Not a Big Reaction to Greek Debt Agreement

November 27, 2012

Ecofin and the IMF settled their differences over Greek aid, paving the way for a EUR 34.4 billion installment next month.  The accord’s assumptions about future Greek growth look suspect.

The dollar is 0.2% stronger against the euro and Swiss franc, unchanged versus the yen, yuan, kiwi, and sterling, down 0.1% against the loonie, and off 0.2% relative to the Australian dollar.

Share prices in China dropped by a further 1.2%, but there were overnight gains of 1.7% in India, 0.9% in South Korea, 0.7% in Australia and 0.4% in Japan.  European stocks rose on news of the Greek debt deal.  The Dax so far is 0.5% higher.  Other gains amount to 0.4% in the British Ftse, 0.3% in the Paris Cac and Spanish IBEX, and 0.2% in the Italian MIB.

Ten-year German bund and British gilt yields are up two and one basis points.  The Japanese JGB is unchanged.

The price of gold slid 0.2% to $1746.20 per ounce.  Oil ticked 0.1% higher to $87.81 per barrel.

This is a big release day of U.S. economic data — durable goods orders, the Case Shiller and FHFA house price indices, the Richmond Fed manufacturing index, and the Conference Board’s consumer confidence index.  Fed Chairman Bernanke and Chicago Fed President Evans speak publicly.  Each has been an advocate of the central bank’s pro-growth policies.

Japanese corporate service prices slid 0.1% and posted a 12-month decline of 0.7%, most since mid-2011.

Shinzo Abe, leader of Japan’s Liberal Democratic Party, reaffirmed his intention to seek a higher inflation target from the BOJ if elected to to in general push for more aggressive monetary and fiscal stimulus.  Abe and Prime Minister Noda of the Democratic Party of Japan are expected to hold one debate soon.

The Conservative British Government has poached Bank of Canada Governor Mark Carney to head the Bank of England for five years starting in mid-2013.  While the Bank of Canada has not raised its interest rate since September 2010, its rhetoric this year has put greater emphasis on containing future inflation than one hears from other central banks.

Britain released a second estimate of third-quarter GDP.  Such advanced 1.0% on quarter, same as the earlier indication, but the on-year comparison was revised to minus 0.1% from an initial estimate of zero.  Personal consumption and government spending each climbed 0.6% on quarter.  Business investment jumped 3.7%.  Net exports enhanced GDP growth by 0.7 percentage points, but inventories exerted a 0.5 percentage point drag.  From a supply-side standpoint, production increased 0.1%, construction fell by 2.6%, and the two offset one another in terms of contribution to GDP growth.  Services, up 1.3% on quarter, accounted for all the economic growth in the quarter. 

Britain’s index of services dipped 0.5% in September alone, however.

German import prices fell 0.6% in October.  Their 12-month pace of increase dropped to 1.5% from 1.8% in September and 3.2% in August.  Excluding mineral oils, import prices slid 0.4% on month and rose 0.4% on year.  Export prices edged 0.2% lower on month and posted the same 1.7% on-year advance as in September.

French consumer sentiment held steady with a score of 84 in November.

Italian wages rose 0.2% on month and 1.5% from a year earlier in October.

Swedish producer prices fell 0.7% in October and posted a 2.3% on-year decline.  The Swedish trade surplus increased to SEK 8.0 billion last month from SEK 6.8 billion in September and SEK 5.3 billion in August.  The year-to-date surplus of SEK 66.7 billion is 9.2% larger than a year earlier.  Swedish consumer confidence weakened 4.5 points in November to a reading of minus 7.4.  M2 money and household lending recorded October-over-October 2011 increases of 6.4% and 4.5%.  Sweden’s economic tendency index fell sharply to 86.0 in November from 92.7 in October.

Norwegian consumer confidence improved two points to 25.4 in the fourth quarter.  Finnish consumer confidence exceeded expectations in November with a +1.0 reading after minus 1.6 in October.

The UBS Swiss Consumption Indicator improved to a reading of 1.31 in October from a slightly downwardly revised 1.04 score in September.

The OECD reduced projected global growth in 2013 to 3.4% from a prior forecast of 4.2%.

Hong Kong’s trade deficit narrowed 5.5% on month to HKD 42.7 billion in October.  The Filipino trade gap widened sharply to $4.8 billion in September.  Taiwan’s index of leading economic indicators firmed 0.2% last month.

New Zealand’s NSD 718 million trade deficit last month was smaller than anticipated.  A gauge of expected New Zealand inflation over the coming year held steady at 2.3% in the current calendar quarter.

South African GDP expanded 1.2% at an annualized rate last quarter.  On-year growth slowed to 2.3% from 3.1% in the year to 2Q12.

Progress in the U.S. fiscal cliff talks appears to have bogged down.  Just 35 days remain in 2012.

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

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