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Morning Snapshotby Peter A. Grant
Oct 11, AM The euro is better today, even though S&P downgraded Spain two-notches to BBB-, with a negative outlook. With the 5th largest economy in the eurozone just a tick above junk status, the Spanish government continues to waffle on whether it will make a formal bailout request or not. The euro may have caught a bid based on an expectation that the latest downgrade will force Rajoy's hand, and that request for aid will be forthcoming. Additionally, there is a growing sense that the troika is on the verge of giving Greece more time, perhaps an additional two-years, to meet the tough budget requirements of its bailout agreement. The IMF's Christine Lagarde was making this case today, after the fund's bleak World Economic Outlook revealed a rather severe negative revision for Greece. The IMF now believes the Greek economy will shrink by 6% this year and an additional 4% in 2013. Previous expectations had been for a contraction of 4.8% in 2012 and flat growth next year. Good news for the euro, only in the sense that a Spanish bailout and deferred austerity for Greece would be yet another kick of the can down the road. Yet we all know that the continued failure to resolve the underlying imbalances will lead to a monumental problem at the end of that road. There was seemingly some more good news on the US jobs front today, with a 30k drop in initial jobless claims last week. That resulted in a print of 339,000 new claims, a four-year low. However, the unexpected big drop apparently came from just one state, presumed to be California, and is thought to be associated with "seasonal adjustment challenges" according to Jim O'Sullivan, Chief US Economist at High Frequency Economics. O'Sullivan added, "While the drop is almost certainly exaggerated, the trend in claims looks flat at worst." And a flat trend in claims is hardly cause for celebration. • US import prices +1.1% in Sep, above expectations of +0.7%; exports +0.8%. • US trade deficit widened to -$44.2 bln in Aug, near expectations of -$44.0 bln, vs revised -$42.5 bln. • US initial jobless claims -30k to 339k in the week ended 06-Oct, well below expectations of 370k, vs upward revised 369k in previous week. • Canada new home price index +0.2% in Aug; +2.4% y/y. • Canada merchandise trade balance -C$1.3 bln in Aug, well inside expectations of -C$2.0 bln on plunging imports, vs revised -C$2.5 bln in Jul. • Sep Consumer Price Index (Y/Y): Germany 2.0%. France 1.8%. Spain 3.4%. Sweden 0.4%. Hungary 6.6%. Portugal 2.9%. Ireland 1.6%. • Greece unemployment rate 25.1% in Jul, vs upward revised 24.8% in Jun. • South Korea PPI +1.0% y/y in Sep, vs +0.3% in Aug. • Japan machinery orders x-Elec&Ship -3.3% m/m in Aug, vs +4.6% in Jul. • Japan consumer confidence index (sa) slipped to 40.1 in Sep, vs 40.5 in Aug. • Australia unemployment rate rose to 5.4% in Sep, vs 5.1% in Aug. • BoK cut repo rate 25bps to 2.75%, in line with expectations. • Indonesia Central Bank holds steady on rates at 5.75%, in line with expectations. Peter Grant is USAGOLD's resident economist and a well-known analyst globally in the forex and precious metals markets. NEWSLETTER SIGN-UP Opinions expressed in commentary on the USAGOLD.com website do not constitute an offer to buy or sell, or the solicitation of an offer to buy or sell any precious metals product, nor should they be viewed in any way as investment advice or advice to buy, sell or hold. USAGOLD, Inc. recommends the purchase of physical precious metals for asset preservation purposes, not speculation. Utilization of these opinions for speculative purposes is neither suggested nor advised. Commentary is strictly for educational purposes, and as such USAGOLD does not warrant or guarantee the accuracy, timeliness or completeness of the information found here.
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Friday October 12
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