Stocks Down but Currencies Steady

June 22, 2012

At the end of a Thursday that saw global equities decline sharply, Moody’s announced that it was downgrading the credit rating of 15 money center U.S. and European banks.  Then today came news of a 1.6-point additional drop in the IFO index of German business confidence.

Stocks in Asia and Europe have lost more ground this Friday, but the dollar is unchanged against the euro, Swissie and yuan, down merely 0.1% versus the yen, loonie, yuan, and sterling and up 0.1% relative to the Australian dollar.

Share price losses today total 2.2% in South Korea, 1.6% in China, 1.4% in Hong Kong, 1.0% in Australia, Germany and Britain, and 0.9% in France.

A stress test study by independent advisors of Spanish banks found they are likely to need recapitalization of at least EUR 20 billion and as much as EUR 62 billion under worst-case conditions.  Even the higher figure lies below the proposed EUR 100 billion Spain would get from the EU.  The Spanish IBEX has risen 0.9% today, recouping further lost ground relative to other regional bourses.

Gold and oil prices recovered 0.3% and 0.5% to $1570.30 per ounce and $78.56 per barrel, but these key commodities show net losses this week of 3.5% and 6.8%.

The 10-year German bund and Japanese JGB yields move one basis point higher.  British gilts are steady.

IFO’s industrial business climate index printed at 105.3 for June, down from 106.9 in May, 109.8 in April and last November’s trough of 106.8.  Current conditions in the latest month actually recovered to a reading of 113.9 from 113.2 in May but were overwhelmed by a 3.5-point additional slide in business expectations to 97.3.  Manufacturing with a score of 5.0 after 10.5 in May and 15.3 in April took the biggest hit.  After plunging to minus 3.7 in May from +10.6 in April, retail bounced up to 0.3 in June.  IFO officials declared, “the German economy fears the growing impact of the euro crisis.”

The IFO business climate index of service-producers also worsened in June, dropping 3.5 points to a reading of 21.3, which unlike the more widely followed industrial index remains above last autumn’s low levels.

Consumer confidence in Italy sank 1.2 points to 85.3 in June and plunged 11 points over the course of the second quarter from 96.3 in March.

Danish retail sales firmed 0.2% on month in May, a shade better than forecast, but was 0.2% lower than in May 2011.  The Greek current account deficit narrowed 57% on month to EUR 910 million in April.  Dutch consumer spending was 2.0% lower than a year earlier in April.

There was an offshore earthquake overnight near Australia.

The Filipino current account surplus in 1Q12 of $882 million was 51% smaller than in 4Q11 and 8% less than in the first quarter of 2011. Malaysian consumer prices rose 0.2% in May, trimming the 12-month rate of increase to 1.7% from 1.9% in April and 2.1% in March.  Taiwanese industrial output recorded a 0.2% on-year downtick in May, which was considerably smaller than anticipated. 

The political leaders of Germany, France, Spain and Italy are meeting today in Rome.  This is a preliminary gathering in advance of the EU semi-annual summit scheduled fo the 28th and 29th of this month.

Today’s key North American data release will be Canadian consumer prices, which arrive at 12:30 GMT.  Sandra Pianalto, President of the Cleveland Federal Reserve, speaks publicly today.

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



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