Euro Stabilizes

May 9, 2011

The euro had tumbled 4.2% against the dollar from its May 4 high to its May 6 low but is 0.6% above Friday’s low and 0.4% above Friday’s close.

EU officials denied last week’s report in the German press that Greece may leave the common currency and are considering less stringent terms on the Greek bailout package.  Ireland reportedly would like to renegotiate its deal if Greece’s is changed.

The dollar has fallen 0.5% against the Australian dollar and 0.2% against the kiwi, Canadian dollar and Swiss franc.  The dollar has risen 0.3% relative to the yen and 0.1% against sterling but is unchanged against the yuan.

Stocks rebounded in Asia but are weaker in Europe.  Equities rose 1.2% in Singapore where the ruling party captured 81 of 87 seats in parliamentary elections and gained 0.9% in The Philippines, 2.1% in Thailand, 0.7% in Taiwan, 0.3% in China and Australia, and 0.8% in Hong Kong.  Japan’s Nikkei, however, fell by 0.7%, and the Paris Cac, German Dax and British Ftse have so far lost 0.8%, 0.7%, and 0.4% on the day.

The ten-year German bund yield slid two basis points, while 10-year British gilts and Japanese JGBs are steady.

Commodities remain very volatile.  Oil prices rebounded 3.0% to $100.08 per barrel, and gold is back above $1500 at $1507.50 per ounce, up 1.1%.

The German trade and current account surpluses were bigger than forecast in March, thanks to a 7.3% monthly increase in merchandise exports.  The current account printed at EUR 19.5 billion after EUR 8.7 billion in February and was EUR 35.3 billion in 1Q11 versus EUR 34.6 billion in the first quarter of 2010.  The seasonally adjusted trade surplus of EUR 15.3 billion was 36.6% wider than in February, and the first quarter monthly average of EUR 13.1 billion was almost as big as those of EUR 13.5 billion per month in 4Q10 and EUR 13.4 billion per month in 3Q10.

German real manufacturing sales advanced 0.6% in March and were 10.0% greater than a year earlier in the first quarter of 2011.  Export orders in 1Q were 14.0% greater than in 1Q10.

Euroland’s Sentix, a gauge of investor sentiment, fell to 10.88 in May, weakest since January, from 14.22 in April and 17.07 in March.

The Bank of France’s business sentiment index for Euroland’s second largest economy fell to 107 in April after three straight readings of 110, leading the central bank to project second-quarter French GDP growth at 0.5%, which would be weaker than what analysts expect from Friday’s first-quarter GDP report.

Greek CPI inflation eased to 3.9% in April from 4.5% in the year to March and 4.8% in the year to April 2010.

British house prices according to the Halifax index recorded a larger on-year 3.7% rate of decrease in April after declines of 2.9% in March, 2.8% in February and 2.4% in January.  This was the greatest on-year drop since September 2009.

Irish consumer confidence slid 1.6 points to 57.9 in April.

Romanian industrial production fell 0.8% in March, trimming the 12-month rate of increase to 7.4%.  Czech industrial output dropped 0.9% in March, cutting its on-year advance to 9.5%. Czech industrial orders were 9.7% greater than a year earlier, and its jobless rate of 8.6% in April was the lowest since November and down from 9.2% in March.  Turkey’s industrial production eased 0.3% in March but surpassed the year-earlier level by 10.4%.

Finland’s trade deficit widened sixfold in March but was only EUR 455 million. Denmark’s current account surplus in March was 35% bigger than in February as exports firmed and imports eased.  Norwegian M2 money growth slowed to 6.2% in March from 6.5% in February. 

Australian business confidence fell two points to +7 in April, while business conditions dropped four points to +5.  Aussie job ads rose 1.0% on month in April.

Minutes from the Bank of Japan meeting of April 6-7 highlighted continuing concern about the ramifications of the Sendai earthquake on productive facilities, supply lines and electric power.

No significant U.S. data releases are scheduled today, but Canadian housing starts and Mexican auto sales and consumer price figures get reported.

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



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