Euro Rises After EU Leaders Agree on Aid to Greece With Role for IMF

March 26, 2010

The dollar fell by 0.9% against the euro and also lost 0.6% against the Swissy, 0.5% relative to sterling, and 0.3% against the kiwi and yen.  The dollar rose 0.3% against the Canadian dollar and 0.2% versus the Australian dollar.

Stocks showed a better tone in Asia but are only level in Europe.  Equities gained 1.4% in China, 1.3% in Hong Kong, 1.2% in Sri Lanka, 0.5% in Taiwan and Indonesia, 0.3% in India and 0.2% in Australia.  The German Dax and British Ftse are 0.2% and 0.1% softer, while the Paris Cac is unchanged.

Ten-year British gilt, German bund and Japanese JGB yields are down by 2, 1 and 1 basis points.

Oil and gold prices each rose 0.3% to $80.80 per barrel and $1097.70 per ounce.

On the first day of the summit of EU leaders, Germany’s suggestion to involve the IMF in a bailout of Greece with imposed austerity was accepted by the others.  ECB President Trichet, who earlier had opposed any role for the IMF, now accepts this inevitable stipulation.  Contrary to prior warnings that such a precedent would tarnish the euro, the common currency has recovered some ground today.

Reserve Bank of Australia Governor Stevens gave a speech that was bullish on Australian growth prospects and bearish on Europe where significant spending cuts will be necessary.  The index of Australian leading economic indicators dipped 0.2% in January.

Revised South Korean GDP data confirmed quarterly growth of 0.2% and a 6.0% on-year rise of GDP last quarter.  Taiwan’s index of leading economic indicators rose 0.6% last month, only a third as much as in January.

Singapore industrial output jumped 5.9% in February after an 11.0% leap in January.  Analysts had assumed there would be a drop.  Production was 19.1% greater than in February 2009.

An advisor to China’s central bank expects yuan appreciation to resume but at a gradual pace.  It’s not unusual for such enticements to be thrown out as the Obama administration decides whether to label China a currency manipulator in its upcoming April 15 report.  I think they will take that step.

Japanese consumer prices rose 0.4% seasonally adjusted in February but were 1.1% lower than a year earlier as expected.  Core inflation was down 1.2% on year, while core-core CPI, which also excludes energy, posted a 1.3% on-year decline.  Tokyo’s CPI fell by 1.8% from a year earlier both on the all-items index and the core index.  CPI deflation has lessened but remains sizable.

New Zealand’s trade surplus of NZ$ 321 million in February was 19.3% wider than the surplus in January but 26% smaller than forecast.

Russia’s central bank, Bank Russii, implemented its twelfth rate cut in less than a year, cutting the 1- and 7-day repo rate by 25 basis points to 7.25% and the refinancing rate by a similar amount to 8.25%.  CPI inflation of 7.2% is at a 12-year low in Russia.  The economy is recovering from a severe recession.

The governor of Norway’s central bank confirmed that interest rates will be rising gradually, and future moves will be occurring later than officials had earlier imagined.  Norwegian unemployment was 3.1% this month.

Net investment in Britain fell 4.3% last quarter, less than the consensus expectation of 5.8% but more than the drop of 0.6% in 3Q09.

French consumer confidence printed at minus 34 in February, a drop of 1.2%.  Analysts had projected a minus 32 reading after such fell in January.

Finnish retail sales in February were 1.2% higher than a year earlier. Spanish home mortgages were 2.3% greater in January than a year before.  Sweden’s trade surplus in February was SEK 3.7 billion on a seasonally adjusted basis and SEK 0.6 billion unadjusted, down from SEK 8.6 billion a year earlier.  The narrowing from a year earlier reflects a stronger recovery of imports than exports.

Colombia’s central bank is expected to retain a 3.5% key interest rate later today.  Scheduled U.S. data included revised GDP and the U. Michigan index of consumer sentiment.

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



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