Festering Concern about Euroland Peripherals

September 8, 2010

Stocks in Germany, France and Great Britain have traded 0.6% lower.  Earlier, equities fell by 2.2% in Japan, 1.5% in Hong Kong, 0.8% in Australia, 0.5% in South Korea and 0.4% in Taiwan and New Zealand.

The euro recouped 0.2% against the dollar despite provocative warnings from German Chancellor Merkel about her country’s limited patience underwriting the debt of the euro area’s peripheral economies.  The U.S. dollar lost 0.7% against sterling and the Australian dollar but is unchanged overnight against the yen, kiwi, and yuan.  The dollar dipped 0.1% against the Canadian dollar and Swiss franc.  The franc touched a new high against the euro of CHF 1.2765.

The unchanged yen masks a new low for the move hit earlier today of 83.33/USD.  Japan’s finance minister explicitly mentioned the possibility of currency market intervention.  Ichiro Ozawa, the prime minister wanna-be, acknowledged that Bank of Japan means for stabilizing the yen are limited.

German and Japanese ten-year sovereign bond yields slid by three and one basis points, respectively, but British gilt yields are flat.

Oil prices settled back 0.7% to $73.57 per barrel.  Gold prices edged 0.1% higher to $1261.10 per ounce.

Off to a fast start in 3Q, Japanese core machinery orders shot up 8.8% in July, more than three times greater than had been forecast.  Their on-year rise jumped to 15.9% from 3.3% in the year to 2Q10.  Foreign machinery orders rose 2.6% on month.

On-year growth in Japanese M1, M2, and M3 edged up a tenth in August to 2.1%, 2.8%, and 2.1%.  M2 growth is neither accelerating nor decelerating, viewed more broadly.  Such posted growth of 2.8% in 1Q and 3.0% in 2Q.  Bank lending continues to contract, with a drop of 2.0% in the year to July and the year to 2Q.

Japan’s current account surplus of JPY 1676 billion in July surpassed expectations and was 26.4% greater than a year earlier.  The merchandise trade surplus of JPY 916 billion was 110% larger than the surplus of JPY 436 billion in July 2009, as export growth of 24.7% exceeded import growth of 15.7%.  Seasonally adjusted exports were 1.8% bigger in July than June, while imports fell by 3.4%.  The sum of the current account and both direct and portfolio net investment flows — also known as the Basic Balance — generated a surplus of JPY 1362 billion in July, down from a surplus of JPY 2332 billion a year earlier.

Japanese stock and bond transactions with foreigners produced a net outflow of JPY 4.94 trillion in August.  All of this figure was accounted for by Japanese buying of foreign bonds.

Japan’s economy watchers index, a gauge of retail demand, slumped unexpectedly to 45.1 in August from 49.8 in July and an average reading in 2Q10 of 48.3.  July’s score was the lowest since February.

Mortgage loan approvals in Australia rose 1.7% in July, beating expectations.

The German EUR 9.0 billion current account surplus in July was 22% smaller than projected.  Exports and imports each posted seasonally adjusted month-on-month declines.  The year-to-July merchandise trade surplus of EUR 88.2 billion was 20% wider than the surplus of EUR 73.5 billion a year earlier on similar on-year export and import growth of 18.3% and 17.9%.  However, July 2010 over July 2009 export growth of 18.7% was much smaller than the 24.9% year-to-date rise in imports.

German industrial production rebounded only 0.1% in July compared to a projected 1.0% rise.  Output was 0.7% greater than the 2Q average level and 10.9% higher in July than a year earlier.

British industrial production firmed 0.3% in July and 1.9% from a year earlier.  Those results were a touch less than anticipated.  Factory output also advanced 0.3% on month but were 4.9% greater than a year earlier.  In the latest three reported months, industrial production increased 0.6% from its March-May level and by 2.0% from a year earlier.

Further evidence emerged of a deceleration in British house price inflation.  The Halifax index was 4.6% higher in August than a year earlier, down from on-year increases of 4.9% in July, 6.6% in June and 6.9% in May.  The Nationwide house price index, reported earlier, showed the 12-month rate of rise slowing to 3.9% in August from 6.6% in July and a recent high of 10.5% in the year to April.

Swedish GDP grew 1.9% last quarter and by 4.6% from 2Q09.  Analysts had been projected a smaller rise.

Czech GDP growth was revised up a tenth to 0.9% in 2Q from 1Q and 2.4% from a year before.  Greek GDP contraction last quarter was even greater than thought initially.  The change from 1Q was revised to a drop of 1.8% from minus 1.5% reported at first.  GDP contracted 3.7% from the second quarter of 2009.  Hungarian GDP was flat in 2Q and up 1.0% on year.  Such fell 6.3% in calendar 2009 when all four quarters had negative results.  Hungarian industrial output dropped 1.1% in July but was 9.0% greater than a year earlier.  Dutch industrial production edged down 0.1% in July but posted on-year growth of 6.6%. Spanish industrial output slid 1.6% in the year to July, depressed by fewer working days than in July 2009.

The Bank of France’s French business sentiment index printed at 101 in August for a fourth straight time.  France posted a EUR 4.18 billion trade deficit in July after a shortfall in June of EUR 3.80 billion.  The French budget deficit through July of EUR 93 billion was 14.4% less than a year before.

The Bank of Canada will release a new interest rate statement at 13:00 GMT.  Whether the bank keeps an unchanged target or hikes such to 1.0% is a very close call.  Canadian data due today include the IVEY-PMI index and building permits.  U.S. consumer credit, the JOLTS index and the Beige Book arrive, too.  U.S. mortgage applications fell 1.5% in the latest reported week.  A 25-basis point rate hike by the Bank of Korea later today is considered likely.

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

Tags: ,


Comments are closed.