A Mixed Bag of Overnight News

August 28, 2012

ECB President Draghi will not be attending the Jackson Hole Symposium.  He was previously scheduled to speak on Saturday.  The announcement creates more uncertainty about what the Governing Council will decide regarding support for Italian and Spanish bonds.  Investors will have to wait until the next meeting on September 6, still ten days away.

Japan’s government downgraded its economic assessment for the first time since last October.  Japanese small business sentiment deteriorated in August.

Confidence has lessened that Fed Chairman Bernanke will pre-announce a round of quantitative easing when he addresses the Jackson Hole Symposium on Friday.

The Republican National Convention kicks off in Tampa today, with NJ Governor Chris Christie slated to present the keynote address.

Euro area money growth accelerated unexpectedly in July.

Spain’s recession has been more severe than realized.   Spanish and Italian 10-year bond yields are higher today than on Monday at 6.46% and 5.80%.  But auctions of Spanish 3- and 6-month government bills produced significantly lower interest rates than the prior auctions of those maturities.

The 10-year Treasury yields touched a two-week low of 1.63%, in contrast.  While 10-year German bunds and Japanese JGBs are steady, the 10-year British gilt is five basis points softer at 1.49%.

Hungary’s central bank, Magyar Nemzeti Bank, surprised analysts with a 25-basis point interest rate cut to 6.75%.  Such was the first cut since April 2010.  From November 2010 to December 2011, five hikes totaling 175 bps had been implemented.

U.S. data released today were mixed, and the DOW is barely changed.  House prices according to Case-Shiller posted the first on-year rise in June (0.5%) since September 2010.  The Richmond Fed manufacturing index improved 8 points to a reading of minus 9 in August but remained 6 points weaker than June’s reading.  The Conference Board index of consumer confidence sank 4.4 points to 60.6 in August, its poorest reading of 2012.  The Fitch credit rating service voiced concerns about America’s approaching fiscal cliff.

The dollar is softer since Monday’s close, with dips of 0.5% against the loonie, 0.4% versus the euro and Swissie, 0.3% against the yen, and 0.1% relative to the yuan and sterling.  The Aussie dollar is steady, and the kiwi is 0.4% weaker.

Share prices have fallen by 1.4% in Spain, 1.1% in France, 0.9% in Germany, and 0.3% in Britain.  In the Pacific Rim, stocks fell 1.4% in Taiwan, 0.6% in Japan, and 0.3% in India but rose 0.5% in China and 0.4% in Australia.

Gold dropped 0.5% to $1667.40 per ounce, whereas oil firmed 0.4% to $95.83 per barrel.

Japan’s government assessment of the economy observes some weak recent movements and downgraded its views of exports, industrial production and consumption.  Officials have been getting increasingly frustrated about the yen’s persistent strength.

Thai industrial production in July was 5.8% below the year-earlier level.  The Filipino trade deficit  was 73% wider in June than May.  Hong Kong posted a HKD 40.1 billion trade deficit in July, smaller than forecast and also less than June’s shortfall of HKD 44.7 billion.

Japan’s Shoko Chukin index of small business sentiment worsened 1.8 points to 44.8 in August.

Australian new house prices sank 5.6% on month in July, their first decrease since March.  Such had risen 2.8% in June, supported by prior monetary stimulus.

Sweden’s trade surplus of SEK 3.7 billion in July was smaller than the June surplus of SEK 8.2 billion and the July 2011 surplus of SEK 7.4 billion.  The year-to-date surplus of SEK 47.7 billion compares favorably with SEK 39.9 billion in January-July 2011, however.

Spanish GDP contracted 0.4% last quarter and fell by a revised 1.3% on year versus a preliminary 4-quarter estimated drop of 1.0%.  Revisions to back data revealed a larger 0.3% GDP slide in 2010 and less positive growth of 0.4% in 2011.

Euroland M3 money growth accelerated to 3.8% in the year to July from 3.2% in June and to 3.4% in the year to May-July from 3.0% in 2Q.  Loans to the private sectors were 0.1% greater than a year earlier.  Such had dipped 0.2% between June 2011 and June 2012.  Loans to firms fell 0.4%, while mortgage lending was up 0.8% on year.  Faster expansion in M1 money accounted for the greater growth of M3.  These data do not have implications for the September 6 ECB meeting.

German consumer confidence stagnated at a reading of 5.9 in September.

The UBS Swiss consumption indicator dipped 0.04 points to 1.55 in August.  Hungarian unemployment averaged 10.5% in May-July. 

South African GDP advanced 3.2% annualized between 1Q12 and 2Q12 and by 3.0% between 2Q11 and 2Q12.  GDP in the first half of this year was 2.5% higher than a year earlier.

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

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