New Overnight Developments Abroad: Chinese Statistical Releases Show Recovery Will Negative Inflation
July 16, 2009
No continuity in foreign exchange movements from day to day. Dollar and yen are higher today after falling early Wednesday. The greenback rose 1.1% against the kiwi, 0.7% against the Australian dollar, 0.6% against the loonie, 0.3% against sterling and 0.2% against the euro and Swissy. The yen has gained 0.6% against the dollar and more versus other currencies.
Pacific Basin stock markets mostly gained: Vietnam and the Philippines 1.5%, Malaysia 1.1%, Japan and South Korea +0.8%, Hong Kong 0.6%, and Singapore 0.5%. Exceptions include drops of 0.9% in Thailand and 0.3% in Indonesia. In Europe, the Paris Cac (0.4%) an German Dax (0.3%) are marginally higher, whereas the British Ftse has edged off 0.1%.
European sovereign bond yields are higher, following Treasuries. The 10-year JGB is little changed at 1.34%.
Oil fell back 1.2% to $60.80/barrel. Gold is 0.4% lower at $935.40 per ounce.
Many Chinese economic indicators were released:
- On-year 7.9% real GDP growth in the second quarter beat analyst expectations of 7.7% and was up from 6.1% in the first quarter.
- Fixed asset investment increased 35.3% in the year to June compared to a gain of 32.9% y/y over the first five months of 2009.
- June industrial production climbed 10.7% y/y, beating forecasts of less than 10% and surpassing prior increases of 8.9% in May and 7.3% in April.
- Retail sales recorded on-year growth of 15.0% in June, the same as in January-May. China needs to rotate growth toward consumption.
- Consumer prices fell 1.7% in the year to June, their deepest negative result of this decade.
- Producer price deflation also lengthened, reaching minus 7.8% in June after negative 7.2% in May, minus 6.6% in April and -4.6% in 1Q09.
The Bank of Japan upgraded its economic assessment to “has stopped worsening” from “has begun to stop worsening after deteriorating sharply.” Bank of Governor Shirakawa said signs of easing financial strains and economic recession were the reasons why quantitative liquidity-supporting programs were extended by three months instead of six, and he suggested that more extensions may not be needed. However, the Reuters Tankan monthly proxy for services slid back seven points to minus 38 in July, not far from May’s low of -44. The manufacturing component did better, gaining 7 points to minus 43.
Japan’s tertiary index for service-producing sectors slid 0.1% in May and was 0.4% lower in April-May than in 1Q09. The index also was down 6.8% from May 2008, a bigger drop than that of 6.1% in the year to April or 6.5% in the year to 1Q09. Japanese stock and bond transactions generated a Y 654 billion outflow last week following a Y 822 billion inflow in the week to July 4.
The main reason for the kiwi’s tumble is that the Fitch credit rating agency reduced its outlook on New Zealand foreign currency reserve holdings to negative from stable. New Zealand CPI inflation dropped to a 7-quarter low of 1.9% y/y in 2Q09 from 3.0% in the first quarter and 5.1% in 3Q08. New Zealand’s PMI index improved 3.1 points to 46.2 in June, a 9-month high but still below the 50 level that separates contraction from expansion.
Moody’s raised South Africa’s foreign currency rating, in contrast.
CIT is expected to file for bankruptcy.
Hungarian wage inflation slowed to 2.5% y/y in May from 3.5% in April. The deceleration had not been anticipated.
The Reserve Bank of Australia sold local currency in intervention last month.
Euroland’s current account deficit in the first quarter was revised sharply higher to EUR 42.4 billion.
French consumer prices ticked up a tenth last month and fell 0.5% from June 2008. Energy prices fell 17.4% year-on-year. Spanish home sales dropped 32% in the year to May, which was still less than the 48% on-year tumble in April. The Italian trade position posted a EUR 1.19 billion surplus in May, swinging from an EUR 84 million deficit in May 2008.
The ZEW investor sentiment index for Switzerland worsened to zero in July from +9.7 in June.
Turkish consumer confidence recovered 2 points to 85.27 in June.
Reports from Asia suggest that North Korea’s leader, Kim, may be closer to death than realized and that Japanese Prime Minister Aso is being urged by some members of his LDP party to resign before elections on August 30th.
The U.S. releases TIC capital flow data, the Philly Fed index, the NAHB index, weekly jobless claims, and more key corporate earnings reports today.
Copyright Larry Greenberg 2009. All rights reserved. No secondary distribution without express permission.
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