Awaiting U.S. Retail Sales and FOMC Minutes

July 14, 2010

From a high of 88.02/USD, the yen had lost 0.7% by yesterday’s close, but it did not retreat further overnight.  The dollar is also unchanged against the Aussie dollar and Chinese renminbi.  The greenback has fallen 0.6% against sterling but shows gains of 0.3% against the Swiss franc, 0.2% versus the kiwi and Canadian dollar, and 0.1% versus the euro.

Japan’s Nikkei advanced 2.7% overnight following the strong North American sessions.  Stocks in the Pacific Rim also gained 1.9% in Australia, 1.5% in Taiwan, 1.3% in South Korea, 0.8% in Singapore, 0.7% in Indonesia, and 0.6% in Hong Kong, New Zealand, and Malaysia.  Profit-taking in Europe has depressed stocks by 0.4% in Britain, 0.3% in France and 0.1% in Spain.  The Dax is flat, and U.S. futures are down a bit.

Ten-year German bund and British gilt yields are two basis points higher.  Peripheral spreads in the euro area have narrowed a bit.  The 10-year JGB yield is one basis point higher.

Gold is unchanged at $1213.60 per ounce, while oil prices softened 0.5% to $76.77 per barrel.

The Bank of Thailand implemented its first rate hike since August 2008, a 25-basis pint rise of the one-day repo rate to 1.50%.  The move was anticipated by many analysts.

Singapore, not China, is Asia’s fastest growing economy.  Real GDP soared 26% annualized in 2Q10 on top of a 45.9% annualized pace in the first quarter.  Growth in the first half of this year was the strongest in at least 35 years.

South Korean unemployment firmed to 3.5% in June from 3.2% in May.  Export prices rose 3.0% last month and by 1.5% from June 2009, while import prices recorded a gain of 2.0% on the month and 8.0% on the year.

Indian wholesale prices rose 10.55% in the year to June compared to on-year gains of 10.16% in May and 11.23% in April.  A rate increase at the July 27 Reserve Bank of India meeting is considered likely.

The Bank of Japan began a two-day meeting that is expected to leave the overnight target rate at 0.1%, where such has been since December 2008.

New Zealand retail sales rose 0.4% in May after dropping 0.3% in April.  Australian consumer confidence rallied 11.1% in July after the change in prime ministers and modification of an unpopular mining tax.

South African real retail sales rebounded much more strongly than forecast in May with a gain of 1.3% from April and 4.6% from May 2009.  Sales had dipped 02% in April and recorded a 12-month increase of 3.2% that month.

Consumer prices in the euro area were flat on month in June and decelerated to an on-year increase of 1.4% from 1.6% in May and 1.5% in April.  Over the two years between mid-2008 and mid-2010, the CPI increased 0.6% per annum, only a third as much as the ECB medium-term target.  That’s precariously close to slipping into a deflationary trap, but ECB President Trichet insists such is not in the cards.

  • On-year CPI inflation was as high as 5.2% in Greece despite a 0.2% monthly dip in June. 
  • The second, third, and fourth largest economies in the Bloc (France, Italy and Spain) had higher inflation (1.7%, 1.5% and 1.5%) than the group average, but German inflation in June stood at only 0.8%.
  • Irish consumer prices were 2.0% lower than a year earlier.

Euro area industrial production went up by an expected 0.9% in May and was 9.4% greater than in May 2009.  Consumer durables rose 2.4% on the month, while production of capital goods expanded 1.0%.  Industrial production in April-May was 2.3% above the first-quarter level after having climbed 10.2% annualized during the spring quarter.

Britain’s Nationwide gauge of consumer confidence slid to 63 in June from 66 in May and 75 in April.  Voters everywhere, not just the U.K., want austerity to curb deficit spending, but they are also bracing for hard times.

The claimant count of unemployment in the U.K. fell by 20.8K, near expectations.  That was down from declines of 31.1K in May and 32.0K in April but not far from the first-half average drop of 23.4K per month.  The claimant rate of unemployment eased to 4.5% from 4.6% in May 4.7% in April and 4.9% at end-2009.  British average earnings rose 2.7% in March-May from a year earlier but just 1.8% if one excludes bonus pay.  The ILO jobless rate in Britain was 7.8% in March-May compared to 8.0% on average in the three prior months.

Final Italian consumer prices were steady in June and posted a 1.3% increase from a year earlier.  Finnish consumer prices firmed 0.2% on month and 0.9% on year in June.  Finnish real retail sales in May were 2.6% higher than a year before.

The Fed releases minutes from the late-June FOMC meeting today.  Scheduled U.S. data feature retail sales, import prices, and business inventories.

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

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