New Overnight Developments Abroad: Sterling and Gilt Yields Climb

February 9, 2009

The dollar lost 0.7% against sterling and is 0.3% softer relative to the yen and kiwi. The greenback rose 0.3% against the euro and 0.2% against the Ozzie dollar. The Canadian dollar and Swiss franc are unchanged.

Share prices are mostly lower, with drops of 1.3% in Janapn, 1.9% in Singapore, 0.6% in Britain, Indonesia, and South Korea, and 0.4% in Germany and France. There were some exceptions, however, such as India (up 3.0%), China (up 2.7%) and Thailand (up 2.5%).

The 10-year JGB yields dipped 1.5% to 1.315%. Ten-year Gilt yields are significantly higher at 3.97%.

Oil firmed 1.1% to $40.62 per barrel. Gold softened 1.4% to $901.50 per ounce.

Russian interest rates were lifted 100 basis points to lend support to the beleaguered rouble.

A keystone of the Obama campaign was a new era of bipartisan leadership, but Washington politics since the inaugural has been extremely partisan, with both sides accusing the other of a failure to compromise. The Treasury has delayed the unveiling of a bank bailout revamp to at least tomorrow, and the stimulus package continues to grind its way through Congress much more slowly than the urgency of the situation demands.

Japanese core domestic machinery orders fell another 1.7% in December to a 22-year low, but the drop was less than forecast. Foreign orders rebounded 27.6% but still posted a 12-month plunge of 29.4%. Core domestic orders tumbled 16.7% last quarter. December’s bounce reflected a 462% increase in iron and steel due to special factors that will not persist.

Japanese bank lending increased 3.7% in the year to January, buoyed by the demise of the commercial paper market. Broad liquidity contracted 0.3% in the year to January. M2 and M3 respectively rose 1.9% and 0.9% from January 2008.

Japan’s Economy Watchers’ index ticked up to 17.1 in January from 15.9 in December. This gauge of retail trends remained extremely depressed.

Japanese corporate bankruptcies increased 15.8% in the year to January and were associated with a 44.3% on-year increase in debt.

Japan’s current account surplus dived 92.5% in the year to December and contracted 34.3% in full-2008. Exports fell 35.1% on year after losing 26.5% in the year to November. Both exports and imports dropped 37% between August and December. The current account surplus in 2008 amounted to Y 16.28 trillion; however, such narrowed to Y 6.92 trillion at an annualized rate in the final two months of last year.  Japan’s Basic Balance, the sum of the current account and long-term capital flows, posted a deficit of Y 12.77 trillion in December alone after a shortfall of Y 5.38 trillion in November.

Japanese stock and bond transactions generated a Y 3.86 trillion outflow in December.

Australian job ads fell 6.3% in January. New Zealand house prices fell 8.3% in the year to January.

South Korean producer price inflation slid to a 12-month rate of 4.7% in January, lowest in a year, from 5.6% in December and 7.8% in November, further fanning speculation that the Bank of Korea will lower its rates by 50 basis points this Thursday.

Taiwanese exports fell by a record 44% in the year to January after plunging 42% in the year to December.

The Bank of France projects a 0.6% decline of GDP (not annualized) in the present quarter, consistent with a recession. The central bank’s gauge of French business sentiment ticked up to 70 in January from a 22-year low of 67 in December, providing a hint that GDP is not declining at an accelerating pace.

Latvian GDP sank 10.5% y/y last quarter. Greek industrial production fell 8.7% in the year to December. Turkish industrial output dropped 11.9% y/y in December, and Slovakian industrial production plunged 16.8% that month from a year earlier.

Denmark’s current account remained in surplus in December at Dkr 3.1 billion, albeit less than November’s surplus.

Chinese yuan lending reportedly soared in January.

The German current and trade account surpluses exceeded expectations in December. The current account surplus of EUR 12.3 billion was still 25.5% smaller than a year earlier. The 2008 surplus of EUR 162.5 billion was 10.1% less than the 2007 surplus. The seasonally adjusted trade surplus of EUR 10.7 billion was similar to November’s EUR 10.9 billion but down from EUR 16.0 billion in October. Exports fell another 3.7% on a seasonally adjusted basis from November and were 14.6% lower than the September total. Imports dropped 4.1% after declining by 5.8% in November and 3.7% in October. Trade data in Europe and Asia are spiraling inward at an alarming rate. Economic nationalism like the Congressional “Buy American” campaign could accelerate this process.

Canadian housing starts are due later.

Copyright 2009 Larry Greenberg. All rights reserved. No secondary distribution without express permission.

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