Uneasiness about Europe

September 25, 2012

Numerous concerns persist about the euro area debt crisis.  Will a banking union get formed?  Will Spain submit to outside conditional aid?  Does the Bundesbank have a hidden agenda to torpedo the monetary union?  What’s to be done about Greece, which seemingly cannot meet its bailout macroeconomic promises? 

Doomsayer Nouriel Roubini, NYU’s pessimistic economics professor, suggested that 2013 could be as difficult a year as 2008 was, if not worse.

Japanese small business sentiment, the Shoko Chukin index, recovered 0.3 points to a still very weak reading of 45.1 in September.  The average score in 3Q was 45.5 after a mean of 47.0 in the second quarter.

In contrast, there was a piece of good news from China, where according to the Conference Board China’s index of leading economic indicators jumped by 1.7% in August, most in seven months.  China’s index of coincident indicators only climbed 0.5%.

The dollar is little changed from Monday closing levels, with upticks of 0.2% against the euro and loonie and 0.1% versus the Swissie and Aussie dollar but downticks of 0.2% relative to the yuan and 0.1% versus the kiwi and yen.  Sterling is steady.

Share prices in the Pacific Rim rose 0.6% in Indonesia, 0.4% in New Zealand and 0.3% in Japan but fell by 0.6% in South Korea, 0.4% in Taiwan, 0.3% in Australia and 0.2% in China.  In Europe, the Paris Cac and German Dax slid 0.3%.  Stocks are off 0.4% in Italy but up 0.1% in Spain.  The British Ftse is steady.  Caterpillar is lower following a downwardly revised medium-term earnings forecast.

Gold and oil prices have firmed by 0.2% and 0.4% to $1768.10 per ounce and $92.28 per barrel.  Other commodities also rose in price.

Ten-year German bund and British gilt yields slipped four and three basis points.  Ezone peripheral yields are higher.  The 10-year JGB is up a single basis point. 

Japanese corporate service prices fell by 0.3% in August both compared to July and to a year earlier.  It was the third straight on-year drop of 0.3%.

South Korean consumer sentiment held steady in September at August’s seven-month low.  S&P revised down projected South Korean GDP growth in 2012 to 2.5%.  The government in Seoul said a fiscal surplus will not get restored until 2014 instead of 2013 as thought earlier.

Australia’s central bank released a semi-annual report on financial stability that was guardedly upbeat about the ability of banks to withstand external strains.

Hong Kong’s HKD 36.03 billion trade deficit in August was 10% narrower than the gap in July and similar to the HKD 36.9 billion average deficit in the first half of 2012.  The Philippines experienced a $236 million trade deficit in July, while Thailand had a $1.02 billion trade shortfall in August.

Among Euroland’s big three economies, French business sentiment stagnated at a reading of 90 in September. German consumer confidence likewise stayed put at a score of 5.9 in October. Italian consumer confidence edged up a tenth of a point to a still-weak reading of 86.2.

The UBS consumption indicator for Switzerland weakened 0.45 points to 1.03 in September from 1.48 in August and a reading of 1.59 in July.

Swedish producer prices fell 0.5% in August, considerably more than forecast, and were 1.9% lower than a year earlier.  The drop was led by a 1.3% monthly plunge in export prices.  Spain’s PPI increased 1.1% in August, accelerating the 12-month rate of increase to 4.1% from 2.6% in July and 2.5% in June.

Finnish unemployment edged higher in seasonally adjusted terms to 8.0% last month from 7.8% in July.  Poland’s jobless rate of 12.4% in August matched June’s result and was marginally above July’s 12.3% reading.  Consumer sentiment in Poland rose 3.5 points to a reading of negative 31.6.  Italian wages edged up 0.1% on month and rose 1.6% on year in August.  The Greek trade deficit of EUR 1.14 billion in July was slightly lower than the average May-June deficit of EUR 1.19 billion per month.

According to the British Bankers Association, mortgage approvals in the U.K. in August of 30,533 surpassed expectations and July’s total of 28,750.

South Africa’s index of leading economic indicators improved a full point to a score of 130.4 in July.

Hungary’s central bank will be announcing its latest interest rate decision today.  No change is forecast.

The U.S. data release calendar for today includes the Conference Board’s index of leading economic indicators, the Case-Shiller house price index, the FHFA house price index, the Richmond Fed manufacturing index, and weekly chain store sales.  Canada will be reporting retail sales.  The Jewish Yom Kippur Day of Atonement begins today at sundown.

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

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