Spanish Delay
August 30, 2012
Following talks in Madrid between the leaders of Spain and France, Spain’s Prime Minister announced another delay in whether it would seek a bailout. This news added to some weak data to depress share prices and commodities, but currency movements have been limited.
The dollar has risen 0.3% against the Aussie and Canadian dollars, 0.2% versus the euro and Swiss franc, and 0.1% against the kiwi, yuan and sterling. The dollar is 0.3% softer relative to the yen.
Equities declined 1.7% in Indonesia, 1.2% in Hong Kong and South Korea, 1.0% in Japan, and 0.9% in Australia and the Philippines. In Europe, the German Dax and Spanish IBEX have faltered 1.7% and 1.5%. The Paris Cac and British Ftse are 0.9% and 0.5% lower. The Dow Jones Industrials has softened another 0.6%.
Oil and gold prices have lost 1.5% and 0.5% to $94.09 per barrel and $1656.60 per ounce.
Ten-year German bund and British gilt yields declined by six and five basis points. The 10-year Treasury yields is off three bps, while the 10-year Japanese JGB is up a single basis point.
Japanese retail sales slumped 1.5% on month following June’s 1.2% decline. A decrease of 0.8% from July 2011 was the first on-year fall since November. Large-store sales were down 4.4% on year versus expectations of a 3.2% 12-month decline. Japanese stock and bond transactions generated a JPY 918 billion net capital outflow last week versus a 784 billion yen inflow in the prior week.
Australian building permits plunged 17.3% on month and by 10.6% on year in August. Aussie business investment advanced 3.4% in the second quarter. New Zealand building approvals rose 2.0% on month in July, which was less than forecast. New Zealand business sentiment improved to a reading of 19.5 in August from 15.1 in July and 12.6 in June.
On-year Filipino GDP slowed from 6.4% in 1Q12 to 5.9% last quarter. An influential economic advisor in China predicted that an acceleration of inflation would limit the ability of the central bank to cut interest rates over the balance of 2012. Malaysian producer prices slid 0.2% in the year to July.
Euroland economic sentiment (ESI) printed at 86.1 in August, 1.8 points lower than in July and down from a crest of 94.5 last March. The deterioration in August exceeded expectations and was inconsistent with a separate business climate index (ECI) that firmed 0.07 to a reading of minus 1.19. Such was the first improvement since February. Within the ESI, consumer confidence worsened 3.1 points this month. Industrial confidence dipped 0.2 points, and construction reported an incremental slide of 4.6 points.
The euro area’s retail-sector purchasing managers index worsened 2.0 points to a three-month low of 44.4. France and Italy scored three-month lows as well of44.2 and 37.1, while the German retail PMI reading of 49.9 was at a 4-month low of 49.9 and down from 50.3 in July and 52.4 in June.
German labor statistics revealed further decay in what had been a resilient market. Unemployment rose 9K in August, the fifth straight monthly rise in seasonally adjusted terms, and by 29 thousand in unadjusted terms. The adjusted jobless rate stayed at 6.8%, however. German machinery orders in July were 2% below year-earlier levels.
Business sentiment in Italy edged higher unexpectedly in August, firming a tenth point to 87.2. Italy’s 5- and 10-year sovereign debt auctions fetched significantly lower interest rate levels than did previous such auctions in July.
According to Bank of England figures, mortgage approvals grew to 47.3K in July from 44.1K in June. The M4 stock of money in July was 4.6% lower than a year earlier.
Spanish CPI inflation accelerated to 2.7% in August from 2.2% in July. Belgian CPI inflation also increased, reaching 2.9% after 2.3% in July. Sweden’s current account surplus of SEK 55.2 billion in 2Q12 was 20.6% narrower than the 1Q surplus. Portuguese retail sales and industrial production respectively fell by 7.9% and 0.2% in the year to July, while consumer confidence in that country slipped by 1.2 points to 49.2 in August.
Icelandic producer prices fell by 4.2% in the year to July.
U.S. personal income and consumer expenditures respectively rose 0.3% and 0.4% in July, close to expectations. The 12-month increases in the personal consumption price deflator (1.3%) and the core PCE deflator (1.6%) showed the lowest paces of U.S. inflation since October 2009 and September 2011.
U.S. jobless insurance claims were unchanged at 374K last week. But continuing jobless claims of 3.316 million in the week of August 18 were nearly 100K higher.
The Kansas City Fed manufacturing index improved three points in August to a score of 8, best since +9 in May but still five points below the best 2012 reading of +13 in February.
U.S. chain stores for the most part reported stronger sales in August.
The Canadian current account deficit widened sharply in the second quarter to CAD 16.0 billion from CAD 10.1 billion in the first quarter. Average weekly earnings in Canada accelerated from a 2.5% on-year pace in May to 3.0% in June.
Late Wednesday, Copom, the Bank of Brazil’s monetary policy committee, cut its Selic interest rate for the ninth time, implementing a 25-basis point cut to a record low of 7.5%. There were signs, however, that this reduction may prove to be the last one of this easing sequence. Brazilian PPI inflation rose to 7.2% in July from 6.7% in June. South African PPI inflation slowed to 5.4% from 6.6% in June. South African M3 and domestic credit growth were each 8.3% in the year to July versus 7.0% and 8.7% in the year to June.
Mitt Romney presents his acceptance speech tonight for the Republican Party presidential nomination. He will try to counter the generalized impression of a nasty, self-absorbed personality that has generated high disapproval ratings. New Orleans survived Hurricane Isaac better than feared.
Copyright 2012, Larry Greenberg. All rights reserved. No secondary distribution without express permission.
Tags: Canadian current account, Ezone sentiment, Rajoy, U.S. personal consumption