Confidence in Europe Hurt by Cyprus Situation
March 27, 2013
Cypriot banks will reopen tomorrow with capital controls. Uninsured large depositors have taken a big hit.
The euro sank as low as $1.2787, its weakest dollar value since November 21, 2012.
There is fear of contagion in Europe. While stocks in the Pacific Rim closed mostly higher, European equities are down 1.7% in Spain, 1.2% in Italy, 1.0% in France, 0.8% in Germany and 0.2% in Britain. Markets earlier closed up 2.7% in the Philippines, 1.8% in Indonesia, 0.9% in Australia, 0.8% in Singapore, 0.7% in Hong Kong, 0.5% in Taiwan, New Zealand and South Korea, 0.3% in China and 0.2% in Japan.
Ten-year sovereign debt yields are down five basis points in both Germany and Britain and off two bps at 0.5% in Japan. Treasury yields will open lower, too.
The dollar has risen 0.5% against the euro and kiwi, 0.4% relative to the Australian dollar and Swissie, 0.3% versus sterling and 0.2% against the loonie. The dollar is unchanged against the yuan and has edged 0.1% lower relative to the yen.
Oil prices settled back 0.5% to $95.86 per barrel. Gold is off 0.2% at $1593.80 per ounce.
Britain recorded a larger-than-expected GBP 14.037 billion current account deficit in the final quarter of 2012. Revised British GDP data shows the economy contracting 0.3% last quarter and just 0.2% above the 4Q11 level. There were negative GDP contributions from inventories, net foreign demand, and business investment in the final quarter of the year.
French GDP sank 0.3% in the fourth quarter from both 3Q and a year earlier. Business investment, exports, and personal consumption dropped by 0.8%, 0.6%, and 0.1% compared to 3Q. GDP was unchanged in 2012 as a whole after expanding 1.7% in 2011.
German consumer confidence had the same 5.9 reading for April as was posted in March. German import prices in February rose 0.3% on month but fell by 1.6% on year, twice as much as the 0.8% 12-month decrease in January. Imported energy prices rose 1.2% on month.
Ezone sentiment indices for March were reported.
- The business climate index worsened for the first time since October, dropping 0.14 points to minus 0.86 after readings of -0.72 in February and -1.08 in January.
- Overall economic sentiment fell 1.1 points to 90.0. That was still above January’s 89.5 reading and October’s 85.7.
- Industrial sentiment fell 1.2 points to a two-month low.
- Consumer confidence ticked 0.1 higher to negative 23.5, but confidence in the retail sector dropped 1.5 points to a 6-month low of minus 17.6.
- Construction sector confidence was 0.6 points weaker than in February with a negative 30.1 reading.
- Service sector confidence fell 1.4 points to minus 6.7.
Other released data also accentuated economic weakness in Europe.
- Spanish retail sales were 8.0% lower than a year before in February.
- Italian industrial orders sank 1.4% on month and 3.3% on year in January. Retail sales in Italy, where another election seems possible, fell 0.5% on month and 3.0% on year in March.
- The March readings for Portuguese business sentiment of -3.9 and consumer confidence of -55.3 were each negative.
- Swedish exports and imports fell on month by 5.2% and 6.6% in February. There was a SEK 7.1 billion trade surplus versus SEK 4.2 billion in February 2012.
- Euroland’s index of leading economic indicators edged up only 0.1% last month, while the index of coincident indicators dipped 0.1%.
- Austrian industrial production slid 0.5% on month and posted a smaller 2.2% 12-month increase in January.
Turkish consumer confidence fell 1.8 points to a reading of 74.9 in March.
Consumer confidence in South Korea ticked up to 104 in March after readings of 102 in both January and February.
Producer prices in Iceland fell 2.8% on month and 0.4% on year in February.
Swedish consumer sentiment improved to a 2.8 score in March. Finnish consumer confidence rose 0.6 points to a score of 10.2 in the same month.
Two Swiss indicators were reported. The UBS consumption indicator improved 0.11 points to 1.26 in February, while the KOF index of leading economic indicators printed at 0.99 this month after 1.04 in February.
Business sentiment in New Zealand worsened 4.8 points to a reading of 34.6 in March.
A central bank survey in Australia revealed continuing caution among consumers.
U.S. pending home sales, Canadian consumer prices, Brazilian producer prices and Mexican trade figures will be reported today. Kocherlakota of the Minneapolis Fed speaks publicly. Trading will begin to slow ahead of the long Good Friday/Easter holiday.
Copyright 2013, Larry Greenberg. All rights reserved. No secondary distribution without express permission.
Tags: British current account, Cypriot capital controls, Euro, European economic sentiment, French GDP