Dollar and Yen Surge on Deflation Fears

* The dollar and yen rose on Friday as Europe’s worsening sovereign-debt crisis increased risks to the stillfragile financial system and even led to speculation of a breakup of the euro. Global stocks and commodities plunged while credit spreads rose as deflation fears surged. The S&P 500 fell 21.76 to 1,135.68. Sterling dropped for a third straight day but closed above the important 1.45 support. The Australian and Canadian dollars fell on fear that the European debt crisis will reduce global economic growth.

* The EUR/USD fell for a fourth consecutive day and closed lower for a fifth straight week. The euro touched the lowest level since October 2008 after plunging through the important 1.25 support. Deutsche Bank CEO Josef Ackermann said Greece may not be able to repay its debt in full. Obviously, that is a problem for the highly leveraged banking system. Supports are in the 1.23 and 1.20 areas.

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Financial and Economic News and Comments

US & Canada

* US retail sales increased as forecast 0.4% m/m to $366.4 billion in April, a seventh straight monthly gain, after an upwardly revised 2.1% m/m advance in March, data from the Commerce Department showed. Retail sales excluding autos increased 0.4% m/m to $303.5 billion, following March’s upwardly revised 1.2% m/m gain. Retail sales rose 8.8% y/y in April and rose 7.6% y/y less autos.

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* US industrial production grew 0.8% m/m in April, the ninth gain in 10 months, after an upwardly revised 0.2% m/m increase in March, according to data released by the Federal Reserve. The rate of change for February was revised down to a 0.1% m/m decline, but the rate of change for January was revised up to a 1.2% m/m gain. Industrial production rose 5.2% y/y in April, a fourth consecutive year-on-year rise. Overall capacity utilization advanced to 73.7%, the highest since November 2008, from March’s downwardly revised 73.1%. Manufacturing production was up 1.0% m/m for a second consecutive month in April and up 6.0% y/y. Manufacturing capacity utilization increased to 70.8% from March’s 70.0%.

* The Reuters/University of Michigan preliminary consumer sentiment increased to 73.3 in May from 72.2 in April, showing US consumer confidence grew slightly less than anticipated this month but improved noticeably from May 2009’s 68.7 level, according to the latest Thomson Reuters/University of Michigan surveys of consumers. The current economic conditions index rose to 81.1 in May from 81.0 in April. The consumer expectations index advanced to 68.3, the highest in three months, from April’s 66.5.

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* US business inventories grew as forecast 0.4% m/m to $1,327.5 billion in March, a third consecutive monthly increase, after a 0.5% m/m advance in February, figures from the Commerce Department showed. Business sales rose 2.3% m/m, a sixth straight monthly rise and the most since November 2009, to 1,069.0 billion, following February’s upwardly revised 0.6% m/m gain. The inventories/sales ratio declined to 1.24 in March from 1.27 in February, compared with 1.46 in March 2009. Inventories declined 5.0% y/y in March while sales climbed 11.9% y/y.

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* Canada’s manufacturing sales increased a slightly more-than-expected 1.2% m/m to C$44.5 billion ($43.0 billion) in March after a downwardly revised 0.0% m/m in February, according to figures from Statistics Canada. March manufacturing sales rose 10.2% y/y.

Europe

* The Conference Board UK leading economic index, a measure of future economic activity, was up 1.0% m/m to 101.7 in March, a 12th straight monthly gain, after an upwardly revised 0.7% m/m advance in February, a report released by the Conference Board showed. The coincident economic index, measuring current economic activity, increased 0.2% m/m to 102.3 in March after a 0.2% m/m increase in February and a revised 0.4% m/m decline in January.

Asia-Pacific

* New Zealand’s retail sales increased a less-than-expected 0.5% m/m in March after a 0.6% m/m decline in February, according to data from Statistics New Zealand.

Источник: Hans Nilsson

14.05.2010