Waiting for More Shoes to Drop

July 15, 2011

European bank stress tests will be released around 16:00 GMT today.  This second round of tests were more rigorous than the first and are expected to flag a number of banks as failing to meet standards.

Standard and Poo’rs joined Moody’s in placing U.S. sovereign debt under review for a possible downgrade.

Obama will be holding a press conference.  No break-through thus far in the debt ceiling talks. 

Fed Chairman Bernanke’s reprise testimony before the senate yesterday dampened hopes of more quantitative easing insofar as deflation isn’t looming. 

Japan’s finance minister against warned about action if current yen strength persists.  Lots of smoke but so far no fire.

Several U.S. economic indicators get released today: consumer prices, industrial production, the Empire State manufacturing index, and the U. Michigan index of consumer sentiment.

Italy’s parliament still hasn’t passed the austerity bill but is expected to do so today or tomorrow.

The dollar was mixed overnight, gaining 0.6% against the Australian dollar, 0.3% versus the kiwi, 0.2% relative to sterling and 0.1% vis-a-vis the Swiss franc but losing 0.2% against the Canadian dollar and 0.1% against the euro.  The yuan and yen (79.13) are unchanged against the U.S. currency.

Remarks from an official of the Swiss National Bank imply that intervention is not under consideration despite relentless franc strength against the euro.

Asian stocks were also mixed.  Equities rose 1.1% in Taiwan, 1.0% in Pakistan, 0.9% in Sri Lanka, 0.8% in The Philippines, 0.7% in South Korea, and 0.4% in Japan and China.  Share prices slid 0.3% in India and Hong Kong and by 0.1% in Singapore and New Zealand.  European stocks continue to creep lower, falling 0.3% in Paris and 0.2% in Frankfurt.  The British Ftse is 0.1% firmer, however.

The yields on ten-year British gilts and German bunds are three and one basis points lower.  That on JGBs edged back to 1.09% after hitting 1.08% Thursday.

Gold is quoted at $1581.20 per ounce, 0.8% below Thursday’s record peak of $1594.60Oil is steady at $95.71 per barrel.

Minutes from the Bank of Japan’s mid-June Board meeting expressed concern about the ramifications of a strong yen and mounting global economic risks and predicted that on-year CPI inflation would get revised downward as a result of an updated base year for that data series in August.  Two members thought that more monetary stimulus might be needed in the future, but not then, and the majority of Board members was comfortable with watching how trends react to steps already taken.  The meeting earlier this week did not produce any new policy initiatives.

Retail sales in Singapore slid 0.4% in May but were still 10% stronger than a year earlier.  South Korea’s trade surplus for June was revised downward to $2.8 billion from $3.3 billion reported initially.

Late Thursday came word that the Bank of Chile left its key interest rate steady at 5.25% as expected, but such is only a pause in tightening.

EU new car registrations were 8.1% lower in June than a year earlier, their worst monthly showing of the first half.  This proxy for sales was 7.1% greater in 1H11 than in 1H10.

Euroland’s seasonally adjusted trade deficit in May of EUR 0.6 billion was the smallest so far in 2011 and a quarter of April’s EUR 2.5 billion.  Exports climbed 1.5% on month, beating import growth of 0.2%.  The unadjusted deficit for the first five months of this year was EUR 21.8 billion compared to EUR 12.1 billion a year earlier.  Exports in January-May were 19.7% higher than a year before.

Italy posted a trade gap of EUR 2.4 billion in May, less than April’s EUR 3.8 billion shortfall.  Finland’s current account deficit widened 20% on month to EUR 902 million in May.  The Dutch trade surplus of EUR 3.9 billion in that month was 1.6% bigger than in April.  Norway’s trade surplus of NOK 24.7 billion in June was 2.1% wider than in the prior month.  The Czech current account deficit widened to CZK 23.1 billion in May from CZK 6.7 billion in April.

Icelandic June consumer prices advanced 0.3% on month and accelerated to a 7.6% 12-month rate of increase. Danish producer prices edged up 0.1% last month and were 6.9% higher than a year earlier.  Czech producer price inflation slowed more than forecast to 5.5% last month from 6.2% in May. 

Britain’s Rightmove house price index fell 1.6% on month to merely 0.1% above its year-earlier level in July.

Besides the aforementioned U.S. data, Canada will be releasing its monthly manufacturing survey results today.

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

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