Risk Aversion Sends Stocks and Commodities Lower and Yen and Dollar Higher
June 8, 2011
Euroland officials still haggling over the composition of a Greek bailout.
OPEC ministers meeting in Vienna have range of stands over whether to raise oil production.
Moody’s again warns that British AAA sovereign debt rating may get downgraded.
Today’s release of the Fed Beige Book of regional trends comes amid mounting concern that U.S. growth may be sputtering.
Stocks fell 2.0% in Thailand, 0.7% in Australia, 0.9% in Hong Kong, 0.6% in Taiwan and India, 0.9% in South Korea, and 0.5% in Indonesia. Equities edged up 0.2% and 0.1% in China and Japan, but the German Dax, British Ftse, and Paris Cac so far show declines of 1.2%, 0.9%, and 0.8%.
Oil and gold prices have fallen by 0.9% and 0.5% to $98.21 per barrel and $1536.20 per troy ounce.
The yen is stronger than 80 per dollar at 79.76, up 0.4% from Tuesday’s closing. The dollar otherwise has risen 1.2% against the Aussie dollar, 0.7% relative to the Canadian dollar, 0.6% versus the kiwi, 0.5% against the euro and 0.4% against sterling. The dollar is steady against the Swiss franc, another low-yielding currency that benefits from spikes in risk aversion, and has dipped 0.1% relative to the yuan.
A senior Swedish monetary policymaker said the krona’s recent strength has been understandable and reverses a prior period of weakness.
The yields on ten-year German bunds and Japanese JGBs are down by 3 and 1 basis points. The 10-year Treasury yield is hovering a pinch below 3% in futures trading.
Several Japanese and German indicators were released. Japan’s current account surplus dropped sharply in April to JPY 406 billion from JPY 1331 billion in April 2010. Merchandise exports dived 12.7% on year in response to the earthquake, whereas imports expanded 12.3%. The Basic Balance surplus JPY 9.2 trillion, including the current account and long-term capital inflows, showed sharp improvement from a JPY 6.6 trillion deficit in March. The seasonally adjusted JPY 546 billion current account was 27.5% smaller than March’s JPY 753 billion. Seasonally adjusted exports were 15% lower in April than in February.
Japan’s customs trade flows generated a deficit of JPY 1.053 trillion in May 1-20 compared to a shortfall of JPY 325 billion a year earlier. Japanese stock and bond transactions generated a JPY 1.8 trillion net capital inflow in May.
Japanese M2 posted the same 2.7% on-year advance in May as posted in April. Growth of M3 (2.1%) was also the same as in April. Broad liquidity was 0.5% lower than a year earlier, and bank loans recorded an on-year drop of 0.8% after minus 1.0%. Japan’s economy watcher’s index, a gauge of consumer activity, recovered more sharply than expected to a reading of 36.0 inn March from 28.3 in April and 27.7 in March but remained over ten points below February’s 48.4 score.
Germany’s current account and merchandise trade surpluses of EUR 8.8 billion and EUR 10.9 billion in April were considerably lower than expected and March’s levels of EUR 19.6 billion and EUR 18.8 billion. The seasonally adjusted EUR 12.0 billion trade surplus, however, was not far different from the first-quarter average of EUR 12.7 billion. Seasonally adjusted exports fell 5.5% on month. The year-to-date unadjusted trade surplus of EUR 51.7 billion was similar to the 2010 January-through-April total of EUR 51.0 billion.
German bankruptcies were 9.0% lower than a year earlier in March and down 5.8% in the first quarter. German industrial production unexpectedly fell 0.6% in April mainly because of a 5.7% slide in construction and a drop of 1.5% in capital goods. Revised output in March had climbed 1.2%, and April production was still 0.7% higher than the average 1Q level.
Greek industrial production sank another 7.5% on month in April and by 11.0% on year. Greek unemployment increased to a record 16.2% in March.
The French trade deficit widened to EUR 7.2 billion in April from EUR 5.9 billion in March as exports fell 1.9% on month.
British shop prices were 2.3% above a year earlier in May.
According to revised and more complete figures, Euroland real GDP expanded 0.8% (not annualized) last quarter, twice as fast as the pace in 2H10. GDP was 2.5% greater than in 1Q10. In quarter-over-quarter comparisons, exports rose 1.8%, investment jumped 2.1%, government spending increased 0.8%, and personal consumption lagged with a 0.3% rise. Compared to the first quarter of 2010, exports went up 9.7%, investment climbed 4.2%, and both consumption and public-sector spending increased by 1.1%. The 2.5% on-year rise of GDP masked a great divergence among member countries, ranging from 5.8% in Finland, 4.8% in Germany and 4.0% in Austria to minus 4.8% in Greece, minus 0.7% in Portugal, +0.8% in Spain, and 1.0% in Italy. In between, GDP advanced by 3.2% in The Netherlands, 3.0% in Belgium and 2.2% in France.
Icelandic GDP rebounded 2.0% last quarter and was 3.4% greater than a year earlier. Norwegian industrial output fell 1.7% in April and by 8.7% on year.
Swiss unemployment of 2.9% in May was two-tenths less than in April below forecasts.
Romanian industrial output slid 0.2% in April but surpassed its year-earlier level by 6.3%. Romanian GDP rose 0.7% in 1Q and was 1.7% greater than in 1Q10. The Czech jobless rate of 8.2% in March was down four tenths and as expected, and the current account surplus of that economy of CZK 19.4 billion in 1Q11 was three times greater than a year earlier. Turkish industrial production fell 0.6% in April but exceeded its year-earlier level by 8.3%.
Australian loans for housing rose 3.8% in April in value and by 4.8% in number. Investment lending fell by 1.6%. New Zealand’s manufacturing activity index fell 6.3% during the first quarter of 2011 when the Christchurch area on the South Island suffered an earthquake.
South Korean real GDP rose 1.3% last quarter and by 4.2% on year according to revised figures. South African business sentiment weakened to 85.8 in May from a reading of 86.9 in April.
Canada reports housing starts today, and interest rate decisions are due in Poland and Brazil. The weekly release of U.S. oil inventories is also scheduled, and Hoenig of the Federal Reserve speaks publicly.
Copyright Larry Greenberg 2011. All rights reserved. No secondary distribution without express permission.
Tags: Euroland GDP, German current account, Japanese current account, OPEC