New Overnight Developments Abroad: Big Decline in Equities

February 17, 2009

Amid mounting signs of an intensifying global recession, stocks fell by 1.4% in Japan, 3.8% in Hong Kong, 4.1% in South Korea, 2.9% in India, 3.1% in China, 3.4% in Vietnam, 2.6% in Singapore, 1.8% in Indonesia and 1.5% in Australian.  In Europe, share prices ore down 1.8% in France and Germany and by 1.5% in Britain.

The dollar has advanced 1.5% against the kiwi, Ozzie dollar and Canadian dollar.  It has gained 1.2% against the euro and 0.8% versus the Swiss franc but shows no change relative to sterling a an uptick of just 0.1% against the yen.  Emerging market currencies were hammered.  Polish Zloty fell 2% against the euro.

Gold prices rose another 2.3% to an 8-month high of $963.60 per ounce, taking aim on key $1000 barrier. Oil, however, softened 1.2% to $37.07/barrel.

Most sovereign bond yields are lower.

Japan’s Finance Minister Nakagawa, point man in government efforts to pass stalled stimulus legislation, resigned in disgrace.  Economics Minister Yosano, age 70, will replace him. This shuffle adds to Prime Minister Aso’s political woes.

Parliament accepted the resignation of the Ukraine finance minister.

The ZEW expectations index of German investor sentiment rebounded by more than expected to -5.8 in February from -31.0 in January, -45.2 in December and -53.5 in November.  The Euroland ZEW expectations index improved to -8.7 from -30.8.  Separate indices for current conditions worsened to -86.2 from minus 77.1 in Germany and to -91.0 from -84.7 in Euroland.  These results depict a very depressed economy (Germany’s long-term average ZEW reading is 26.4) but point to a less severe downturn after mid-2009.

The seasonally adjusted EUR 0.3 billion Euroland trade deficit in December was down from EUR 4.0 billion in November and the smallest shortfall in the second half of 2008.  Exports fell at a 35.3% annualized rate between September and December, while imports tumbled at a 43.3% annualized pace over those three months.  The trade balance swung to a deficit of EUR 32.1 billion in 2008 from a surplus of EUR 15.8 billion in 2007, as a rising energy import bill outweighed a wider surplus from non-energy commerce.

Monthly Tankan readings compiled by Reuters, proxy gauges for the quarterly Bank of Japan, hit a new record low in non-manufacturing of -39 in February after -31 in January and -9 last October, while the manufacturing measure bounced 2 points off January’s all-time low of -76.

Japan’s Tertiary index (a gauge of service sector activity) fell 1.6% in December and by 2.9% from a year earlier.  Industrial output had previously been reported to have plunged 9.8% in December.  In 4Q08, the tertiary index fell 1.7%, and industrial output dived 12.0%.

Minutes from the Reserve Bank of Australia’s last policy meeting warned of a continuing weak economy in the near term but voiced optimism that significant policy stimulus would boost growth later in 2009.  Officials said inflation is now in a clear downtrend.

Swiss real retail sales advanced 3.6% in the year to December, more than anticipated, but slid 0.5% adjusted for variations in the number of working days.

British consumer price inflation did not recede as much as assumed in January.  The CPI fell 0.7% from December but showed a 3.0% on-year gain compared to 3.1% the month before.  Retail price inflation of 0.1% in the year to January was the lowest since March 1960, but the RPIX (excluding mortgage and interest payments) was still at 2.4%, down from 2.8% in December.

Britain’s DCLG house price index fell 10.3% in the year to December versus an on-year drop of 8.6% in November, -6.4% in the year to 4Q08 and -3.0% in the year to 3Q08.

Scheduled U.S. data today include the Empire State index at 13:30 GMT, TIC capital flows at 14:00 GMT, and the National Association of Home Builders Index at 18:00 GMT.  President Obama will sign a $789 billion fiscal stimulus into law today.

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

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