Uneasiness about Europe Returns

October 11, 2011

The dollar is stronger, and stocks are lower in European trading.  All eyes are on the Slovakian parliament where a vote to ratify the agreement to enlarge the EFSF could be rejected.  ECB President Trichet meanwhile warned of mounting systemic risk related to the unresolved European sovereign debt crisis.

The dollar has strengthened 0.8% against the Swissie, 0.7% versus the Australian and New Zealand dollars, 0.5% relative to the loonie, and 0.4% against the euro and yuan.  The yuan had earlier been fixed at a record high of 6.3483 per dollar.  The greenback slid 0.2% against sterling and 0.1% against the yen.

Equities are down 0.7% in Germany and Great Britain and have lost 0.6% in France.  This slippage reverses a generally good session in the Pacific Rim, where stocks climbed 2.4% in Hong Kong, 2.3% in Thailand and Indonesia, 2.6% in Taiwan, 1.7% in The Philippines, 1.1% in Malaysia, and 0.9% in Singapore.

Oil and gold prices slid 0.6% and 0.2% to $84.92 per barrel and $1666.80 per ounce.

Ten-year German bund and British gilt yields edged down two and one basis points.  The JGB is a basis point firmer.

Bank Indonesia unexpectedly cut its key reference interest rate by 25 basis points, reversing its single hike made last February.

Japanese consumer confidence improved to a seven-month high of 38.5 in September from 37.4 in August.  The index averaged 37.9 in 3Q after 34.8 in 2Q.

Japan’s economy watchers index, a barometer of retail activity, suffered a greater-than-forecast setback, dropping to 45.3 in September from 47.3 in August and 52.6 in July.  The forward-looking outlook index also slipped to 46.4 from 47.1.

Japanese bankruptcies were 9.2% lower in September than a year earlier.

Japan’s current account surplus of JPY 408 billion in August was considerably smaller than July’s JPY 990 billion or the surplus of JPY 1.143 trillion in August 2010.  The trade balance showed a deficit of JPY 695 billion on import growth from a year earlier of 22.4% and export growth of 4.0%.  JPY 3.249 trillion kept the yen strong, however.  The seasonally adjusted current account surplus was JPY 653 billion, JPY 100 billion less than in July.

Japan’s customs clearance trade surplus printed in the first 20 days of September at JPY 176 billion, 67.5% smaller than a year earlier.  Although smaller than in recent months, on-year import growth of 12.7% still dwarfed export growth of 1.0%.

The Bank of Japan monthly assessment projects positive but slower growth in exports and industrial production in coming months.

Stock and bond transactions generated a JPY 4.4 trillion outflow last month in Japan.

British industrial production firmed 0.2% in August, a better result than forecast, but nonetheless was 1.0% lower than a year earlier.  Factory output slid 0.3% on month and posted a smaller on-year advance of 1.5%. Dutch industrial production fell 0.6% in August and was only 1.6% higher than a year before.  Irish industrial output increased 4.4% on month and 10.4% on year in August.

The British RICs house price barometer had an unchanged reading in September of -23.  The Department of Communities and Local Government house price index was 1.3% lower than a year earlier in September.  That followed on-year drops of 1.5% in July and 2.0% in June.  Same store retail sales were merely 0.3% higher in September than a year earlier according to the British Retail Consortium.  Analysts were looking for a gain of almost 1%. 

Many European countries reported price data. Spanish consumer price inflation ticked up a tenth to 3.1% in September, but the core CPI was only 1.7%.  Swedish consumer prices advanced 0.7% last month and by 3.2% from September 2010.  Core Swedish CPI inflation eased a tenth to 1.5%. Hungarian consumer prices edged down 0.1% in September with an unchanged 12-month increase of 3.6%.  Romanian consumer prices eased 0.2% in September and were 3.5% above a year earlier.  Greek CPI inflation nearly doubled to 3.1% in September from 1.7% in August.

Malaysian industrial output rose 2.6% on month and 3.0% on year in August.  South Korean producer price inflation slowed to 5.7% in September, a nine month low, from 6.6% in August.

Australian business confidence improved six points to minus 2 in September, and business conditions went up five points to +2.

Scheduled U.S. data today include the NFIB index of small business sentiment, the IBD/TIPP optimism index, weekly chain store sales and the monthly federal budget.  Minutes from the last FOMC meeting will be publishedCanadian housing starts also arrive today.

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

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