Persistent Worry about Greece and Other Peripherals

February 7, 2012

Greek Prime Minister Papademos is to hold more meetings with the main political factions today, as a deal on austerity remains elusive.  Concern is also mounting that Portugal may default, too.

Following massive yen sales on October 31 totaling JPY 8.072 trillion, Japan’s Ministry of Finance intervened covertly each of the first four days in November, selling an additional JPY 1.019 trillion.  This willingness to intervened under the radar breaks new ground in the fight to contain upward pressure on Japan’s currency.  Japanese reserved jumped $10.8 billion last month, reversing a drop in December of $8.9 billion.  Reserves were $213.7 billion greater than in January 2011, totaling $1.307 trillion at the end of January.

Share prices are lower on euro debt worries.  Such have declined by 0.7% in Germany, 0.3% in France and Britain, 1.9% in China, 1.3% in The Philippines, and 0.5% in Australia, Indonesia, and India.  Japan’s Nikkei-225 edged 0.1% lower.

The dollar has firmed 0.3% against the yen and 0.1% each versus the loonie, euro, Swissie and sterling.  The Australian dollar rose 0.5%, while the yuan ticked 0.2% higher.  The kiwi is steady.

Ten-year British gilt and German bund yields are two and one basis points lower.  JGBs are steady.

Oil and gold prices softened by 0.6% and 0.5% to $96.32 per barrel and $1716.40 per ounce.

The casualty count following a 6.8-magnitude earthquake near Negros, The Philippines continues to climb.  Numerous aftershocks have been felt.  Filipino CPI inflation of 3.9% in January was a tick less than expected.

China will suffer an appreciable slowdown in economic growth if the euro debt crisis isn’t controlled, according to IMF officials.

The Reserve Bank of Australia surprised analysts, who were anticipating a third reduction of the Official Cash Rate today.  The 4.25% benchmark was instead retained.  However, the door was left open to more easing should aggregate demand weaken materially.  The OCR was cut at the prior two RBA Board meetings in November and December.  As per custom, there was no meeting in January.  Australia’s construction PMI index slid 1.2 points to 39.8 in January.

New Zealand wages were unchanged last quarter.

Industrial output data were released in several countries, most notably Germany.  German industrial production sank 2.9% in December, ten times more sharply than anticipated.  Output was 0.9% greater than a year earlier and fell by 1.9% between 3Q11 and the fourth quarter of last year.  December’s sharp drop was widely dispersed across sectors, with monthly declines of 6.4% in construction, 2.2% in energy and 2.7% in manufacturing.  Within the latter, output of capital goods fell by 3.6%.

Elsewhere, industrial production rose in December by 1.7% in the Netherlands (1.5% on year).  Such climbed 2.1% in Hungary (1.7% on year). Danish output increased 3.3% on month and 6.1% on year.  Norwegian production dropped 2.2% on month. 

The British Retail Consortium reported the second weakest on-year January comparison for same-store sales since at least 1995.  Such fell 0.3%.  Total retail sales posted a 12-month 2.1% increase, half the gain in December.

France recorded a record EUR 69 billion trade deficit in 2011, 35% wider than in 2010.  France’s erosion of competitiveness has damaged the popularity of the right-of-center Sarkozy government.  Presidential elections will be held in two rounds on April 22 and May 6.  Sarkozy may not survive to the second run-off round between the two top vote-getters on April 22.  The December trade deficit was EUR 4.99 billion, 20.5% bigger than in November.

Finland’s trade deficit increased 42% in December to EUR 475 million.  The Czech trade surplus narrowed 47% to CZK 10.5 billion but was larger than expected in December.  Austrian wholesale prices increased 1.8% on year in January, down from 3.4% in the year to December.

Japan’s index of leading economic indicators rose 0.6 points to a 5-month high of 94.3 in December.  The coincident index improved to a 10-month high.  Department store sales in South Korea were 4.2% lower than a year earlier in January.

Officials in India are predicting 6.9% GDP growth in the current fiscal year to March, down from 8.4% last fiscal year.

Scheduled U.S. data today are the Labor Department’s JOLTS index on job openings, the weekly figures on chain store sales, the IBD/TIPP optimism inex, and consumer credit.  These are all second-tier indicators.  Of greater interest will be testimony by Fed Chairman Bernanke before the Senate Banking Committee and whether his very dovish message from last month’s press conference is tempered in the wake of last Friday’s more buoyant jobs report.  Canada releases building permits.

Copyright 2012, Larry Greenberg.  All rights reserved.  No secondary distribution without express permission.

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