Eye on Jackson Hole, Gulf Coast, and Greek Debt

August 27, 2012

It’s been another summer Monday of waiting for events to unfold.  The dollar is marking time with no net overnight changes against the euro, yen, Swiss franc or loonie, an uptick of 0.1% against sterling and the yuan, and a 0.2% rise relative to the kiwi.  An exception to this stability is an advance of 0.9% versus the Aussie dollar.

Tropical Storm Isaac in the Gulf Coast has delayed the start of the Republican National Convention in Tampa by a day to tomorrow.  Keynote address Tuesday to be delivered by Chris Christie, Governor of New Jersey.  Paul Ryan speaks Wednesday, and Mitt Romney is set to accept his party’s nomination on Thursday.

Investors are waiting to see if Ben Bernanke, speaking Friday at the Jackson Hole Symposium, unveils a new round of U.S. quantitative easing or, short of that, makes any gesture that new stimulus is becoming more likely. 

ECB Pdt Draghi speaks at Jackson Hole on September 1, five days before the monthly meeting of the ECB Governing Council.  A story in the German press claims that the Troika of Greek creditors (ECB, EU and IMF) will not finalize their assessment of Greek implementation of reforms until October rather than September.

China’s share prices have slumped 2.1%.  That’s the only substantial change in equities. British markets are closed for a late summer bank holiday.  Elsewhere, equities lost 0.6% in India, 0.4% in Hong Kong, 0.2% in Japan and Singapore, and 0.1% in Australia.  In Europe, the German Dax and Spanish IBEX are up 0.7%, and the Paris Cac is 0.4% higher.  The DOW is off 0.2% following Friday’s rebound.

The 10-year German bund yield has edged up a basis point.  The ten-year Treasury opened a bit lower.

Oil prices dropped 1.2% to $95.04 per barrel, and gold is 0.2% softer at $1669.70 per ounce.

Germany’s IFO Institute released results of its August business climate index.  Germany’s overall business climate weakened between July and August but by less than between June and July.  The overall index still printed at a 29-month low of 102.3, down from 103.2 in July, 105.2 in June, 106.8 in May, 109.6 in February, and 108.8 in August 2011.  Most of August’s deterioration was in expectations, down to 94.2 from 95.6 in July.  Current business conditions dipped 0.3 points to 111.2.  Retail swung from a +5.1 reading in July to negative 4.7 in August, while wholesale fell by 5.9 points to a negative 2.1 score.  Manufacturing was comparatively stable.

German import prices rose 0.7% on month in July but decelerated on an on-year basis to 1.2% from 1.3% in June, and 3.1% last March.  Import price inflation excluding mineral fuels eased to just 1.0% from 1.6%.  Export prices increased 0.3% in July and retained a 12-month 1.4% rate of increase.

The Conference Board reported that Euroland’s index of leading economic indicators was unchanged in July and that the index of coincident indicators also stagnated.  Holland’s business sentiment index improved 0.6 points, which was more than expected, to a reading of negative 4.6 in August.

The British Hometrack house price index dipped 0.1% on month and by 0.5% on year in August.

Swedish retail sales rose 0.3% in July and by 2.4% from a year earlier.  Swedish producer price inflation swung to negative 1.1% in July from 0.4% in June.  M2 money was 7.8% larger than in July 2011.

Finnish consumer confidence stayed weak in August, bouncing only back to 0.5 after plunging from 5.8 in June to a score of 0.1 in July.  The Greek trade deficit narrowed by 20.5% to EUR 1.05 billion in June.  Hungarian economic sentiment worsened 1.5 points in August to a reading of minus 24.7.

Moody’s reclassified South Korean debt at Aa3, up from A1 and said the debt rating outlook is stable.  The Bank of Korea estimated expected CPI inflation for the coming year at an unchanged 3.6%.  Consumer confidence in South Korea slid a point to a 7-month low of 99 in August.

Bank of Japan Governor Shirakawa reiterated that chronic yen strength could weaken Japanese economic growth.

Industrial profits in China fell 5.4% in the year to July, the fourth on-year drop in a row.  Profits in January-July were 2.7% lower than a year before.

Taiwan’s index of leading economic indicators firmed 0.2% in July, while the coincident index went up 0.4%.  Vietnamese industrial output was 4.4% greater in August than a year earlier.

Turkish business sentiment fell sharply in August to 104.5 from readings of 108.1 in June and 107.3 in July.

The Bank of Israel left its key interest rate unchanged for another month at 2.25% as analysts were expecting.

The Dallas Federal Reserve manufacturing index slumped 5.6 points in August to a 3-month low of 6.4.

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

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