European Currencies Stronger Despite Continuing Greek Debt Woes

March 31, 2010

The dollar weakened 0.6% against sterling and the Swissy and by 0.4% relative to the euro.  The dollar strengthened 0.6% against the yen and to its highest level since the first week of 2010.  Movements relative to commodity-sensitive currencies are mixed, with a drop of 0.4% against the loonie but gains of 0.3% and 0.2% versus the Australian and New Zealand dollars.

The Greek-German 10-year sovereign bond yield spread is its widest in almost five weeks.  Greece plans to issue dollar-denominated debt.  Ten-year government bond yields dipped one basis point in Britain and Germany but were steady at 1.40% in Japan.

Stocks in the Pacific Rim fell for the most part, with drops of 1.1% in Sri Lanka, 1.6% in Singapore, 0.8% in Indonesia and Australia, 0.6% in China and Hong Kong, 0.5% in Taiwan and 0.1% in Japan.  European stocks are trading up 0.3% in Britain and by 0.2% in France and Germany.

Oil and gold prices firmed 0.6% and 0.3% to $82.84 per barrel and $1109.40 per ounce.

Reported Japanese data were mixed.  Housing starts (down 9.3% on year in February after minus 8.1% in January) and construction orders (off 20.3% after plus 15.7%) were worse than forecast.  Total wage earnings were 0.6% lower than a year earlier in February, in part reflecting a record 9.3% drop in winter bonuses.  The manufacturing purchasing managers index (PMI) was generally steady and above 50 for a ninth straight time at 52.4 in March following 52.5 in February.  The export orders component of the index rose another half-point to 55.7.  The March Shoko Chukin index of small business sentiment jumped to a two-year best of 45.8 (still below 50, however) from 42.3 in February.

Euroland’s retail-sector PMI improved to 46.9 in March from 44.6 in February, partly reflecting better weather.  Germany’s index jumped to 49.3 from 42.1.  France’s climbed to 48.6 from 46.4, its third sub-50 score in a row, and Italy’s slumped to a 13-month low of 41.3 from 45.5.  Note that all of these results are below 50, indicating that retail activity continues to contract.

Euroland’s jobless rate edged up to 10.0% after printing at 9.9% in November, December and January.  Such is 1.2 percentage points higher than in February 2009.  The unemployment rate was 10.0% for both men and women versus 8.5% and 9.2% a year earlier.  Youth unemployment hit 20.0%, up from 18.4% in February 2009.

Euroland’s preliminary consumer price inflation indication is 1.5% in March, a ten-month high and up from 0.9% in February and 1.0% in January.

German unemployment unexpectedly fell in March, recording its largest month-to-month decline (31K) since August 2008.  The jobless rate of 8.0% was its lowest since February 2009.  Jobs were unchanged in February and just 0.3% below their year-earlier level in Europe’s largest economy.

French producer prices edged up 0.1% last month and by 1.0% from February 2009.  Italian producer prices also firmed 0.1% on month and were up 0.4% on year.  Italian consumer prices gained 0.3% in March and 1.4% from a year earlier.  Irish producer prices rose 1.0% in February by printed a 2.6% 12-month rate of drop.

Consumer confidence in Britain according to the GFK gauge worsened a point to minus 15 in March.  Analysts thought such would rise a point instead.

Thailand’s PMI index improved to 51.3 in February from 50.4 the month before.  Industrial production in February was 30.3% greater than a year earlier after rising 28.6% in the year to January and by 35.9% on year in December.  The trade surplus widened to $591 million in January from $122 million in December and $1.688 billion in January 2009.  Hong Kong M3 money showed on-year growth of 10.7% in February.  South Korean industrial output rose 3.6% on month and 19.1% on year in February.  South Korea’s index of leading economic indicators was up 10.3% on year in February after 11.3% in January.

China’s central bank released a report promising a moderately loose policy stance.

Hungary’s current account surplus of EUR 456 million last quarter was greater than expected.  Turkey’s trade deficit of 3.3 billion lira in February was also bigger than anticipated.  Turkish GDP rose 2.3% in 4Q09 and by a working-day adjusted 4.0% from a year earlier. 

Moody’s credit rating agency said Italy would have a difficult year growth-wise and deficit-wise.  S&P downgraded Iceland’s currency credit rating to BBB/A-.  Spain’s current account deficit widened to EUR 6.5 billion in January. Danish GDP firmed 0.2% that same quarter but was 3.2% lower than in 4Q08. 

Australia unexpectedly reported a 1.4% drop in retail sales for February after a 1.1% advance in January.   Most analysts had been anticipating another RBA rate hike next week.  Now some think that may not happen.  Building permits in Australia  dropped 3.3% in February but were 34.2% greater than a year earlier.  New Zealand business sentiment worsened to 42.5 in March from 50.1 in February. 

Today’s U.S. calendar will be dominated by the ADP estimate of private employment.  Weather was a positive factor.  The full-economy jobs report on Friday will also reflect the addition of about 100K census workers.  Other U.S. scheduled data today are oil inventories, factory orders, and the mid-western PMI readings.  Canada releases monthly GDP.  Poland’s central bank has an interest rate meeting that probably will not result in a change of its 3.5% benchmark interest rate.  Tonight sees the release of the Bank of Japan’s quarterly Tankan report on business conditions and expectations.

Today is the last day of the first calendar quarter and Japan’s fiscal year.

Copyright Larry Greenberg 2010.  All rights reserved.  No secondary distribution without express permission.

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