Good morning. Here’s what you need to know.
China credit growth. Credit growth in China continues to slow. “New yuan loans were higher than expected at 1.05 trillion yuan in March (consensus: 1 trillion; Barclays: 1.1 trillion), while credit growth slowed further to 13.9%, from 14.2% in February,” write Barclays economists Jian Chang and Jerry Peng in a note to the firm’s clients. “M2 growth fell to a record low of 12.1% in March (consensus: 13.0%; Barclays: 12.8%), reflecting a high base last year and slower deposit growth. Overall, we maintain our view of weak near-term growth but a recovery in Q2. The year-over-year slowdowns in money and credit growth rates suggest near-term weakness in economic growth. We have lowered our Q1 GDP growth forecast to 7.2% year over year (from 7.3%), which implies a sharp slowdown in growth momentum to 4.6% quarter over quarter at a seasonally adjusted annualized rate. On the other hand, the better-than-expected March new loans and total financing support the view that financing channels remain open to stabilise growth as demand recovers.”
Australia decoupling? The Australian dollar is up more than 5% against the U.S. dollar so far this year despite the reemergence of concerns about the slowing Chinese economy, Australia’s biggest export destination. Minutes of the Reserve Bank of Australia’s April meeting released Tuesday contained a bit of discussion on this. The Aussie dollar is down about 0.4% against the USD today as a result. “Members noted that the exchange rate remained high by historical standards,” said the minutes. “Despite commodity prices falling further over the past month, the exchange rate had appreciated a little further. While the decline in the exchange rate from its highs a year earlier would assist in achieving balanced growth in the economy, this would be less so than previously expected given the rise in the exchange rate over the past few months.”
Yellen speaks. Federal Reserve Chairwoman Janet Yellen will deliver opening remarks via streaming video at the Atlanta Fed’s annual Financial Markets Conference at 8:45 AM ET. Yellen’s comments have caused gyrations in markets multiple times in recent weeks as she has sought to reassure market participants that the Fed will not wind down its monetary stimulus measures too early, and will thus be closely monitored this morning. “This week offers a few key pieces of Fed commentary that could be meaningful to the market this weeks as we hear from Yellen twice — once on Tuesday at a financial markets conference and then on Wednesday when she addresses the Economic Club of New York,” says Ian Lyngen, a senior government bond strategist at CRT Capital. “Attention will be paid to any further clarity on the timing of the first hike, but we anticipate she’ll be more cautious on offering hint at this point, especially in the wake of the ‘6 months’ confusion.”
Markets are quiet. U.S. stock futures are rallying a bit and are set to open in the green, while U.S. Treasury note futures point to higher yields. European equity indices are trading lower with the exception of France’s CAC 40. Gold is down 1.6%, trading around $US1305 an ounce. The dollar is up slightly against the euro and little changed against the yen. The Japanese Nikkei 225 closed up 0.6% on Tuesday, but the Hong Kong Hang Seng fell 1.6%.
German sentiment. ZEW’s monthly indicator of German economic sentiment slid to 43.2 in April from 46.6 in March, marking a decrease in expectations for future growth. The “current situation” component, however, leaped to 59.5 from 51.3, marking the highest level in three years. “The cautious expectations in this month’s survey are likely to be caused by the Ukraine conflict, which still creates uncertainty. Furthermore, the slight decline in economic expectations has taken place against the backdrop of a very positive evaluation of the current economic situation in Germany,” said ZEW in a press release. “This very positive assessment of the economic situation may also explain to some extend why a part of the surveyed experts have slightly lowered their expectations for the next six months — in their view the German economy is already growing at a considerable pace.”
U.K. prices. The year-over-year change in the U.K.’s consumer price index eased to 1.6% in March from 1.7% in February, in line with expectations. “This is the slowest pace since October 2009,” says Marc Chandler, global head of currency strategy at Brown Brothers Harriman. “It is the third consecutive month that the reading is below the BOE’s 2% medium term target. If the inflation is not in the consumer sector, some fear it may be showing up elsewhere. The ONS reported today that annual house price inflation accelerated to 9.1% in February, nearly a 4-year high. In London, the ONS found, house prices have increased almost 18%, the most in nearly 7 years.”
U.S. prices. Monthly U.S. consumer price index data will be released at 8:30 AM ET. Economists predict both the headline index and the “core” index (which excludes food and energy prices) rose 0.1% in March. Such gains would leave the year-over-year change in the core index steady at 1.6% while boosting the year-over-year change in the headline index to 1.4% from 1.1% in February, due to a drop in energy prices in March 2013.
Empire manufacturing. The results of the New York Fed’s monthly Empire State Manufacturing Survey are also due out at 8:30 AM. Economists predict the report’s headline index rose to 8 this month from March’s 5.61 reading, indicative of an acceleration in the pace of improvement in business conditions for manufacturers in the state of New York.
NAHB housing. The National Association of Home Builders releases the April update to its monthly Housing Market Index at 10 AM. Economists expect it to advance to the neutral 50 level from March’s 47 reading, implying that an equal number of home builders view sales conditions as positive as those who view conditions as negative.
Earnings. Consumer giants Coca-Cola and Johnson & Johnson report quarterly earnings results this morning before the opening bell. Coca-Cola is expected to post earnings of $US0.44 per share in the quarter ended March 31 on revenues of $US10.55 billion (down 4.4% from last year). Johnson & Johnson is expected to report earnings of $US1.48 per share on revenues of $US18 billion (up 2.8% from last year). Yahoo! and Intel report this afternoon after the closing bell.
Below is a submission to our quarterly “Most Important Charts In The World” presentation from Paul Diggle, a property economist at Capital Economics. If you haven’t seen the other 123 charts yet, click here to check them out »
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