Greek Austerity Proposals Not Enough

February 10, 2012

A new shock wave of risk aversion hit markets as EU finance ministers rejected the Greek proposed reforms for being insufficient. German Finance Minister Schaeuble projected that Greek debt to GDP would still reach 136% in 2020, 16 percentage points higher than target.

Other market depressants overnight stem from disappointing Chinese data and the Reserve Bank of Australia’s quarterly Monetary Policy Statement.

Share prices fell 1.7% in Indonesia, 1.1% in Hong Kong, 1.0% in South Korea, 0.9% in Australia, 0.7% in Singapore, 0.6% in Japan, and 0.5% in India.  The German Dax and Paris Cac currently show declines of 1.0% and 0.9% on the day, while the British Ftse is off 0.3%.

The dollar advanced by 1.0% relative to the Aussie dollar, 0.7% against the kiwi, 0.5% versus the loonie, 0.3% against the euro and 0.1% relative to the Swissie.  The yen, yuan, and sterling are steady against the greenback.

Oil and gold prices have slumped 1.3% to $98.56 per barrel and 1.0% to $1723.50 per ounce.

The yields on ten-year British gilts, German bunds, and Japanese JGBs are 7, 5, and 1 basis points lower.

Australia’s dovish quarterly Monetary Policy Statement contains downwardly revised growth and inflation forecasts and foreshadows more interest rate cuts in the 4.25% Official Cash Rate.

Bank lending in China amounted to 738 billion yuan last month, 26% less than expected.  Such had totaled Yuan 1.04 trillion in January 2011 and Yuan 641 billion in December.  Money growth in the year to January also fell below expectations. M0 slowed to 3.0% from 13.8% in December.  M2 slowed to 12.4% from 13.6%, and M1 slumped to 3.1% from 7.9%.

Chinese imports were 15.3% lower in January than a year earlier after having risen 11.8% in the year to December.  Exports were down 0.5% on year.  The $27.3 billion trade surplus was the largest since July and the second highest in over a year.  The average monthly surplus in 4Q11, by comparison, was $16.0 billion.

Indian industrial production growth slowed to 1.8% on year in December from 5.9% in November.  India appears headed for discernibly less growth in 2012 than experienced in recent years.

Japanese corporate goods prices for January showed a sharp drop off in inflationary pressure.  The domestic CGP slid 0.1% on month and to a 12-month 0.5% gain from 1.2% in December and 2.8% last July.  Export prices fell 5.2% on year versus a 1.1% 12-month decline in July, and import price inflation has decelerated to 1.9% from 13.3% six months earlier.

German consumer price inflation of 2.1% last month matched December’s pace.  Non-energy consumer prices were only 1.5% higher than a year earlier.

French industrial production fell 1.4% in December, more than reversing November’s 1.1% increase.  The fourth quarter saw such drop 0.8%.  France’s current account deficit widened to EUR 3.0 billion in December from EUR 2.1 billion in November.

Italian industrial production rose 1.4% in December.  Unlike France, this outcome was much better than expected.  Likewise, Irish industrial production increased 3.5% after tumbling by 14.1% in November.

British producer output prices rose 0.5% in January, but the 12-month pace of 4.1% constituted a 14-month low after a gain of 4.8% in the year to January.  Core PPI-O inflation slowed to 2.4%, while core producer input price inflation slowed to 5.4% from 7.3% in December.

Norwegian consumer prices slipped 0.2% on month and recorded an on-year rise of only 0.5% in January.  PPI inflation slowed to 7.9% from 8.2%. Danish CPI inflation picked up to 2.8% in January from December’s 2.5% pace.  Swiss CPI inflation continued to be negative.  Such fell 0.8% between January 2011 and January 2012.  Portuguese CPI inflation slowed to 3.5% from 3.7% in December. 

Swedish industrial production was unchanged in December and 2.0% higher than a year earlier.  Finnish industrial output climbed 2.8%  in December and was 2.0% greater than a year earlier.  Romanian industrial production ended 2011 1.4% higher than in December 2010.

Peru’s central bank interest rate has been left at 4.25% as expected.

Canada and the United States release trade data at 13:30 GMT.  The U. Michigan index of consumer sentiment and the January U.S. federal budget arrive today as well.

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

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