Friday’s Mid-Day Movers: 3 Stories Driving Markets

U.S. equities were a mixed bag on Friday afternoon. The Nasdaq rose on largely positive tech earnings, although the Dow couldn’t keep up. At 12:55 p.m.:

DJIA: -0.26% to 14,499.00 S&P 500: +0.67% to 1,551.99 NASDAQ: +1.06% to 3,199.86
Gold: +0.47% to $1,399.10 per ounce Oil: +0.38% to $88.06 per barrel U.S. 10-Year: +0.017 points to 1.702%

1) German Produce Prices Remain Soft: Producer prices fell 0.2 percent on the month in March in Germany, according to data released on Friday. This is more than the 0.1 percent decline expected by economists. Year over year, prices increased 0.4 percent, compared to a 1.2 percent year-over-year increase in February.

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Prices were pretty soft in all major product groups, but were led by a 0.6 percent decline in energy prices. Excluding energy, March PPI would have increased 0.7 percent on the year. The PPI data confirms forecasts that German inflation will remain low this year…

2) Japan’s Third Arrow: “Japan’s economy has finally stopped weakening and has shown some signs of picking up,” Ryuzo Miyao, a member of the Bank of Japan’s Policy Board, said in a speech this week. “Overseas economies remain in a deceleration phase on the whole, but the U.S. and Chinese economies are heading toward a pick-up.”

“With regard to the outlook,” he continued, “Japan’s economy is expected to return to a moderate recovery path, mainly on the assumption that domestic demand will remain resilient, partly due to the effects of various economic measures, and th at growth rates of overseas economies will gradually pick up.”

For Japan, years of stagflation will be addressed with the first two of a three-arrow approach. Following the initiation of a loose monetary policy and a tremendous round of government spending (the first two arrows), Prime Minister Shinzo Abe previewed the third arrow on Friday. The third arrow consists of free-trade talks, efforts to make it easier for women to work, and promotion of workforce transition from mature to sectors to growth sectors.

3) Banks Take Center Stage In European Economic Crisis: Non-performing loans have been at the heart of the European economic crisis. At a glance, it’s easy to see that economies with abnormally high levels of bad loans tend to find themselves in a situation that requires a bailout. Greece and Ireland, topping the list even in 2012, are well-known examples.

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Banks with abnormally high levels of non-performing loans have found themselves in a situation that has required emergency recapitalization, or liquidation. Cyprus’s second-largest bank was a prime example of this. Crisis-mode policy making has put an enormous amount of pressures on major financial institutions — some of which are at least partially state owned in Europe — to cut costs, shrink operations, and demonstrate that their boats are not, in fact, sinking… (Read more.)

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