Continuing Market Upheaval
August 9, 2011
Investors continue to wait in vain for governments and central banks to take action and stop the turbulence. The FOMC meets today and will release a statement at 16:15 GMT amid speculation that QE3 will be undertaken, but no press conference is scheduled. The ECB was again buying peripheral bonds today, and Spanish and Italian yields settled back further. But no new dramatic gestures have been forthcoming.
Gold prices are 3.4% higher at $1770.90 per ounce. Oil fell 2.6% to $79.18 per barrel. The Swiss franc and yen are 1.7% and 0.7% stronger against the dollar.
Share prices plunged by 5.7% in Hong Kong, 4.0% in The Philippines, 3.8% so far in Germany, 3.7% in Singapore, 3.6% in South Korea, 3.3% in Thailand, 3.2% in Pakistan, 3.0% in Indonesia, 2.8% in New Zealand, 2.3% so far in Great Britain, 2.2% in Vietnam, 1.7% in Japan and Malaysia, and 1.4% so far in France.
The dollar has also lost 0.6% against the euro, 0.3% versus sterling and 0.1% relative to the yuan but is unchanged against the Australian, New Zealand and Canadian currencies.
Sovereign 10-year bond yields have risen by six basis points in Germany and four bps in Japan, but gilt yields are steady.
Chinese CPI inflation accelerated to 6.5% in July from 6.4% in June and 5.5% in May. Food prices were up 14.8% on year. Producer price inflation climbed to 7.5% from 7.1% in June and 6.8% in April and May. The CPI and PPI were each above street forecasts, but retail sales and industrial production posted smaller-than-projected on-year advances of 17.2% and 14.0%. Such had risen 17.7% and 15.1% in the year to June. Fixed asset investment in China also showed slower growth of 25.4% on year in January-July after 25.6% in January-June.
Germany’s current account and trade surpluses fell in June, as seasonally adjusted exports dropped 1.2% on month and imports unexpectedly rose. The current account on an unadjusted basis was EUR 11.9 billion, down from EUR 13.4 billion in June 2010. The seasonally adjusted trade surplus of 11.5 billion was smaller than quarterly means of EUR 12.1 billion in 2Q11, EUR 12.7 billion in 1Q11, and EUR 13.4 billion in 2H10. Exports were only 3.1% higher than a year earlier compared to an 18.6% on-year advance in January-June.
British industrial production and trade data also were disappointing. The goods and services deficit of GBP 4.47 billion in June surpassed expectations of GBP 3.8 billion. It’s 2Q deficit of GBP 11.3 billion was 33.7% wider than the deficit in the first quarter. The goods deficit exceeded GBP 8.0 billion for a second straight month and widened 4.8%. Exports slumped 4.8% on month, and the oil deficit tripled to GBP 1.45 billion. Industrial production was unchanged in June and 0.3% lower than a year earlier. Industrial production fell 1.6% on quarter in 2Q following a dip of 0.1% in 1Q and a rise of 0.6% in 4Q10. Factory output in June dropped 0.4% and posted a smaller on-year increase of 2.1%. In the year to 2Q, factory output was up 2.0%, down from an on-year advance of 4.3% in 1Q.
In other U.K. data, same-store sales were 0.6% greater than a year earlier in June, while total sales went up 1.5%. The Royal Institute of Chartered Surveyors published its house price balance index, which unexpectedly improved five points to a still weak reading of minus 22.
German insolvencies were 6.7% larger than a year earlier in May but were down 3.8% in January-May.
Greek industrial production in June was 13.1% lower than in June 2010. That plunge was even larger than May’s of 10.0%.
Czech consumer prices rose 0.3% on month and 1.7% on year in July. Danish industrial production sank 5.5% in June and was 3.7% weaker than a year earlier. Hungary’s trade surplus narrowed 15.8% on month in June, while Romania’s deficit fell by 27.2%.
Swiss consumer confidence, a quarterly measure, has weakened sharply to minus 17 in July from minus 1 in April and +10 in January.
S&P downgraded five U.S. insurers and assigned a negative outlook to five other insurers.
Australian business conditions worsened 3 points to a score of minus 1 in July, while business confidence recovered from zero to +2. Australian home loans were flat in June, while investment lending sank 4.4%, reversing May’s increase.
Japanese consumer confidence continued to recover from the quake, reaching a score of 38.5 in July after 36.2 in June, 34.8 in May, and 33.4 in April, but such remains below the neutral 50 level and the first-quarter average score of 40.0. On-year growth in machine tool orders slowed to 34.6% in July from 53.5% in June.
On-year growth in Japanese M1, M2 and M3 money amounted to 5.1%, 2.9%, and 2.3% in June. These results were almost identical to May’s.
Bank Indonesia as expected left its key reference interest rate at 6.75%. It so far has raised such just once from a cyclical low of 6.5%, and that move was engineered this past February. 300 basis points of reduction were implemented previously between October 2008 and December 2009.
Today is a busy day on the U.S. calendar. Besides the FOMC meeting, data releases will include quarterly productivity and unit labor costs, the IBD/TIPP optimism index, the NIFB index of small business sentiment, and weekly chain store sales. Canadian housing starts arrive, too.
Copyright 2011, Larry Greenberg. All rights reserved. No secondary distribution without express permission.
Tags: Dollar, FOMC, German current account, record gold price, Swiss Franc, U.K. industrial production, Yen