Germany’s auction of government bonds was uncovered for the first time since November, as investors balked at accepting the lowest yields on record as the price for safety.
Germany auctioned €5 billion ($6.54 billion) of the new 1.75% July 2022-dated bund and sold €3.87 billion. It received bids totaling €4.109 billion, leaving the auction technically uncovered.
The average yield came in at 1.77%, the lowest ever at a German 10-year auction. At the previous 10-year bund sale on Feb. 29, conducted for the previous, 2% January 2022 bund, the average yield was set at 1.83%. The previous lowest yield Germany paid for the same maturity when it sold a 10-year bund was 1.8% at an auction Sept. 21, 2011.
On a monthly basis, industrial production fell 3% against a 2.5% drop in January. The statistics office said all industrial sectors, outside of energy, showed monthly drops in production, and all 12 autonomous communities recorded negative production in February.
Madrid’s bond yields jump above 6% for first time since December
The yield on Spain’s 10-year hit 5.95%, and Italy’s 10-year is following not far behind, lately around 5.67%. In addition credit default swaps on Spanish debt took off, hitting a record-wide 490 basis points. The previous record was 487 basis points in November.
ECB’s Coeure Indicates Bank May Buy Spanish Debt to Reduce Borrowing Costs European Central Bank Executive Board member Benoit Coeure suggested that the bank could revive its bond-purchase program to reduce Spain’s borrowing costs.
Australian consumers are at their gloomiest since a crisis gripped global financial markets last summer, which economists say will help cement the case for a further cut in interest rates in May, with more to follow later in the year.
U.K. retail sales rose in March as the warm weather led to an increase in sales of nonfood goods, while a separate survey indicated that the number of permanent job placements rose for a third straight month.
The BRC’s monthly retail sales monitor showed same-store-sales rose 1.3% on the year in March while total sales—which include sales made at newly built or opened stores—rose 3.6% over the same period. In February same-store sales fell 0.3% on the year while total sales rose 2.3%.
Vehicle sales in China fell 3.4 percent year on year in the first three months of 2012, an industry group said Wednesday, as the world’s largest auto market slows. Total vehicle sales for the three-month period reached 4.79 million units, the China Association of Automobile Manufacturers said in a statement. Sales for March rose just 1.0 percent to 1.84 million, it added.
LOWER OIL PRICES TO THE RESCUE?
“Refinery maintenance season reduces crude runs by millions of barrels per day, curbing price appreciation,” he said. This “normal correction” could trim oil prices by 10 per cent or more but was likely to be shortlived.
The fall in energy prices did not discourage the oil bulls, however. Goldman Sachs, Wall Street’s largest commodities dealer, told investors on Tuesday to continue to expect much higher oil prices later in the year. (FT)
Copper prices tumbled roughly 4 per cent to $8,050 a tonne, the lowest since mid-January. The sell-off in base metals at the London Metal Exchange concentrated around copper due to worries about the Chinese economy, analysts said.
OECD LEADING INDICATORS TURNING UP
The CLIs for Japan and the United States continue to show strong signs of regained momentum in economic activity. The CLI for the Euro area indicates a potential turning point but with diverging assessments for the four major European economies. The CLIs for Italy and France point to continued sluggish economic activity. In Germany and the United Kingdom the CLIs continue to show signs of a positive change in momentum but these are weaker than in last month’s assessment. The assessment for Brazil, India, Russia and, in particular China, shows stronger positive signals compared to last month’s assessment.
BUT WEAK NEW ORDERS AMONG EUROZONE ECONOMIES DON’T SUPPORT MUCH OPTIMISM
The current weakness in market conditions in many sectors can be explained by data on new order inflows. Only eight sectors registered higher new business in March, which meant that many sectors relied on existing workloads to support output expansion. The number of sectors registering growth of new orders has not matched the total for activity expansion for almost a year. (Markit)
Consequently, backlogs of work fell in the majority of sectors in March. Moreover, incomplete workloads have contracted for six months or more in 15 sectors, and most posted strong rates of depletion in the latest period.
Alcoa Inc. (AA), the largest U.S. aluminum producer, reported an unexpected first-quarter profit after orders rose and it closed higher-cost smelting capacity. Net income fell to $94 million, or 9 cents a share, from $308 million, or 27 cents, a year earlier. Profit excluding restructuring costs and other items was 10 cents a share, compared with the average estimate for a 4-cent loss from 19 analysts surveyed by Bloomberg. Sales rose 0.8 percent to $6.01 billion, beating the $5.77 billion average of 12 estimates.
Reuters had the most important part of Alcoa’s conference call:
Alcoa Inc. said on Tuesday it lowered by 1 percentage point its outlook for China’s aluminum consumption growth in 2012, but kept its forecast for global demand growth at 7 percent.
In 2011, global primary aluminum use grew by 10 percent.
Alcoa now expects China’s aluminum demand will grow by 11 percent in 2012, down from the 12 percent pace it projected in early January. It also trimmed its projected 2012 outlook for Asian aluminum use minus China to 8 percent from 9 percent previously. Consumption increased by 15 percent in China and by 10 percent in Asia excluding China during 2011.
The company raised its 2012 global sales growth projections in only two of the six main aluminum market segments from the forecasts announced in January.
It left its outlook for beverage cans steady at 2 to 3 percent sales growth and barely lowered production growth targets for the automotive and heavy truck and trailer segments.
It lifted 2012 global aerospace sales growth outlook to 13 to 14 percent from the previously projected gains of 10 to 11 percent in early January, but cut commercial building growth outlook by 1.5 percentage points to 2.5 to 3.5 percent.
Remember Trimtabs’ claim that the U.S. employment data are wrong? Part of their view was based on California data that showed that February’s personal income tax receipts were down 16.5% YoY. On March 22, I wrote that both Trimtabs and Mike Shedlock (who had piggy backed on Trimtabs’ claim) failed to note that California treasurer had warned that:
If Californians are filing taxes early or making a shift from paper to electronic filing, this shortfall could be offset in the coming months. While this month’s totals appear lackluster, February is typically a poor indicator of tax receipts collected later in the fiscal year.
We got March data yesterday:
Personal income taxes in March were $215 million higher, or 10.3 percent, than they were in March 2011.
According to estimates from the Franchise Tax Board, gross receipts of personal income taxes actually exceeded the Governor’s Budget estimates — rising by $110 million above the Governor’s Budget estimates.
The negative total in March’s personal income tax receipts is explained by $305 million in tax refunds going out sooner than expected.
The controller’s letter included an interesting and surprising piece on the California economy with this chart and comments:
(…) employment in the information sector (high-tech sectors) remains stunted. This is in spite of the fact that the high-tech sectors have experienced high earnings as well as sales growth; but unfortunately, this growth has not translated into new jobs.
Fears are mounting about a slow-down in India’s economic growth, persistent inflation and a mounting government deficit.
LAWYERS NEED TO MAKE A LIVING!