EU Spells Out Details of Bigger-Than-Expected Aid Package for Greece

April 12, 2010

Markets have reacted to weekend news of a 3-year EUR 45 billion promise of aid for Greece.  The plan puts a 5.0% ceiling on Greek interest rates.  EUR 30 billion will come from other EU countries including EUR 8.4 billion from Germany.  The IMF will top this off with another EUR 15 billion.

  • The euro strengthened 0.7% against the dollar, which also lost 0.5% against the Swissie and 0.4% relative to sterling.
  • Two-year Greek notes tumbled to 5.92% from 7.16%.  The Greek-German 10-year spread narrowed more than 65 basis points.
  • Ten-year bund and gilt yields firmed two and one basis points.  The 10-year JGB held at 1.40%.

The dollar otherwise climbed 0.6% against the Aussie dollar, 0.4% against the yen and Canadian dollar, and 0.3% versus the kiwi.

The Nikkei closed 0.4% higher.  Stocks rose 1.3% in Indonesia and 0.7% in Australia but fell by 3.6% in Thailand, 0.8% in China and South Korea, 0.4% in India and 0.3% in Hong Kong.  The Paris Cac and British Ftse edged 0.1% lower, while the German Dax is unchanged.

Oil and gold prices firmed 0.2% and 0.1% to $85.09 per barrel and $1163.30 per ounce.

As expected, China’s trade balance swung into deficit in March (by $7.74 billion) for the first time since May 2004.  Import strength, up 66%, was the main cause of the deficit.  China may show more red-ink figures in the months just ahead, but a return to surplus is likely before long.

Chinese new loans in March of 510.7 billion yuan (roughly $74.8 billion) were smaller than anticipated and than February’s yuan 700 billion total.  New loans in the first quarter equaled 35% of the full-2010 target.  M2 grew 22.5% on year, marginally more than forecast but down from 25.5% in February.

Japan also reported money and loan growth.  M2 expanded 2.6% in the year to March, less than quarterly growth rates of 2.8% in 1Q10 and 3.3% in 4Q09.  Bank loans fell by 2.0%, their greatest on-year drop in more than 4 years.

In the minutes of the Bank of Japan’s March 16-17 meeting, dissenters Noda and Suda objected to the voted rise in liquidity infusions, claiming that an easing could not be justified since Japanese economic conditions are improving.

In the weekend plane crash that killed Polish President Lech Kaczinski, the Polish Central Bank Governor Skrzypek also perished.  The zloty has retained its value.  It has appreciated over 6% against the euro since the end of 2009.

Italian industrial production was unchanged in February after leaping 1.9% in January.  Output was 2.7% larger than in February 2009.

Latest British polls indicate a widening lead for the Tories in the run-up to the May 6 election.  The British index of leading economic indicators firmed 0.6% in March, less than February’s 0.8%.

India’s industrial production was 15.1% greater than a year earlier in February, down from 12-month increases of 16.7% in January and 16.8% in December but more than the average 10.1% rise in April 2009 through February 2010.

Turkey posted a $2.6 billion current account deficit in February, much greater than the $308 million deficit a year earlier.

Danish consumer prices gained 0.6% in March and 2.2% from a year earlier.  Romanian consumer prices firmed 0.2% last month, trimming on-year inflation to 4.2% from 4.5% in February.

South African house prices increased 4.2% in the year to March.

In Australia, where interest rates have been raised to 4.25% from 3.0% in five central bank adjustments so far, mortgage finance dropped for a fifth time in a row, falling 1.8% in February after a 7.3% drop in January.

Canada reports housing starts today.  The U.S. monthly federal deficit figures also get releases.  FDR died 65 years ago this day, and the firing on Fort Sumter, which began the Civil War, occurred 149 years ago today. 

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

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