Spanish Glue

June 26, 2012

Spain’s problems look increasingly sticky.  Moody’s downgraded the rating of 28 Spanish banks, and Spanish T-bill auction results produced worse results on dampened expectations of a productive EU summit at the end of this week.  The 2.36% yield on the 3-month paper sold by the government was 1.5 percentage points higher than at the May auction and produced a 2.6 bid-cover ration versus 3.95 the month before.  The 6-month T-bill yield of 3.24% was also 1.5 percentage points above the May auction yield and likewise evoked lessening demand from investors.  Ten-year Italian and Spanish bond yields are higher.

The dollar, yuan, euro and Swiss franc fell overnight by 0.4% against the yen, sterling, loonie, kiwi and Australian dollar.

Share prices fell 0.8% in Japan, 0.6% in Malaysia, Indonesia and New Zealand, 0.5% in Hong Kong, 0.4% in South Korea, Taiwan, and Australia and 0.1% in China.  In European trading, the Paris Cac, Spanish IBEX, and British Ftse edged 0.1% higher, and the German Dax has risen 0.2%.

Gold slid 0.2% to $1584.90 per ounce and is over 16% below highs last September.  Oil ticked 0.1% higher to 79.30 per barrel but has lost over 25% since the start of May.

Ten-year German bund and British gilt yields are six basis points higher today.  Their Japanese counterpart dipped a basis point to 0.82%.

Japanese corporate service prices fell 0.4% last month and were a mere 0.1% higher than in May 2011.

China’s index of leading economic indicators posted a bigger 1.1% increase in May after gaining 0.8% in March and 0.9% in April.  The coincident index climbed 0.8%, more than reversing a 0.6% drop in April.  HSBC revised down projected Chinese GDP growth this year to 8.4%.

Singapore industrial output advanced 1.8% in May and by 6.6% from a year earlier.  Hong Kong’s trade deficit narrowed 17% on month to HKD 35.6 billion in May.  Consumer sentiment in South Korea dropped to 101 in June after cresting at a 15-month high of 105 in May and 104 in April.

German consumer confidence printed at 5.8 in July, similar to readings of 5.7 in May and June and the same as April’s score.  French consumer confidence of 90 in June matched May’s reading and was a point higher than the score in April. Italian retail sales dropped 1.6% on month and 6.8% on year in April but were 0.2% higher in February-April than in November-January.  The Swiss consumption indicator, compiled by UBS, weakened by 0.32 points to 1.05 in May.

British government finances worsened in May.  The public sector net borrowing requirement of GBP 15.6 billion was 26.7% greater than a year earlier.  Debt climbed to 65% of GDP from 61.3% a year earlier.  Fiscal austerity while in recession is counter-productive.

Bank of England Governor King, as well as fellow Monetary Policy Committee members Dale, Broadbent, and Miles testified before parliament on the U.K.’s difficult circumstances.

Dutch first-quarter GDP didn’t contract after all.  An initially reported drop of 0.2% has been revised to an increase of 0.3%.  However, GDP did fall in the final two quarters of 2011 and remained 0.8% smaller than a year earlier last quarter.  Italian hourly wages stagnated on month in May and posted a 12-month increase of 1.4%, the same on-year pace as in April and up from 1.2% in the year to March. 

Swedish producer prices fell 0.5% in May and were 0.3% above a year earlier. Finnish unemployment ticked a tenth percentage point lower in May to 7.5% and was 0.3 percentage points less than in May 2011. 

Polish unemployment fell as expected to 12.6% in May from 12.9% in April.  Polish retail sales were 7.7% greater than in May 2011. Hungary’s central bank announces its latest interest rate decision within the hour.

The South African index of leading economic indicators fell 1.5% in April after a 0.4% drop in March.

Scheduled U.S. data arriving today include the Richmond Fed manufacturing index, the Conference Board consumer confidence index, the Case Shiller house price measure, and weekly chain store sales.

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

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