Greek Debt Prognosis Still Unclear

February 16, 2010

EU finance ministers, also known as Ecofin, have told the Greek government to draw up more budget cuts by March 16th.  The situation remains unclear what the EU is exactly prepared to do and when should Greece needs additional aid support.

U.S. and Canadian markets reopen today after Monday holidays.  The New York region is receiving additional snowSome Asian markets (china, Hong Kong, Taiwan and Singapore, for instance) remained closed for the Lunar New Year holiday.  Today is the final day of Mardi Gras.  Investors seem more hopeful despite unresolved sovereign debt issues in Europe.  Bund and gilt yields are marginally lower.  The 10-year JGB remained low at 1.33%.

The dollar fell back 0.6% against the euro.  The greenback also lost 0.2% against the Swiss franc despite suspected intervention and by 0.1% against sterling.

Stocks rose 1.6% in Indonesia, 1.2% in India, 0.7% in Pakistan, 0.5% in Australian and South Korea.  In Europe, the German Dax and British Ftse are trading 1.0% higher, and the Paris Cac has advanced 0.7%.

Commodities continued to rebound.  Compared to closing levels on Friday, Gold is up 2.2% at $1114.20 per ounce, and oil has risen 1.7% to $75.38 per barrel.

Commodity-sensitive currencies are stronger against the dollar: NZ$ +0.8%, AUD +0.5% and CAD +0.3%.

Minutes from the Reserve Bank of Australia’s February Board meeting, which unexpectedly kept its cash rate at 3.75%, have a hawkish tone, noting that 1) the decision not to raise rates then following three cuts in 4Q09 had been “finely balanced” and swayed by European uncertainties at the time and 2) further rate hikes in the future will be needed if Australia’s recovery develops as expected.

Business sentiment in Australia improved sharply to +15 in January from +8 in December, but business conditions worsened to +3 from +10.

New Zealand producer input prices went up 0.3% last quarter, while producer output prices fell by 0.4%.  Each result was lower than forecast.

Sri Lanka’s central bank left its repo rate at 7.5% as expected.  The reverse repo was kept at 9.75%.

The ZEW expectations index of investor sentiment toward Germany settled back to 45.1 in February from 47.2 in January and a quarterly mean reading of 52.5 in 4Q09.  The current situation score improved to minus 54.8 from minus 56.5.  The results were better than forecast.  For Euroland, the ZEW expectations index slid to 40.2 from 46.4 in January and a quarterly average of 52.2 in 4Q09.

The British Community and Local Government index of home prices firmed 0.8% in December and by 2.9% from a year earlier.  Previously, the DCLG index had posted 12-month changes of +0.6% in November, minus 2.2% in October, minus 4.1% in September and minus 5.6% in August.

British consumer prices slid 0.2% in January, normally a month that sees very large monthly declines, and as a result, on-year CPI inflation jumped to 3.5%, highest since November 2008, from 2.9% in December, 1.9% in November, 1.5% in October and 1.1% in September.  Being above 3.0%, the result necessitated an exchange of letters between Bank of England Governor King and Chancellor of the Exchequer Darling in which the men agreed the spike would be temporary because of excess capacity in the U.K. economy and that it had been related to the restored 17.5% VAT tax rate and to energy trends.  King reiterated that a resumption of bond purchases by the central bank remains possible.  The retail price index accelerated to an on-year 3.7% increase from 2.4% in December and 0.3% in November.  The RPIX, which used to be what the central bank targeted, rose 4.6% in the year to January versus on-year gains of 3.8% in December and 2.7% in November, but RPIY inflation eased to 3.3% from 3.8% in the year to December.

Turkish consumer confidence rose to 79.24 in January from 78.79 in December.  A reading below 100 still signifies more pessimism than optimism.

Swedish capacity utilization increased last quarter to 79.5% from 78.3% in 3Q09 and 76.6% in 2Q09.

Scheduled U.S. data today include the Treasury capital flows figures (TIC), the Empire State manufacturing index, and the National Home Builders index.  The monthly manufacturing report in Canada gets released as well.

Copyright Larry Greenberg 2010.  All rights reserved.  No secondary distribution without express permission.



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