Greek Concerns Haven’t Dissipated

May 4, 2010

In Europe, the Paris Cac, British Ftse and German Dax have lost 1.5%, 1.1%, and 0.8%.  Public-sector workers are protesting in the streets of Athens.  Fear persists that the crisis could spread to Iberia and that Greek debt will still have to be restructured eventually.  Trichet has backtracked on stand that monetry policy will not be customized to meet any particular country’s circumstances.  Collateral ruIes loosened so that Greek bonds still count. 

In the Pacific Rim, equities lost 1.6% in China, 1.5% in Singapore, 1.4% in India, and 1.0% in Australia.  Japan remained closed for Greenery Day.  Childrens Day on Wednesday will be the last holiday of Golden Week.

The dollar shows broad gains of 0.9% against the Australian dollar, 0.6% against the kiwi and Canadian dollar, 0.5% against the euro and Swissy, 0.4% versus sterling but just 0.1% against the yen.

The yields on ten-year German bunds and British gilts are 7 basis points and 8 bps lower.

Oil prices dropped 1.2% to $85.15 per barrel, while gold has edged 0.2% higher.  The BP oil spill in the Gulf of Mexico remains uncontained.

The Reserve Bank of Australia as I expected implemented a sixth hike of its cash rate since last October.  It is now at 4.5%, but officials indicated that rates for most borrowers are now in line with long-term averages, thus signaling a possible pause in tightening for at least a while.

Romania’s central bank cut its benchmark interest rate by 25 basis points to 6.25%.  The rate has dropped 175 bps since end-2009 and 400 bps since February 2009.  The easing had been expected.  Some even anticipated a larger decline.

Producer prices in Euroland increased 0.6% in March and by 0.3% excluding energy.  A 1.3% jump in Greek producer prices compared with rises of between 0.6% and 0.8% in Germany, France, Italy, Spain, and the Netherlands.  From a year earlier, producer prices rose 0.9% overall but by 7.9% in Greece compared to a 1.7% 12-month drop in Germany.

The volume of German retail sales slumped 2.4% on month in March versus expectations of no change.  Sales fell 0.8% on year in the first quarter after a decline of 2.2% in 2009, no change in 2008, and a drop of 1.2% in 2007.  German car sales were 32% lower in April than a year before.

Britain’s manufacturing purchasing managers index improved to 58.0, the best reading since September 1994 and a half-point better than forecast, from 57.3 in March, 56.5 in February and 51.8 last November.  Such was the seventh reading in a row above the 50 expansion-or-contraction threshold.  The jobs sub-component reached a 3-year high, and order backlogs were at an 11-year high.

British M4 expanded 3.6% in the year to March, down from 3.9% in February; however, broad money growth was near to a two-year higher when volatile noise in the index eliminated.  Bank of England data also showed mortgage approvals at 48.9K in March, near expectations, but an unexpected slowdown in net mortgage lending to Gbp 318 million from 1.848 billion pounds in February.  Net consumer credit slowed 44% between the two months. 

A naturalized U.S. citizen, who was born in Pakistan, was arrested in connection with the attempted Times Square bombing while trying to board a plane for Dubai.

Poland’s purchasing managers index in manufacturing remained at a 25-month high of 52.5 in April versus 45.6 last August.  Russia’s PMI improved to 52.1, best since May 2008, from 50.2 in March and 48.1 in December.

China’s PMI settled back to a six-month low of 55.4 from 57.0 in March, suggesting that tighter policy moves have been effective.  A reading of 55.4 still connotes considerable strength.

Brazil’s PMI score of 53.8 after 55.4 in March and 57.8 in January was also the lowest since October.

South African motor vehicle sales accelerated to a 12-month increase of 26.6% in April.  The jobless rate, however, rose 0.9 percentage points to 25.2% last quarter.

Scheduled U.S. data include pending home sales and factory orders.

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

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