European Equities and Euro Turn Lower
August 8, 2012
The euro and Swiss franc that shadows it are each 0.3% weaker against the dollar, which otherwise has lost 0.4% versus the yen, 0.2% relative to sterling and 0.1% against the Australian dollar and yuan. The greenback has edged 0.1% higher against the kiwi.
Stock prices are down 1.5% in Spain, 0.5% in Britain and 0.4% in France and Germany. Earlier, the Japanese Nikkei close 0.9% higher. Recovery trends also continued in South Korea (up 0.9%), Australia (0.5%), the Philippines (+0.5%) and Malaysia (0.3%). The Chinese and Indian markets closed unchanged.
Oil prices fell 0.5% to $93.17 per barrel. Gold edged 0.1% lower to $1610.50 per ounce.
The ten-year Japanese JGB yield climbed 3 basis points to a 1-month high of 0.80%. However, ten-year German bund and British gilt yields are six and five basis points lower, respectively.
The Bank of England released a new quarterly Inflation Report that no longer sees any economic growth in 2012 but looks for recovery in 2013. Inflation is projected to ease to the 2.0% target later this year and to fall below such in 2013. While more stimulus is possible given these parameters, the report lacks a tone of urgency to ease, which analysts had been anticipating.
The Bank of Japan Board began a two-day policy meeting, the first with the two recently appointed members. Although they are thought to have more dovish views than the existing members, analysts are not anticipating further stimulus at this time. The decision will be announced Thursday, when decisions are also due from Bank Indonesia and the Bank of Korea.
Japan’s current account stayed in the black in June, printing at a 3-month high surplus of JPY 433 billion after JPY 215 billion in May but still 19.6% smaller than the surplus in June 2011. The first-half 2012 surplus of JPY 3.037 billion was 45% smaller than the surplus in 1H11. The seasonally adjusted current account surplus of JPY 774 billion was almost three times larger than May’s JPY 282 billion surplus and embodied a JPY 167 billion trade deficit versus a shortfall in May of JPY 450 billion. A 5.5% on-month drop in imports was the main factor behind the stronger trade position.
Japan’s “Basic” balance of payments position (current account plus long-term capital flows) showed a deficit of JPY 3.57 trillion in June versus a deficit in May of JPY 1.53 billion. the Basic balance swung from a JPY 11.3 trillion surplus in 1H11 to a deficit of JPY 3.68 trillion in 1H12. Stock and bond transactions in July generated a net capital inflow of JPY 1.08 trillion.
Japan’s economy watchers index, which captures perceptions of people working in services, produced mixed results in July. The outlook component weakened to 44.9 from readings of 45.7 in June, 48.1 in May and 50.9 in April, but current conditions printed at 44.2 after dropping to 43.8 in June from 47.2 in May.
Japanese bank lending (including trust accounts) was only 0.7% higher in July than a year earlier. Still that was better than the 0.3% on-year increase in 2Q12.
Germany’s current account surplus doubled to EUR 16.5 billion in June from EUR 8.1 billion in May, thanks to a EUR 5.4 billion improvement in net investment income. Also, the merchandise trade surplus widened to EUR 17.9 billion on an unadjusted basis from EUR 15.6 billion in May and EUR 12.5 billion in June 2011. Comparisons of 1H12 against 1H11 show the current account surplus up 16% at EUR 76.7 billion and the trade surplus widening 18.4% to EUR 93.3 billion. The seasonally adjusted trade surplus increased to EUR 16.2 billion in June despite a 1.5% drop in exports from EUR 15.3 billion in May, and it was 12% greater in 2Q12 than in the first quarter of this year.
German industrial production relapsed 0.9% in June after rebounding 1.7% in May and posted a second-quarter dip of 0.2% after falling by 1.7% in the final quarter of 2011 and by 0.4% in the first quarter of 2012.
French business sentiment according to the Bank of France measure continued to ebb in July, dipping another point to a reading of 90. Such averaged 95 in the first third of 2012 and was at 98 in July 2011. The result suggest third-quarter GDP growth of negative 0.1%. The French trade deficit of EUR 5.99 billion in June reflected a 1.9% decline in exports and followed a deficit of EUR 5.47 billion in May.
Standard and Poor’s reduced the outlook on its CCC rating for Greek sovereign debt to “negative.”
Spanish industrial production adjusted for variations in the number of working days was 6.3% smaller in June than a year earlier. Not adjusted, the drop was by 6.9%.
There was also weak news from Switzerland, where the SECO consumer climate index printed at minus 17 in May-July, nine points lower than in the previous three-month period. Analysts had anticipated some slight improvement.
Hungary’s trade surplus of EUR 3.59 billion in 1H12 was 6% narrower than in the first half of 2011 and reflected on-year export growth of just 0.2%. The Czech jobless rate increased to 8.3% in July from 8.1% in June.
The number of Australian home loans in June increased 1.3% to a 6-month high, suggesting that 125 basis points of reduction in the central bank’s Official Cash Rate is starting to benefit the economy. More stimulus may not be necessary. Investment lending growth was decent at 4.9%.
CPI inflation in the Philippines accelerated to a 6-month high in June of 3.2%. The core rate was 4.1% after 3.7% in May. Producer prices, in contrast, fell by 1.7% on month and were 2.0% lower than in June 2011. In the year to June, South Korean M2 money and Filipino M3 were 5.9% and 7.1% greater than a year before. Malaysia’s MYR 9.2 billion trade surplus in June was twice as large as the surplus in May.
The United States releases its monthly federal budget data and quarterly figures on productivity and unit labor costs today. Weekly oil inventories arrive as well.
Copyright 2012, Larry Greenberg. All rights reserved. No secondary distribution without express permission.
Tags: German current account, German industrial production, Japanese current account