Further Deterioration of Euro Debt Climate

April 5, 2012

The mood of investors is darkening this Maundy Thursday.

  • Share prices fell 1.6% in Taiwan, 1.3% in Thailand, 1.0% in Hong Kong, 0.8% in Pakistan and 0.5% in Japan.
  • In Europe, the German Dax, Paris Cac and British Ftse have lost 1.1%, 0.9%, and 0.7%.
  • U.S. stock futures are lower.
  • Spanish 10-year sovereign debt yields rose to pre-LTRO levels of 5.75%.  Their spread versus German bunds is near a 3-month high.
  • Protests in Greece intensified.
  • German and British industrial production data released this morning are worse than forecast.
  • Markets are closed for religious holidays in The Philippines and India.

The yen gained 0.7% against the dollar, and the greenback in turn is up 0.5% versus the euro, 0.4% relative to the Swissie, 0.3% against the yuan and sterling, 0.2% versus the loonie and 0.1% against the kiwi.

Ten-year sovereign debt yields fell by 6, 4, and 3 basis points in Britain, Germany and Japan.

Gold and oil prices recovered 0.5% and 0.3% to $1622.50 per ounce and $101.78 per barrel.

German industrial production slumped 1.3% in February, nearly three times as much as forecast and erasing January’s 1.2% increase.  Output in the first two months of 2012 was 1.2% weaker than the 4Q11 average level.  Cold and snowy weather caused construction to tumble by 17.1%, while factory output dropped 0.4% in February.

Germany’s construction PMI index recovered strongly in March to 55.7 from a 35.3 reading in February and also exceeded January’s 53.2 score.

The Bank of England as expected made no change in its policy stance and gave no information about the discussion at its April meeting.  Minutes of that meeting will be released April 18.

British industrial production rose 0.4% in February but was 2.3% weaker than a year earlier.  Factory output dropped 1.0%, surprising forecasts of scant change.  In December-February, industrial production dropped 0.5% from the previous three months and by 3.1% from a year before. 

Speculation the China’s central bank may ease monetary policy next week helped Chinese share prices to buck the downward trend of other bourses.  Chines stocks jumped 2.4%.  China’s service-sector PMI printed in March at 53.3, slightly less than 53.9 in February and similar to January’s 51.9.  The composite index scored a 49.9, however, which was the third sub-50 reading in five months.

Stock and bond transactions in Japan generated a JPY 328 billion outflow in the final week of March, considerably less than the outflow of JPY 1.576 trillion in the week of March 24.

Hong Kong’s service-sector PMI dropped 0.8 points to 52.0 in March but surpassed the 50 no change line for a third straight time.

Brazil’s service purchasing managers index declined 3.3 points to 53.8 but surpassed 50 for a 32nd straight time.  The composite Brazilian PMI of 53.4 followed readings of 53.8 in January and 55.5 in February, producing the best calendar quarter since 1Q10.

JP Morgan’s global composite PMI slid to 54.6 in March from 55.4 in February.  The services index slipped to 55.2 from 56.3.

Swiss consumer prices rose 0.6% in March but were 1.0% lower than a year earlier.  Those results were similar to analyst expectations.  The Dutch CPI increased 1.1% in March and by an unchanged 2.5% from a year earlier.

Investors await U.S. weekly jobless claims and Canada’s monthly labor force survey, each due at 12:30 GMT.  Canada also reports building permits and the IVEY-PMI index today.  President Bullard of the St. Louis Federal Reserve speaks publicly today.

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

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