Aid Tranche to Greece Still Not Approved

June 20, 2011

The meeting in Luxembourg of EU finance ministers postponed paying Greece EUR 12 billion, the next part of the EUR 110 billion package.  They’ll try again in July but insist that Greek politicians must first legislate more austerity.  Prime Minister Papandreou faces a confidence vote this week.

All things considered, the euro’s overnight losses were generally contained.  The common currency dropped 0.4% against the dollar but remains above key $1.42000 level.  The greenback also climbed 0.3% against the yen and Canadian dollar and 0.8% versus the Australian and New Zealand dollars.  The U.S. currency inclined 0.2% against sterling but fell 0.2% versus the Swiss franc.  The Chinese yuan is 0.1% softer.

Equities reacted more sharply than currencies to the Greek news.  The German Dax, Paris Cac, and British Ftse are 1.0%, 1.1% and 0.7% weaker.  Japan’s Nikkei is unchanged, but stocks fell by 2.0% in India, 1.2% in Taiwan, 1.4% in Pakistan, 0.7% in Australia, 0.8% in South Korea, and 0.6% in Thailand and China.

Ten-year bond spreads of Euroland’s peripherals versus German bunds widened.  The biggest reaction involved Greek sovereign debt followed by Portugal’s.  German bunds fell by four basis points, and a similar drop in Treasury’s at the open is indicated.

Oil dropped another 1.2% and, at $91.86 per barrel, has lost 19.4% since the end of April.  Gold edged down 0.1% to $1538.40 per ounce.

Japan’s customs clearance trade deficit in May of JPY 854 billion exceeded analyst expectations and compared to a JPY 309 billion surplus a year earlier.  Exports fell 10.3% on year and by 10.8% on a volume basis.  Export volumes in April-May were 11.2% lower than a year earlier after having posted increases of 24.2% in 2010 and 2.7% in the first quarter of 2011. 

Japan’s index of leading economic indicators in April was revised down two-tenths of a point to 96.2, and the coincident index was revised down that much as well to 103.6.  The leading and coincident indices had printed two months earlier at 103.3 and 106.5.

New Zealand released two encouraging measures.  Nominal and volume manufacturing sales rose 2.9% and 1.9% between 4Q10 and 1Q11.  New Zealand’s Performance of Services index improved to a six-month high of 52.8 last month from 52.6 in April.  The composite index, which encompasses both manufacturing and serivces, printed at 53.1 in May after 52.6 in April.

German producer prices were unchanged in May and 6.1% higher than a year earlier.  That was the fourth consecutive month with a 12-month rate of change of at least 6.0%.  Energy prices slid 0.5% but were 11.5% greater than in May 2010, while other prices edged 0.2% higher on month and rose 3.8% on year.

The 12-month rate of increase in Euroland labor costs accelerated to 2.6% last quarter from 1.5% in 4Q10 and 1.0% in the third quarter of 2010.  Euroland ran a EUR 5.1 billion seasonally adjusted current account deficit in April after shortfalls of EUR 6.5 billion In February and EUR 3.0 billion in March.  The unadjusted current account deficit during the 12-months to April cumulated to EUR 52.6 billion about four times greater than the deficit of EUR 13.8 billion in the previous twelve months to April 2010.  But the Basic Balance (current account plus direct and portfolio long-term capital movements) showed a surplus of EUR 168.6 billion in the latest reported 12 months compared to EUR 155.4 billion a year before.

The British Rightmove house price index advanced 0.6% in June and by 1.1% on year.  Such had risen 0.7% between May 2010 and May 2011.

Italian industrial orders sank 6.4% on month but rose 5.8% on year in April.  The French index of leading economic indicators rose 0.3% in April after increasing by 1.0% the month before.  Icelandic harmonized consumer price inflation accelerated to 4.3% in May from 3.1% in April.  Portuguese PPI inflation slowed to 6.0% in May from 6.5% in April.

Hungary’s central bank will announce its latest interest rate policy decision shortly.  Analysts do not anticipated a rate change.

No U.S. or Canadian economic data releases are scheduled.  Stark and Weidmann of the ECB Governing Council speak publicly today.

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

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