ECB Comment Weighs on Euro and Stocks

October 13, 2011

Investor attention was drawn to the ECB Bulletin where it is warned that forced euro bondholder write-offs could hurt the euro’s reputation. 

  • The euro fell as much as 1.7% against the yen and 0.9% relative to the dollar.
  • Stocks in Europe lost 1.4% in Germany, 1.1% in France, and 0.8% in Great Britain.

Compared to Wednesday closing levels, the dollar has gained 0.4% against the yuan, kiwi, euro, and Swissie and 0.3% relative to sterling and the loonie.  The dollar is 0.4% softer against the yen.

Stocks in the Pacific Rim advanced by 2.3% in Hong Kong, 1.2% in Malaysia, 1.1% in Indonesia, 1.0% in Australia and Japan, 0.8% in South Korea and 0.7% in China.

Ten-year German bund and British gilt yields slipped five basis points each, while the 10-year JGB is two basis points higher.

Oil prices slumped 1.7% to $84.12 per barrel.  Gold lost 0.5% to $1673.70 per ounce.

The Bank of Korea left its seven-day repo rate at 3.25%.  It’s been at that level since a 25-basis point increase on June 10.

The Chinese yuan has softened apparently as a protest from Beijing officials against the senate vote earlier this week that would authorize tariffs against imports from China.  Chinese trade figures for September released today showed a smaller surplus of $14.51 billion and weaker export growth of 17.1% on year than analysts were anticipating.  The surplus was down from $17.76 billion in August and $31.48 billion in July, and export growth was lower than any other month since February.  This report will add to concern that Chinese growth will be slowing more sharply than had been assumed.  China’s business climate index fell 2.2 points to a reading of 133.4 in the third quarter.

Japan’s tertiary index, which measures service-sector activity, dropped 0.2% in August on top of a 0.3% decrease in July.  The average index in July-August was nonetheless 1.1% greater than in the second quarter.  However, the tertiary index was only 0.2% above its year-earlier level.

Bank lending in Japan was 0.3% lower than a year earlier in September.  The 3Q11-over-3Q10 decline was 0.5%.  Minutes from the Bank of Japan September 6-7 meeting showed some Policy Board members predisposed to further quantitative easing if deemed necessary.

The Indonesian island of Bali was hit by a 6.8 magnitude earthquake.

Final German consumer price data for September confirmed a monthly uptick of 0.1% and a 12-month 2.6% advance, the most since September 2008.  On-year inflation in energy was 11.2%.  For all other items, such was 1.5%.

Australia reported an unexpected drop in unemployment from 5.3% in August to 5.2% in September along with the largest rise of jobs (20.4K) in six months.  Employment had fallen 10.5K in the prior month.  September’s jobs growth was split roughly evenly between full-time and part-time workers.  Employment was 1.1% higher than in September 2010.

Britain’s goods and services trade deficit narrowed to GBP 1.877 billion in August from GBP 2.273 billion in July and a 2Q monthly mean of GBP 2.26 billion.  The merchandise trade deficit of GBP 7.768 billion last month was about 14% smaller than forecast.  Goods exports firmed 0.6% on month, while imports slid 0.7%.

The Swiss PPI/import price index eased 0.1% in September and posted a 2.0% on-year decline.  Domestic producer prices also fell 0.1% on month, while import prices were 0.3% lower.

Consumer prices in Portugal rose 0.8% in September and 3.6% from a year before.  Irish consumer prices increased 0.3% and by 2.6% from September 2010.  Greek import price inflation slowed to 6.4% in August from 8.7% in July.  Dutch retail sales slumped 4.2% on month and 0.2% on year in August.

New Zealand’s business purchasing managers index printed at a lower 50.8 in September after 52.9 in August.  Food prices in that down under nation fell 1.0% last month and to a 12-month 4.7% rate of increase.

U.S. and Canadian trade figures will be released today at 12:30 GMT along with U.S. weekly jobless insurance claims.  A new poll of Republican presidential candidates shows Cain ahead of both Romney and Perry, signifying voter sympathy with a major simplification of the U.S. tax code.

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

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