Suspense in Greek and Italian Politics

November 8, 2011

The dollar is unchanged overnight against the yen and euro but otherwise mixed.  The U.S. currency slid by 0.5% against the Swiss franc and 0.1% versus the yuan and sterling but has risen against commodity currencies.  It is up 1.5% against the kiwi, 0.5% relative to the Aussie dollar and 0.3% against the loonie.

From a near double-bottom of 1.2458 per euro hit overnight, the Swiss franc strengthened to 1.2320.  An official from the Swiss National Bank, Jordan, called the franc overvalued even at 1.2000.  He denied that the imposed ceiling compromises the autonomy of monetary policy and lamented that an end to the euro debt crisis is not at hand.  There’s been recent chatter that officials may move the ceiling rate to 1.2500 soon.

Oil prices continue to creep closer to $100, firming another 0.8% overnight to $96.26 per barrel.  Gold, which peaked marginally above $1900 on August 22 but dipped below $1600 a month later,  edged 0.2% higher to $1794.20 per ounce.

In the Pacific Rim, equities were widely mixed.  Stocks rose 2.9% in Thailand, 0.7% in Indonesia, 0.6% in Singapore, and 0.5% in Australia but fell 1.3% in Japan and Sri Lanka, 0.8% in South Korea, and 0.3% in China and Taiwan.  In Europe, the German Dax, Paris Cac and British Ftse show significant advances of 1.5%, 1.4%, and 1.0% so far.

Ten-year sovereign debt yields in Germany, Britain, and Japan have risen by four, two and one basis points.

Once again, political decisions in Greece are moving more slowly than hoped.  The leader for a unity government, which is supposed to be installed today, has still not been announced (chosen?).

Debate has begun in yet another confidence vote to decide the immediate fate of Italian Prime Minister Berlusconi’s government.  The outcome is seen as very close.  Berlusconi has previously won such votes that he was presumed likely to lose. 

Italian bond yields remain painfully elevated.  Japan has halved its purchases of EFSF bonds, taking EUR 300 million.

The German current account and trade surpluses in September were much greater than expected.  The seasonally adjusted trade surplus widened to EUR 15.2 billion from EUR 13.9 billion in August and EUR 10.9 billion in July.  Exports were projected to drop but rose 0.9%, while imports had been forecast to rise but instead dropped by 0.8% on month.  The monthly average surplus was EUR 13.3 billion in 3Q versus EUR 12.4 billion in the first half of 2011.  The unadjusted current account surplus of EUR 15.7 billion was much greater than August’s EUR 6.5 billion and even above the EUR 15.1 billion surplus in September 2010.  The year-to-September surplus of EUR 92.5 billion was similar to a surplus of EUR 93.6 billion a year before.

The French trade deficit widened EUR 2.0 billion on month to EUR 6.3 billion in September.  This shortfall surpassed analyst expectations.

Germany’s construction purchasing managers index relapsed to a sub-50 score of 47.3 in October after readings of 50.5 in September, 49.8 in August, and 50.6 in July.  October’s was the lowest reading of 2011. 

British industrial production was unchanged in September, a shade worse than forecast, and 0.7% lower than in September 2010.  Output rose 0.4% in the third quarter but was 0.8% lower than in 3Q10.  Manufacturing firmed 0.2% in the latest month and was up 2.0% on year.

The Royal Institute of Chartered Surveyors index of British house prices slid to a 4-month low of minus 24 in October.  A third straight reading of minus 23 had been predicted.  Same-store retail sales were 0.6% lower than a year earlier in October, according to the British Retail Consortium.  That was the worst outcome in five months.  Total sales were 1.5% higher than a year before.  The National Institute of Economic and Social Research called Britain’s recovery the slowest in a century and predicted 2012 GDP expansion of just 0.8%.

Dutch industrial output slid 0.3% in September after falling 0.5% in August.  Romania’s industrial production fell by 0.5% and showed a smaller 5.8% increase from a year earlier after having climbed 7.4% in the 12 months to August.  On-year growth in Hungarian industrial output slowed to 3.0% in September from 4.4% in August. Czech retail sales fell 0.6% on month and 0.5% on year in September, but the Czech jobless rate edged down from 8.0% in September to 7.9% last month, lowest since May 2009.

The global composite purchasing managers index compiled by J.P. Morgan fell closer to the boom-or-bust line of 50, dropping to 51.4 in October from 52.0 in September.  Service sector activity around the world showed its slowest rate of growth in six months.

Australian business confidence improved by three points in October to a reading of +2, but business conditions weakened by three points to minus two.  Australia’s trade surplus narrowed 17.4% on month to AUD 2.56 billion in September as exports fell 3.1%, while imports rose by 1.0%.

Japanese international reserves jumped $9.289 billion in October to $1.2099 trillion.

Lots of officials speak publicly today, including Weidman, president of the German Bundesbank, Hildebrand, president of the Swiss National Bank, Bank of Canada Governor Carney, and Plosser and Kocherlakota, presidents of the Philadelphia and Minneapolis Feds. 

The United States releases weekly chain store sales, the IBD/TIPP optimism index, and the NFIB measure of small business sentiment.  All of these are second-tier indicators.  Canada reports housing starts.

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

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