Focus Continues on Greece

May 10, 2011

Dollar movements overnight were moderately positive.  The greenback advanced 0.6% against the Swiss franc, 0.4% relative to the kiwi and sterling, 0.3% versus the yen, 0.2% vis-a-vis the euro and 0.1% against the Australian dollar but fell by 0.2% against the Canadian dollar.  The yuan is unchanged.

Stocks have benefited from hopes that Greek debt may not be restructured now and by good reported corporate earnings.  The biggest improvements have been in Europe where the German Dax, Paris Cac and British Ftse are up 1.6%, 1.5%, and 1.3%.  In the Pacific Rim, equities rose 1.2% in Thailand, 1.1% in The Philippines, 0.8% in China and Hong Kong, 0.6% in Singapore, and 0.3% in Japan and New Zealand.  Stocks fell 0.4% in South Korea and 0.7% in Australia.

The yields on 10-year German bunds and British gilts rose by three and two basis points, while that on JGBs is one basis point lower at just 1.14%.

While currency movements were dollar-supportive for the most part, commodities are firm, with gold above $1500 at $1516.40 and up 0.9% on the day and oil, though 0.7% lower than the Monday close, above $100 per barrel at $101.80.  Strong commodity markets have correlated inversely with the dollar most of this year.

A lot of mostly unimportant economic indicators were released earlier today.  The most meaningful news concerns Greece, about which a slew of conflicting remarks have been made.  The $64,000 question is whether Greek debt gets restructured now or if that step is kicked down the road.  European banks would be hit when restructuring occurs, especially if that happens soon, so euro holders are hoping such action will be deferred and were cheered by signs of a bigger IMF package of help being arranged for that economy.  Markets are widely agreed that the common currency’s debt problem is political more than economic.

China’s trade surplus of $11.4 billion in April was three and a half times greater than forecast and the largest since $13.1 billion in December.  February had seen a rare $7.3 billion deficit, and the March surplus had been only $0.14 billion.  Exports rose 2.3% on month and 29.9% on year, about as expected, but a 5.2% slide in imports and slower on-year import growth of 21.8% were much weaker than forecast and a possible sign of China become a less dynamic engine of world growth.

French industrial production sank 0.9% in March, rather than firm 0.4% as forecast.  Such was still 4.9% greater than in March 2010.  Italian industrial output did rise 0.4% and was 3.2% higher than in March 2010.  Greek industrial production, though up 8% on month, recorded an on-year drop of 8.0% and was 11.2% less than a year before. Finnish industrial output fell 1.2% on month and edged up only 0.1% on year.

Swedish industrial production increased 0.9% in March on top of a 1.1% monthly rise in February and was 15.0% higher than a year earlier.  The Swiss consumption indicator weakened to minus 1 in February-April from +10 in the prior three months.

Among released price data, the Swiss CPI only firmed 0.1% in April, cutting the 12-month rate of increase to a tiny 0.3% from 1.0%.  Danish consumer prices rose 0.4% and were 2.9% higher than a year earlier.  Norway’s CPI (up 0.5% on month and 1.3% on year) and PPI (+2.3% from March and +20.0% on year) were each released.  Dutch CPI inflation edged up a tenth percentage point to 2.1% in April; the monthly increase was 0.5%.  Czech consumer prices rose 0.3% on month and 1.6% on year in April, a month that saw Romanian consumer prices jump 0.7% and by 8.3% on year. 

Same-store British sales increased 5.2% on year in April, supported by better weather, the royal wedding, and a late Easter.  The Royal Institute of Chartered Surveyors latest U.K. housing index reading edged up to a nine-month high but was still soft at minus 21 after minus 23 in March.

Portugal had a EUR 4.27 billion trade deficit last quarter, 8% narrower than in 4Q10.  The Czech Republic’s trade surplus widened to CZK 21.49 billion in March from CZK 13.99 billion the month before and exceeded expectations by almost 40%.

Australia’s trade swung abruptly to a surplus of AUD 1.74 billion in March from a deficit of AUD 0.87 billion in February, as exports shot up 9.4% on month.

Indonesia’s current account surplus amounted to $1.9 billion last quarter after $1.1 billion in the final quarter of 2010.

The United States will be releasing import prices, wholesale inventories, and the IBD/TIPP optimism index today.

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

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