Morning News: Nikkei Surges, U.S. Home Prices Climb, Eurozone Crisis Deepens, Policy Battle Rages In China As Slowdown Feeds ‘Sense of Crisis’

Asian markets were mostly higher in overnight trading with the Nikkei surging 3.6% to over 14,000 for the first time since June 2008.  Europe is rallying and U.S. futures are modestly higher. Global shares are near five-year highs.

German factory orders rose 2.2% month-over-month in March. This beat expectations for a 0.5% drop, giving some hope to Europe. Meanwhile, check out Jim O’Neill’s view of the world from now through 2030 >

Australia’s central bank cut rates to a record low of 2.75% as the currency hovers nears a 30-year high. In a statement, the central bank said that it was unusual that the exchange rate was at a historically high level, “given the decline in export prices and interest rates during that time.” Nomura’s Charles St. Arnaud said this could incite those talking about currency wars.

U.S. home prices climb 1.9% in March: CoreLogic

No Recovery Here Either: Home Renovation Spending Plummets To 2010 Levels

Senate Passes Internet Tax Bill, Siding With Traditional Retailers 

The Senate aimed to help traditional retailers and financially strapped state and local governments Monday by passing a bill that would widely subject online shopping — for many a largely tax-free frontier — to state sales taxes.

Eurozone crisis deepens as German ‘sado-monetarists’ refuse to back QE

German service sector contraction sounds alert for recovery in eurozone

Germany’s services industry contracted in April for the first time in five months and a broader measure of the service industry in the 17-member eurozone remained in negative territory.

The German PMI Services index, which is compiled by surveying about 1,000 German business leaders, shrank to 49.6 in April from 50.9 points in March, according to data from financial information company Markit.

French Industrial Production Confirms Hollande’s Triple-Dip Fears

French industrial production came in considerably lower than expected overnight. France’s output fell 2.5% YoY against an expectation of a mere 1.4% drop and manufacturing production dropped 4.9% YoY – almost its worst since the crisis. This data confirms what we have discussed in detail (here and here) that France is heading for a depression. After the briefest of renaissances in Q3 2012, the Gallic nation now looks set for a triple-dip recession, further stretching the core of an already tense European Union. The last few days have seen 10Y French debt yields increase a little (+17bps off the lows) but they remain (much as the rest of Europe) near record lows.



Charts: Bloomberg

Taiwanese Exports Unexpectedly Sputter Out

Gold Just Tumbled

Here’s the NY spot price.


ny gold


Policy battle rages in China as slowdown feeds ‘sense of crisis’

China’s Caixin Magazine reports that there is a growing “sense of crisis” not felt since the depths of the global banking crash in 2008-2009.

The State-owned Assets Supervision and Administration Commission (SASAC) has assembled a team to “protect economic growth” and pressure state companies to boost jobs at all costs.

SASAC is the bastion of vested interests and controller of 115 state behemoths with assets above $6 trillion and lock on much of the economy.

The move comes amid further signs that growth is faltering across all fronts. HSBC’s gauge of Chinese services fell three points to 51.1 in April, the lowest in almost two years.

The broader composite index also dropped sharply to a six-month low of 51.1 and is now barely above the contraction line, with new orders trailing badly. The economy grew 7.7pc in the first quarter, slower than expected.