Growth Clouds Gather
Risk appetite was relatively stable in the European session, following a cautious Asian session. There were few major developments in Greece, though SYRIZA leader Tsiparas is due to make a statement at 2pm Athens time. Fotis Kouvelis (Democratic Left party) said repeat elections are unavoidable unless SYRIZA changes its stance. The euro found some support and pushed higher after falling to a new three-and-half-month low against the dollar in the Asia session. Hopes continue that PASOK leader Venizelos will be able to forge a coalition with the New Democracy and Democratic Left – an arrangement that would command a majority of 168 of 300 seats. Last night Kouvelis publicly approved of the idea of a unity coalition government. Though pro-euro, the Kouvelis is opposed to the bailout agreement so even if a government can be formed, a showdown with the EU/IMF seems likely. Moreover, an unnamed PASOK official’s comment that SYRIZA must be involved in any ‘national unity’ government suggests this is not a done deal. The fact that SYRIZA is still in the mix probably reflects its growing public popularity. Indeed, according to the latest public opinion poll (by MARC SA), SYRIZA is leading the pack (24%) ahead of New Democracy (17%), PASOK (11%), the Independent Greeks (9%), KKE (6%), and the Democratic Left (4%). China April new yuan loans data was weak at just CNY681.8 bn vs CNY780.0 bn consensus. This confirms domestic reports that the March loan number was seasonally inflated/window dressing, while there was major deposit flight/credit squeeze in the first two weeks of April and the government was reluctant to replenish liquidity outright. Aggregate deposits fell by CNY465.6 bn for the month Our China Economics team have downgraded their 2012 Q2 GDP growth estimates to 8% (from 8.5%) and the 2012 growth forecast to 8.2%. They note that with export growth still in decline and downside risk in Europe and the global economy remaining, we now think the government may want to ease credit and fiscal policy further to support growth. The existing policy is unlikely to bring about a Q2 rebound as quickly and as strongly as we had expected.
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