved, more autonomy has been given to tax collectors, tax evasion and corruption has been tackled.

It added:

The mission also discussed with the authorities progress in strengthening the social safety net, including through targeted employment and training programmes supported by the EU, pilot programmes to extend unemployment benefits and provide minimum income support, a programme to provide access to primary health care for the uninsured, and a scheme to reduce the financial burden on indebted low-income households which have been severely affected by the crisis.

8.22am BST

Greece/Troika meetings

Over in Athens, the Greek government has been meeting with the Troika group of lenders.

Finance minister Yiannis Stournaras told waiting reporters that a deal has been reacted on a review of the country's austerity programme, adding that the Cyprus crisis will not change Greece's macro-economic situation.

Finally, he revealed the cuts have seen a primary budget surplus this year, which will be used to pay down public debt.

8.17am BST

Gold to April 2011 levels

Spot gold prices continue to fall, hitting ,450 an ounce, the lowest level in two years.

8.12am BST

Mining companies down

Bang on time, the FTSE 100's biggest fallers on opening are all mining companies, reacting to the Chinese data and commodity price falls.

Randgold (down -4.9%), Fresnillo (down 3.8%), Polymetal (down 3.2%), Evraz (down 3.2%), Rio Tinito (down 3%), ENRC (down 2.1%), Anglo American (down 1.9%), Antofagasta (down 1.9%), BHP Billiton (down 1.6%) and Xstrata (down 1.6%)

8.06am BST

Key Chinese data disappoints

Good morning and welcome to another day of rolling coverage of the eurozone crisis.

After the excitement of Friday's finance ministers get-together in Dublin and Cameron and Merkel's weekend together, today is slightly quieter, but we wait to see if the tumbles in commodities continue. Gold fell to an 18-month low, with oil and silver both down too.

Overnight, disappointing numbers came out of China, with Q1 GDP at 7.7% missing expectations of 8% and down from 7.9% last time.

Industrial production in March fell from 9.9% to 8.9%, missing expectations of 10.1%.

However, retail sales remained strong at 12.4%, up from 12.3% in February.

Meanwhile, in Venezuela, results of the country's general election are through, but political uncertainly in the oil-rich country could also have an impact on commodities.

We will be keeping an eye on all the reaction to the results and any other events to break throughout the day.

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