Spain Getting Another Dose of Fiscal Austerity

July 11, 2012

Spain’s government will implement its fourth package of fiscal austerity in the last seven months.  It will amount to EUR 65 billion, too much for social sustainability but insufficient to reach budget targets.

The dollar fell overnight against commodity-sensitive currencies, dropping 0.8%, 0.7% and 0.4% relative to the Australian, New Zealand and Canadian dollars.  The greenback also shows net losses of 0.3% versus sterling, 0.2% against the euro and Swiss franc, and 0.1% relative to the yen.  The dollar is 0.1% firmer against the yuan.

Japan’s 10-year JGB yield dipped by a further basis point and slid below 0.80%.  The German bund yield also slipped one basis point, while the British gilt yield is two basis points lower.  Concern about weakening global growth continues to overshadow the previous regional focus on just Europe.

Share prices fell 0.7% in India and 0.1% in Japan but recovered 0.8% in China.  In Europe, the British Ftse and Paris Cac are down 0.4% and 0.6%, but the Spanish IBEX and German Dax have risen 0.2% and 0.1%.

Oil prices advanced 0.9% to $84.68 per barrel.  Gold prices fell 0.3% to $1575.00 per ounce.

Australian consumer confidence improved 3.7% to a reading of 99.1 in July from 95.6 in June.  The improvement has been attributed to the lagged boost of a series of central bank rate cuts.  Home loans and investment loans in Australia fell by 1.2% and 4.6% in May, however.

Japan’s tertiary index, a measure of service sector activity, climbed 0.7% in May, the biggest on-month gain since December.  The tertiary index average in April-May still remained 0.3% lower than the 1Q level and 2.8% stronger than a year before.

Domestic corporate goods prices in Japan fell 0.6% in June on top of a 0.5% decline in May, and they were 1.3% weaker than in June 2011.  Export prices (down 0.9% on month) and import prices (off 2.3%) also showcased continuing deflation.  Japanese machine tool orders were 15.5% smaller in June than a year earlier.

South Korea’s jobless rate held steady at 3.2% last month.  Likewise, M2 money in that economy posted the same on-year 5.5% increase in May as in April.  Filipino M3 growth slowed to 7.9% from 9.1% in April.  Fuel prices in China were cut by officials for a third time in two months.  Malaysian industrial production jumped 3.0% in May, more than doubling the 12-month increase to 7.6% from 3.2% in the year to April. 

The final German CPI report for June reaffirmed that such dipped 0.1% on month and slowed further to 1.7% in on-year terms.  From January 2011 until April 2012, such had exceeded 2.0%.  In annualized terms, consumer prices increased just 1.1% during the first half of 2012.

The French current account deficit of EUR 4.1 billion was slightly less than posted in April.

Consumer price inflation in Portugal held steady at 2.7% in June, accelerated in Hungary to 5.6% from 5.3% in May, and also picked up in the Czech Republic to 3.5% from 3.2%.  The Czech jobless rate of 8.1% in June from 8.2% in May.  A warning was released by the ILO that unemployment in the whole euro area could climb by 4.5 million more workers during the coming four years.  In Spain where yet more tax increases and spending cuts were announced today, the index of leading economic indicators fell in May by 0.6% following drops of 0.9% in March and 1.5% in April.

Turkey’s current account deficit widened 17% in May.

U.S. mortgage applications fell by 2.1% in the first week of July.  At 12:30 GMT (08:30 EDT) both the United States and Canada release their trade figures.  The most awaited U.S. release today are the FOMC minutes at 16:00 GMT.  Other scheduled U.S. releases are wholesale inventories and sales and the monthly federal budget.  Mexican trade numbers arrive, and COPOM, Brazil’s monetary policy committee, will reveal its latest interest rate decision.

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

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