November 24, 2010

Sentiment toward the euro remains poor as an increasing number of analysts postulate the possibility the union will break up.

Portugal, the likeliest next target in the debt crisis food chain, has been crippled by a general worker strike to protest budget austerity.

S&P downgraded Irish debt by two steps to A from AA- and signaled the possibility of a further downgrade.  Ireland’s government slashed projected 2011 growth by 1.3 percentage points from an estimate made in the summer and now anticipates 1.9% which also is probably over-optimistic.  Prime Minister Cowan survived a no-confidence vote. 

Euroland industrial orders fell 3.8% in September, more than anticipated, trimming the 12-month increase to 13.5% from 24.7%.  Orders in September were 1.0% lower than the 3Q10 average level.  Greek industrial orders plunged 16.3% on month in September, underscoring the futility of premature fiscal consolidation.

Austrian industrial production fell 1.6% in September, more than halving its on-year increase to 3.6%.

Italian retail sales dipped 0.2% in September and posted a tiny 12-month gain of 0.3%.  These results were worse than forecast.

Germany continues to operate on a wholly different and higher level of efficiency than other parts of the European Monetary Union.  The IFO business climate index leaped another 1.7 points in November to a record high of 109.3.  That’s 7.4 points above June’s level and 15.5 points greater than in November 2009.  Current conditions improved 2.1 points to 112.3, while the expectations component was 106.3 versus 105.1 in October and 103.9 in September.  All four major industrial sectors had better readings than in October: manufacturing 25.1 after 21.7, construction at minus 14.8 after minus 16.4, wholesaling at 22.4 versus 19.5, and retailing at 13.3, 4.1 points higher than October’s 9.2 score.

The IFO index of German service-sector activity also improved, climbing to 25.1 from 21.7 in October and 20.0 in September.  Both current conditions and future expectations advanced.

The dollar is 0.4% higher against the euro since Tuesday’s close and has risen 1.7% against the common currency in the past 24 hours.  The dollar also rose 0.3% against the yen and 0.1% relative to the Swiss franc and sterling.  The greenback slid, on the other hand, by 0.3% against the Australian and Canadian dollars and is 0.1% softer versus the kiwi.  The yuan is steady, as Chinese stocks recovered 2.3%.

Other bourses showed rises of 0.6% in Hong Kong, 0.3% in Singapore, 0.3% in New Zealand, and 0.2% in South Korea but losses of 1.2% in India, 0.8% in Japan, 0.6% in the Philippines, 0.5% in Indonesia, and 0.4% in Taiwan and Thailand.  European stocks responded favorably to the sinking euro, with gains of 1.2% in the German Dax, 0.7% in Britain, and 0.5% in France.  In a disinflationary world, the purpose of the game is to depreciate one’s currency.

Ten-year sovereign bond yields rose four basis points in Germany and two bps in Britain but eased by a single basis point in Japan.

Oil prices climbed 0.4% to $81.55 per barrel, while gold prices slid 0.2% to $1377.30 per ounce.

October Japanese department store sales recorded the first on-year advance, 0.6%, in 32 months.  Sales had posted drops of 5.2% in September and 3.2% in August.  Cool weather spurred clothing sales.  Tokyo department store sales were 2.7% higher than a year earlier, a contrast from September’s 3.8% drop.

Australian construction work completions declined 2.1% in the third quarter following a 3.5% rise in 2Q10.

Consumer prices in South Africa rose 0.2% last month, twice as much as forecast, and this boosted the 12-month increase to 3.4% from 3.2% in September.

Singapore consumer prices increased 0.5% on month and 3.5% on year in October.  The CPI had recorded on-year increases of 3.7% in September and 2.5% over the first ten months of this year.

Revised British 3Q national income accounts confirmed GDP growth of 0.8% (non-annualized) and 2.8% from 3Q09.  Growth was led by net foreign demand, where exports advanced 2.2% compared to a 0.7% increase of imports.  Personal consumption, government spending, and business investment went up by 0.3%, 0.4%, and 0.6% last quarter.  The GDP price deflator rose 0.2% on quarter and 3.0% on year. 

The monthly U.K. services index firmed 0.6% in September and by 2.5% from a year earlier.  The index rose 0.6% last quarter, same as in 2Q.

British investment last quarter was unchanged among non-manufacturers but sank 2.0% in manufacturing.

In the Czech Republic, consumer confidence rose 2.2 points to 90.2 in November, while business sentiment also improved, firming 0.9 points to 93.2.

Norwegian unemployment in 3Q of 3.5% was the same as in 2Q.

The U.S. Treasury market will close early today but not before the release of several economic indicators covering personal income and spending, durable goods orders, the U. Michigan consumer sentiment index, new home sales, the FHFA house price index, and weekly oil inventories and mortgage applications.

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

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