Wishful Hopes Regarding U.S. and Ezone Debt Talks
July 20, 2011
Tuesday’s improved market tone has been extended. Investors are hopeful that a senate plan will avert a last minute showdown over the U.S. debt ceiling and are looking for a huge effort to emerge from Thursday’s EU summit to stop debt crisis contagion there.
Symptomatic of less risk aversion,
- Ten-year sovereign debt yields firmed seven basis points in Germany, four bps in Britain, and two bps in Japan.
- Oil prices advanced 1.2% to $98.62 per barrel.
- While gold retreated below $1600/ounce, dropping 0.9% to $1587.50.
- Stocks rose 1.2% in Japan, 1.8% in Australia, 1.0% in Singapore, 0.7% in Indonesia, and 0.5% in Hong Kong, New Zealand, Malaysia and the Philippines. The Paris Cac and British Ftse have risen thus far by 1.0% and 0.8%, but the German Dax is just 0.1% firmer.
- The dollar fell by 0.5% against the euro, 0.4% relative to the Swiss franc, 0.3% against the yen and loonie, 0.2% versus the Aussie dollar and 0.1% against sterling and the yuan. The dollar edged 0.1% higher against its New Zealand counterpart.
Minutes from the Bank of England MPC meeting of July 6-7 revealed the same mixed voting pattern seen in June and suggest no tightening or easing in the near term. Weale and Dale again dissented against a 7-2 majority for keeping such at 0.5%. Posen re-submitted a proposal to lift the asset purchase ceiling of GBP 200 billion to GBP 250 billion, a motion that was again defeated 8-1. The majority is comfortable with waiting out the current policy stance. The minutes were on the whole marginally less dovish than a month earlier. Policymakers still expect to see CPI inflation reach 5.0% later this year despite an unexpected drop to 4.2% in the most recent report.
Australia’s index of leading economic indicators compiled by Westpac and the Melbourne Institute sagged to a 20-month low in May, suggesting sub-3% GDP expansion in the second half of 2011. The Reserve Bank of Australia hasn’t raised rates since November. Australian skilled job openings dropped in July by 3.6% in a further sign that the labor market has softened.
China’s index of leading and coincident economic indices each went up 0.5% in May. Malaysian consumer prices rose 0.3% on month and 3.5% on year in June. Export orders in Taiwan in June were 9.2% higher than a year earlier.
Japanese Finance Minister Noda again complained that the yen is stronger than Japanese fundamentals warrant.
German producer prices edged up 0.1% in June after being unchanged on month in May. The 12-month 5.6% rate of increase was down from 6.1% in May and 6-something readings in February-through-April as well. Non-energy producer price inflation eased to 3.7%, while energy posted a 9.9% on-year advance.
Dutch consumer confidence weakened a point to minus 12 in July. Danish consumer confidence swung from +3.0 in June to minus 0.6, four-month low.
Italian industrial orders rebounded by a greater-than-anticipated 4.1% in May from a 6% drop in April. Sales, however, fell 1.7% in the most recent report. Italy’s current account deficit narrowed 9.1% in May to EUR 5.09 billion.
South African consumer prices rose 0.4% in June, producing a higher 5.0% on-year increase after 4.6% in the year to May.
Some scheduled releases today are U.S. existing home sales, Canadian and Mexican wholesale turnover, the Bank of Canada Monetary Policy Report, and consumer confidence in Euroland. A Brazilian interest rate decision is also awaited, with analysts expected a small advance in the Selic rate.
Copyright Larry Greenberg 2011. All rights reserved. No secondary distribution without express permission.
Tags: Bank of England, Dollar, Noda
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