Stocks Rose in Asia But Falling in Europe Despite Strong GDP Results

August 13, 2010

The dollar shows marginal overnight losses of 0.2% against the yen and 0.1% relative to the Aussie and New Zealand dollars as well as sterling.  The greenback has risen 0.3% against the Swiss franc and 0.1% versus the euro, on the other hand.  Japan’s ruling political party is said to be putting mounting pressure the Ministry of Finance to consider currency market intervention.

The Chinese renminbi retreated another 0.2% overnight, doubling its weekly loss to 0.4%.

Stocks in the Pacific Rim advanced by 1.4% in China and South Korea, 1.6% in Sri Lanka, 1.3% in Australia, 0.9% in Indonesia, 0.8% in Taiwan, 0.5% in India and 0.4% in Japan and Singapore.  However,  the German Dax, Paris Cac and British Ftse have traded 0.7%, 0.5%, and 0.3% lower.

The German 10-year bund yield dipped another basis point, and the Greek bond premium relative to bunds widened to 805 basis points, most since the last week of June.  The 10-year Japanese JGB yield edged below 1% to 0.99%, a drop of two basis points on the day and five basis points on the week.

Oil prices recovered 0.3% but are showing a loss of 7.4% for the week at $75.95 per barrel.  Gold is unchanged on the day but 1.8% higher for this risk aversion-filled week.

Many nations in Europe released preliminary second-quarter GDP results, summarized in the table below.

  • Real GDP in the euro area advanced 1.0% (not annualized) on the quarter.  On-year growth accelerated to 1.7% from 0.6% in 1Q and negative 4.9% in the year to 2Q09.
  • German GDP shot up by a record 2.2% on quarter.  The 3.7% rise in the year to 2Q10 represents a 9.5 percentage point swing from minus 5.8% in the prior statement year.  Analysts had expected GDP to have risen 1.3% on the quarter.  The IMK Institute revised projected German growth for 2010 upward to a range of 2.5% to 3.0%.
  • Dutch and Austrian GDP each rose 0.9% on quarter.  Similar GDP increases from 2Q09 amounted to 2.1% in the Netherlands and 2.0% in Austria.
  • Czech GDP climbed 0.8% on the quarter and 2.2% on the year.
  • Belgian GDP rose 0.7% from 1Q10 and 2.2% from 2Q09.
  • French GDP climbed 0.6% on the quarter but just 1.7% on the year.  Finance Minister Legarde expects at least 1.4% growth in 2010.
  • Italian GDP firmed 0.4% for a second straight quarter and 1.1% on year.
  • Romanian GDP went up 0.3% between 1Q and 2Q but remained 0.5% below its year-earlier level.
  • Spanish and Portuguese GDP both edged 0.2% higher.  Compared to 2Q09, GDP in Portugal rose 1.4%, but such fell 0.2% in Spain.
  • Hungarian GDP was unchanged on the quarter and merely 0.1% higher on the year.
  • Greek GDP, as announced yesterday, plunged 1.5% on the quarter and was 3.5% lower than in 2Q09.

The euro area seasonally adjusted trade balance showed a deficit of EUR 1.6 billion in June.  The last surplus was registered in March, but a sign of strength could be observed in two-month June-over-April growth of 7.1% in exports and 8.5% in imports.  First-half unadjusted exports were 17.9% greater than a year earlier, while the June level of exports showed an on-year increase of 27.0%.  The first-half unadjusted trade deficit was only EUR 4.6 billion compared to EUR 2.9 billion a year earlier.

French consumer prices declined 0.3% last month, leaving the 12-month rate of inflation at 1.7%.  Core inflation slumped under 1% to 0.8% from 1.4%.  Finnish consumer prices fell 0.5% in July and posted a 12-month 1.1% gain.  French jobs grew 0.2% last quarter but were still 0.2% lower than in 2Q09. 

Swedish industrial production growth of 1.1% in June (12.0% on year) surpassed forecasts of 0.8%.  Industrial orders fell back 2.5% in the month but were 15.5% greater than a year earlier, thanks to a 24.2% surge in foreign orders for Swedish goods.  Hungarian industrial output rose 0.8% in June and 12.6% from June 2009.

The combined Swiss index of producer and import prices fell more sharply than expected in July, dropping 0.5% to post a reduced on-year gain of 0.5% after 0.8% in June.

Dutch retail sales in June were 2.1% greater than a year before.

Hong Kong reported significantly weaker GDP growth than assumed.  The nonannualized quarterly pace of 1.4% was a half-percentage point less than analyst expectations, and on-year growth in the second quarter slowed to 6.5% from a downward revised 8.0% in the first quarter.  Real exports were 20.1% greater than in 2Q09, and real GDP in the first half of 2010 was 7.2% larger than in 1H09.

Non-auto retail sales in Singapore slowed to a 5.0% on-year pace from 7.7% in May.  Seasonally adjusted sales slid 0.7% on month.

New Zealand retail sales growth more than doubled to a gain of 0.9% in June from 0.4% in May.  Retail sales volume in the second quarter advanced by a solid 1.3%.

The Reuters monthly estimates of the Bank of Japan’s Tankan data of business sentiment were released.  The manufacturing index jumped 10 points from +12 in July to a three-year high of +22 in August, while the non-manufacturing index edged two points higher to minus ten.  However, the manufacturing index is not projected to move lower over the coming three months to around +15.  A strong yen is weighing on sentiment.  Minutes from the Bank of Japan Policy Board’s mid-July meeting reveal that the yen was a growing concern there as well.  Monetary authorities were also worried about developments in global financial markets.

Scheduled U.S. data today feature retail sales, consumer prices, business inventories, and the first U. Michigan estimate of consumer confidence in August.  Canadian auto sales get reported today as well.

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

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