New Overnight Developments Abroad: Dollar Up but Stocks Lower
May 21, 2009
Stocks fell by 0.9% in Japan, 2.2% in China, 1.1% in South Korea, 2.3% in India, 2.6% in Singapore, and 1.6% in Hong Kong. The German Dax and Paris Cac are trading off 1.6%, while the British Ftse has lost 2.2% after a damaging S&P warning, which also depressed sterling.
Citing poor public finances, Standard and Poor’s downgraded Britain’s credit rating outlook to “negative” from stable. Gilt yields rose in response.
The dollar climbed 0.8% against sterling and is also stronger by 0.7% against the Australian dollar and 0.6% relative to the New Zealand kiwi. The dollar firmed 0.3% on balance against the yen after hitting a low of 94.29 and is up 0.2% against the Canadian dollar and 0.1% versus the Swiss franc. The euro is 0.1% firmer against the dollar.
FOMC minutes released yesterday have fanned risk aversion, projecting a deeper recession and indicating a willingness to expand quantitative easing.
Oil settled back 2.0% to $60.80/$. Gold rose 0.3% on concerns about monetary reflation.
Australian auto sales rose 0.9% last month but were 20.3% below their April 2008 level. Australian wages climbed 1.2% in December-February and posted on-year growth of 5.6%.
Japan’s tertiary index of service-sector activity plunged 4.0% in March and by 6.8% from a year earlier. These results were much weaker than forecast. Japanese stock and bond transactions generated a Y 590 billion net outflow last week.
Euroland flash PMI readings for May were better than assumed and much better than April scores, but they still imply contracting activity.
- Euroland’s composite PMI improved to 43.9 from 41.1 in April and 36.2 in February. The factory PMI rose 3.7 points to 40.5, while the services PMI advanced 0.9 points to 44.7.
- Germany had a composite PMI of 44.4, up from 40.1 in April and 36.3 in February. The manufacturing index increased to 39.1 from 35.4, while the services PMI climbed to 46.0 from 43.8.
- The preliminary French composite PMI rose to 46.1 in May from 43.8 in April and 36.7 in February, with manufacturing increasing 3 points to 43.1 and services climbing 1.1 points to 47.6.
British retail sales again surprised on the upside, rising by a real 0.9% in April and 2.6% on year (best in three months). But a larger than expected public sector net cash requirement in April of Gbp 5.15 billion underscored the S&P warning. The public sector net borrowing of Gbp 8.47 billion was 4.6 times greater than in April 2008. Britain’s Council of Mortgage Lenders reported drops of 9% on month and about 60% on year in gross mortgage loans. The Bank of England reported lower net mortgage loans and slightly smaller mortgage applications in April.
U.K. business investment dropped 5.5% last quarter and by 6.8% on year. These are bigger declines than assumed in the preliminary GDP report. M4 growth slowed to 17.4% in the year to April from 18.2% in March.
The central bank in Sri Lanka cut its reverse repo rate by 25 basis points to 11.5%.
Singapore’s real GDP fell 14.6% last quarter and by 10.1% from 1Q08.
Taiwan’s GDP dropped 10% in the year to 1Q, a deeper decline than the 8.4% decrease in the year to 4Q08.
Hong Kong consumer prices edged up 0.1% in April, halving on-year CPI inflation to 0.6%. The core rate of inflation was 1.9%.
Sources claim that the ECB considered a much larger EUR 125 billion amount of covered bond buying when its Governing Council met in early May but opted for doing EUR 60 billion.
U.S. jobless claims arrive at 12:30 GMT followed by the Philly Fed index and index of leading economic indicators at 14:00 gmt. Canada reports wholesale sales at 12:30 GMT.
Copyright 2009 Larry Greenberg. All rights reserved. No secondary distribution without express permission.
ShareThis
