Euro Weaker Despite Aid Agreement for Ireland

November 29, 2010

The euro is 0.5% weaker than Friday’s close at $1.3173, which is also marginally softer than last week’s low.

An EUR 85 billion aid package was reached with Ireland.  The composition of the bailout is EUR 45 billion from EU governments, 22.5 billion from the IMF, and the rest (20.6% of the total) from Ireland itself.  Ireland’s portion, which underscores that the government is not short of cash, was a surprise.  Nevertheless, persistent contagion fears with Portugal on deck and Spain in the hole have weakened the euro.

Against other currencies, the dollar firmed 0.2% against sterling, the New Zealand kiwi, and the Chinese yuan and by 0.1% versus the Australian dollar.  The dollar is steady against the yen and Canadian dollar.

In the Pacific Rim, equities rose 1.3% in Hong Kong, 1.7% in Thailand, 1.4% in India 0.9% in Japan, 0.7% in Taiwan, and 0.4% in Australia but fell 1.9% in Sri Lanka and 0.3% in Indonesia.  European stocks are lower, with drops of 0.9% in Paris, 0.8% in Frankfurt, and 0.4% in London.

The yield on 10-year German bunds firmed a basis points, while that on JGBs slipped two basis points.  10-year British gilts are unchanged.

Oil prices rose 0.7% to $84.35 per barrel, while gold prices slid 0.2% to $1361.90 per troy ounce.

Japanese retail sales fell 0.2% on year in October.  A small increase had been projected.  Large store retail sales rose 0.4%, with on-year gains of 0.6% among department stores and 0.3% at supermarkets.

The Shoko Chukin index of Japanese small business sentiment softened in line with expectations to a reading of 45.8 in November from 46.4 in October, 47.3 in September and 48.4 in August.

Seasonally adjusted business sentiment in New Zealand improved to +25 this month from +10 in October.  New Zealand posted an NZD 319 million trade deficit in October.  Exports were 24% greater than a year earlier.

Australian new home sales rose 2.4% in October.  Australian business inventories and profits fell by 0.8% and 1.5% last quarter.  Reserve Bank of Australia Governor Stevens gave a speech that did not comment on monetary policy but noted very strong Chinese and Indian demand for Aussie steel is likely to be sustained into the long run.

Britain’s Hometrack house price index fell 0.8% on month and 1.1% on year in November.  In the four months since July, when the index was 2.0% higher than a year earlier, the Hometrack index has fallen 2.4%.  There were 47,185 mortgage approvals in October, the lowest total in eight months but more than forecast.  British net loans to individuals firmed 0.1% on month and 0.8% on year in October. U.K. M4 money posted a 0.7% on-year drop in October, the largest decline ever recorded. 

Retail sector purchasing manager survey results were released for the euro area, Germany, France and Italy.  Although the last of these showed deterioration to 44.7 from 48.9 in October, thus connoting faster contraction, the overall picture was good.

  • Euroland’s index climbed 3.3 points to 51.3 in November, best since June.
  • The German reading of 55.2 was 4.8 points better than October’s score and the highest level since July.
  • The French index jumped the most from 45.0 in October to 52.2 in November, best since July.

Economic sentiment in Euroland advanced more sharply in November than October, gaining 1.5 points to 105.3 from 103.8 in October and 103.3 in September.  Among key sub-components, industrial-sector sentiment was at +0.9 versus zero in October and minus 1.7 in September.  Consumer confidence was less negative at minus 9.4 after minus 10.9.  The service sector reading was 10.2 after 8.1.  Retail (minus 1.5 after minus 1.1) and construction (minus 26.4 after minus 25.4) were mitigating factors in the overall index’s improvement.  A separate business climate index for the region improved by 0.05 to 0.95 in November.  That index had a reading of 0.39 six months earlier.

Austria’s manufacturing purchasing managers index slid to 55.2 from 56.0 in October.  Spanish retail sales dropped 1.0% on year last month.

Belgian consumer price inflation ticked down to a 12-month 2.9% rate of increase in November from 3.0% in October.

Italian producer price inflation held steady in October at 4.0%, a two-year peak.

Swedish real GDP increased 2.1% last quarter, almost twice as much as forecast.  Retail sales in October firmed 0.8% and were 5.1% greater than a year before.  Finnish business sentiment fell two points to 5.0 in November, while consumer confidence improve by 0.3 to 20.8.

U.S. holiday shopping sales over the post-Thanksgiving Day weekend were an encouraging 6.6% higher than a year ago.  Little further U.S. data will be reported on this Cyber Monday, just the Dallas Fed manufacturing index. Canadian producer prices, raw material prices, and 3Q current account figures get reported at 13:30 GMT.

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

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