New Overnight Developments Abroad: Commodity Currencies Stronger

March 20, 2009

Gold firmed another 0.4% to $962.90 per ounce and has advanced 7.2% over the ten days since March 10, buoyed partly by concerns that Fed stimulus will spark inflation. Oil eased 0.8% but remains above $50 at $51.20 per barrel.  Commodity-sensitive currencies climbed further against the greenback: kiwi up 1.0%, Australian dollar +0.8%, and Canadian dollar +0.3%.

The U.S. currency is otherwise narrowly mixed, with drops of 0.4% against the Swiss franc but rises of 0.3% versus the yen and 0.1% against the euro. Sterling is unchanged.  There’s been negligible further net movement in gilt or bund yields.

No major U.S. data are due this Friday.

Japan was closed for the Vernal Equinox holiday.  Stocks elsewhere in Asia were lower to mixed, falling by 2.3% in Hong Kong, 1.5% in Taiwan and 0.6% in India but rising by 0.8% in South Korea and 1.4% in Indonesia.  Stocks fell in Australia by 0.4% and are lower in Europe, led by a 1.3% decline in France.

Industrial production in the euro area had its worst month yet, plunging 3.5% in January and 17.3% on year.  The January level was as much below the 4Q08 level (6.1%) as the decline between the third and fourth quarters of last year.  Industrial output fell 27.3% at an annualized rate in the five months between August and January.  Monthly drops in January were spearheaded by Portugal (9.8%), Germany (7.5%) and France (3.1%); Germany, Portugal, Finland, Spain, France and Italy all posted 12-month declines of more than 14.0%.

In France, the statistical agency INSEE revised projected GDP growth to declines of 1.5% this quarter, 0.6% next quarter, and 2.9% in 2009 as a whole.  A breakdown of expected contributions to the 2.9% negative growth in 2009 shows -1.4 percentage points from inventories, -1.0 percentage points from net exports and -0.5 percentage points from real final domestic sales.

German producer prices fell 0.5% in February, slicing the 12-month increase to 0.9% from 2.0% in January, 4.0% in December and 8.2% last July. Non-energy producer prices fell 0.7% in the year to February compared to an on-year rise of 2.8% in December.

A German politician claimed that a plan has been drawn up to rescue any Euroland governments in danger of default.

Global trade fell 17% in volume terms between January 2008 and January 2009 according to a European think tank.

In Colombia, where the central bank holds a policy meeting today, retail sales and industrial output fell by 4.5% and 10.7% in the year to January. The Bank of Mexico also announces an interest rate decision today.  Both central banks are expected to reduce rates.  Yesterday, the Central Bank of Turkey cut its key rate by an as-expected 100 basis points to 10.5%. Such had been at 17% in early November.

The Greek current account deficit widened 8% to EUR 34.98 billion last year.

Italian unemployment rose to 6.9% last quarter from 6.7% in the third quarter of 2008.  Spanish industrial orders sank 30% in the year to January.

Sentiment among South African manufacturers slumped to 16 according to a quarterly measure from 31 in 4Q08.

An OECD officials implied that group now looks for Chinese growth of 6-7% this year.

Malaysian consumer price inflation slowed to 3.7% in February from 3.9% y/y in January and 8.5% last August.

Canadian retail sales will be reported at 12:30 GMT.

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

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