New Overnight Developments Abroad: Reaction to Stress Test Results Has Been Only Mild

May 8, 2009

Ten U.S. banks will need to boost capital by a combined $74.6 billion, and that is seen as manageable.  Since most of the information had already leaked, investors were not surprised by any of the stress test revelations.  Attention turns to U.S. labor force report at 12:30 GMT, where analysts anticipate better numbers than seen in the first quarter.

The dollar has fallen 0.8% against the Canadian dollar and 0.6% against the kiwi but is narrowly mixed otherwise with a gain of 0.3% against the yen, no change against the Swissy or euro, and dips of 0.2% against the Australian dollar and 0.1% relative to sterling.

The Dax and Cac40 are trading 1.6% and 1.0% lower, but the Ftse is little changed.  Asian stocks were mixed with losses of 0.4% in Japan, 0.9% in China, and 0.8% in Hong Kong but gains of 1.4% in India, 0.7% in Vietnam and 0.4% in Indonesia.

JGB, gilt and bund yields are higher, following yesterday’s trend in Treasuries.

Oil prices climbed 1.0% to $57.25 per barrel, but gold settled back 0.2% to $913.70 per ounce.

German industrial production was unchanged in March, a better outcome than forecast, but plunged 40% saar in the first quarter after a 23.8% dive in 4Q08.  In March, production of capital goods went up 2.5%, while construction recovered 7.6%.

Germany recorded a bigger EUR 10.2 billion current account surplus in March after EUR 6.8 billion in February, but it was still down 42% compared to March 2008. The seasonally adjusted trade surplus remained flat at EUR 8.9 billion in March as exports and imports each posted gains for the first time since September.  Exports advanced 0.7% after having tumbled 22.1% or 45% at an annualized rate between September and February.

Comments by ECB officials about the chances of a future cut in the 1% refinancing rate have been mixed.

The Reserve Bank of Australia released its quarterly Monetary Policy Statement, voicing optimism about a recovery but revising projected growth to -1.0% for 2009.  The RBA also revised projected CPI inflation in the out-years down to a sub-target 1.5%.  The report left analysts expecting neither a rate cut nor increase for a long time to come.

Central banks cut rates yesterday in Peru (100 bps), Chile (50 bps), the Czech Republic (25 bps), Iceland (250 bps) and Euroland (25 bps).

Canadian April labor market data were much better than forecast thanks to a 37K increase in self-employment.  The jobless rate did not rise further but instead remained at 8.0%, and overall jobs increased 35.9K after dropping 61.3K in March.  Factory jobs went up 6.7%, and wages increased 4.3% on year after an increase of 4.1% in the year to March.

Minutes from the Bank of Japan’s early-April meeting acknowledged some signs of stabilization but voiced mounting concern about corporate funding conditions.

Malaysian exports fell 15.9% in the year to March, a smaller drop than feared.  A 12.5 billion ringgit trade surplus was posted that month.

Norwegian industrial output fell 2.7% in March.  Factory production dropped by an expected 0.6%.  Finnish industrial output climbed 2.1% in March but fell 16.5% from a year earlier.

British producer output prices rose 0.6% in April and recorded a smaller 12-month increase of 1.2% after 2.0% in the year to March. Core fell to 2.4% from 3.2%.  Producer input prices fell 1.0% and by 5.0% from a year earlier.  Analysts had predicted somewhat lower figures, but the report nonetheless points to lessening inflation.

Slightly less intervention was spent to defend the Ukrainian hryvnia in April ($946 million) than in March.

The U.S. employment data for April arrive at 12:30 GMT. Wholesale inventories are due, too.  Canada reports housing starts. Evans and Lacker of the Fed speak.

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

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