More Angst about Europe as G8 Leaders Gather at Camp David for Annual Summit

May 18, 2012

Pacific Basin equities took another deep dive, falling 3.0% in Japan, 2.7% in The Philippines and Australia, 3.4% in South Korea, 2.8% in Taiwan, 1.6% in Thailand and Indonesia, 1.5% in China and Singapore, and 1.3% in Hong Kong.  In the epicenter of worry, stock prices are down 2.1% in Stockholm, 1.0% in London, but only 0.3% in Paris and Frankfurt.

The dollar advanced to its highest levels since January 16 against the euro, November 25 versus the Australian dollar, and December 20 against the kiwi.  The yen touched its strongest value against the euro since February 6.  The Swiss franc continues to hover near 1.2000 per euro.  From Thursday closing levels, the dollar shows net gains of 0.6% against the kiwi, 0.3% relative to the Australian dollar and 0.1% versus the yen, but the greenback is unchanged against the euro and 0ff 0.2% versus the loonie and 0.1% relative to the Swissie and sterling.

The yields on 10-year German bunds and British gilts are a basis point firmer, but the 10-year Japanese JGB yield has edged two basis points lower.

Gold prices recovered 0.8% to $1588.00 per ounce, while oil prices are 0.1% softer at $92.50 per barrel.

For the first time since August, the Japanese cabinet upgraded its economic monthly assessment from “picking up slowly” to “recovering at a moderate pace.”  Upgrades were announced in consumption to “increasing at a moderate pace” and exports to “showing signs of picking up.”  This optimism follows Thursday’s GDP data showing first-quarter growth of 4.1% annualized from 4Q11 and 1.4% on-year expansion from 1Q11.

Fresh impetus for fear about Europe came from Moody’s 1-3 notch downgrade of sixteen banks in Spain.

Chile’s central bank as expected retained a 5.0% key interest rate level.

New house prices in China suffered a larger 1.2% on-year drop in April.  South Korea’s index of leading economic indicators fell by 1.5% in March.

Facebook’s IPO went well despite mixed predictions.

German producer price inflation slowed to 2.4% in April, lowest since May 2010, from 3.3% in March and 6.4% in April 2011.  Energy was 4.5% higher than a year earlier, while all other producer prices collectively went up 1.5% in the past statement twelve months.

Italian industrial orders rebounded more strongly than anticipated in March with a rise of 3.5% from February, but such were still 14.3% lower than a year earlier.

Spain’s index of leading economic indicators fell 0.9% in March.  Icelandic consumer prices rose 0.5% on month and 7.2% on year in April.

There’s been a moderate earthquake in Japan.  Political leaders from the Group of Eight will be meeting today and tomorrow in Camp David, Md.

Canadian consumer price data get released at 12:30 GMT today.  No U.S. economic releases are scheduled.

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

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