Spotlight on Greece and China

July 4, 2011

Currency movements were limited overnight, reflecting a loss of leadership due to U.S. Independence Day closure.  The dollar is 0.5% higher against the Aussie dollar and shows other gains of 0.2% relative to the Swiss franc and 0.1% versus the euro and Canadian dollar.  The greenback is down 0.2% against the kiwi and sterling and off 0.1% versus the yen.  The yuan is steady.

A non-manufacturing purchasing managers index for China compiled by the Federation of Logistics and Purchasing fell to a 28-month low of 57.0 from 61.9 in May, sparking some speculation that Chinese monetary authorities might loosen restraints on lending. 

Ecofin’s approval of the next installment of aid to Greece was counter-punched by news from Standard and Poors that even a voluntary extension of Greek debt might be considered a “selective default.”  Asian stocks did well overnight, but European markets have been subdued.

Stocks climbed 2.4% in China, 1.7% in Hong Kong, 4.7% in Thailand, 1.6% in The Philippines, and 1.0% in South Korea and Japan.  But the British Ftse (0.3%) and German Dax (0.1%) are only marginally higher, and the Paris Cac has lost 0.2%.

Ten-year yields on German bunds and British gilts slid by two and three basis points.  Their Japanese counterpart firmed two basis points.

Australia reported an unexpected and disappointing 0.6% drop in retail sales during May.  Such were 2.4% greater than a year earlier.  Other Australian data releases showed a 7.9% slump in building approvals, which also fell 14.4% on year, a 3.7% rise in June job ads, and lessening expected inflation of 3.3% over the coming twelve months.  Speculation about a further Australian central bank rate hike from the present 4.75% level are mixed.

New Zealand commodity prices fell 1.2% in June, their first decline in ten months.

Euro area producer prices dipped 0.2% in May.  Such had accelerated from an annualized increase of 4.5% in 4Q10 to 11.8% in 1Q11 and risen 0.9% further in April.  The April-May PPI thus still managed to be 1.5% above the 1Q level, not annualized, and 6.2% greater than in May 2010.  Energy producer prices fell 1.1% in May, while other producer prices went up 0.2% on month.

The Sentix index of investor confidence in the euro area recovered to 5.3 in July after slumping to 3.5 in June from 10.9 in May, 14.2 in April and 17.1 in March.

Britain’s construction purchasing managers index printed at 53.6 in June after 54.0 in May.  An 8-month high of 56.5 was reached in February.

Swiss retail sales sank 4.2% on month and 4.1% on year in May.  Czech retail sales fell 0.7% in May and were only 1.4% higher than a year earlier.

Japan’s monetary base grew 17.0% over the year to June, accelerating from 16.2% in May but not back to April’s pace of 23.9%.

The Saudi Arabian purchasing managers index in manufacturing improved to a three-month high of 62.8 in June from 62.6 in May and 62.7 in April.

Thailand reported CPI and PPI inflation in June of 4.1% and 4.5%.  Each was less than May’s on-year results.  Retail sales in Hong Kong was 21.6% higher than a year earlier in May.

Turkish CPI inflation slowed to 6.2% in June from 7.2% in May, while PPI inflation picked up to 10.2% from 9.6%

The Russian refinancing rate was left at 8.25%.  Taiwan’s central bank raised its discount rate by another 12.5 basis points to 1.875%.  The prior increase of similar size was made in March.

Canada releases monthly producer prices and raw material prices in about a half hour.  U.S. markets are closed today.

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

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