New Overnight Developments Abroad: Financial Jitters Weigh on Equities
September 10, 2008
Stocks fell by 3.8% in Indonesia, 2.4% in Hong Kong, 1.6% in India, 1.5% in Australia,1.2% in Thailand, 1.3% in the U.K., 0.7% in Germany, 0.6% in France and 0.4% in Japan. Intense concerns persist about Lehman.
The dollar rose 0.6% against the yen, 0.4% against the Swiss franc, and 0.2% against sterling and the euro. Buck is flat against the A-dollar and 0.2% lower versus the kiwi. The yield on 10-year JGB sank as low as 1.475% but is up 0.5 basis points on balance at 1.505%. U.S. and European sovereign bond yields firmed.
Oil briefly dipped to a 5-month low under $100/bbl yesterday but popped upward on the unexpected OPEC production cutback announcement of 520K per day. It is trading up 0.1% at $103.33/barrel. Gold, on the other hand, is 1.8% lower on balance at $777.5/ounce or 24.7% below its record higher earlier in 2008.
China released CPI, trade, PPI, and fixed asset investment data for August. Biggest surprise is a lower-than-forecast CPI of 4.9% y/y, down from 6.3% in July and 8.7% peak last February. The PPI edged a tenth higher to 10.1%. Investment stayed very brisk, with a 27.4% increase in Jan-August versus 27.3% in January-July from a year earlier. A record $28.7 billion trade surplus was posted in August, up from $25.28 billion in July. Import growth of 23.1% y/y was lower than assumed, while exports advanced 21.1%.
French industrial output jumped 1.2% in July on strength of a 5.1% gain in autos. A 0.1% uptick had been expected. But output still fell 2.5% in May-July. The French trade deficit narrowed 9.8% m/m in July to EUR 4.834 billion.
Italian 2Q GDP growth was confirmed at -0.3% versus 1Q and revised down to -0.1% from 2Q07. Italy’s non-EU trade gap widened nearly threefold y/y in July to EUR 1.636 billion because of sharply higher energy imports. The non-energy surplus increased.
The British merchandise trade deficit of Gbp 7.667 billion was slightly above expectations in July but smaller than June’s Gbp 7.993 billion shortfall. The goods and services deficit in July narrowed to Gbp 4.585 billion from Gbp 4.982 billion in June. The NIESR Institute estimates that GDP in June-Aug fell by 0.2%.
Japan’s current account surplus fell 17.3% y/y in July to Y 1.532 trillion. Imports soared 18.9% y/y. Japanese stock and bond transactions generated a large Y 4379 billion capital inflow in August. Although the coincident index of Japanese indicators posted an above-50 diffusion reading of 66.7 in July, officials maintained their assessment that Japan may be in recession. The leading index has been under 50 in 22 of the last 25 months including 30 in July. Japan’s corporate goods price index dipped 0.1% m/m in August but rose 7.2% from August 2007, just below the 12-month pace of 7.3% in July (a 27-month high).
Australian consumer sentiment improved 7.0% y/y in September in response to the central bank rate cut. The Reserve Bank of New Zealand is likely to cut its rate tonight by 25 basis points to 7.75%. New Zealand’s terms of trade fell 0.5% last quarter, as import price growth of 4.8% from 1Q edged out export price growth of 4.4%.
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