New Overnight Developments Abroad: Yen Stronger on Risk Aversion

May 6, 2009

The yen rose 0.6% against the dollar, helped by a report that stress test sees need for Bank of America to boost capital by greater-than-assumed $34 billion.  The stress test formal results get released tomorrow.

The dollar otherwise rose 0.4% against the Canadian dollar, but dipped 0.3% against the kiwi and 0.1% versus sterling and the Swiss franc.  Euro and Aussie dollar are unchanged.

Japanese markets again closed for final day of the Golden Week holidays.

Stocks climbed 2.5% in Hong Kong, 1.5% in Indonesia, 3.3% in Thailand, 1.5% in Malaysia and 1.4% in China, but Indian and South Korean stocks fell 1.4% and 0.3%.  In Europe, the Paris Cac, British Ftse and German Dax are higher by 0.9%, 0.6%, and 0.3%.  Aussie stocks eased 0.6%.

Gilt and bund yields extended their uptrend.  Oil firmed 0.6% to $54.16/barrel.  Gold is unchanged at $904.10/ounce.

Retail sales reports from Australia far surpassed expectations, while a similar report from Euroland disappointed.

  • Australian retail sales jumped 2.2% in March, over four times more than forecast.
  • Euroland retail sales sank another 0.6% in March and by 4.2% from March 2008. Such fell 4.1% at a seasonally adjusted annual rate in 1Q09, similar to the 4.3% drop in the fourth quarter of 2008.

Euroland and British PMI-service results for April showed unexpectedly large improvements but remained below 50, connoting continuing contraction.

  • Euroland’s services index was 43.8, a 6-month high and 0.7 higher than its flash release and up from 40.9 in March and 39.2 in February.
  • Germany’s services index improved 1.5 points to 43.8.  The French index rose 2.9 points to 46.5.  Italy’s index went up 2.9 points to 42.0 and was 4.1 points above February’s record-low reading of 37.9.  Spain’s services PMI soared 8.2 points to 42.3, but Ireland’s fell 3.5 points to 32.2.  The sharpest improvement occurred in the business expectations sub-component.
  • Euroland’s composite PMI reading (manufacturing and services) was 41.1 in April, a 6-month high and up from 38.3 in March and 36.2 in February.
  • The British PMI-services printed at 48.7, more than two points better than forecast and up from readings of 45.5 in March and a low in November of 40.1.

The Halifax index of British house prices fell another 1.7% in April, more than forecast, and by 17.7% from a year earlier, similar to the 12-month drop of 17.6% in March.  The Nationwide index of British consumer sentiment jumped to a 23-month high of 50 in April from 42 in March. The NIESR Institute projects a 4.3% drop in British real GDP this year and projects a debt/GDP ratio of 94.5% by FY13/14, even greater than government officials anticipate.  According to the British Retail Consortium, shop prices slid 0.5% last month and were just 1.4% higher than a year earlier.

Australia’s trade surplus widened 43% in March and improved A$ 5 billion compared to March 2008 as exports soared 25% and imports slid 0.4%.  A leading index of the Australian labor market deteriorated further in May.

New Zealand labor costs rose just 0.5% in 1Q09 and posted an on-year advance of 3%.  Wage pressures will not constrain on central bank easing.

Spanish industrial production plunged 24.7% in the year to March, the biggest drop since at least 1994.

Russia’s service-sector PMI weakened in April by 3.5 points to 32.7.

U.S. data releases today include the ADP report on private-sector jobs and energy inventories.  Stern and Yellen of the Fed speak.  Canada releases building permits and the IVEY-PMI index.  Central bank meetings in Norway and Romania are expected to result in interest rate cuts.

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

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