New Overnight Developments Abroad: Stocks Higher, Dollar Mostly Lower
November 27, 2008
Asian bourses were inspired by China’s big rate hike yesterday and rallied by 2.0% in Japan, 4.3% in Taiwan, 3.3% in South Korea, 1.8% in the Philippines, and 1.5% in China. Australian equities advanced 1.4%. In Europe, the Dax is up 2.2%, and the Ftse has gained 2.0%. The Paris Cac shows a 1.7% rise.
The dollar lost 0.7% against sterling and 0.4% against the yen, Swissy, and Australian dollar. EUR/USD is flat, and the dollar has dipped 0.1% versus the Canadian dollar.
Indian markets were closed today. Over 100 dead in Islamic militant attacks. U.S. markets will be closed today for Thanksgiving.
Oil slipped back 2.0% to $53.33/barrel. Gold rose 0.6%. The 10-year JGB yield dipped another 0.5 bp to 1.375% and touched its lowest level since October 7.
Economic sentiment in Euroland fell to 74.9 in November from 80.0 in October and 88.5 in August. A significantly smaller drop had been forecast. Industrial sentiment (-25 after -18 in October and -9 in August) worsened more sharply than consumer confidence (-25 after -24 in October). Service sector sentiment dropped to -12 from -7, and construction sentiment had a score of -24 after -20 in October and -13 in August. A separate business climate index worsened to a 15-year low of -2.14 in November from -1.34 in October and -0.82 in September. Price expectations among consumers (11, down from 19) and firms (1 versus 6 in October and 12 in September) show rapidly receding inflation risks.
The German labor market showed resilience in November. Unemployment fell 10K, more than anticipated, and remained at 7.5% of the labor force. Employment grew 1.3% in the year to October.
Euroland M3 growth failed to slow in October, posting another 8.7% on-year advance as M1 rose on portfolio shifts into cash. But private credit (8.6% after 10.1% in September) and private loans (+7.8%, down from +8.5%) reflected the credit crunch. The figures will not prevent the ECB from easing at least 50 bps next week.
Producer prices in South Africa rose 14.5% in the year to October, a bigger-than-expected deceleration from 16% in September. Monetary easing is expected soon.
China’s Planning Agency warned of sub-8% growth in 4Q08, a 3-year low, saying that the global financial crisis had not bottomed and was being felt more deeply in China.
A retail-PMI for Euroland compiled by Bloomberg dropped to 40.6 in November from 44.3 in October, with readings of 41.3 in Germany, 48.7 in France and a record low of 28.5 in Italy.
Britain’s Nationwide house price index posted the smallest monthly drop (0.4%) in a year and a reduced on-year decline of 13.9% in November versus -14.6% in October. From the “I told you so” department, Bank of England dove Blanchflower scolded his colleagues for not cutting interest rates sooner in a preemptive way rather than reactively.
Japanese automakers saw an on-year drop in their global production during October. Toyota -14.7%. Nissan -18.3%.
Bank of Japan minutes from the October 31st meeting that cut the overnight target rate to 0.3% from 0.5% revealed that Governor Yamaguchi had to break a 4-4 tie vote. A proposal to cut the rate by 25 basis points was rejected by a vote of 5-3 earlier. Hawk Mizuno opposed any rate reduction, feeling there was no point.
Business sentiment in New Zealand worsened in November, as views of own firms and of national economy deteriorated. New Zealand’s trade gap widened 21.7% between October 2007 and October 2008.
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