New Overnight Developments Abroad: Most Markets Still Shut

December 26, 2008

Japan released even more data Friday than Thursday, but market closures continued in Australia, New Zealand, the Philippines, Hong Kong, and Sri Lanka. Britain celebrates Boxing Day, and most European markets and Canada will remain shut. U.S. markets have an early close.

The dollar is mostly lower, with drops of 0.6% against sterling, 0.4% veresus the Australian dollar and euro, and 0.1% against the yen. The yen, however, seems likely to post a weekly loss for the first time in about two months. Dollar/yen is above the key 90 pivot level, but EUR/USD is above its pivot of 1.40. The dollar is steady against the Swiss franc and kiwi, and it has recovered 0.2% relative to the Canadian dollar.

The Nikkei gained 1.6%. Other Asian bourses closed mixed with drops of 0.7% in Singapore, 2.5% in India, 0.9% in South Korea, and 0.3% in Malaysia but rises of 0.3% in Taiwan and Indonesia, 0.5% in Thailand, and 0.8% in Vietnam.

The 20-year JGB dropped 6.5 basis points to a 5-year low. The BOJ is adding 30-year JGB’s to what it will be buying. The 10-year yield of 1.20% is off by 1 bp.

Oil recovered 3.8% to $36.69/barrel. Gold edged 0.2% lower to $846.60/ounce.

Early indications confirm a big slump in U.S. holiday shopping.

Iraq’s central bank will cut its benchmark rate to 14% from 15%, effective January 4th. The Central Bank of Egypt did not change its key rates but said scope is mounting for a more accommodative posture.

South Korean officials declared this an “unprecedented crisis.”

The Russian rouble underwent yet another mini-devaluation and hit a record low against the euro. It has fallen over 13% since September against its target basket.

Spanish retail sales posted an 8% on-year drop in November, same as in October.

A Chinese central bank official said more must be done to boost consumption. An officials from the Bureau of Statistics argued that the yuan is coming under depreciation pressure but that a sharp drop of the currency would be avoided. These remarks followed news that corporate profits slowed to an on-year increase of only 4.9% in January-November from 19.4% in January-August and 36.7% in January-November 2007.

Japanese data highlights include:

  • A drop in small business sentiment (the so-called Shoko Chukin index) to 29.4 in December, lowest since at least 1976, from 35.1 in November, 37.6 in October, 40.2 in September and 41.4 in August. The manufacturing sub-index dropped 8.9 points to 23.3, while non-manufacturing fell 3.1 points to 34.4.
  • Industrial production plunged 8.1% in November and by 16.2% from a year earlier. That’s the greatest monthly decrease in at least 55 years and worse than forecast. Officials expect another 8.0% decline in December, implying a 37.7% drop in 4Q08 at an annualized rate. The forecast for January is a drop that month of 2.1%. The ratio of inventories to sales soared 12.4% last month and by 25.1% in the year to November.
  • Employment fell 0.7% in the year to November, somewhat faster than the 0.6% drop in the year to October. Job offers were 23.7% lower than in November 2007, and the job offers ratio of 0.76 was down from 0.80 in October, 0.91 at mid-2008, and 0.99 in November 2007. The unemployment rate was still comparatively low at 3.9%, only three-tenths above the cyclical low. However, cash earnings, a measure of wage inflation, dropped 1.9% in the year to November after edging 0.1% higher in the year to October. Overtime pay fell 6.8% y/y.
  • Non-food consumer price inflation slowed to 1.0% from 1.9% in the year to October. So-called core-core CPI was unchanged on year, down from increases of 0.2% y/y in both October and September. Total consumer prices fell 0.9% m/m and by 0.4% seasonally adjusted. Tokyo consumer prices slid 0.3% seasonally adjusted in December and to 0.7% y/y.
  • Total retail sales edged down 0.1% in November and fell 0.9% from a year earlier. Among large stores, total sales fell 3.2%, and clothing sales slumped 9.3% from a year earlier.
  • A more comprehensive gauge of consumption, real household spending posted a diminished 12-month drop of 0.5%, but real disposable incomes slumped 0.9%.
  • The manufacturing PMI fell to 30.8 in December from 36.7 in November, 42.2 in October, and 46.8 in August. Output, orders, and the overall index were at record lows in this 7-year-old data series, and the jobs index was at an 82-month low.
  • Stock and bond transactions last week generated a net outflow of Y 1.133 trillion.

Speculation keeps mounting that the Bank of Japan will undertake full quantitative easing again early in 2009. Economics Minister Yosano tried to dampen such thinking, voicing doubt that quantitative easing will put money in business hands effectively.

Wholesale price inflation in India continues to recede, reaching 6.6% by mid-December, lowest since late February, and down from 12.9% in August.

Chinese foreign debt rose 3.4% in the third quarter and 18.3% since end-2007.

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