France and German Still Apart over EU Debt Bailout Plan

October 21, 2011

The dollar has risen 0.4% against the euro, 0.3% versus the kiwi, and 0.2% relative to the Australian and Canadian dollars.  It’s unchanged against sterling and the yuan and down 0.2% versus the yen and by 0.1% against the Swissie.  These moves suggest lingering risk aversion.  And why not?  French President Sarkozy and German Chancellor Merkel are still haggling over the EU debt bailout plan and specifically about the ECB’s role in that plan.

The EU will hold summits on Sunday and Wednesday.

Equities rose 1.8% in Vietnam and South Korea, 1.3% in Thailand, and 0.7% in Singapore but fell by 0.9% in India, 0.5% in China and 0.1% in India and Australia.  The Nikkei closed down less than 0.1%.  In Europe the Paris Cac, British Ftse and German Dax show gains of 0.9%, 0.7%, and 0.6%.

Ten-year German bund and British gilt yields are five and six basis points firmer, while the Japanese JGB yield was unchanged.

Oil and gold prices firmed 0.3% and 0.7% to $86.33 per barrel and $1624.20 per ounce.

The IFO Institute German business climate index fell by a full point to 106.4 in October, 0.2 points lower than anticipated.  Expectations dropped 0.9 to 97.0, while current conditions declined 1.2 points to 116.7.  The business climate index has lost eight points over the past four months and is down nine points since this year’s best reading in February.  Nonetheless, IFO officials said, “given the international turmoil, the German economy is still performing well.”

The Nationwide measure of British consumer confidence fell three points to a five-month low of 45 in September.

British public sector net borrowing in September amounted to GBP 14.1 billion compared to GBP 15.4 billion a year earlier.  Borrowing in the first half of the current fiscal year (April – September) was GBP 63.5 billion, down from GBP 71.0 billion a year before.  Debt rose to 62.6% of GDP in September from 56.6% in September 2010.

There was more evidence that Australia’s strong terms of trade (export/import price ratio) continues to improve.  Export prices advanced 4.0% last quarter, while import prices stagnated.  Between 3Q10 and 3Q11, export prices climbed 6.6%, while import prices fell by 1.7%.  Over the past two years, export prices advanced 36.1%, and import prices dropped by 4.0%.

The Bank of France business confidence index slid another two points in October to 97.  France’s index of leading economic indicators dropped 0.5% in August.

Swiss M3 money grew 8.2% in the year to August.  Hungarian retail sales were just 0.4% higher than a year earlier in August.  Icelandic wage costs advanced 8.4% on year in September.

Malaysian CPI inflation edged up to 3.4% in September from 3.3% in August.  CPI inflation in Hong Kong also firmed a tenth percentage point to 5.8%, with food costs some 7.8% higher than a year ago.

Japanese officials unveiled two initiatives.  First, the Cabinet approved its third post-earthquake supplementary budget.  It totals JPY 12.1 trillion (about $157.5 billion).  The first two supplementary budgets had totaled JPY 6 trillion.  The second announcement from officials was a JPY 2 trillion package of actions to ameliorate the effect on the economy of a strong yen.

Vietnam’s central bank as expected left its key interest rate unchanged at 14.0%.

Canada will be reporting consumer prices within the hour. No U.S. data are scheduled today.  Minneapolis Fed President Kocherlakota, one of the central bank’s hawkish members, will speak publicly later today.  Yesterday’s main international story was the death of the former Libyan leader Qaddafi.

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

Tags: ,


Comments are closed.