Mid-2011 Sees Euro Touch $1.4523

June 30, 2011

Today ends the month of June and second quarter.  QE2 expires in the United States.  The euro has firmed 0.3% on balance to $1.4475 but broke above $1.4500 in earlier overnight trading.  Today is an active day from a data release stand-point.  A second critical Greek vote of approval is need today, this time to authorize implementation of the austerity plan outlined in yesterday’s 155-138 vote.

The U.S. currency also has lost 0.4% against the yen, 0.3% relative to the Australian and Canadian dollars, and 0.2% versus the kiwi.  The Swiss franc and Chinese yuan are unchanged, while sterling has slid by 0.3% against the dollar.

Stocks in the Pacific Rim rallied on the final day of the first half, with gains of 1.5% in China, Hong Kong and Indonesia, 1.7% in Australia, 1.3% in Singapore, 0.9% in Taiwan and Pakistan and 1.0% in New Zealand and the Philippines.  Japan’s Nikkei rose just 0.2%, however, and stocks in Europe show rises of only 0.5% in the U.K. and 0.2% in Paris as well as a 0.1% dip in the German Dax.

After a four-basis point climb yesterday, the 10-year JGB yield edged up another basis point to 1.14%.  The 10-year British gilt slid three basis points to 3.30%, and the German bund is steady at 2.98%.  U.S. 5- and 7-year Treasury auctions did not go well.

Oil fell 0.2% to $94.62 per barrel, while gold is steady and above $1500 at $1510.90 per troy ounce.

 Japan’s manufacturing purchasing managers index printed in June at 50.7 after 51.3 in May and 45.7 in April.  May-over-May increases of 6.4% in housing starts and 25.5% in construction orders surpassed expectations.  Japanese stock and bond transactions generated a JPY 864 billion outflow last week following a JPY 330 billion outflow in the week of June 18.

Industrial production in South Korea advanced 1.7% in May and to a 12-month increase of 8.3% from 6.9% in April.

The volume of German retail sales dropped 2.8% on month in May following no change in April and a 1.6% decline in March.  Sales in April-May were 2.6% lower than the 1Q average.  Such had increased in the first quarter.  German unemployment fell 8K in June, the same decline as in May but less than an expected 17K decrease and much less than the average monthly drop of 37K sustained in January-April.  The unemployment rate held at 7.0%, and on-year growth in jobs slowed to 1.2% in May from 1.3% in April and 1.4% in the first quarter.

Euroland consumer price inflation remained well above the sub-2% target at 2.7% in June.  Such was also at 2.7% in May.  M3 grew 2.4% in the year to May, accelerating from 2.0% between April 2010 and April 2011.  Slightly faster increases in private credit and private loans were also recorded.  Remarks by ECB President Trichet left the likelihood very high of a July ECB interest rate hike.

British consumer confidence weakened four points to a reading of minus 25 in June.  The Nationwide index of British house prices was unchanged in June from May and 1.1% lower than a year earlier.

Italian consumer prices rose 0.1% on month and 2.7% on year in June, meeting expectations. French consumer spending on manufactured goods surprisingly posted another drop in May of 0.8% following declines of 1.0% in March and 1.4% in April.  This trio of monthly declines left spending 1.8% below its year-earlier level.  Spanish consumer price inflation slowed to 3.2% in June from 3.5% in May. Dutch producer price inflation decelerated to a still-high 10.4% in May from 11.7% in April.  Portuguese retail sales and industrial production were respectively 7.9% and 0.3% lower in May than a year earlier.

The Swiss current account surplus of CHF 17.3 billion in the first quarter was 11% smaller than the 4Q10 surplus.  Hungary’s current account surplus more than doubled in 1Q11.  In Denmark, unemployment ticked up to 5.9% in May, while real GDP edged 0.1% downward in the first quarter. Norwegian retail sales increased 6.8% in the year to May. 

Australian private credit grew 0.3% on month and 3.1% on year in May, a tad less than generally forecast.  M3 rose 1.0% on month and 10.6% on year in May.  The New Zealand business confidence index improved to 46.5 in June from 38.3 in May, and building permits in that country rebounded 2.2% in May after easing 1.2% in April.

South African producer price inflation accelerated to 6.9% in May from 6.6% in April.  M3 rose 6.1% on year in May, while private credit growth slowed to 5.2% from 6.2% in April.  Turkish GDP increased 1.4% on quarter and by a faster-than-expected 11.0% in the year between 1Q10 and 1Q11. 

Investors await U.S. Midwestern PMI scores from Chicago and Milwaukee and weekly jobless insurance claims.  Canada will be releasing monthly GDP.

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

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