Thursday Morning Cheat Sheet: 3 Stories Moving Markets

Markets in Asia were mixed on Thursday. Japan’s Nikkei index fell 0.39 percent despite better-than-expected GDP growth. Stocks declined as capital expenditures fell more than expected, although the yen continued to weaken to trade at 102.5150 to the dollar. In Hong Kong, the Hang Seng edged up 0.17 percent, while the S&P/ASX 200 fell 0.50 percent in Australia.

Meanwhile, markets in Europe advanced slightly in mid-day trading, as aggregate inflation data came in line with expectations. Germany’s DAX climbed 0.32 percent, London’s FTSE 100 climbed 0.24 percent, and the STOXX 50 index climbed 0.08 percent.

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U.S. futures at 8:25 a.m.: DJIA: +0.04%, S&P 500: +0.10%, NASDAQ: -0.06%.

Here are three stories to keep an eye on:

1) Japan’s Economy Grows Under Abenomics: Japanese gross domestic product increased at a seasonally-adjusted annual rate of 3.5 percent in the first quarter of 2013, according to data released by the nation’s cabinet office. This is better than the 2.8 percent consensus growth estimate, and compares favorably to 1.0 percent SAAR growth in the fourth quarter of 2012.

GDP was up 0.9 percent on the quarter, driven primarily by personal consumption — about 60 percent of Japan’s GDP — which was up an annualized 3.7 percent. On the other side of the coin, capital expenditures (a proxy for business investment) declined 0.7 percent on the quarter. Exports were climbed 3.8 percent on the quarter, while imports were up 1.0 percent.

2) U.S. Treasury Reaches Into its Magic Hat: It’s no small secret that the government spends more than it takes in. The United States has run a $1 trillion deficit in each of the past four years, and the debt crisis has grown into one of the top concerns of the American political and economic engine.

On Wednesday, as it has done in the past, the U.S. Treasury announced that it will suspend sales of securities to state and local governments in order to avoid hitting the federal borrowing limit, which will be reinstituted at approximately $16.4 trillion on Sunday.

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3) Final Data Confirms Sharp Decline in European Inflation: Europe’s harmonized index of consumer prices, or the HICP, declined 0.1 percent on the month, in line with economist expectations. The decline pulled down the year-over-year inflation rate in the region from 1.7 percent in March to 1.2 percent in April, its lowest level since February of 2010.

Like in the U.S., many are interpreting soft inflation data as a sign that the European Central Bank has plenty of room left for accomodative monetary policy. The ECB just recently cut benchmark interest rates, but leadership seems open to the idea of further cuts should conditions remain appropriate. Negative first-quarter GDP and low inflation are definitely an environment in which accomodative policy can thrive.

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