A Buoyant Dollar as G7 Meets

September 9, 2011

The dollar is showing net gains of 0.6% against the Swissie, 0.5% relative to the euro and Australian dollar, 0.4% versus the Canadian dollar, 0.3% against the yen and kiwi, and 0.1% versus the yuan and sterling.  The euro hit a six-month low of $1.3787 but is trading comfortably above the CHF 1.2000 line in the sand at CHF 1.2216.

Group of Seven finance ministers are meeting in Marseille, France.  No formal statement with concrete pledges is expected, but there are very serious problems to discuss as the global economy strays closer to recession and the euro debt crisis intensifies.

President Obama presented a $447 billion American Jobs Plan to Congress where extreme partisanship continues.  Investors are not confident about the U.S. economy or its politics.

IMF head Lagarde sees greater risks of recession than inflation.

Stocks, sovereign bond yields, and commodities are mostly lower.

  • Share prices have lost 1.7% in India, 1.1% in Singapore, 1.3% in France, 1.0% in Germany, 0.9% in Thailand, 0.6% in Japan and 0.7% so far in Britain.
  • Oil and gold prices fell 1.1% each to $88.09 per barrel and $1837.60 per ounce.
  • Ten-year German bunds, British gilts, and Japanese JGBs have slipped by three, three, and two basis points.

Canadian jobs contracted by 5.5K in August following a small 7.1K rise in July in spite of a combined 51.2K increase in full-time positions over those two months.  Canadian unemployment increased to 7.3% from 7.2% in July.

Japanese GDP was revised to show a deeper 2.1% annualized contraction in the second quarter.  The preliminary reading had been minus 1.3%.  Real GDP had also fallen by 2.4% in 4Q10 and 3.7% in 1Q11, and such dropped 1.1% between the second quarter of 2010 and 2Q11.  A revision to non-residential investment from +0.9% to minus 3.6% was the primary source of the change.  Personal consumption, residential investment, and exports also registered declines.

On-year growth in Japanese M1, M2, and M3 amounted to 5.0%, 2.2%, and 2.7% in August, but broad liquidity was only 0.6% greater than a year earlier.

Japanese consumer confidence posted a sixth straight sub-40 reading in August, dipping to 37.4 from 37.7.  The index was at 42.4 in August 2010 and at 40.1 in August 2009.

China released five monthly indicators for August.

  • Consumer prices firmed 0.3% on month and decelerated to 6.2% on year from 6.5%.  However, non-food CPI inflation picked up to 3.0% from 2.9%.
  • Producer prices edged up 0.1% and recorded a 7.3% 12-month rate of increase after 7.5% in July.
  • Industrial output growth slowed to 13.5% from 14.0% in the year to July.  The new figure was a tad lower than expected.
  • On-year growth in retail sales was an as-expected 17.0%, matching July’s figure.  Sales in 2Q had been 17.2% higher than in 2Q10.
  • Fixed asset investment in January-August was 25.0% lower than a year earlier, implying some further loss of momentum versus a 25.4% increase in January-July.

Revised German CPI statistics for August showed no change on month and a steady 2.4% on-year advance.  Non-energy consumer price inflation ticked down a tenth to 1.4%.  German WPI inflation slowed to 6.5% in August from 8.2% in July and a peak of 10.9% last March.  The oil component slowed to 13.8% from 16.2%.

French industrial production rose 1.5% on month in July, reversing June’s 1.5% decline. 

Italian revised GDP data confirmed increases of 0.3% from 1Q and 0.8% from a year earlier.

British producer output prices firmed 0.1% on month and rose 6.1% on year in August, with a core rate of 3.6% versus 3.4% the month before.  Producer input prices fell by 1.9% but exceeded the August 2010 level by 16.2%.  The core rate slowed to 13.0% from 13.3%.

In spite of a 13.2% advance from June, Greek industrial production was 2.8% lower than a year before.  Irish industrial output fell by 6.0% in the year to July.  Swedish industrial production was 8.2% greater in July than a year earlier, but industrial orders only showed a 0.4% uptick.

Norwegian CPI and PPI inflation in August was 1.3% and 12.8%, respectively.

South Korean PPI inflation picked up to a 4-month high of 6.6% in August.

Central bank meetings in Peru and Vietnam resulted in unchanged key interest rates of 4.25% and 14.0%, respectively.

U.S. wholesale inventories will be released today.

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


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