New Overnight Developments Abroad: September Ezone Flash PMI Shows Weaker Activity

September 23, 2008

The dollar is mostly lower, with drops of 0.4% against the kiwi, 0.3% against sterling, 0.2% against the Australian dollar and yen, and 0.1% against the Canadian dollar.  EUR/USD is unchanged, however, and the dollar is up 0.2% against the Swiss franc.

Japanese markets were closed for the autumn equinox holiday.

Ten-year sovereign bond yields are mostly lowerEquities tumbled in Asia by 3.9% in Hong Kong, 3.8% in China, 3.0% in India, 2.7% in Singapore, and 1.3% each in Indonesia and the Philippines.  Exceptions: stocks rose 1.2% in Taiwan, 1.4% in South Korea and 1.3% in Vietnam.  Australia’s bourse fell 1.9%.

Stocks moved lower in Europe as well, with drops thus far of 2.1% in Britain, 1.5% in France, and 0.7% in Germany where the powerful I.G. Metall union is asking for an 8% wage increase, most in 16 years.

Oil and gold prices settled back amid concerns about a global slowdown by 1.8% to $107.38/barrel and 0.6% to $903.70 per ounce. 

Bernanke and Paulson testify at 13:30 GMT before the Senate Banking Committee on the proposed bad debt buyout plan.

In Europe, preliminary PMI scores mostly worsened. Euroland’s compositePMI  index fell to 47.0 in September from 48.2 in August and 54.7 in September 2007.  The manufacturing sector reading of 45.3 was its weakest since December 2001 and below an expected score of 47.2.  The services reading of 48.2 was marginally better than forecast but still at its lowest level since mid-2003.  The German composite PMI fell to 48.6 from 50.5 in August.  Germany’s services slid below the 50 line of demarcation between expanding and contracting activity, and business expectations slumped to a very weak 38.7 reading, worst in the 11-year history of this data series.  The PMI’s show Euroland flirting with a recession but not yet a steep downturn.

French personal spending fell 0.3% in August and by 0.1% from August 2007.  The results were depressed by monthly drops of 1.9% in clothing and 1.0% in cars, and they were worse than forecast.  France’s composite PMI improved to 47.7 in September from 46.9.

Italian consumer confidence recovered in September to 102.8 from 99.6 in August.  This better-than-assumed reading should be taken with a grain of salt because the household survey was taken before this month’s financial crisis took a bad turn for the worse.

Asian inflation seems to have crested according to data from Singapore, Hong Kong, and India.  The one silver lining in the Euroland PMI reports was signs that inflation there may be receding, too.  In the Zone’s composite index, both output prices (52.8) and input prices (61.4) were the lowest readings since October 2007.

South African consumer price inflation accelerated to 13.6% in August from 13.0% y/y in July, and retail sales volume in that economy fell 4.6% in the year to July.

Year-over-year Canadian CPI inflation of 3.5% in August was a tenth higher than expected.  Core inflation rose to 1.7% from 1.5%.  Consumer prices fell 0.2% from July on an unadjusted basis but firmed 0.2% seasonally adjusted.

British mortgage approvals plunged 64% in the year to August according to British Banking Association data to a record low in August of Gbp 21.09 billion.  Net mortgage lending dropped to Gbp 2.1 billion from Gbp 4.8 billion in July.

Industrial orders for Euroland in July rose 1.0% m/m and by 1.6% from July 2007.  Although greater than expected, the result was distorted by a 10% surge in transportation equipment, which is a lumpy item.  Excluding such, orders fell 1.4% after an uptick of 0.5% in June but a 3.0% plunge in May.  Moreover, overall orders in July were still 0.6% lower than their 2Q average level.  Orders in 2Q fell 1.6% or 6.1% at a seasonally adjusted annualized rate.

The Swiss National Bank’s overnight injection of $10 billion was substantially oversubscribed.  The ECB added the full $40 billion of dollar liquidity, obtainable from the earlier swap line expansion with the Fed. 

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