Much News, Little Action

European markets re-opened for the first time since the middle of last week, and although there has been much news, the price action looks largely uninspired.  Sterling has lost some ground after the disappointing CIPS PMI and the $1.5200 area is proving a difficult area to convincingly overcome.  The euro is little changed from where it was late yesterday in NY, but continues to struggle to sustain even modest upticks.  Meanwhile, in Europe, the dollar recouped the losses suffered in Asia against the yen, that had brought it to its lowest level since March 1.  The dollar-bloc currencies are generally out-performing today, but well within their well worn recent ranges.  

The MSCI Asia-Pacific Index was off about 0.2%, dragged down by losses in the Japan, China and South Korea.  European bourses are mostly firmer, though Italy and Spain are laggards.  Monte Dei Paschi recouped about half of its early 13% decline, after reporting a large than expected quarterly loss on new bad loan provisions.  Nevertheless, Italian and Spanish bond yields are a few basis points lower, while the core bond yields are firmer.

The Reserve Bank of Australia, the first of the major central banks meeting this week, left rates on hold as widely expected.  The RBA's statement did not deviate much from the previous statement.  The take away is that while there is scope for additional easing, the RBA is in no hurry and some of its concerns appear to have eased. 

The euro area manufacturing PMI ticked up from the flash reading of 46.6 to 46.8, but still represents a deterioration from the 47.9 seen in February.  The forward looking new orders component slumped to 48.7 from 51.7.   Both the German and French reports were 0.1 above the flash readings,while the weakness in the periphery (especially Spain, Italy and Greece) was even more pronounced.   Separately, the euro area reported a 12% unemployment rate, which matches the recent record.  Of course, this masks the double or even triple rate of unemployment among younger people.  

The UK's CIPS manufacturing survey showed a small improvement over February, but not as much as expected.  The 48.3 reading compares with 47.9 in February and expectations for 48.5.  Of note, the new export order component has not fallen for fifteen consecutive months.  Therein lies the rub--sterling's weakness apparently is sufficient to boost some import prices, but is not sufficient to boost UK exports. 

In Cyprus, the central bank has announced some easing of the controversial (but arguably necessary given the circumstances) capital controls.  It has raised the daily transaction limit to 25,000 euros per account and raised the limit on check payments to 9,000 euros a month.  Additional adjustments are expected before the end of the week.  Talk that Cyprus is about to leave the monetary union, or that it is introducing a Cypriot euro have died down.  Lastly, we note Slovenia's bond market is a bit weaker while the CDS is firmer.