Bundesbank Says Not So Fast

July 27, 2012

After ECB President Draghi yesterday said the central bank will do whatever is needed to preserve the euro, officials at the German Bundesbank reaffirmed their opposition to buying peripheral sovereign debt via the SMP facility.  An ECB meeting is scheduled next Thursday.

A number of further indications of softer European economic activity emerged in released data.

The first estimate of U.S. GDP data last quarter is due at 12:30 GMT.  Analysts expect growth to be only around 1.5%.

Japanese data released overnight were disappointing.

  • CPI deflation hasn’t lifted.  Headline national consumer prices were 0.8% lower in June than a year earlier, the greatest on-year drop in seven months.  Consumer prices fell 0.6% excluding seasonal foods and by 1.0% excluding food and energy.  All three measures dipped on a sequential unadjusted monthly basis.  So did Tokyo CPI measures for July, which were negative on a seasonally adjusted as well as unadjusted basis.
  • Large-store retail sales slumped 2.6% between June 2011 and June 2012. That was the greatest 12-month drop in nine months.  Total retail sales sank 1.2% seasonally adjusted versus a 0.2% uptick that had been forecast and were only 0.2% higher than in June 2011, down from a 3.6% on-year increase in May.

With investors awaiting the U.S. national income accounts release, the dollar is unchanged on balance overnight against the euro and Swiss franc following yesterday’s significant drop.  The greenback has fallen 0.4% against the Australian dollar, 0.3% relative to the kiwi and sterling, 0.2% against the loonie and yen, and 0.1% relative to the yuan.

Following the rally Thursday in share prices, equities climbed by 2.6% in South Korea, 2.2% in Taiwan, 2.0% in Hong Kong and Indonesia, 1.5% in Australia and Japan, 1.3% in the Philippines, 0.5% in New Zealand but just 0.1% in China.  The British Ftse is unchanged, and the German Dax has fallen 0.2% on the Bundesbank’s sobering signal.  The Paris Cac and Spanish IBEX are up 0.4% and 0.1%.

The 10-year British gilt and German bund yields rose two and one basis points.  The Japanese JGB is steady at 0.75%.

Gold and oil prices are 0.5% and 0.2% firmer at $1627.50 per ounce and $89.56 per barrel.

All six German states upon which the preliminary CPI estimate is based reported a 0.4% monthly advance.  The 12-month inflation rate dipped further in three instances, remained unchanged in two other states, and edged marginally higher in one case.  Core inflation was lower.

French consumer confidence printed at a lower-than-forecast 87 reading in July from a downwardly revised score of 89 in June.

Italian business sentiment in July fell 1.6 points to a reading of 87.1, 6.3 points below the average reading in the final quarter of 2011.

Swedish retail sales unexpectedly dropped 0.4% in June, offsetting May’s downwardly revised 0.3% increase.  Sales were just 0.9% higher than a year before.

Spanish unemployment rose to 24.6% in the second quarter, most since the mid-1970s.

Consumer confidence in Finland slumped to a reading of 0.1 in July from 5.8 in June, 12.0 in May and 10.4 in April.

Euroland’s index of leading economic indicators fell 0.3% in both May and June, while the index of coincident indicators was unchanged in both months.

Irish retail sales fell by 0.7% on month and 5.5% on year in volume terms last month.

Greek producer prices fell 1.9% in June, trimming the 12-month increase to 2.9% from 5.0% in the year to May.  Icelandic CPI inflation slowed to 4.6% in July from 5.4% in June, while producer prices in Iceland dropped by 1.2% on month and by 0.7% on year in June.

The Swiss index of leading economic indicators improved to 1.43 in July from 1.15 in June.

South Korea recorded a $3.7 billion seasonally adjusted current account surplus in June and an unadjusted $13.7 billion surplus in the first half of 2012.  Producer prices in Singapore fell 3.3% on month and by 2.4% on year in June.  Thailand reported disappointing industrial production for June; such was 9.6% lower than a year before, suggesting a continuing struggle after the 2011 floods. 

Besides GDP, the U.S. will be reporting the U. Michigan index of consumer sentiment today.  Colombia’s central bank is holding a policy meeting and is not expected to change its policy rate.  The opening ceremony of the 2012 Olympic games in London takes place today.  The games have cost four times original estimates.  Mitt Romney managed to upset British officials by expressing doubt about whether security at the games is tight enough.  Romney organized the Salt Lake City winter Olympics in 2002.

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

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