Low liquidity saw sporadic and jittery price action in the markets this morning, even though most moves remained largely range bound. The Yen weakened against the Dollar and the Euro as investors prefer higher yield assets such as the AUD and NZD. The Yen posted a full figure decline against the Euro, bringing it to 131.30 this morning, while the Nippon currency retraced early losses against the dollar.
The fall in Yen demand came as the government posted a decline in CPI for the first in a year – with Fresh food prices dropping 0.1%. This comforted the BoJ in it’s decision to keep interest rates at a lowly 0.1%. Furthermore, a very weak jobless number (4.8%, +0.4% from February number), the biggest decline since 1967 – drove home the notion that Japan is still in some very serious economic trouble despite tentative signs of a bottom in manufacturing data.
Chrysler., LLC Filed for chapter 11 bankruptcy during the night, as creditors to the company refused to give-way in talks that would have seen them lessen the $6.9Bn Chrysler owed them, this despite the government pledging to add $250m to the $2.0Bn already allocated to this effect. Markets took well to the news (largely priced in), bolstering the dollar momentarily but then weakening the dollar some as markets sought out riskier trades.
It is reported that the scheduled May 4th unveiling of the infamous “Stress Test” would be postponed till later in the week as regulators and officials debate the means, manor and tone to use on the release. The reason for this cautious stance is to preserve the stock prices of the banks that will need capital re-injections to “stay afloat”. Regulators have made it clear that they are favoring TCE (common equity) hikes, as they seem them as the best indicator of a bank’s financial health.