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Europe: Spring has arrived after a bleak winter. The literal and figurative moment of sunshine the region is enjoying post LTRO has been sullied in recent weeks by the reminder that the financial storm clouds may be regathering just over the horizon. The news flow out of Spain, Portugal, Greece, Italy and Ireland has been chipping away at the complacency of early March.
United States: The activity momentum seen at the end of 2011 has not persisted into 2012. Although the data is seemingly not (yet) weak enough to justify further policy easing, we believe that the Fed will be laying the groundwork for additional growth supporting measures around the middle of the year.
Japan: The recent softness in the yen can be partially attributed to the combination of heavy intervention (and the threat of the same) and the BoJ's unconventional policies, the February 14 announcement of which was a surprise to the markets. We hope that the Bank will be emboldened by the events of recent months and 'maintain the rage'.
China: Since we went to press in March, the flow of data has been consistent with both our below consensus view on the short term activity front and our assessment that the counter-cyclical policy thrust remains timid in nature. When one brings survey responses on the policy stance/willingness to lend/desire to borrow together, one can interpret the lending data, which has disappointed us in the year to date, as the joint outcome of constrained credit supply and softer loan demand.
Australia: As expected, the Reserve Bank Board decided to leave the cash rate unchanged at 4.25% at their April meeting. The accompanying statement flagged the distinct possibility of a cut at the May meeting if inflation behaves itself on April 24. Such a move would be entirely consistent with our view. A bout of China-inspired jitters hurt the Australian dollar over the month.
New Zealand: GDP grew slightly less than expected in the December quarter, and with yet more downward revisions to the recent history, calendar year growth reached just 1.4%, compared to 1.2% in 2010. Even so, business indicators have started 2012 on a stronger note, while consumers have remained circumspect about their own prospects.