Friday Morning Cheat Sheet: 3 Stories Moving Markets
Markets advanced in Asia on Friday. Japan’s Nikkei surged 2.93 percent to yet another 5.5-year high after the yen weakened to trade at 100 to the dollar for the first time in years. The Hang Seng advanced 0.47 percent, while the S&P/ASX 200 advanced 0.15 percent.
Markets were also up in Europe in mid-day trading, hitting fresh five-year highs of their own. Germany’s DAX was up 0.55 percent, London’s FTSE 100 was up 0.41 percent, and the STOXX 50 was up 0.58 percent.
U.S. futures at 7:50 a.m.: DJIA: +0.20%, S&P 500: +0.10%, NASDAQ: +0.17%.
Here are three stories to keep an eye on:
1) Group of 7 Meets: The United States, Germany, Japan, Britain, Italy, France, and Canada are set to meet outside of London to discuss some of the most important economic issues facing the world’s major economies. At the top of the list is Japan’s weak currency and its tremendous stimulus program, which raised some hairs at a previous G20 meeting. Japan has been warned that its monetary policy will be supported as long as the focus is domestic growth, and competitive devaluation of the currency.
Aside from that, the European Central Bank will likely be in focus. To put it lightly, the idea of a banking union has been something of a hot button issue in the EU for the past couple of months. European authorities have grappled with the paradox of needing to wind down illiquid banks without having a formal mechanism to do so. Draghi and the ECB have previously championed the formation of a banking union, which would possess the means and authority to handle the thankless task, but the idea has received opposition from Germany.
2) Italian Industrial Production Remains Weak: Italian industrial output (excluding construction) declined 0.8 percent on the month in March, much worse than the 0.1 percent decline expected by economists. On the year, production is down 5.2 percent, and has remained mired in negative territory since 2011. What’s more, February’s downturn was revised down from a contraction of 0.8 percent to 0.9 percent.
Consumer goods experienced the largest decline at -2.7 percent, while intermediate goods declined 1.8 percent. Energy output increased 2.2 percent, but only did little to offset the overall effect.
3) Do These Corrections Validate Harvard Austerity Findings? Earlier in April news broke that two Harvard University economists, Carmen M. Reinhart and Kenneth Rogoff, published findings on the impact of government debt mired with Excel errors. UMass academics did their own study, and found that the data published by Reinhart and Rogoff contained excel faults which omitted certain countries from their findings. The findings of the Harvard economists were used in House Representative Paul Ryan’s (R-Wis.) Path to Prosperity budget proposal, in addition to being widely cited in the debate on austerity.
However, the two have remedied their work, incorporating countries including Spain and New Zealand into their findings as well as correcting Excel coding errors. Moreover, they remain defiant towards doubters, specifically the UMass researchers, claiming that their work ignores key findings pertaining to post World War II growth… (Read more.)