Greek Deficit Worries Depress Euro

April 21, 2015

The dollar rose overnight by 0.5% against the euro, 0.3% versus the Swiss franc, 0.2% vis-a-vis the yen and sterling, and 0.1% relative to the loonie but is unchanged against the yuan and Australian dollar and down 0.4% against the kiwi.

Greek share prices have slumped 3.3%.  The Chinese and Hong Kong stock markets closed 2.2% and 2.8% higher in contrast.  Stocks gained 1.4% in Japan, 1.1% in Indonesia and 0.7% in Australia but fell in India.  European markets are mixed.  Stocks are 0.8% lower in Italy but up 0.9% in Switzerland, 0.7% in Germany, and 0.4% in Spain.  The British Ftse is off 0.1%, while the Paris Cac is 0.1% firmer.

Comex gold strengthened 0.4% to $1,198.20 per troy ounce.  West Texas Intermediate oil has slipped 0.4% to $56.15 per barrel.

Ten-year German bund, Japanese JGB, and British gilt yields are unchanged.  Greek yields are 1,275 basis points above German yields.

Japan’s index of leading economic indicators was revised down a half point to a 3-month low of 104.8.  The index of coincident economic indicators was revised upward slightly but also was at its lowest level in February since November.

Japanese supermarket sales and department store sales each posted substantially larger 12-month declines in March.  Supermarket sales dropped 8.6% versus an 0.8% dip in the year to February.  Department store sales plunged 19.7% after a 1.1% on-year rise in February and a 2.8% decline in January.

A quarterly BOJ survey of corporate loan demand revealed deterioration between January and April.

The ZEW Institute’s index of investor expectations about the German economy unexpectedly fell by 1.5 points to 53.3.  However, the index for current conditions jumped to a reading of 70.2 in April from 55.1 in March, and ZEW officials said Germany’s economy is in “good shape.”  The ZEW expectations index for the eurozone rose 2.4 points to 64.8, while the current situation index for Euroland improved by 8.3 points to negative 28.3.

Semi-annual estimates were released for Euroland’s deficit/GDP and debt/GDP ratios.  The deficit equaled 2.4% of GDP last year, shrinking from 2.9% in 2013.  In spite of Greece’s difficulties, that economy’s deficit plunged to 3.5% of GDP from 12.3% of GDP the year before.  German posted a surplus of 0.7% of GDP after one of 0.1% of GDP in 2013.  Among economies that could experience contagion if Greece defaults, the deficits of Spain (5.8% of GDP), Cyprus (8.8%), Portugal (4.5%) and Ireland (4.1%) exceeded the 3.0% threshold in 2014, while Italy’s was exactly at 3.0%.  Euroland as a whole had a 91.9% debt-to-GDP ratio last year.  Economy’s exceeding that mean included Greece (177.1%), Italy (132.1%), Cyprus (107.5%), Belgium (106.3%), Portugal (130.2%), and Ireland (109.7%).

The Reserve Bank of Australia’s Board minutes from this month’s meeting retained the option of cutting the official cash rate further in the future but favored a wait-and-see stance now pending results of tomorrow’s CPI and other forthcoming data releases.  Investment spending has been a bit disappointing.

Swiss M3 money grew 2.2% between March of 2014 and last month.  Seasonally adjusted Swedish unemployment ticked down to 7.7% last month from 7.8% in February.

CPI inflation in Hong Kong of 4.5% last month surpassed the January-February pace of 4.3% and was well above mainland China’s inflation rate.  The leading and coincident economic indices in South Africa each declined in February.

Hungary’s central bank is likely to have cut interest rates further at today’s meeting.

U.S. weekly chain store sales and Canadian wholesale turnover data get released today.

Copyright 2015, Larry Greenberg.  All rights reserved.  No secondary distribution without express  permission.

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