New Jitters About Euroland Peripherals

December 15, 2010

The dollar was buoyed as Moody’s flagged a risk that Spain’s Aa1 sovereign debt rating might get downgradedGreece was hit by more worker strikes today, disrupting transportation in that economy.  The U.S. currency rose 0.7% against sterling and the Australian dollar, 0.4% versus the euro and kiwi, 0.3% relative to the Swiss franc and yen and 0.1% against the Canadian dollar.  There’s been little reaction to the FOMC statement yesterday.  The Chinese yuan is steady against the dollar.

Equities fell overnight in Asia and Europe on the new wave of risk aversion.  Stocks dropped 2.0% in Hong Kong, 1.4% in the Philippines, 0.9% in Indonesia and Singapore, 0.8% in India, and 0.7% in China.  In Europe, the German Dax has also lost 0.7%, while the Paris Cac and British Ftse have so far traded 0.9% and 0.4% lower.

Ten-year German bund and British gilt yields have risen one and three basis points.  The 10-year JGB yield held steady.

Oil and gold prices slipped by 1.1% and 1.0% to $87.28 per barrel and $1389.70 per ounce.

The Bank of Japan released its quarterly corporate survey results known as the Tankan.  See my review.  Conditions did not deteriorate to the extent that September survey participants had been anticipating.

Japan’s tertiary index of service-sector activity rose 0.5% in October after falling by 0.8% in September but gaining 0.9% in 3Q as a whole.  On-year expansion in the tertiary index slowed to 0.9% from 1.4% in the year to September.

Euro area jobs remained steady in the third quarter, cutting the on-year rate of decline to 0.2% from 0.6% in 2Q and 1.2% in 1Q.  German employment rose 0.8% on year, but jobs between 3Q09 and 3Q10 fell by 3.0% in Greece, 1.7% in Spain, 1.2% in Portugal, and 0.5% in Italy.

British unemployment according to the “claimant count” method fell 1.2K in November after a 5.2K revised decrease in October and held steady at 4.5% for a sixth straight time.  The ILO jobless rate, which is consistent with how other countries measure unemployment, unexpectedly increased to 7.9% in August-October from 7.7% in July-September.  Average earnings in August-October were 2.2% higher than a year earlier with bonus pay and 2.3% greater without such.

The monthly CBI survey of British retailers produced an unexpected jump to +56 in December from readings of 43 in November and 36 in October.  It probably was inflated by purchases that were brought forward ahead of next month’s hike in value added taxes.

As expected, the Swedish Riksbank implemented a fourth straight rate hike of 25 basis points and signaled more increases in the future. 

Norway’s central bank is also meeting and not expected to change policy.

New car registrations in the European Union were down 6.5% on year in November and by 5.1% over the first eleven months of 2010.

Several governments released price data.  Danish producer prices firmed 0.3% in November, trimming the 12-month rate of climb to 5.9% from 6.2% in October.  Spanish consumer prices advanced 0.5% in November, retaining an on-year pace of 2.3% but just 1.2% on the core index.  Czech producer prices went up 0.5% in November and by 2.7% on year.  South African producer price gains of 0.7% on month and 6.2% on year in November exceeded analysts forecasts.

Norway’s trade surplus of NOK 31.1 billion in November was the biggest in nine months.  Exports climbed 9.6% on year versus a 1.8% rise of imports.

Italy’s trade deficit of EUR 2.0 billion in October was somewhat greater than projected.  Finland’s current account widened to EUR 2.02 billion in October from less than EUR 0.5 billion in September.  Industrial output in Hungary fell 1.0% in October but was 8.3% greater than a year earlier.

The ZEW index of investor sentiment toward Switzerland improved significantly in December.  The expectations component rose to minus 12.5 from minus 30.9, while the current conditions index climbed to 62.5 from 50.0.  The Swiss franc touched a new all-time high of 1.2758 per euro today.

The Hong Kong Monetary Authority kept its base rate at 0.5%, prompting banks to keep their prime lending rates at 5.0%.

Turkish joblessness remained above 11% in September at 11.3% after 11.4% in August.  South Korean unemployment was steady in November at 3.6%.  The Filipino jobless rate increased to 7.1% last quarter from 6.9% in 2Q.  Skilled job vacancies in Australia fell 2.8% in December and were just 0.1% greater than a year earlier.

Australian consumer confidence edged up 0.2% this month after a policy-related 5.3% drop in November.

China’s index of leading economic indicators rose 0.9% in October, accelerating from a 0.6% increase in September, and the coincident index edged up 0.1%.

Retail sales in Singapore firmed 0.3% in October but were lower than a year earlier.

U.S. mortgage applications fell by 2.3% in the week to December 10, as the 30-year fixed mortgage rate advanced 18 basis points to 4.84%, a seven-month high.

The United States is scheduled to release industrial production, consumer prices, the National Association of Home Builders Index, the New York Fed factory index, and Treasury data on international capital flows, as well as weekly oil inventories.  Atlanta Fed President Lockhart speaks publicly.  Canada’s monthly manufacturing survey results get released today as well.

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

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