Bold Talk from Europe about Averting Grexit

May 25, 2012

It’s amazing that European politicians would retain any credibility with the markets.  Nonetheless, the euro and German Dax are firmer following comments from Italian Prime Minister that most EU members support joint euro bonds and that he believes that a way will be found to keep Greece in the EU.  There were reports overnight, too, that Germany is more amenable to a growth stimulus plan for Euroland peripherals.  On the other hand, Bundesbank President Weidman had tough remarks about the ECB doing all that it can already within the central bank’s mandate.

The Chinese press ran a story that bank lending in that economy likely slowed to an eight-month low this month.  Still, interest rates have not be cut by the central bank, which has only adjusted reserve requirements modestly thus far.

Japanese Finance Minister Azumi blamed yen strength on safe haven demand related to euro debt-inspired uncertainty.

New York Fed President Dudley indicated that more easing isn’t needed now.

U.S. Treasury Secretary Geithner claimed that political paralysis aggravates America’s economic problems.

The dollar has retreated 0.7% against the kiwi, 0.5% versus the euro, 0.4% relative to the Swiss franc and Australian dollar and 0.1% against the yen, loonie, and sterling.  The Chinese yuan is steady.

The German Dax is 0.8% stronger.  The Paris Cac has firmed 0.2%, while the British Ftse is 0.1% softer.  Earlier in the Pacific Rim, share prices fell by 2.1% in Indonesia, 0.9% in China, 0.8% in Taiwan, 0.7% in Australia, and 0.3% in New Zealand, but gains were made of 0.6% in Thailand, 0.5% in South Korea, 0.3% in Hong Kong, and 0.2% in Tokyo.

Gold and oil prices edged up 0.1% and 0.3% to $1561.70 per ounce and $90.94 per barrel.

The ten-year British gilt yield is two basis points lower, while the 10-year JGB and German bund yields have edged up by two and one basis points.

Japanese consumer prices in April were unchanged on month and 0.4% higher on year.  The core CPI, which excludes fresh food but not energy, ticked up 0.1% on month and 0.2% on year, but the core core CPI index, which excludes energy as well as fresh food, rose 0.2% on month but fell 0.3% on year.  Tokyo’s core core CPI in May was 1.3% lower than a year before following a 1.0% drop between April 2011 and April 2012.

South Korean consumer sentiment improved to a 15-month high with a reading of 105 in May after 104 in April. Thailand’s $2.9 billion trade surplus in April was as expected.  The Filipino trade shortfall in March of $1.1 billion was 87% wider than in February.

Singapore released three economic indicators:  1) Real GDP expanded at a 10% annualized rate last quarter after contracting 2.5% in 4Q11, and such posted a 1.6% on-year increase, down from 9.1% in the prior year between 1Q10 and 1Q11.  2) The first-quarter current account surplus of SGD 13.2 billion was 22.6% smaller than the 4Q11 surplus.  3) Industrial production unexpectedly sank 3.5% in April and recorded an on-year dip of 0.3% instead of the 4% gain that was forecast.

Euroland’s index of leading economic indicators slumped 0.8% in April following gains of 0.8% in February and 0.1% in March.  The index of coincident economic indicators edged down 0.1% last month.

French consumer confidence edged up a point to a score of 90 in May from 89 in April.  Spanish producer price inflation decelerated to 3.1% in April from 4.5% in March.

Italian retail sales fell 0.2% in March, less than forecast, and rose 1.7% on year.  Italian hourly wages posted gains in April of 0.3% on month and 1.4% on year.  Both increases were greater than those in March.  Polish retail sales fell back 2.4% in April after a 15.7% jump in March, and the 12-month rate of increase dropped to 5.5% from 10.7%.  Poland’s jobless rate declined to 12.9% last month from 13.3% in March and 13.5% in February.

The first German state to report May CPI inflation, Saxony, reported a monthly drop of 0.2% and a 12-month increase of 1.9%, down from 2.0% in the year to April.

The U. Michigan full-month gauge of U.S. consumer sentiment arrives today.  Mexico’s trade and current account data will be reported, too.  U.S. Treasury market trading will close early for the start of the three-day Memorial Day holiday weekend.

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

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One Response to “Bold Talk from Europe about Averting Grexit”

  1. yasuyo1 says:

    “It’s amazing that European politicians would retain any credibility with the markets.”

    Paris, Berlin & Athens are not New York or London. There’s more than one score… The world is not one mono-culture, even in finance.