Greek Bailout Hasn’t Ended Fear of Contagion

May 3, 2010

The dollar rose overnight by 0.7% against the Swiss franc, 0.6% relative to the euro, 0.3% against sterling and 0.1% versus the yen.

Commodity-sensitive currencies are stronger.  The kiwi is up 0.3% against the U.S. dollar, while the Canadian and Australian dollars firmed 0.2%.

Markets were closed in Japan for Constitution Day, China for Labor Day (May Day observance), and Britain for a bank holiday.

Stocks are lower, with drops of 1.0% in Singapore and India, 1.2% in South Korea, 1.4% in Hong Kong, 0.7% in Taiwan, 0.4% in Indonesia and 0.5% in Australian.  In Europe, the Paris Cac and German Dax have lost 0.6% and 0.3%.

Oil and gold are very firm but little changed at $86.28 per barrel and $1181.00 per ounce.

Ten-year German bund and British gilt yields are two and six basis points higher.

A three-year EUR 110 billion Greek rescue plan was reached over the weekend.  As a quid pro quo, Greece will imposed EUR 30 billion of budget cuts equal to some 13% of its GDP.  Bond spreads remain wide including those involving Spain and Portugal.

Manufacturing purchasing manager survey readings have been released in many countries.  The attest to improving world trade but also revealed intensifying input price inflation.

  • Euroland’s score was 57.6, a tenth of a point better than the preliminary indication and highest since June 2006.
  • Germany reported a record high reading of 61.5 in this series that began in 1996.  Such compares to 60.2 in March57.2 in February, 51.0 last October and 49.2 in August 2009.
  • The French index was 56.6 after 56.5 in March and 50.8 last August.
  • Italy’s index of 54.3 was the best since May 2007 and up from 53.7 in March 50.8 in December and 44.2 last August.
  • Spain recorded the second above-50 reading in a row, which connotes expanding activity.  The score of 53.3 was the highest since June 2007 and up from 47.2 last August.
  • Ireland had a 53.4 reading versus 53.0 in March and 48.6 in February.
  • Troubled Greece saw the PMI remain very depressed at 43.6 after an 11-month low of 42.9 in March.
  • The Dutch PMI of 56.9 was below March’s 32-month peak of 57.8. 
  • The Czech PMI improved to a 25-month high of 57.3 from 56.8 in March, propelled by faster growth in orders and production.
  • The Swiss PMI rose further to 65.9 from 65.5 in March and 57.4 in February.
  • Sweden’s PMI increased to 64.0 from 61.1 in March.  Both the Swiss and Swedish reading surpassed expectations.
  • Norway’s PMI of 51.9 was above 50 for the first time since January.
  • Hungary’s PMI fell to 51.6 in April from 54.1 in March and 55.9 in February and was the lowest score since December.

Australia’s PMI leaped to 59.8, best since May 2002, from 50.5 in March, 53.8 in February, 51.0 in January and 48.5 in December.  Australian house prices jumped 4.8% last quarter and by 20% from 1Q09.  The TD-MI gauge of expected inflation rose to 2.9% at the top of the central bank target range.  Australia’s commodity price index was 29.4% greater in April than a year earlier.  These data collectively make another Aussie rate increase very likely on Tuesday.

Turkey’s PMI improved to 56.0, a record high, from 54.9 in March. India’s reading of 57.2 constituted a second straight dip but remained well above 50.  Taiwan’s PMI of 60.7 was lower than in March but above 60.0 for a fourth consecutive month.  South Korea’s PMI improved to 57.1 after dropping 2.6 points in March from a 26-month high in February.  South Africa’s PMI slid by 0.4 to 55.2.

South Korea posted a $4.4 billion trade surplus in April.  Consumer prices firmed 0.5% last month and to a 12-month pace of 2.6% from 2.3% in March.  Core CPI held steady at 1.5%.  Indonesian consumer prices increased 0.3% in February and by 3.8% from a year earlier.  The core rate was 3.9%.  Turkish consumer prices firmed 0.6% in April and 10.2% on year.  The 12-month PPI rate was also in double digits at 10.4%.  Thai consumer prices advanced by 0.5% in April and 3.0% from a year earlier.

Danish retail sales rose 2.9% in March and by 8.1% from a year earlier.  Such had dipped 0.8% in the year to February.

Over the weekend, the People’s Bank of China announced its third increase in reserve requirements of 2010.  The rise was again by a half percentage point.

Scheduled U.S. data include the purchasing managers index, personal spending and income, construction spending, and motor vehicle sales.  A sixth Australian rate increase of 25 basis points is expected Tuesday.

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

Retail sales in Hong Kong posted 12-month increases of 19.0% in March and 17.2% in volume terms.

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