Greek Government Formally Requests Aid Package Be Activated

April 23, 2010

Faced with sky-high Greek interest rates, the government in Athens has asked that the EUR 45 billion aid package from the EU and IMF be activated.  The process not requires consent from all 15 other members of the euro area.  The big uncertainty is Germany’s response, but on the whole markets are relieved that something concrete is finally happening.

The biggest overnight currency move came in the Australian dollar, which fell 0.8% against its U.S. counterpart after Reserve Bank of Australia Governor Stevens indicated that Aussie interest rates are close to “average” now and that future policy will be dictated by developments in inflation.   The U.S. currency otherwise is up 0.1% against the Swissy, sterling and kiwi, unchanged against the euro and off 0.1% relative to the yen and Canadian dollar.

Stocks in Greece rebounded 3.2%.  Elsewhere in Europe, the German Dax, British Ftse, and Paris Cac have traded up 1.3%, 0.8%, and 0.6%.  In the Pacific Rim earlier, stocks fell 1.0% in Hong Kong, 0.9% in Thailand, 0.5% in Australia and 0.4% in China, while climbing 0.7% in India, and 0.3% in Singapore and Taiwan.

Ten-year bund and gilt yields are 3 basis points firmer.  The JGB yield is steady at 1.32%.

Oil prices held steady at $83.68 per barrel, while gold eased by a marginal 0.2% to $1140.30 per ounce.

A second debate was held in Britain among the three prime minister aspirants.  Polls indicate no clear winner, leaving a hung parliament more likely than ever.

British first-quarter GDP figures were disappointing, as growth amounted to only 0.2% on quarter, half that in 4Q09, and negative 0.3% from a year earlier.  Construction slumped 0.7% on quarter, while service-sector GDP firmed just 0.2% and remained 0.2% lower than in 1Q09.  On a brighter note, same-store retail sales in March were 4.4% greater than a year before, helped by an advantageous Easter holiday factor.

Britain’s index of services increased 0.4% in 4Q09, 0.2 percentage points less than presumed.

According to the German IFO Institute, the business climate in Euroland’s largest economy shot up to 101.6 in April from 98.2 in March, 95.3 in February, 92.1 last October and 83.6 in April 2009.  Current conditions improved by 4.8 points on month and by 9.4% over the prior two months.  Expectations went up two points to 104.0.  Analysts had projected a 98.9 score on the overall business climate.  The retail index improved to minus 3.7 from minus 12.3 in March and minus 22.0 in February.  Manufacturing advanced to 7.5 from minus 0.4 in March and minus 6.1 in February.

A separate services index from IFO also jumped sharply, increasing to 15.0 in April from 9.8 in March and 6.8 in February.

Industrial orders in Euroland climbed 1.5% in February, reversing January’s decrease and were 12.2% greater than a year earlier.  This gain occurred despite monthly drops of 4.5% in Greece and 1.3% in France.  Orders increased 4.3% in the Netherlands, 2.5% in Portugal, and 3.7% in Italy but just 0.4% in Germany.  Orders in January-February were 0.6% above the 4Q09 average level.

French consumer spending increased by a brisk 1.2% in March and posted on-year growth of 2.5%.

Spanish producer prices rose 0.8% in March and by 2.4% from a year earlier.  Both gains surpassed expectations.  Polish retail sales accelerated to on-year growth of 8.7% in March from 0.1% in February.  In Hungary, real retail sales were unchanged in February and off 4.3% from February 2009.

Japan’s all-industry index dropped much more sharply than forecast in February, losing 2.3%, but the January-February level was still 1.9% greater than in 4q09.  Industrial production, the tertiary services index, and public spending declined on month by 0.6%, 0.2%, and 1.2%.  However, the all-industry index was 4.1% greater than in February 2009.

Australian import prices rose 0.3% last quarter, beating analyst forecasts which had anticipated a decline.  Export prices increased 3.8%.

Consumer prices in Singapore rose 1.6% in the year to March and by 0.9% between 1Q09 and 1Q10.  Consumer prices in Malaysia posted an on-year advance of 1.3% in both March and the first quarter of this year.  Taiwanese industrial production was 39.2% greater in March than a year earlier.

Canadian consumer prices on a seasonally adjusted basis in March slid 0.1% for all items and by 0.3% for the core measure.  On-year unadjusted inflation decelerated to 1.4% for all items from 1.6% in February and to 1.7% from 2.1% on core.  A major point made in the Bank of Canada’s Monetary Policy Report released yesterday had been that core inflation had been resistant to downward pressure and higher than officials had expected.

Canada also releases retail sales today, while U.S. scheduled indicators today include durable goods orders and new home sales.

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

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