Portugal Asks for a Bailout

April 7, 2011

Investors have a lot to watch:

  • Details of Portuguese bailout, which is said to start out as a request for about EUR 75 billion but likely to reach EUR 90 billion.  Terms should be similar to those given earlier to Greece and Ireland.  A side issue is whether pressure now escalates on Spain, whose economics minister refuted today any danger of contagion.
  • Results of the ECB and Bank of England monetary policy meetings.  Will Trichet use the V-for-vigilance word?  Peru also has a policy announcement today.
  • Ramifications of the BOJ policy meeting.  That central bank unveiled another loan facility to channel longer-term funds to banks and firms in the stricken area.
  • Risk of a U.S. partial government shutdown looms tomorrow as Democrats and Republicans play their game of chicken.

The dollar has fallen 0.6% against the yen, 0.3% versus the Australian dollar and 0.1% against the Canadian dollar and Swiss franc.  It is 0.4% stronger against the euro and up 0.3% relative to the kiwi.  The dollar is unchanged against sterling and the yuan.

Share price changes have been limited.  Stocks rose 0.6% in Malaysia and Taiwan, 1.2% in Thailand, 0.1% in Indonesia and Japan, and 0.4% in China.  Stocks were unchanged in Hong Kong and down 0.7% in Pakistan, 0.2% in South Korea, and 0.1% in India and Australia.  In Europe, the Paris Cac is up 0.1%, while the German Dax and British Ftse slid 0.1%.

!0-year yields on British gilts, Japanese JGBs and German bunds firmed by 3, 2, and 1 basis points.

Gold prices are steady at $1458.30 per ounce, while oil edged 0.1% lower to $108.77 per barrel.

German industrial production increased 1.6% in February, three times faster than forecast, and by 14.8% on year, up from a 12.7% advance in the year to January.  Output in January-February exceeded the 4Q10 average level by 2.2%, matching the 4Q-over-3Q increase.

Japanese international reserves jumped $24.54 billion last month to $1.116 trillion.  The increase in 1Q11 amounted to $19.84 billion.

The Bank of Japan will continue to promote a target range of zero to 0.1% on uncollateralized overnight money.  Monetary officials also introduced two new liquidity-enhancing arrangements, the aforementioned longer-term funding facility (JPY 1 trillion for up to a year) to stricken areas) and a broadening of the definition of eligible collateral for its money market operations.  The votes were 9-0 by the Policy Board.  Subsequent remarks by Governor Shirakawa expressed hope that supply channels might be restored within about three months.

As expected, the Bank of England left its policy parameters unchanged.  Key rate stays at 0.5%.

Australian March labor statistics beat expectations.  The jobless rate fell to 4.9% from 5.0%, and jobs climbed by 37.8K with full-time positions accounting for 85% of that increase.

Germany’s six economic institutes revised up projected German growth in 2011 to 2.8% from 2.0% and projected Euroland growth this year to 1.7% from 1.3%.

The French trade deficit widened further in February, printing at EUR 6.55 billion after EUR 6.1 billion in January, EUR 5.1 billion in December, EUR 4.1 billion in November and EUR 3.7 billion in October.  Finland’s trade deficit narrowed sharply to a mere EUR 10 million in the same month.

Dutch consumer prices rose 1.2% on month but just 2.0% on year in March.  Irish consumer prices climbed 0.9% in March and accelerated to a 12-month increase of 3.0% from 2.2% in the year to February.

Norwegian industrial production firmed only 0.1% in February and posted an on-year drop of 6.1%.  Factory output fell 0.3% on month and rose 2.0% on year.  Hungarian industrial production rose 0.9% in February and by 14.3% on year. Sweden’s service output index increased 0.3% in February and recorded an on-year advance of 5.8%.

Scheduled U.S. data today included consumer credit and weekly jobless claims.  Richmond Fed President Lacker will be speaking publicly today.  Canada reports building permits.  The ECB and Central Bank of Peru are expected to raise rates.  The ECB press conference starts at 12:30 GMT.

Copyright Larry Greenberg 2011.  All rights reserved.  No secondary distribution without express permission.

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