Ezone Default Fears Mount Ahead of U.S. Jobs Report
July 8, 2011
Investors are watching two shows today. Mounting concern that Euroland’s peripherals will default are reflected in a stronger German bund and weaker peripheral bonds. The Italian minus German 10-year bond spread reached its greatest width since July 2002, and the euro has depreciated 0.7% against the dollar. Meanwhile, optimism about the U.S. employment figure, due at 08:30 local time, has grown with the consensus non-farm payroll rise now at 125K and whisper numbers approaching 200K. In May, jobs climbed only 54K.
Canadian jobs expanded 28.4K last month, marginally more than forecast. Only a quarter of the gain involved full-time positions. Jobs had risen 22.3K in May and recorded a 237.5K increase (1.4%) between June 2010 and June 2011. Last month saw public sector employment rise 50.7K but self-employment contract 44.2K. June can be a quirky month because of the influx of students seeking summer work. Canadian unemployment held steady at 7.4% in June. Such peaked at 8.7% in August 2009.
The dollar rose overnight by 0.2% against the yen and 0.1% versus sterling, the Canadian dollar, the Australian dollar, the kiwi and the yuan. The dollar is 0.2% softer against the Swiss franc on the latest spike in risk aversion.
Equities advanced 1.6% in Indonesia, 1.1% in Australia, 0.9% in Hong Kong, 0.8% in Singapore, and 0.7% in Japan but dropped 1.2% in India and 0.3% in Taiwan. The Paris Cac and British Ftse are 0.4% and 0.2% weaker, while the German Dax is unchanged so far.
Oil and gold prices slid 0.5% and 0.1% to $98.16 per barrel and $1528.40 per ounce.
Several Japanese statistics were released. The JPY 591 billion current account surplus in May was 51.7% smaller than in May 2010. Merchandise exports on a settlements basis sank 9.8% on year, while imports climbed 14.7%. The Basic Balance (current account plus long-term capital flows) showed a JPY 3.586 trillion surplus versus surpluses of JPY 8.73 trillion in April and JPY 2.54 trillion in May 2010. There was a customs trade deficit of JPY 116 billion in June 1-20, with exports 3.9% lower than a year earlier and imports 10.9% higher. Stock and bond transactions in June generated a JPY 2.408 trillion net outflow. Bank loans were 0.6% lower in June than a year earlier following an 0.8% on-year drop in May. The economy watchers index printed in June at 49.6, up from 36.0 in May, 28.3 in April, and 27.7 in March and above forecasts of a 40.0 reading.
The German current account surplus contracted to EUR 6.9 billion in May from EUR 9.0 billion in April but exceeded its year-earlier value of EUR 3.1 billion. Net investment income deteriorated on month by EUR 7.3 billion. The unadjusted merchandise trade surplus of EUR 14.8 billion exceeded expectations of a EUR 11 billion surplus. The seasonally adjusted trade surplus widened to EUR 12.8 billion from EUR 11.9 billion in April, thanks to a 4.3% surge in exports. The year-to-May current account surplus of EUR 51.2 billion was similar to the year-earlier surplus of EUR 49.6 billion.
Many countries reported industrial production.
- In the Czech Republic, such advanced 2.7% in May and by 15.2% from a year earlier.
- In Romania, output went up 1.6% in May and accelerated to a 12-month 7.9% rate of increase from 6.3% in the year to April.
- Finland also reported a 1.6% on-month increase in industrial production along with a 6.0% rise from May 2010.
- Turkish industrial production slid 0.3% in May, cutting the 12-month increase to 8.0% from 8.3%.
- Dutch output increased 0.3% in May and by 2.6% from a year earlier.
- Swedish industrial production recorded strong gains of 2.6% on month and 13.4% on year in May. Industrial orders edged up 0.1% and were 8.6% greater than in May 2010.
- Italy had a disappointing 0.6% monthly decline in May, six times greater than forecast. The 12-month rate of rise was sliced to 1.8% from 3.8% in April.
British producer output prices edged 0.1% higher in June and posted a 12-month advance of 5.7%, up from 5.4% in May. Core PPI-O inflation of 3.2% was down from 3.4% in May and 3.6% in April. Bank of England officials have been projecting a downtrend in inflation next year but a risk that CPI inflation could touch 5.0% later in 2011. Producer input prices rose 0.4% in June and accelerated to a 12-month 17.0% increase. Core PPI-I inflation was 12.8% in June, up from 11.2% in May.
South Korean producer prices slid 0.3% in June and replicated May’s 12-month pace of 6.2%.
In China where the central bank hike its key interest rates by another 25 basis points two days ago, officials announced that the next CPI data will be released on July 9 instead of July 15 as initially scheduled. Chinese trade figures will be reported tomorrow as well.
Swiss unemployment edged a tenth lower to 2.8% in June. Finland’s trade deficit widened 6.3% to EUR 255 million in May. Hungary’s trade surplus of EUR 720 million in May was 50.2% bigger than the surplus in April and 79.1% larger than that posted in May 2010. The year-to-May surplus was 41.6% wider than a year before.
In addition to the Labor Department jobs report, the United States is scheduled to report wholesale inventories and consumer credit.
Copyright Larry Greenberg 2011. All rights reserved. No secondary distribution without express permission.
Tags: Canada jobs, European debt crisis, Japanese current account