Weaker Stocks and Euro Ahead of U.S. 2Q GDP Release

July 30, 2010

The dollar has climbed 0.6% against the euro but fallen 0.7% against the yen.  The greenback is stronger by 0.5% against the kiwi, 0.3% versus the Aussie dollar, and 0.2% relative to sterling.  Dollar/Swiss is unchanged, and the yuan ticked up 0.1% against the U.S. currency.  The loonie is 0.2% higher.

Stocks in the Pacific Rim fell by 1.6% in Japan, 0.9% in Indonesia, 0.7% in India, Australia, and South Korea, 0.5% in Taiwan, and 0.3% in Singapore, China and Hong Kong.  The German Dax, Paris Cac, and British Ftse have lost 0.8%, 0.7%, and 0.6%.

Ten-year sovereign bond yields are down five basis points in Britain, three basis points in Germany, and two basis points in Japan.  The three-month euribor rate softened 0.3 basis points to 0.896%, the first dip in a month and a half.  Treasury yields are indicated lower.  Saint Louis Fed President Bullard unexpectedly warned about a possible U.S. brush with deflation yesterday.

Oil prices slipped 0.7% to $77.78 per barrel, while gold prices firmed 0.2% to $1173.3 per troy ounce.

A considerable amount of data has been released on this final trading day of July.

Japanese unemployment rose by a tenth for a fourth straight time to 5.3% in June, highest since November.  Jobs were 1.1% lower than a year earlier, their biggest on-year decline since February.  The job offers to applicants ratio, however, rose to 0.52 from 0.50 in May and 0.43 in December.

Japanese real household spending recovered 3.5% seasonally adjusted in June from May but nonetheless posted an 8.2% annualized drop between the first and second quarters.  Real spending was 0.5% greater in June than a year earlier.  Real disposable incomes were up 7.4% on year after dropping 5.3% in the year to May.

Japanese CPI deflation intensified in the second quarter.  Between March and June, the overall CPI, non-food CPI and core-core CPI (excluding seasonal food and energy) recorded annualized declines of 1.6%, 2.4%, and 3.2%.  All of these results were worse than first quarter-over-4Q09 outcomes.  Core-core CPI in June was 1.5% less than a year before.  Tokyo consumer prices in July confirmed strong continuing downward momentum at the start of the third quarter, with the total index dropping 0.4% on month and 1.2% on year, and core CPI falling 0.2% on month and 1.3% on year.

Japanese industrial production fell 1.5% in June.  A small uptick had been anticipated.  New estimates for July and August suggest that output in those months will be 0.9% lower than the second-quarter average level.  However, industrial production was up 1.4% on quarter in 2Q10 and 20.9% greater than in 2Q09, so officials reiterated that such “continues to show an upward movement.”

Japanese housing starts were 0.6% higher in June than a year earlier, a smaller increase than forecast after posting a 4.5% on-year drop in May.  Construction orders sank 10.2% between June 2009 and June 2010, reversing an on-year climb of 9.2% in May.  Orders in April had been 25% lower than in April 2009.

Japanese motor vehicle production recorded a smaller 25.6% on-year increase in June than the 45.8% advance between the first half of 2009 and 1H10.

Japan’s manufacturing purchasing managers index fell by 1.1 points to a four-month low of 52.8 in July.  Output and orders each recorded slowing growth.

German retail sales volumes slumped 0.9% on month in June but firmed 1.3% at an annualized rate in the second quarter.  Retail sales were 3.1% higher in June than a year earlier, an improvement from 12-month drops of 0.7% in May and 4.4% in April.

British consumer confidence sank sharply from minus 12 in June to minus 25 in July, the worst reading in almost a year.

Unemployment in the euro area was at 10.0% for a fourth straight month in June.  That compares with 9.5% in June 2009.  Between June 2009 and June 2010, the number of jobless workers increased by 788 million.

The preliminary euro area CPI inflation reading in July is 1.7%, three-tenths higher than June’s inflation rate.  Italian consumer prices rose 0.4% on month and 1.7% on year (with a 1.6% core rate).  Italian producer prices firmed 0.2% in June and slowed to a 12-month 3.4% pace from 3.7% in May. 

Switzerland’s KOF index of leading economic indicators remained at 2.23 in July, highest since August 2006.

Swedish GDP posted second quarter growth of 1.2% from 1Q and 3.7% from the second quarter of 2009.  Industrial production advanced 5.2% on year, while services were 2.8% higher.  Salaried workers in Sweden had a 2.3% on-year wage rise in May.

Greek retail sales in May were 1.2% lower than a year earlier.

Thai industrial production in June was 21.3% greater than a year earlier.  Thailand’s PCI index of business sentiment improved to 52.1 from 49.9 in May.  Thailand posted surpluses in the current account and trade balance of $681 million and $2.5 billion last month.  Malaysian M3 expanded 8.8% in the year to June, accelerating from 8.1% in the year to May.  Hong Kong M3 growth slowed to 3.1% in June from 4.4% in May.

Turkey recorded a larger TRY 5.6 billion trade deficit in June than expected.

Private credit growth in Australia amounted to 0.2% on month and 2.8% on year in June. 

The United States releases the first estimate of 2Q10 GDP at 12:30 GMT, with analysts anticipating similar growth to the 2.7% annualized first-quarter pace.  The employment cost index and U. Michigan final July consumer sentiment gauge also get released.  Canada will be reporting monthly GDP.

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

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