Gloom Continues over Euro Debt Problems

April 10, 2012

The Easter break is over, and investors continue to fret about Europe’s debt issues.  The IMF will be releasing a new World Economic Outlook today.

The Spanish-German 10-year sovereign debt yield spread widened to 5-month high.

Post-holiday opening levels of ten-year German bund and British gilt yields show steep drops of five and eight basis points.

Share prices are down 1.1% in France, 0.8% in Britain, and 0.7% in Germany. 

The dollar has climbed 1.0% versus the kiwi, 0.6% against the Aussie dollar, 0.5% relative to the euro, 0.4% versus sterling, and 0.2% against the loonie.  The greenback is unchanged on balance against the yen and yuan and has dipped 0.1% versus the Swiss franc, which remains only fractionally below the Swiss National Bank’s 1.2000 per euro target ceiling.  EUR/JPY touched 105.97, not far from its 200-day average. 

Gold is 0.1% firmer at $1645.80 per ounce.  Oil is 0.5% softer at $101.90 per barrel.

In the Pacific Rim, stocks fell by 1.2% in Hong Kong, 1.4% in Thailand, 0.6% in Australia, and 0.1% in Japan, Indonesia and South Korea, but they rose 1.0% in China, aided as a return to surplus was reported in China’s trade balance.

The Chinese trade position swung from a $31.4 billion deficit in February to an unexpected surplus of $5.4 billion in March.  However, on-year growth in exports of 8.9% and imports of 5.3% were substantially less than seen in February.

The Bank of Japan did not change any policy settings after a two-day meeting.  The overnight rate target of 0-0.1% since October was kept, and the asset purchase plan was not raised further.  There has been speculation such may happen after the next meeting on April 27, but BOJ Governor Shirakawa said no decision regarding that meeting has been made thus far.  The central bank’s economic assessment wasn’t changed either. 

Australian job ads rose only 1.0% last month, worst since December.  But both the business conditions index (+4 after +3) and business confidence (+3 versus +1) increased in March.

Malaysia’s trade surplus widened 20.5% in February.  Industrial production and factory output were 7.5% and 9.1% higher than in February 2011.

Tensions remain high between North and South Korea.

French factory output in February was 3.7% lower than a year before, the biggest on-year decline since late 2009.  Industrial production rose 0.3% on month after a 0.2% uptick in January but was 1.9% lower than a year earlier nonetheless.  The Bank of France gauge of business sentiment printed in March at 95, same as in the prior month.  Such has been 95 or 96 since October.

Germany’s merchandise trade surplus averaged EUR 14.4 billion per month on a seasonally adjusted basis in the first two months of 2012, above the 4Q average level of EUR 13.7 billion.  The two-month current account surplus of EUR 20.6 billion compared to EUR 19.3 billion a year earlier.  Exports rose 1.6% on month and 8.6% on year in February.

The Sentix barometer, a gauge of investor sentiment toward the euro area, weakened sharply to minus 14.7 in April from minus 8.2 in March.  Analysts were anticipating considerably less deterioration between the two months.

Dutch industrial production fell 0.7% on month and 3.3% on year in February. Irish industrial output in was 3.3% lower than a year before in February.  Finnish industrial production climbed 2.9% between February 2011 and February 2012.  Sweden reported on-year declines of 7.1% in industrial production and 8.3% in industrial orders for February. 

Czech CPI inflation edged up a tenth percentage point in March to 3.8%, while the jobless rate that month eased to 8.9% from 9.2% in February. Danish CPI inflation ticked down to 2.7% in March from 2.8% in February.  Romanian CPI inflation eased to 2.4% last month from 2.6%. 

Seasonally adjusted unemployment in Switzerland held steady at 3.1%.  Norwegian CPI inflation fell to a 12-month increase of just 0.8% in March, whlle PPI inflation slowed to 6.6% from 7.6% in February. 

The house price balance index reported by Britain’s Royal Institute of Chartered Surveyors printed at minus 10 in March, best since mid-2010 and down from readings of negative 13 in February and minus 16 in January.  The U.K. index of leading economic indicators rose 1.0% in March, but the coincident index was unchanged for a second straight time. 

The U.S. has a busy data release schedule today, including the IBD/TIPP optimism index, the JOLTS index of job openings and firings, the NIFB small business sentiment index, wholesale inventories, and weekly chain store sales.  Federal Reserve regional presidents Fisher, Lockhart and Kocherlakota speak publicly.

Copyright 2012, Larry Greenberg.  All rights reserved.  No secondary distribution without express permission.

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