Fresh Concern over Greek Debt Talks

November 13, 2012

An Ecofin meeting failed delayed a decision on the next tranche of aid to Greece until November 20th.  Leaders of the European Union and IMF have disagreed over deadlines when Greece must meet debt reduction targets

The euro hit a two-month low of $1.2661 overnight but is up 0.1% on balance at the moment.  The dollar also has eased 0.2% versus sterling and 0.1% relative to the Swiss franc but is unchanged relative to the yen, loonie, yuan, and New Zealand and Australian dollars.

There were some large share price slumps in the Pacific Rim.  In addition to fresh jitters over Greece, markets reacted to stories that Chinese officials continue to worry about property price inflation.  A third source of worry is the U.S. fiscal cliff as both the Democrats and Republicans in Washington remain intransigent against modifying their desires.  Equities fell by 1.8% in China and Taiwan, 1.5% in Australia, 1.1% in Hong Kong, 0.6% in South Korea, and 0.2% in Japan.  In Europe, stocks have fallen 0.7% in Germany, Britain and France, 0.6% in Italy and 0.4% in Spain.

Oil and gold prices slipped 0.6% to $85.09 per barrel and 0.3% to $1726.60 per ounce.

Ten-year German and British sovereign debt yields edged a basis point higher.  Japanese JGBs are unchanged. 

A fourth factor weighing on markets is the weakness of the Germany economy.  The ZEW Institute in Germany released results of its November survey of investor sentiment, showing weaker readings than expected.  Regarding Germany, the expectations index fell to a score of minus 15.7 from minus 11.5 in October, and the current situation index dropped 4.6 points to 5.4.  Six months ago in May, that component was at 44.1.  The ZEW readings for the euro area were at minus 2.6 on expectations and minus 80.3 on current conditions, respectively down 1.2 points and 0.9 points from October scores.

British consumer price inflation unexpectedly rose a half-percentage point to 2.7% in October, due mainly to higher education and food expenses.  Analysts were projected 2.3%.  Retail price inflation rose 0.6 percentage points (ppts) to 3.2% and by 0.5 ppts to 2.6% excluding mortgage and interest.

British producer output price inflation held steady at 2.5% last month.  The core PPI-O pace rose to a 12-month 1.4% increase from 1.2% in September.  Producer input prices increased 0.4% on month but just 0.1% on year.  Core PPI-I increased 0.5% on month but fell 0.3% on year.

Two housing price indices were also reported in Britain.  The Royal Institute of Chartered Surveyors’ index improved to minus 7%, best in 28 months from negative 14% in September.  The OMS house price index, formerly released by the Department of Communities and Local Government, slipped 0.2% lower on month and fell by 0.2 percentage points to a 12-month increase of 1.7%.

Greek import prices dropped 0.8% in September, trimming the on-year increase to 4.9% from 6.9%.

The Swiss producer price/import price index dipped 0.1% last month and posted a 0.4% increase from a year earlier.  Domestic producer prices were unchanged from September and 0.5% higher than a year before.

Italian consumer prices were unchanged between September and October and 2.6% higher than in October 2011.  In harmonized terms, on-year inflation stood at 2.8%.

Spanish consumer prices increased 0.8% on month and 3.5% on year in October.  Portuguese consumer prices advanced 0.3% on month and 2.1% on year.  CPI inflation in Hungary fell to 6.0% from 6.6%.

France’s current account deficit narrowed to EUR 3.3 billion in September from EUR 3.6 billion in August.  Non-farm payroll jobs in that economy shrank 0.3% between the second and third quarters of 2012, while wage costs went up 0.4%.  Romania’s current account deficit of EUR 1.5 billion in 3Q12 was 20% smaller than the 2Q shortfall.

New Zealand food prices slid 0.6% in October and were 0.3% higher than a year before.

Small business sentiment in the United States recovered 0.3 points to a reading of 93.1 in October.  The U.S. IBD/TIPP Optimism index and the October federal budget figures also will be released today.  Chile’s central bank is holding an interest rate policy meeting.

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

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