Firmer Dollar as EU Leaders Meet in Brussels

March 2, 2012

The dollar strengthened overnight by 0.6% against the kiwi, 0.5% relative to the yen and euro, 0.4% against the Swiss franc, 0.3% versus the Aussie dollar, 0.2% against sterling and 0.1% versus the Canadian dollar.  The yuan is steady.  Dollar/yen has advanced for four straight weeks.

Stocks rose in Asia but are marginally softer in Europe.  Equities climbed 1.8% in China, 1.4% in New Zealand, 1.1% in Pakistan and  Indonesia, 1.6% in The Philippines, 0.8% in Hong Kong, 0.7% in Japan and Malaysia, 0.5% in Singapore and 0.3% in India.  The British Ftse and German Dax have slid 0.2% and 0.1%, while the Paris Cac is 0.1% firmer.

Ten-year German bund and British gilt yields softened two basis points each, while the JGB rose three bps.

Oil spiked briefly on a denied rumor that a Saudi pipeline had been attacked.  The current price of $108.13 per barrel is down 0.7% on balance and 2.2% below the high of $110.55.  Gold has slipped 0.3% to $1716.60 per ounce.

At the EU summit, leaders agreed to accelerate their payments to enlarge a bailout fund but have not yet agreed upon a new ceiling.  That must be done within 11 days to secure IMF aid for Greece.  EU leaders also finalized a new fiscal enforcement accord.  Greece began the PSI (private sector involvement) bond swap, which is supposed to be done by March 9.  A risk remains that credit default swap payments could be triggered.  In the wake of the ECB’s second and final 3-year LTRO of EUR 529.5 billion, deposits at the central bank shot up to a record high EUR 777 billion.

The Greek-German 10-year bond yield premium widened to 3,592 basis points.

Japan released several disappointing statistics showing economic weakness and an inability to shake off deflation completely.

  • The unemployment rate rose to a 6-month high of 4.6% in January from 4.4% in November and December, 4.4% in October and 4.2% in September.
  • Jobs were 0.8% lower than a year earlier after having dropped 0.2% between December 2010 and December 2011.
  • Core CPI inflation posted fourth straight sub-zero 12-month change, slipping 0.2% in the year to January.  Core-core inflation, which excludes energy as well as seasonal food, was negative 0.9% in the latest month.
  • In Tokyo, total consumer prices in February were 0.2% lower than a year before.  The core-core CPI in Japan’s biggest city fell 0.9% in the year to February.
  • Real household spending sank 2.3% in the year to January despite a 0.4% monthly rise and positive on-year gains in personal income and disposable income.
  • The 12-month rate of growth in the monetary base settled back to 11.3% in February from 15.0% in January, 16.6% in 4Q11, 15.8% in 3Q11 and 15.2% in 2011 as a whole.

German retail sales in January were weaker than projected.  Instead of a 0.5% rise, such fell in volume terms by 1.6% both from December and the 4Q11 average level.  Sales were 1.6% greater than in January 2011, however.

Britain’s construction purchasing managers index increased 2.9 points to a healthy reading of 54.3 in February.  The average score over the past six reported months has been 53.2.

JP Morgan’s estimate of the global manufacturing purchasing managers index settled back 0.2 points to 51.1 in February despite a 7-month high of 52.5 in the production component of the index.

Producer prices in the euro area jumped 0.7% in January, thanks mainly to a 2.2% leap in energy costs.  The PPI was also 0.7% higher than the 4Q average level and 3.7% above the January 2011 level.  PPI on-year inflation in January ranged from 7.7% in Greece to 4.2% in France and 3.4% in Germany.

Finnish GDP growth slowed sharply to 0.1% last quarter from 1.1% in the third quarter of 2011.  The on-year 1.4% rise of GDP was down from 3.3% in 3Q and resulted in 2011 growth of 2.9% after a 3.7% pace in 2010.  Norwegian retail sales volume accelerated a a 6.7% on-year gain in January.

Romanian PPI inflation settled back to 6.0% in January from 7.0% in December.  Hungary’s trade surplus narrowed 52% from November to EUR 325 million in December. 

South Korean CPI inflation of 3.1% last month was down from 3.4% in January and associated with a 2.5% core inflation rate.  Consumer confidence in February rose 2.3% points in Thailand but fell 6.3% in IndonesiaSouth African motor vehicle sales were 6.4% higher than a year before in February.

Canada will be reporting December and 4Q GDP data at 13:30 GMT.  No U.S. economic statistics are scheduled today.  St. Louis Fed President Bullard speaks publicly.  Republicans hold a caucus vote in the state of Washington tomorrow, and Russians elect their president on Sunday.

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

Tags: , ,


Comments are closed.