Another Speed Bump in Greek Bailout Talks

September 28, 2011

Overnight reports have been confusing on the negotiations over a bailout plan for Greece, specifically over how much debt to write off in a default.  The head of the German IFO Institute said Greece needs to leave the euro area as the only feasible way it can recoup competitiveness.

The dollar is lower, consistent with its tendency to move inversely with share prices, which had advanced on Monday and Tuesday.  U.S. currency overnight losses amount to 0.5% against the euro, 0.4% versus the Australian dollar and yen, 0.3% relative to the kiwi and Swissie, and 0.1% against the yuan and sterling.  The loonie lost 0.2% against its U.S. counterpart, however.

Japan’s fiscal half ends in two days.  That will remove a source of yen demand (corporate repatriations) but need not necessarily lead to a softer yen when October begins.

Stocks stumbled for the most part in Asia, with loses of 1.6% in Thailand, 1.0% in China, 0.9% in Singapore, 0.7% in South Korea and 0.5% in India.  Some markets continued to improve, however, like Indonesia (1.1%), Pakistan (0.6%), Malaysia (0.5%) and Japan (0.1%).  In European trading, the German Dax is down 0.2%, and the Paris Cac and British Ftse have edged 0.1% lower.

Sovereign bond yields are mixed.  The 10-year German bund rose 3 basis points.  The Japanese JGB is unchanged, and the British gilt dipped two basis points.

Oil softened 0.4% to $84.13 per barrel, while gold firmed 0.4% to $1659.10 per ounce.

Regional CPI data from four German states (North Rhine Westphalia, Brandenburg, Saxony, and Hesse) point to a higher 12-month inflation rate in September.  Three of the states posted on-month increases of 0.3%.  On-year rates ranged from 2.3% to 2.8% among the four states.

German import prices fell 0.7% in August, trimming the 12-month rate of increase from 7.5% in July to 6.6%.  Such peaked last December at 12.0%.  Export prices dipped 0.1% in August and were 3.2% higher than a year earlier.  Non-oil import price inflation fell to 3.9% from 4.3% in July.

Final French GDP figures showed zero quarterly growth in the second quarter and a rise of just 1.6% from 2Q10.  Consumer spending sank 0.7% last quarter, and inventories failed to provide any forward thrust unlike the first quarter, when such enhanced GDP growth by 0.8 percentage points.

Italian business sentiment sank considerably more than assumed in September, falling 4.1 points to a 20-month low of 94.5.

Business sentiment was released in South Korea, where press reports surfaced that higher reserve requirements at the central bank may be coming.  The sentiment index held steady at 86 in the latest monthly report and rose 3 points to 86 for non-manufacturers.

Swedish consumer confidence continued to worsen in September, printing at minus 5.8 after +4.3 in August and +12.0 in July.

Icelandic consumer price inflation accelerated to 5.7% in September from 5.0% in August.  The volume of Irish retail sales fell 0.4% on month and 3.6% on year in August.  Hungary posted a 10.8% jobless rate in June-August.

Australian new home sales recovered 1.1% last month.

Data will be released today for U.S. monthly durable goods orders and weekly oil inventories and mortgage applications.  Hoenig of the Fed, Mersch of the ECB and Jordan of the Swiss National Bank will speak publicly today.

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

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