New Hope Regarding Greek Situation

June 17, 2011

Markets are showing a little less extreme risk aversion as the third week of June draws to a close.  Former Greek Finance Minister Papconstantinou has been replaced by Defense Minister Venizelos, and Prime Minister Papandreou is believed likely to survive a confidence vote that will probably occur on Sunday.  Plus there are rumors of progress toward a new Greek bailout package in the area of EUR 150 billion.

The dollar eased overnight by 0.3% against the kiwi, Aussie dollar and euro, by 0.4% relative to the yen, 0.2% against the Swiss franc, and 0.1% vis-a-vis the yuan and Canadian dollar.  Sterling is unchanged.

Hope regarding Greece surfaced after Asian trading, where stocks fell by 1.2% in Hong Kong, 0.9% in China, 0.7% in South Korea and India, 0.6% in Japan, and 0.5% in Indonesia, The Philippines and Singapore.  The German Dax edged 0.1% higher.  The Paris Cac is unchanged so far, and the British Ftse is 0.1% lower.

Ten-year yields on German bunds and British gilts rose two basis points, while the 10-year JGB is steady at a low 1.12%.  In spite of hope that a Greek bailout package might be forthcoming, the 10-year Greek minus German bond yield spread is hovering around a punishing 1500 basis points, and the Portuguese and Irish differentials are each wider than 800 basis points.

Oil, which was trading above $100 as recently as June 9 and over $113 at the start of May, slumped another 1.6% to $93.40 per barrel.  Gold slid 0.2% to $1526.70 per ounce.

Euroland registered a EUR 2.9 billion seasonally adjusted trade deficit in April, largest since January.  Exports climbed 0.6%, while imports advanced 1.1%.  Over the four months since December, exports and imports posted annualized gains of 22.9% and 25.4%.  The unadjusted deficit in the first third of 2011 was EUR 21.9 billion versus just EUR 7.0 billion a year earlier.  Exports were 19.5% higher than a year earlier in January-April.

Construction output in the euro area rose 0.7% in April but was 2.0% lower than a year earlier.  In 1Q11, such had climbed 1.2% versus 4Q10 but had dropped 2.2% in on-year terms.

Minutes from the Bank of Japan Policy Board meeting of May 19-20 reflected worries that sentiment could yet take a turn for the worse.  No new policy stimulus was adopted, although some members felt there might be a need for such in the future.  Japan’s finance minister indicated that the size of another supplementary budget had not yet been decided.

Japanese department store sales were 2.4% lower in May than a year earlier.  Tokyo sales posted a drop of 4.3%.

Singapore’s trade surplus narrowed 30.7% on month in May as imports climbed 3.0% while exports eased 0.4%.

Italy’s current account deficit increased to EUR 5.6 billion in April from EUR 5.5 billion in March.  The Dutch current account swung from an EUR 11.9 billion surplus in the final quarter of 2010 to a deficit of EUR 16.6 billion last quarter. Finnish producer prices rose 0.4% on month and 6.6% on year in May. New car registrations in the European Union were 7.1% greater than a year earlier in May.

The U.S. index of leading economic indicators and U. Michigan index of consumer sentiment get released today.  So do Canadian wholesale sales.

Copyright Larry Greenberg 2011.  All rights reserved.  No secondary distribution without express permission.

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