Concerns Continue about Advanced Economies

May 25, 2011

The dollar is mixed, and stocks are trading precariously.  The dollar rose 0.6% against the Australian dollar and by 0.2% relative to the yen, Canadian dollar, euro, and kiwi.  The greenback is down by 0.4% against the Swiss franc, 0.3% versus sterling and 0.1% against the yuan.

Equities fell 1.3% in South Korea, 1.2% in China, 1.0% in Australian, 0.9% in The Philippines and India, and 0.8% in Thailand.  In Europe, the Paris Cac and German Dax slid another 0.2%, while the British Ftse is steady.

The yields on ten-year sovereign debt fell by four, three and two basis points in Germany, Great Britain, and Japan.

Oil slipped 0.4% to $99.21 per barrel, while that on gold improved 0.2% to $1526.50 per ounce amid distrust toward all paper money.

Japan’s April customs trade deficit of JPY 464 billion was much larger than forecast.  Exports were 12.5% lower than a year earlier, whereas imports advanced by 8.9%.  Export volumes plunged from a year earlier by 21.2% to the United States, 8.5% to the EU and 6.3% to Asia.  The seasonally adjusted deficit amounted to JPY 496 billion after a JPY 1.4 billion surplus in March.  Exports dropped 5.5% on month, while imports rose 3.8%.

Minutes from the Bank of Japan’s April 28 meeting in which Nishimura unsuccessfully attempted to get an increase in the asset buying program were released.  Governor Shirakawa sees some signs that the recession is losing steam and expects recovery to take root in the second half of the current fiscal year, but Nishimura is worried about the impact of weaker consumer and business confidence.

The second estimate of British first-quarter GDP growth was released, confirming a rise of 0.5% that only reversed the fourth quarter’s drop.  Both personal consumption (down 0.6%) and gross fixed capital formation (off 4.4%) declined for a second straight quarter.  Net exports enhanced growth by 1.7 percentage points, as exports increased 3.7% in the latest quarter while imports were dropping 2.3%.  Construction plunged 4.0% after falling 2.3% in 4Q10.  Real GDP was 1.8% greater than a year earlier after having slid 0.4% between 1Q09 and 1Q10.  The GDP price deflator was 2.8% higher than a year earlier.

According to the British Bankers Association, mortgage loans totaled 29.4K in April, 6% less than in March and 10% fewer than forecast.

Italian retail sales fell 0.2% in March after holding steady in February and were 0.8% lower than a year earlier.

Smaghi of the ECB reiterated that restructuring Greek debt would have disastrous ramifications.  Just about everyone else thinks there’s no other way out and that restructuring is only a matter of when, not if.  The Greek-German 10-year bond spread is wider than 1350 basis points.

The contest for Strauss-Kahn’s successor as head of the IMF will be essentially a two-person race between French Finance Minister Lagarde, who is the front-runner, and Bank of Mexico Governor Carstens.

German consumer confidence dropped more than anticipated to 5.5 in June from 5.7 in May and 5.9 in February.

Spanish producer price inflation settled back to 7.3% in April from 7.8% in March.  Icelandic CPI inflation rose to 3.4% in May from 2.8% in April.  The jobless rates last month in Poland and Sweden stood at 12.6% and 7.4%.  Polish retail sales rose 2.3% in April, however, instead of holding steady as forecast. 

The Westpac-Melbourne Institute Australian index of leading economic indicators improved to 5.3 in March from 3.8 in February.  Australian construction slowed to 0.7% in the first quarter from 1.4% in 4Q10. 

Turkey’s central bank is expected to leave its key interest rate unchanged at today’s meeting.

Scheduled U.S. data releases today include durable goods orders, the FHFA house price index, and oil inventories.  Brazil and Mexican current account figures arrive, too.

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

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