Hopeful Mood Persists

June 7, 2012

Share prices rose overnight in the Pacific Rim by 1.2% in Japan and India, 2.6% in South Korea, 1.3% in Australia, 0.9% in Hong Kong, 1.9% in Vietnam, and 1.1% in The Philippines.  In European markets, equities have risen 1.0% in Spain, 0.7% in Britain, 0.6% in France and 0.5% in Germany.

10-year sovereign debt yields moved higher by three basis points in Germany and one basis point each in Japan and Britain.

The dollar is unchanged against the euro, Swissie, Aussie dollar, yuan and sterling.  It’s risen 0.2% against the yen and 0.1% versus the kiwi and loonie.

Gold and oil prices slipped by 0.9% and 0.2% to $1619.00 per ounce and $84.83 per barrel.

Yesterday’s Beige Book spoke of modest pick-up in growth and job hiring but also highlighted continuing uncertainty and fragility.  Vice Fed Chairman Yellen made dovish remarks suggesting a readiness to do more stimulus.  Chairman Bernanke testifies today before the Joint Economic Committee on the economy, and Fed regional presidents Fisher, Lockhart and Kocherlakota also will be speaking today.

Three Spanish sovereign bond auctions that fetched a total of EUR 2.07 billion at 2, 4, and 10 year maturities produced lower yields than anticipated.

German Chancellor Merkel endorsed the need for tighter political and fiscal union even if such excludes some laggard countries.  She also said that a full solution may not be secured at the June 28-29 EU summit but rather take further meetings to complete.

Swiss currency reserves shot up 27.9% in May from April, as the Swiss National Bank intervened heavily to prevent the franc from strengthening through 1.2000 per euro.

The British service-sector purchasing managers survey for May showed greater resilience than expected.  The index printed at 53.3, the same level as in April, with signs of solid jobs strength and accelerating new business but a 5-month low in business optimism.

Also in the U.K., the Halifax house price index rose by an as-expected 0.5% in May, trimming the on-year drop in March-May to 0.1% from a decline of 0.5% in the year to February-April.  The British Retail Consortium reported on-year sales growth of 1.3% in May, matching a five-month best gain.

Perhaps influence by the services PMI, the policymaking committee of the Bank of England did not expand its stimulus further as a minority of analysts were hoping.  The Bank Rate has been 0.5% since March 2009, and the Asset Purchase Plan was last raised by GBP 50 billion in February to the current limit of GBP 325 billion.

Australian labor statistics were reported and, like the GDP data out yesterday, were much better than projected.  Jobs in May rose 38.9K instead of holding just steady.  Such had climbed 37.6K in March and by 7K in April.  Full-time positions, up 46.1K, accounted for all of May’s increase.  The unemployment rate, however, also advanced, reaching 5.1% compared to 4.9% in April and 5.2% in March.

Australia’s construction purchasing managers index printed in May at 34.7, which was the fifth consecutive sub-40 outcome and 0.2 points less than in April.

Japanese reserves fell by $11.826 billion in May to $1.2777 trillion, a 6-month low.  In January, reserves had totaled $1.3067 trillion.

Japan’s index of leading economic indicators slid 1.3 points in April to a preliminary reading of 95.1.  The coincident index dropped 1.2 points to 96.5.  Stock and bond transactions last week generated a JPY 205 billion net capital inflow after an inflow of JPY 282 billion in the previous week.

South Korea’s second estimate of GDP growth in 1Q was unchanged from the earlier report, showing a rise of 0.9% from 4Q11 and 2.8% on year.  GDP had risen 0.3% on quarter and 3.3% on year in the final quarter of 2011.  On-year M2 money growth slowed to 5.5% in April from 5.7% in March.  Lending to households of KRW 456 billion was a shade greater than in April.

Swiss consumer prices were unchanged on month and 1.0% lower on year in May.  That was the same 12-month drop as in April and a tad bigger than forecast.  On a harmonized basis, the CPI was 1.1% below its year-earlier level.  Swiss unemployment slid to 3.0% not seasonally adjusted in May from 3.1% in April.

French unemployment on an ILO basis increased to 9.6% last quarter from 9.3% in 4Q11 and 9.2% in 1Q11.  The Greek jobless rate increased a half percentage point to 21.9% in March.  Professor Martin Feldstein of Harvard, mentor to numerous economists including Fed Chairman Bernanke, said there’s no way to repair Greece’s economy while it stays in the common currency area.

Industrial production in Denmark edged up 0.2% in April but was 3.6% lower than a year before.  Output in Hungary fell 2.4% on month and by 3.1% from April 2011.  Norwegian industrial production increased 2.4% on month and 7.5% from April 2011, with factory output rising 1.1% from March and 1.9% on year.  The Czech current account last quarter swung to a CZK 35.5 billion surplus from a deficit of CZK 17.4 billion in 4Q11.  Dutch consumer prices dipped 0.1% in May and to a 12-month increase of 2.1% from 2.4% in the year to April. 

Two measures of South African business sentiment were reported, one showing a 1.5-point decline from April to 92.8 in May and the other an 11-slide to 41 in the second quarter.

Scheduled U.S. data today include weekly jobless claims and monthly consumer credit, but the day will be dominated by the Bernanke testimony.  Canada reports the IVEY-PMI index.  Mexican consumer price figures get released, and the Central Bank of Peru has a scheduled interest rate policy announcement.

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

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