Greek Concerns Overshadowing FOMC Meeting

April 28, 2010

Ahead of an FOMC announcement at 18:15 GMT today, stocks tumbled further in Asia and Europe, as Euroland’s crisis keeps worsening and seemingly is likely to forestall any attempt by U.S. monetary officials to modify key language in their statement.

The EU plans a summit on Greece on May 10.  Strauss-Kahn, leader of the IMF, and ECB President Trichet will meet with German officials today in Berlin.

Chinese officials took further steps to slow their housing market, prohibiting fund-raising by Chinese real estate firms.

The dollar is up 0.9% against the yen and 0.5% relative to sterling but down 0.6% against the Australian dollar, 0.5% versus the kiwi, and 0.1% against the euro, Swissy, and Canadian dollar.

Stocks in the Pacific Rim fell by 2.6% in Japan, 2.0% in Singapore, 1.6% in Thailand,1.5% in Hong Kong, 1.2% in Indonesia and Australia, 1.0% in South Korea, 0.8% in Taiwan and 0.4% in China.  The Paris Cac and German Dax have already lost 2.0% and 1.7% additionally today.  The British Ftse, sheltered because Britain is not part of the euro area, is off by a lesser 0.9%.

Gilt and JGB 10-year yields fell by three and two basis points, but 10-year bund yields are notably higher.

Oil retreated another 0.7% to $81.83 per barrel.  However, risk aversion is keeping gold firm at $1162.50 per troy ounce.

Australian consumer prices rose 0.9% last quarter, accelerating on-year inflation to 2.9% from 2.1% in 4Q09 and 1.3% in 3Q09.  The Reserve Bank of Australia’s two measures of core inflation, the weighted CPI and the trimmed mean index, fell to 3.1% from 3.5% and to 3.0% from 3.2%, respectively.  The results were close to expectations.

Business sentiment in New Zealand improved to 49.5 in April from 42.5 in March.

Japanese large-store retail sales fell 5.0% on year in March and 4.9% in the first quarter.  Those drops were smaller than the 7.0% decline in 2009 as a whole.  Total retail sales posted a 4.7% on-year increase in March after a gain of 4.2% in February.  Such rose 3.7% between 1Q09 and 1Q10, a dramatic improvement from last year’s 2.3% decline.

South Korea’s current account surplus on a seasonally adjusted basis was 85.5% wider in March at $1.2 billion than in February.  Merchandise exports and imports were 34.3% and 49.0% greater than in March 2009.  This report follows yesterday’s news that real GDP shot up 1.8% in the first quarter and by 7.8% from a year earlier versus a 6.0% rise between 4Q08 and 4Q09.  Investors wonder how soon the Bank of Korea will begin to raise its interest rates.

South African consumer prices increased 0.8% in March, reducing the 12-month pace to 5.1% from 5.7% in February.  The improvement was slightly greater than anticipated and reflects the rand’s appreciation in part.  Lower inflation enables South Africa’s central bank to maintain a loose monetary policy.

All six German states reported April consumer price figures that undershot expectations.  None saw the CPI higher on a monthly basis.  Consumer prices fell by 0.2% in North Rhine Westphalia, Germany’s most populous state where regional elections will be held later this month, and in Baden-Wuerttemberg.  The CPI dipped by 0.1% in Saxony, Hesse, and Bavaria, and it was unchanged in Brandenburg.  On-year inflation fell in each instance and ranged from 0.7% to 1.1% compared to a range of 0.8% to 1.3% in March.

Swedish unemployment of 9.1% in March was lower than forecast.  Norway’s first-quarter business tendency survey indicated that output stopped falling after six quarters of decline and is expected to trend upward from the present quarter onward.

Business sentiment in Italy improved 1.1 points to 85.5 in April.  That was the seventh rise in a row and left the index at a 22-month high.

Stark of the ECB and a German said that Greece is a unique case in an unsuccessful effort to prevent contagion.  Portuguese stocks slumped to a 20-month low.

The Fed is but one of four central banks to be holding policy meetings.  Rate announcements are also awaited in Brazil, Poland, and New Zealand.  A rate hike is expected in Brazil, but no changes are expected from the other three central banks.  Weekly oil inventory data will be reported today in the United States.

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

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