New Greek Austerity Measures Lift European Currencies

March 3, 2010

The dollar and yen slid 0.6% against sterling, 0.4% against the euro and Swissy, and 0.3% against the Canadian dollar.  The greenback is unchanged against the Aussie dollar but 0.6% higher against the kiwi.

Stocks rose 1.4% in India, 0.7% in China and Australia, 0.5% in South Korea, 0.4% in Singapore and Taiwan, and 0.3% in Japan.  The German Dax, Paris Cac and British Ftse have each edged 0.1% lower.

Ten-year JGB yields rose 4 basis points.  British Gilts are up 2 bps, while German bunds are flat.

Oil and gold prices firmed 0.4% and 0.1% to $79.97 per barrel and $1139.1 per ounce.

As a condition for aid from other European governments, Greek political leaders announced EUR 4.8 billion of additional austerity measures, split evenly between spending cuts and revenue enhancements.

Australian real GDP growth accelerated threefold from 0.3% in 3Q09 to 0.9% last quarter.  On-year growth likewise tripled to 2.7%.  Last quarter saw the fastest growth since 1Q08.  Consumption advanced 0.9%, while investment jumped 4.8%.  The ratio of export to import prices increased 2.9%.

South Korean industrial output was steady in January after soaring 3.5% in December.  The 12-month change was a jump of 36.9%.

Euroland retail sales in volume terms fell 0.3% in January, their third drop in a row though not quite as much as forecast.  Sales were 0.2% lower than their average level in 4Q09 and down 1.3% from January 2009.

German retail sales were unchanged in January and 3.4% lower than a year earlier.  That was the steepest 12-month drop since last May.

The British PMI-services index rebounded sharply in February, printing at a 37-month high of 58.4 after 54.5 in January, 56.8 in December and 56.6 in November.  The Nationwide consumer confidence index increased further to a reading of 80 in February from 74 in January and 70 in December.

Euroland’s service-sector PMI was disappointing on the other hand, getting revised down two-tenths to 51.8.  That’s the weakest reading since September and seven-tenths less than in January.  Only Germany, France, and Italy posted scores above 50.  Service sector activity is contracting elsewhere in the region.  Nonetheless, the composite PMI for services as well as manufacturing printed at 53.7 in both January and February, good enough to imply first-quarter GDP expansion of about 0.4%.

  • Germany posted composite and service purchasing manager index readings of 55.7 and 51.9, versus 54.6 and 52.2 in January.
  • France recorded composite and service PMI scores of 55.6 and 54.6.  Each was a five-month low after 58.0 and 56.3 in January.
  • The Italian PMI in services slid a tenth to 50.8 and was 3.1 points less than in December.
  • Spain’s service industries are experiencing a deepening recession.  The PMI printed at a 3-month low of 47.1 after 48.8 in January.
  • Ireland’s service PMI was 48.8, a 25-month high after 44.4 in January and 48.3 in December.  Bad weather hit the January reading.

Australia’s PMI-services (48.3) was below 50 for a second straight month and at the same level as last September before the Reserve Bank of Australia began raising interest rates.  The Bank’s cash rate is now 4.0%, up from 3.0% at the low.

February’s service-sector PMI readings in India (60.9) and China (56.7) connote very strong growth in those economies. China recorded a composite PMI of 57.3, similar to the average score of 57.75 over the five previous months.  India’s composite PMI was at a year and a half high.

Russia’s PMI-services fell further to 51.0 from 51.9 in January and 53.4 in December.  Russia is losing more than Olympic medals.

Japan’s services PMI printed at a low 44.6 after 43.4 in January and 42.7 in December.  Its composite PMI score was 47.4 last month.

Investors await several U.S. indicators: the services PMI reading, the ADP gauge of private-sector jobs, the Fed Beige Book, and weekly oil inventories.

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



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