New Overnight Developments Abroad: Equities Rally Sharply

June 1, 2009

Stocks in the Pacific Rim advanced by 4.3% in Indonesia, 4.0% in Hong Kong, 3.6% in Vietnam and China, 3.5% in Thailand, 2.9% in The Philippines, 2.0% in Australia and 1.6% in Japan and New Zealand.  In Europe, the German Dax, Paris Cac and British Ftse have traded 3.2%, 2.5%, and 1.8% higher.

The dollar has lost 1.5% against the kiwi, 1.3% each against sterling and the Australian dollar, 0.8% versus the Canadian dollar, 0.6% against the yen and euro and 0.4% against the Swiss franc.  The ten-year JGB yield edged up another basis point to a six-month high of 1.5%.  South Africa’s central bank governor protested the strength of the rand.  ECB and British monetary officials hold policy meetings on Thursday in which the recent appreciation of sterling and the euro is likely to be noted.

Oil and gold have climbed 2.7% and 0.8% to $68.09 per barrel and $987.70 per ounce.

Confidence continues to build that the recession is ending.  Geithner in China has stressed the commitment to reduce the fiscal deficit once a recovery starts.

Manufacturing PMI’s improved in May.

  • Euroland’s reading of 40.7 was 2/10ths better than the flash indication and 3.9 points higher than the March score.  Germany’s PMI improved 4.2 points to 39.6.  France’s was 3.2 points higher at 43.3.  Italy’s rose 6.5 points to an 8-month high of 41.1.  Spain’s jumped 5.2 points from April to 39.8.  Ireland’s went up 3.3 points to 39.4, and the Greek PMI increased 5.2 points to 46.1.
  • The British PMI reading of 45.4 was 2.3 points better than April’s and 1.4 points higher than the consensus forecast. Sweden’s climbed 4.9 points to 43.7.
  • PMI readings in Poland of 42.6 and in the Czech Republic of 40.5 showed gains of 0.5 and 3.9 points.
  • South Africa’s PMI of 37.3 was up 1.7 points on April.  Russia’s reading increased 1.9 points to 45.3.  Australia’s reading jumped 7.6 points to 37.5.
  • China’s PMI proved an exception, dipping 0.4 points, but it surpassed 50, connoting expansion for a third consecutive month. Hong Kong’s index edged up 0.4 to 44.8.

In Australia, retail sales firmed 0.3% in April on top of a 2.2% leap in March, and new home sales went up another 0.5%.  These signs of strength support the consensus view that the Reserve Bank of Australia will keep its cash rate unchanged this week.  A gauge of future inflation in Australia, the TD-MI expected inflation, settled back further.  Business inventories fell 1.1% in the year to 1Q09, while growth in gross profits slowed.  The Aussie commodity price index sagged by 3.5% last month and by 8.2% in local currency terms.

Japanese auto sales dropped 19% in the year to May and by 22.9% y/y in January-May.  Wage earnings fell 2.5% in the year to April as overtime pay tumbled by 18.8%.  Japan’s output gap, a measure of the likely intensity of deflation, widened to 8.5% in 1Q09 from 4.5% in 4Q08.

Britain’s hometrack index of house prices was unchanged on month and down 9.6% on year in May.  The Land Registry house price index fell 0.3% and 16.2% in the year to April.

In Hong Kong, retail sales volume fell 5.5% in the year to April, less than expected.  South Korean exports (off 28.3%) an imports (-40.4%) posted larger on-year declines in May than expected.  The trade balance was in surplus by $5.15 billion.  Indonesian exports (-23%) and imports (-45%) also fell further than forecast.  Exports and imports in India recorded on-year declines in April of 33.2% and 36.6%.

Thai consumer price inflation of negative 3.3% was deeply in the red last month.  South Korean CPI inflation slowed to 2.7%.  South Korean house prices fell 0.6% in the year to May.  Indonesian CPI inflation slowed to 6.0% from 7.3%.  There is an Indonesian central bank meeting on Wednesday, and a rate cut is expected to be announced then.

Spanish car sales fell 38.7% in the year to May.

Canada reports monthly and quarterly GDP figures today at 12:30 GMT.  U.S. personal income and spending figures get released at the same time, followed at 14:00 GMT by construction spending and the ISM manufacturing PMI index.

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

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