New Overnight Developments Abroad: IMF Warning on Ireland

June 25, 2009

The dollar mostly firmed in continuing post-FOMC trading.  The Fed did not modify its bond purchase program and saw further progress toward end of recession.  The greenback is up 0.7% against the yen, 0.6% versus sterling, 0.4% relative to the Canadian dollar, 0.3% against the kiwi, and 0.2% versus the Swiss franc.  The Australian dollar is unchanged, and the euro has edged 0.2% higher against the dollar.  Markets continue to chatter about yesterday’s more aggressive Swiss intervention to prevent any further appreciation of the franc with resulting deflation.

Stocks are down in Europe: Dax -1.2%, Ftse -0.6%, and Paris Cac off 1.0%.  Earlier in the day, Asian bourses closed mostly higher: Thailand 1.6%, Indonesia 2.4%, Hong Kong 2.1%, Philippines 2.1%, Singapore 1.0% and Japan 2.2%.  Aussie stocks advanced 1.3%.  China’s market hit a 52-week high.

The 10-year Japanese JGB yield ticked a basis point higher to 1.40%.  Treasuries holding onto yesterday’s big post-FOMC rise.

Oil rose 0.4% but gold dipped 0.1% to $68.96/barrel and $933.20/ounce, respectively.

The IMF said Irish banks face EUR 35 billion of losses through next year and called situation unprecedented.  European bank stocks stumbling.

Repression of Iranian protestors has stepped up.

Euroland industrial orders sank another 1.0% in April, 2-1/2 times as much as projected, and were 35.5% lower than in April 2008 after a 12-month drop of 26.5% in March.  Orders were 1.5% less than 1Q mean level, which still represents a lessening rate of drop after tumbling by 53% at a seasonally adjusted annualized pace in 4Q08 and 58.1% last quarter.  Orders recorded on-year drops of more than 30% in Germany, France, Italy, Spain, Portugal, Holland, Estonia and Greece.  These new figures belie optimism that manufacturing will generate much growth in 2H09.

The Czech central bank did not cut its 2-week 1.5% repo rate further as many analysts had been expecting.  Concern about the koruna was a likely reason.

Taiwan’s central bank also kept monetary policy steady.  Its key rate stays at 1.25%, the level since February, which was as expected in light of improving export orders.

German real construction orders fell 12.3% in the year to April.

Spanish producer prices firmed 0.1% but posted the 5th straight on-year decline, falling by 4.4% from May 2008.

South African PPI inflation swung from a 12-month rise of 2.9% in April to a record on-year drop of 3.0% in May.  The Reserve Bank is expected to announce a 50-basis point rate cut later today.

New Zealand’s current account deficit narrowed sharply to NZ$ 1.25 billion in 1Q09 from NZ$ 4.07 billion in 4Q08 on a big drop in imports.  As a percent of GDP, the deficit amounted to 8.5% in the year to March.

Italian business sentiment improved to a 7-month high of 69.3 in June from 68.8 in May and 59.8 in March, but higher inventories is a bad sign.  Italy’s non-EU trade showed its biggest surplus, EUR 555 million in May, since 2004 and the greatest on-year drop of imports (33.2%) since 1993.

Polish unemployment dipped two tenths to 10.8% in May but was a full percentage point than a year earlier.  Polish retail sales firmed 1.1% in the year to May, about twice as much as assumed.

Swedish consumer confidence became less negative in June at minus 9 after -11 in May and -21 in April.  Swedish domestic and imported producer prices fell 0.5% in May, cutting the 12-month pace to 2.9% from 3.2%.

Dutch business sentiment printed at minus 15 in June, better than expected, after minus 17.3 in May.

South Korea’s government revised projected growth in 2009 higher to minus 1.5% from minus 2%, which had been projected in April.

India’s prime minister said less rainfall than hoped would make it hard for GDP growth to reach 9%.  Indian wholesale prices posted a second straight negative weekly on-year result, with a drop of 1.14%.

The Conference Board index of leading economic indicators for Australia improved for a third straight month, rising to 113.5 in April from 112.8 in March.

U.S. jobless claims and revised 1Q GDP data are due later today, and Fed Chairman Bernanke testifies in Congress.

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

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