Share Prices Drop Significantly Further in Europe

July 18, 2011

With Japan closed for Marine Day, stocks in the Pacific Rim were mixed, dropping 0.7% in South Korea, 0.6% in New Zealand, 0.4% in Taiwan, 0.3% in Hong Kong and India, and 0.2% in China, gaining 0.4% in Thailand and 0.2% in Indonesia, and closing unchanged in Australia.  But the mood of investors soured anew in Europe, where equities have so far declined 1.1% in Italy, 1.0% in France and Switzerland, 0.9% in Germany, and 0.8% in Great Britain. European stress test results released Friday failed to blunt concern about Europe’s debt crisis.  An EU summit has been pushed back to July 21.

Gold poked above $1600 per ounce for the first time to $1600.80 and are currently 0.6% higher on balance.  Silver leaped 2.2% to a ten-week high.  Oil eased 0.4%, in contrast, to $96.87 per barrel.

Yields on ten-year German bund and British gilts fell by five basis points each.  Greek and Italian sovereign bond spreads versus bunds widened sharply.

The dollar is mostly stronger, with overnight gains of 0.5% against the euro, 0.3% relative to the Australian and New Zealand dollars, 0.2% versus sterling and 0.1% against the yen, yuan, and Canadian dollar.  Today’s firmest currency so far is the Swiss franc, which has risen 0.1% against the dollar.

New Zealand consumer prices climbed 1.0% last quarter and accelerated to a 5.3% on-year advance from 4.5% in the year to 1Q and 1.9% in the year to 2Q10.  Inflation stands at 3.3% if one excludes New Zealand’s goods and services tax hike at the start of this year.

New Zealand’s performance of services index continued to reflect recovery from February’s earthquake, rising to 54.7 in June from 52.8 in May.

Australian motor vehicle sales rebounded 1.3% last month from a 7.5% decline in May but were still 11.5% weaker than in June 2010.  Consumer behavior remains very cautious.

Singapore’s non-oil domestic export data, showing a 4.5% monthly decline in June, were more disappointing than projected.  Turkish consumer confidence rose about as expected to print at 96.4 in June after 92.9 in May.

The British Rightmove house price index decreased 1.6% in June, virtually wiping out any on-year appreciation.  Prices were 0.1% greater than in June 2010, down from a 1.1% rise in the year to May.

Finnish producer price inflation receded to 5.9% in June from 6.6% in May. Spanish house prices fell 1.4% last quarter and by 5.1% from a year earlier.

There was no meaningful progress in U.S. debt ceiling talks over the weekend.  Another top Afghan official has been assassinated.  Underdog Japan beat the United States in a shoot-out to win the ladies World Cup.

Scheduled U.S. data today feature the National Association of Home Builders house price index and the Treasury Department TIC data covering capital flows with non-residents.  Canadian auto sales arrive, too.  The Bank of Canada’s fifth interest rate announcement will be made tomorrow, and the Reserve Bank of Australia publishes minutes of this month’s policy meeting tonight.

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

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