Twin Focus Persists on Greece and China

April 16, 2010

EU finance ministers, a.k.a. Ecofin, are meeting today in Spain over the Greek debt problems.  Greek long-term interest rates remain too high, and the government in Athens is attempting to secure a quick activation of the EUR 45 billion aid package, which remains very unpopular with German voters.  A subsequent meeting on April 19 in Athens of the EU, IMF, and ECB is mooted.

Following yesterday’s strong Chinese data including GDP growth in 1Q of 11.9% on year, Beijing’s government promised tighter restraints to cool the country’s overheated property market.  One PBOC advisor claims a consensus exists to allow a gradual yuan rise.  Speculation continues about a near-term Chinese interest rate increase.  China’s stock market fell 1.1%, dragging down other Asian markets: Hong Kong by 1.3%, Indonesia by 0.8%, Taiwan by 0.7%, South Korea and Malaysia by 0.5%, the Philippines by 0.4% and Australia and New Zealand by 0.3%.

The dollar advanced 0.4% against the Swissie, 0.3% relative to sterling and the euro, and 0.2% against the Australian dollar, but it is unchanged against the Canadian dollar and off 0.4% against the kiwi.

Ten-year sovereign bond yields have eased three basis points in Britain and by two basis points each in Japan and Germany.

Oil and gold prices fell 0.8% to $84.81 per barrel and 0.5% to $1155 per troy ounce.

The Hatoyama government in Japan retained the same overall economic assessment this month but upgraded business sentiment.

Singapore Prime Ministers Loong recommended that China follow the S$ revaluation and do the same with the yuan.

Nigeria’s central bank held an emergency policy meeting but left its key interest rate steady at 6.0%.

Department store sales in South Korea posted their smallest rise in eight months.

New Zealand home prices rebounded 1.7% in March following sharp declines earlier last quarter.

Turkish consumer confidence rose 3.5% in March.

The euro area’s seasonally adjusted trade surplus widened 73.7% in February, as exports increased 2.7% on month versus a 15.5 increase in imports.  Over the past four reported months, exports and imports have soared at annualized rates of 20.0% and 21.1%.  Dynamic two-way commerce is back, and the trade surplus was EUR 33.2 billion annualized over the past six months of reporting.  The unadjusted trade deficit in January-February was EUR 6.3 billion, 52.3% smaller than recorded in the first two months of 2009.

Euroland consumer prices increased 0.9% on month in March, as energy soared 2.6% and other prices went up 0.7%.  On-year CPI inflation climbed to 1.4% from 0.9% in February and 0.6% in March 2009.  Energy prices increased 7.2% in the past twelve months versus a drop of 8.1% in the 12 months to March 2009.  Core inflation was 0.9% in the latest month, similar to prints of 0.8% in February, 0.9% in January and 1.0% in December but only about half as much as 1.5% in the year to March 2009.

EU new car sales were 10.8% greater in March than a year ago following a rise of 3.0% on year in February.

Switzerland’s producer price/import price index rose 0.5% last month, slightly more than expected and a big shift from its zero net change between December and February.  The index’s 12-month change was zero, the first non-negative on-year result since December 2008.  Swiss National Bank officials are less worried about deflation and thus allowed the franc to gain somewhat over 5% against the euro since mid-December.

Italian consumer price inflation in March was unrevised, showing gains of 0.3% on month and 1.4% on year, up from 1.1% in the year to February.  Italy’s current account deficit narrowed 9% in February to EUR 5.0 billion.

U.S. housing starts and the U. Michigan consumer sentiment index get released today.  Canada reports auto sales and manufacturing sales figures.  Mexico has a central bank meeting that is expected to leave the benchmark interest rate at its current 4.5% level.

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

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