Spain Gets More Bad News
June 14, 2012
The dollar has declined 0.8% against the kiwi, 0.5% versus the loonie, 0.4% relative to the Australian dollar, and 0.2% relative to the euro, Swissie, and sterling. The yuan is steady.
Share prices dropped 1.2% in Hong Kong and India, 1.8% in Indonesia, 1.7% in the Philippines, 0.8% in China, 0.5% in Australia and Singapore, and 0.2% in Japan and Taiwan. Stocks rose 1.0% in New Zealand after a dovish central bank policy statement. The British Ftse, German Dax, and Paris Cac are 0.5%, 0.4%, and 0.2% softer, but the Dow Jones Industrials has risen 0.7% so far after yesterday’s setback.
The 10-year British gilt and German bund yields have slipped five and two basis points. Japanese JGBs are steady, and the 10-year Treasury yield is up two basis points. Spanish 10-year yields touched 7.0% for the first time, reacting to news of a 3-notch downgrade by Moody’s of Spain’s debt rating to Baa3 from A3 and a continuing outlook assignment of “negative.” Italian yields have risen also.
Gold prices are 0.3% softer at $1615.40 per ounce. Oil prices are 0.2% firmer at $82.82 per barrel.
Japanese April industrial production was revised downward by 0.4 percentage points to minus 0.2%. While 12.9% higher than a year earlier, April’s output level was only up 0.1% from the 1Q12 mean. Capacity usage fell 0.6% in April, and capacity was 0.2% lower.
Japanese stock and bond transactions generated a JPY 448 billion capital inflow last week, a bit more than twice as large as the prior week’s inflow.
More signs of a slowdown emerged in China where the current account surplus narrowed 60.7% on quarter to $23.5 billion in the first quarter. Deutche Bank’s forecast for Chinese GDP growth this year was revised below 8% to 7.9% from 8.2% estimated earlier.
Bangko Sentral ng Pilipinas left the Filipino central bank rates (4.0% for overnight borrowing and 6.0% for overnight lending) unchanged. There had been cuts of 25 basis points each in January and March of this year.
The Reserve Bank of New Zealand’s Official Cash Rate of 2.5% will be continued. Defending the appropriateness of the stimulative monetary stance, central bank officials released a statement that spoke of weaker-than-expected domestic data and euro-inspired risks.
The Swiss National Bank also reaffirmed its accommodative stance. After a quarterly policy review, officials kept a zero to 0.25% target range for 3-month Libor and, more importantly, proclaimed that it will do whatever is needed to prevent the franc from strengthening beyond 1.2000 against the euro.
Released U.S. data showed
- A wider current account deficit of $137.3 billion last quarter after $118.7 billion in 4Q11. As a percent of GDP, the deficit of 3.6% was a half percentage point greater than those in the final quarter of 2011 and for the full calendar year of 2011.
- The largest monthly drop of consumer prices in over three years. The CPI fell 0.3% in May and to a 1.7% 12-month pace from 2.3% in the year to April. Energy prices sank 4.3% on month, and core CPI rose by 0.2% on month and 2.3% on year.
- New jobless insurance claims unexpectedly rose to 386K last week. The four-week 382K average level was slightly above the 378.5K pace of the prior four-week period and more substantially above the pace of 355K in the four weeks to March 17.
Euro area consumer prices dipped 0.1% on month in May and to an on-year 2.4% increase from 2.6% in the year to April and 2.7% in both February and March. Consumer prices had also risen 2.7% in the year to May 2011. Core inflation held steady last month at merely 1.6%. Energy prices dropped 1.4% on month and slowed to a 7.3% on-year pace from 8.1% in April and 11.1% in May 2011.
Labor cost pressure in the euro zone subsided much more sharply than anticipated in the first quarter, posting an on-year increase of 2.0% versus 2.8% in 4Q11.
German wholesale prices slumped 0.7% on month in May and to a 1.7% 12-month increase from 2.4% in April and 8.9% in May 2011.
Greek unemployment swelled to 22.6% in the first quarter form 20.7% in the final quarter of 2011.
Britain’s index of leading economic indicators rose 0.2% in April, while the index of coincident indicators stagnated.
Moody’s also downgraded the credit rating of Cyprus. The change was by two notches to Ba3.
Dutch retail sales plunged 7.0% in April and by 10.6% from a year earlier. The EUR 4.38 billion Dutch trade surplus in April was 2% wider than in March. Finnish CPI inflation remained steady at 3.1% last month.
Wholesale price inflation in India accelerated to an even more uncomfortable 7.6% last month from 7.2% in April.
In Hong Kong, industrial production was 1.6% lower than a year ago in the first quarter, while producer price inflation slowed to 3.6%. South Korean unemployment declined in May to 3.2%.
Expected inflation in Australia slowed sharply to 2.3% this month, a 37-month low.
Canadian capacity utilization edged up 0.2 percentage points in the first quarter of 2012 to 80.7%. In Q11, such had been 79.7%. Canada also reported house prices, which firmed 0.2% in April and by 2.5% on year. Brazilian retail sales increased 0.8% on month and 6.0% on year in April. Wholesale sales in South Africa advanced 1.4% in April and by 8.1% from a year earlier.
Copyright 2012, Larry Greenberg. All rights reserved. No secondary distribution without express permission.
Tags: Euroland labor costs and consumer prices, U.S. CPI, U.S. current account