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Germany’s DIHK Chambers of Commerce cut its economic growth estimate to 0.3% for 2013 from 0.7% earlier, citing concerns that growth in exports would be less than expected. DIHK added GDP would expand by more than 1% in 2014. Separately, the Conference Board Leading Economic Index for Germany rose 1.3% in the six months to March compared to the previous six months, where it fell 2.9%.
Global Equity markets have been spooked this morning after a few weeks of growing concern that they might be running too far ahead of events. The more overbought they become, the more susceptible to bad news they become. The sequence of events is broadly as follows…
China’s flash HSBC Purchasing Managers’ Index (PMI) fell to 49.6 in May, contracting for the first time in seven months, after a final reading of 50.4 in April. A sub-index measuring total new orders declined to 49.5, its lowest reading since September.
Japan’s exports rose 3.8% y-o-y in April, below the market estimate of 5.9% and after gaining 1.1% y-o-y in March, the Ministry of Finance reported. Imports jumped 9.4% y-o-y in April due to a rise in liquefied natural gas purchases following a revised 5.6% increase in March. The trade deficit widened to ¥879.9bn after a revised deficit of ¥364.0bn in March.
The attached charts show:- a) The FTSE 100 Index with rises since 1994 (for context). The bottom-to-top rises have been 140%, 104% and (so far) 91%; b) Inflation (Retail Price Index); c) FTSE 100 since September 2000 (all-time index closing high at 6,798.10 on 4th September 2000). This demonstrates how much inflation is in the current index valuation. In itself, it does not mean that the index is necessarily undervalued.
Italy’s current account balance swung to a surplus of €1.9bn in March vis-à-vis a deficit of €1.6bn during the same period last year, as per the Bank of Italy. The surplus in goods account almost doubled to €4.7bn, while the deficit in services narrowed to €429m from €836m in the previous year.
China’s new home prices jumped 4.9% y-o-y in April, the fastest gain since April 2011, after a 3.6% y-o-y increase in March, the National Bureau of Statistics (NBS) said on Saturday. New home prices in Beijing and Shanghai advanced 10.3% and 8.5%, respectively, in April. However, on m-o-m basis, new home prices were up 1% in April, easing from the 1.2% gain in March.
Yesterday’s news of the credit rating cut by the S&P rating agency of Berkshire Hathaway, the consistently successful investment business run by Warren Buffett, looked incongruous. To long-time fans of the ‘Sage’, the announcement may go on to prompt the expression ‘I remember where I was when Berkshire was downgraded’. Reasons given for the one-level cut to AA boiled down to concerns about the level of reliance on the group’s insurance interests for its dividend income and whether there could be life after Mr Buffett’s demise. Just for good measure, the outlook was reduced to ‘negative’.
Japan’s core machinery orders rose 14.2% to ¥793.1bn in March, its quickest monthly rate in eight years, and ahead of the market forecast of a 2.8% gain, the Cabinet Office said today. Orders increased a revised 4.2% in February. On y-o-y basis, core orders rose 2.4% after contracting 11.3% in February. However, manufacturers expect core orders to decline 1.5% in the next quarter and 7.7% on y-o-y basis.
Japan’s economy grew 0.9% q-o-q in Q1 2013, ahead of forecasts for 0.7% growth, after a flat reading the previous quarter, the Cabinet Office revealed today. On y-o-y basis, GDP climbed 3.5% following a revised 0.2% gain in Q4 2012. However, capital spending fell 0.7% in Q1, missing forecasts of a 0.7% rise.
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