No surprises as Japanese CPI falls

- New Zealand GDP: (NZ Q4 GDP QOQ: 0.8% V 0.9% expected): New Zealand's economy rebounded in 4Q06 as GDP grew 0.8%, compared with the 0.3% expansion the previous quarter. The figures illustrate the continued high level of willingness by New Zealand consumers to borrow to finance consumption. Services made the biggest contribution to growth, rising 0.9%. The NZD initially sold off on the data, but NZD/USD managed to rebound above the 2/27/07 high of 0.7120.

- Japanese consumer prices decline in February, as expected: (JP FEB CORE CPI MOM: -0.2% V -0.1% expected; YOY: -0.1% V -0.1% expected); (JP FEB NATIONAL CPI MOM: -0.3% V -0.1% expected; YOY: -0.2% V -0.1% expected) The fall in core CPI, helped by falls in oil prices, was within expectations and in line with the BoJ scenario. The BoJ said in its monthly report on March 20 that consumer prices will remain in an upward trend. But the report also said year-on-year changes in CPI are expected to be around zero percent in the short run (this is a downward revision in their view on inflation from the previous months report).

- Japanese household spending figures suggest consumption will be strong in January-March GDP: (JP FEB OVERALL HOUSEHOLD SPENDING YOY: 1.3% V 0.6% expected, the 2nd consecutive rise) Recent Japanese data has suggested that consumer spending is regaining ground. The consensus is that the rebound in Japanese spending, making up about 55% of GDP, will prevent the economy from stalling as production and exports slow.

- Japanese labor cash earnings drop, undermining strength of consumption rebound: (JP FEB LABOR CASH EARNINGS YOY: -0.7% V 0.1% expected; OVERTIME EARNINGS YOY: 0.7% V 0.1% prior) Japanese labor cash earnings declined for the third straight month.

- Chinese economic outlook: A leaked report reveals that the PBoC sees 2007 Chinese CPI up around 2.3%. The PBoC sees 2007 GDP growth at 10%, ahead of the government target of 8%. Several analysts expect China's CPI for March to rise to 2.9% from 2.7% in February due to rising grain prices. Another survey showed that Chinese interest rate expectations are at the highest level ever. The March Future expectations index came in at 83.77 v 81.43 in January, the highest level since Jan-Mar 2006.

- Asian equities: The Nikkei 225 opened sharply higher, tracking the late gains in U.S. equities. Sentiment was also boosted by stronger than expected industrial production and overall housing spending data. Company's most dependent on the domestic Japanese economy gained, such as banks and real estate stocks. Shares of exporters also gained on industrial production data and the higher USD/JPY. The Kospi index is higher by more than 0.10%, led by gains in steel-makers on expectation of further steel price increases. The ASX 200 is higher by more than 0.50% as a revision to Australian media laws led to gains in media-related shares. Shares of Australian miners also continued to gain on rises in commodities prices and the upward revision to U.S. GDP. The Hang Seng index is little changed as declines in shares of telecom shares offset gains in energy related shares.

- Commodities: Crude oil is rising in Asian trading, holding above the $66.50 level. Traders continue to reevaluate the risk premium for oil prices as the Iran and U.K. situation evolves. Crude oil is also gaining after earlier inventory data showed that natural gas inventories were lower than expected. Spot gold is slightly higher in Asian trading, tracking the weakness in the USD/JPY pair, along with developments in Iran. Shanghai copper is higher by more than 1.0%, tracking gains in the LME contract.

- Feds' Lacker talks tough on inflation: Lacker said that current inflation is "uncomfortably high". He also said that the inflation outlook now seem anchored, a deviation from comments he made on March 9, when he said that inflation expectations are "not anchored enough".