Weekend Elections in Greece and France

June 15, 2012

Greek elections on Sunday have captivated the market’s attention.  G20 sources claim that central banks have contingency plans to handle inadequate market liquidity afterward.  Investors have to wonder if the reports are adequate and if officials really have the means to combat market volatility.

France holds the second round of parliamentary elections on Sunday as well.

The dollar is 0.1% firmer against the euro, Swissie, loonie and yuan but down by 0.8% against the yen, 0.4% versus the kiwi and sterling and off 0.2% relative to the Australian dollar.

U.S. stocks rose at today’s open, with the DJIA showing a 0.5% gain.  The British Ftse, Paris Cac and German Dax have advanced 1.8%, 1.4%, and 1.1%, but Japan’s Nikkei closed unchanged after the Bank of Japan voted not to change its policy settings.  Elsewhere in the Pacific Rim, share prices rose by 2.3% in Hong Kong, 1.6% in India, 1.1% in Taiwan and Thailand, 1.3% in Singapore, 0.9% in New Zealand, 0.4% in Australia and 0.3% in China.

Ten-year sovereign debt yields are down by ten, six, and six basis points in Britain, Germany, and the United States.  The 10-year JGB edged one basis point lower.

Oil prices are steady at $83.93 per barrel, while gold has firmd0.4% to $1625.70 per ounce.

The Bank of Japan left its key interest rate range at zero to 0.1%, did not expand its asset buying plan beyond current levels, and released an upgraded economic assessment that claims a pick up has begun.

The Central Bank of Chile retained a 5.0% benchmark interest rate as had been expected. 

Bank Rossii, Russia’s central bank, likewise made no change in its key interest rate but reduced FX swap rates as a precautionary move to preserve stability after the Greek election.

U.S. data accentuated weakness today. 

  • Industrial production unexpectedly fell by 0.1%, the second drop in three months.  Output was 4.7% higher than in May 2011.
  • Capacity usage dropped 0.2 percentage points to 79.0% in May.  For manufacturers, the decline was by 0.4 percentage points to 77.6%.
  • The Empire State manufacturing index, compiled by the New York Fed, slumped by 14.8 points in June to a 7-month low of 2.29.
  • The Treasury Department reported a smaller $25.6 billion net long-term capital inflow in April.  The inflow in March had been $36.0 billion.
  • The Thomson Reuters/U. Michigan measure of consumer sentiment fell more sharply than expected in June, printing at 74.1 after 79.3 in May.

Canada’s manufacturing survey for April was likewise weak.  Shipments and new orders fell by 0.8% and 3.2%, respectively, and inventories rose as a percent of shipments.

Britain’s merchandise trade deficit jumped into double figures in April, printing at GBP 10.103 billion, 15.7% bigger than in March.  The total goods and services deficit widened 49% to GBP 4.42 billion as exports slumped 5.1%.

Employment in Euroland fell 0.2% on quarter in 1Q and by 0.5% from the first quarter of 2011.  Jobs rose by 1.5% on year in Germany but fell by 8.7% in Greece, 4.2% in Portugal, 3.7% in Spain, and 0.8% in Italy.  French employment was just 0.1% higher than in 1Q11.

Euroland’s seasonally adjusted trade surplus widened to EUR 6.2 billion in April, highest since December and up from EUR 3.7 billion in March.  However, exports posted a consecutive monthly decline.  The year-to-April unadjusted trade balance was in surplus by EUR 5.9 billion versus a cumulative deficit of EUR 23.3 billion in January-April 2011.

Poland’s current account deficit more than doubled between March and April.  The Czech current account surplus contracted 50.5% to CZK 5.3 billion in the same interval.  Czech producer price inflation slowed to 1.7% in March.  Danish PPI inflation slowed from 2.2% in April to 2.0% in May. Icelandic consumer price inflation was at 6.0% in May on a harmonized basis, down from 7.2% in April.  Industrial production in Hungary fell 2.4% on month and 3.1% on year in April.  Belgium’s trade position remain at virtual balance in April.  Norway posted a NOK 35.5 billion trade surplus in May, 7.6% smaller than in April.

New Zealand’s business purchasing managers index recovered to 55.7 in May, but consumer confidence in that economy sank to a 14-month low in May.  Retail sales in Singapore dropped unexpectedly by 0.9% in April and was just 2.2% higher than a year earlier.  The Filipino jobless rate improved to 6.9% last quarter from 7.2% in 4Q11.  South Korean export and import prices each fell in May but were respectively 3.2% and 2.1% higher than a year earlier.

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

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