New Overnight Developments Abroad: Across-the-Board Dollar Gains Ahead of ECB and BOE Announcements

March 5, 2009

The dollar has risen 1.2% against the Australian dollar, 1.0% versus the Swissy, 0.9% against the euro, 0.8% against the kiwi and Canadian dollar and 0.4% relative to sterling and the yen.

Asian stocks were mixed.  There were rises of 2.0% Japanese Nikkei.  The Philippines gained 2.0% also despite a smaller-than-expected central bank rate cut. Vietnam up 1.0%, but India and Singapore fell 2.9% and 1.7%.  China firmed 0.9% even though Premier Wen did not unveil extra stimulus a la Wednesday rumors.

Wen’s disappointing remarks weighed on European stocks where the Dax, Ftse, and Cac40 show drops of 1.8%, 1.6%, and 1.4%.

A somewhat weak 30-year JGB auction produced a smaller bid-cover ratio of 2.50.  Ten-year yield firmed 1.5 basis points to 1.31%.

Oil settled back 2.9% to $44.07 per barrel.  Gold firmed 0.7% to $913.4, refusing to dip under $900 just as it could not hold above $1000 a few weeks ago.

In Japan, the quarterly Finance Ministry corporate survey revealed on-year drops of 64.1% in profits, 17.3% in investment spending and 11.6% in sales last quarter, all of which suggests that investment and perhaps even GDP will get revised to show bigger declines.

Japanese stock and bond transactions generated a smaller Y 302 billion outflow last week versus a Y 1289 billion outflow in the week to February 21st.

The Philippino Central Bank cut its overnight borrowing and lending rates by 25 basis points each, not 50 bps as expected.  There had been two earlier cuts of 50 basis points on January 29th and December 18th.  The rates are now 4.75% and 6.75%, respectively.  Consumer price inflation edged higher to 7.3% in February instead of dropping under 7% as assumed.  January’s pace had been 7.1%.

Chinese Premier Wen stuck to an official forecast of 8% real growth in 2009, expressing the view that the 4 trillion yuan stimulus would be plenty sufficient and not fattening that offer.

German real retail sales sagged 0.6% in January and fell 1.2% from a year earlier.  Retail sales were 0.3% below the 4Q08 level.  Analysts had projected a modest increase of retail sales in the latest month. Germany’s construction PMI of 37.8 in February after 33.7 in January showed sharp but a slightly reduced rate of contraction.

Australia reported more weak data.  Exports fell 5.0% between December and January, and building approvals fell 3.7% in January, much worse than expected.

 Euroland released the second estimate of 4Q08 GDP growth, this time with details on demand components.  Real GDP was confirmed at a drop of 1.5% from 3Q.  The on-year fall was revised to 1.3% from 1.2%.  The data are weak in all respects.  Consumption off 0.9%. Investment and exports plunged by 2.7% and 7.3%. Growth would have been negative 2.1% if not for an 0.6 percentage point boost from an unplanned rise in inventories. Quarterly (non-annualized) GDP declines were 2.1% in Germany, 2.0% in Portugal, and 1.8% in Italy.  Drops of at least 1% also recorded by France, Spain, Belgium, and Finland.

French producer prices sank 2.0% and by 2.7% in the year to January.  These results were well below forecasts.

British house prices fell 2.3% m/m and 17.7% y/y in February according to the Halifax index.  The index has fallen 19.7% from its 2007 peak. British new car sales fell 21.9%.

Angolan authorities denied plans to devalue its currency.

The ruble strengthened on firmer oil prices this week.

The Bank of England announces its rate decision at 12:00 GMT followed by the ECB at 12:45 GMT.  Peru to announce today as well.

U.S. jobless claims, productivity, unit labor costs, and factory orders are due today.  Canada reports its PMI and building permits.

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

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