More Greek Jitters as Clock Runs Down

June 2, 2015

No agreement yet on Greece.  Negotiators from the troika (IMF, EU and ECB) met last night in Berlin.

The dollar fell 0.9%, touching a 2-week low of 1.1038 per euro.  The dollar also lost 1.0% against the Australian dollar, whose central bank released a less dovish statement than anticipated, preferring data-driven forward guidance to an outright easing bias.  The Reserve Bank of Australia’s official cash rate had been cut by 25 basis points each in February and May of this year but not after today’s meeting.

The dollar also slid 0.6% against the Swiss franc, 0.3% vis-a-vis the kiwi and 0.2% relative to sterling but is unchanged against the yen, yuan and loonie.

European share prices have fallen today by 0.8% in Germany, 0.7% in Greece, 0.6% in Great Britain and 0.3% in France and Switzerland.  In the Pacific Rim, equities tumbled 1.7% in Australia, 2.4% in India, 1.5% in Singapore and 1.1% in South Korea.  Chinese stocks advanced another 1.7%, however.

Ten-year sovereign debt yields rose by 7 basis points in the U.K. and 3 bps in Germany. 

The 10-year JGB is flat, and the Nikkei closed down just 0.1% lower.  Japanese labor cash earnings advanced 0.9% on year in April, most since January, and the Japanese monetary base posted on-year expansion of 35.6% in May following gains of 35.2% in April and 36.4% in the first quarter of 2015.

Eurozone consumer price and producer price data were each released.

  • The flash estimate of the harmonized CPI shows a return to positive inflation in May, amounting to 0.3%.  Inflation had been zero in April, -0.1% in March, -0.3% in February and a low of -0.6% in January.  Core inflation jumped to 0.9% from 0.6% in both March and April.  Service price inflation of 1.3% in May even exceeded the 1.1% rise in the previous year to May 2014.  ECB actions seem to be nipping deflation in the bud, largely through a falling euro.
  • Producer prices dipped 0.1% in April and were 2.2% lower than a year earlier.  Energy fell 0.6% on month and 4.4% on year.  Other producer prices rose 0.1% on month and dipped 0.5% on year.

The Reserve Bank of India cut its repo lending rate to 7.25% from 7.5% and its reverse repo overnight borrowing rate to 6.25% from 6.5%.  The easing had been expected by analysts and was the third such move of 2015, augmenting cuts in January and March.  Projected Indian growth was lowered marginally.

Some more purchasing manager survey results were reported.

  • J.P. Morgan’s estimate of the global manufacturing PMI edged up 0.2 points to 51.2 in May.
  • The British construction PMI rebounded 1.7 points to 55.9 following the lowest reading in April since June 2013.  The rebound failed to restore March’s level of 57.8.
  • The Greek manufacturing PMI improved 1.5 points to a 2-month high of 48.0 in May, thus still signaling a contraction of activity.
  • The Irish manufacturing PMI rose 1.3 points to a 9-month high of 57.1 in May after touching a 3-month low in April.

New Zealand’s terms of trade rebounded 1.5% last quarter, breaking a streak of three drops in a row including -1.9% in 4Q14.

Italy is observing its Republic Day holiday.

South Korean consumer prices rose 0.3% on month and 0.5% on year in May, but core inflation was higher at 2.1%.  South Korea posted an $8.14 billion current account surplus in April, 22% narrower than in March.

The volume of retail sales in Hong Kong declined 4.6% on month in April but accelerated to a 2.4% 12-month rate of climb.  In Thailand, producer prices fell 4.8% in the year to May, while consumer prices dropped 1.3% in that span.

German seasonally adjusted unemployment stayed at 6.4% in May; on an ILO basis, the jobless rate in April remained steady at 4.7%.  Seasonally adjusted unemployment contracted just 5K in May, less than declines of 9K in April, 14K in March and 19K in February.  On-year growth in jobs of 0.5% in April after 0.7% in the first quarter and 0.9% in 4Q14 also showed a lessening pace of labor market improvement.

Sweden’s current account surplus of SEK 80.6 billion surpassed the year-earlier surplus of SEK 67.5 billion.

The Bank of England reported 68,076 mortgage approvals in April, the biggest monthly total since February 2014.  U.K. M4 money was unchanged on net between April 2014 and April 2015.

Romanian producer prices declined 2.8% in the year to April.  Portugal recorded a 13% jobless rate in April, while unemployment in Austria slipped 0.5 percentage points to 8.6% in May.

Scheduled U.S. data releases today include motor vehicle sales, factory orders and the New York PMI known as the NAPM index.

Copyright 2015, Larry Greenberg.  All rights reserved.  No secondary distribution without express permission.

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