New Overnight Developments Abroad: Awaiting British Budget and More Geithner Comments
April 22, 2009
Many Asian stock markets fell: Hong Kong -2.7%, China -3.7%, Pakistan -3.3%, and Thailand -1.2%. But Japan’s Nikkei edged 0.2% higher, and in Europe, the Dax, Ftse, and Cac40 show modest 0.5% rises.
The yen is up 0.9% against the dollar, but the kiwi and Aussie dollar fell by 1.8% and 1.0%. Sterling and the C-dollar slid 0.4% and 0.3%. EUR/USD is unchanged.
The yield on 10-year JGBs fell 2.5 basis points to 1.43%. Oil (+0.7%) and gold (+0.4%) are somewhat firmer at $48.89/barrel and $886.60 per ounce.
Japan posted its first fiscal year trade gap (Y 725 billion) since FY80, but March saw a tiny surplus of Y 11 billion. Exports fell 51.4% in the year to March and by 16.4% in fiscal 2008. But seasonally adjusted exports rose unexpectedly by 2.2% after plunging 42.5% (73.5% at an annual rate) between September and February. The BOJ’s quarterly senior loan officers’ survey saw the diffusion index for corporate loan demand plunge 30 points to 13 from 43 in January.
Australian quarterly CPI results were mixed but on the whole suggest the RBA has less room to cut the 3% cash rate further now. While total consumer price inflation slowed to a 1-1/2 year low of 2.5% y/y from 3.7% in 4Q08 and 4.2% in 1Q08, the two measures of core inflation were higher than anticipated at 3.9% and 4.4%. Australian skilled labor vacancies were 61.5% smaller in April than a year earlier.
On budget day, Britain reported horrific public finances. There were record deficits in public sector net borrowings of Gbp 19.1 billion in March and Gbp 90.0 billion in fiscal 08/09. The public sector net cash requirement of Gbp 28.4 billion in March was 72% greater than street forecasts. The PSNB and PSNCR deficits posted on-year increases last fiscal year of 160% and 178%.
British jobless claims jumped 73.7K last month, lifting the unemployment rate to a 121-month high of 4.5% from 4.3% in February, while the ILO jobless level recorded its biggest 3-month increase since 2Q91. On such a basis, 2.1 million workers are unemployed, most since February 1997. Average wage earnings including bonuses slowed to an on-year rise of 0.1% in Dec-Feb and -2.1% in February alone, each record lows. Factory-sector productivity fell 7.8% in Dec-Feb from a year earlier.
Released minutes show the Bank of England Monetary Policy Committee voted 9-0 earlier this month to keep a 0.5% Bank Rate and to proceed with its Gbp 75 billion asset purchase plan. Policymakers project sub-target inflation in the second half of this year. Some nascent signs of a second derivative slowdown in the rate of economic contraction were noted in recent surveys, but officials felt it was too early to draw firm conclusions that such will continue.
Corporate goods prices in China fell 6.6% in the year to March, a dramatic swing from their rise of 10.2% in the year to March 2008. Goldman Sachs revised Chinese GDP growth forecasts upward by 2.3 percentage points to 8.3% for 2009 and 1.9 percentage points to 10.9% in 2010. Speculation that the central bank may begin to mop of liquidity weighed on Chinese equities today.
Euroland’s deficit-to-GDP and debt-to-GDP ratios in 2008 were -1.9% and 69.3% compared to -0.6% and 66.0% in 2007. The Spanish and French deficits exceeded the 3.0% target ceiling last year.
Poland posted a 3.9% deficit/GDP ratio last year, dashing any prospect for early admission to the European Monetary Union. GDP growth slowed to 2.9% in 4Q08 from 4.8% y/y in the third quarter.
Danish consumer confidence improved 7.3 points to -4.4 in April. Spanish exports in Dec-Feb were 25.4% lower than a year earlier.
British M4 was unchanged in March and slowed to a 12-month gain of 17.6% from 18.6%. The Council of Mortgage Lenders reported a 52% plunge in gross mortgage loans in the year to March.
Serbia’s central bank cut its key two-week repo rate to 14% from 15%. Earlier this month on the 6th, a 150-bp rate cut was announced.
The German deputy finance minister intimated that the G-7 statement this Friday would use the same language on forex policy. No surprise there.
Geithner will be speaking further today about the banking system. His remarks yesterday helped stocks reverse some of Monday’s steep losses, but markets look vulnerable heading into the new day. U.S. data include the FHFA house price index, weekly mortgage applications and weekly oil inventories. The British budget gets presented at 11:30 GMT.
Copyright 2009 Larry Greenberg. All rights reserved. No secondary distribution without express permission.
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