New Overnight Developments Abroad: Sharp Rise in European Confidence

July 30, 2009

The dollar is lower, especially against the Australian dollar (1.1%) and sterling (0.8%) but also by 0.3% relative to the Canadian dollar, euro and Swissy and by 0.1% against the yen.

An exception is the dollar’s 0.2% rise against the kiwi.  The Reserve Bank of New Zealand kept a 2.5% cash rate and released a more dovish statement than expected.  See review.

In the Pacific Rim, equities bounced back 2.1% after reassuring signals from the central bank that stimulus will not be taken back too quickly.  Stocks also went up 3.3% in Indonesia, 1.4% in India, 1.2% in Thailand and Australia, 1.2% in Singapore, and 0.5% in both Japan and Hong Kong.  In Europe, the British Ftse, Paris Cac and German Dax have traded up by 1.2%, 1.1% and 0.6%.

Bond yields are mostly higher.  The ten-year JGB rebounded 2 basis points to 1.40%.

Oil and gold prices went up 0.9% and 0.5% to $63.89 per barrel and $932.20 per ounce.

Economic sentiment in Euroland jumped to 76.0 in July from 73.2 in June, 70.2 in May 67.3 in April and 64.6 in March.  Consumer confidence advanced 2 points to minus 23.  Industrial sentiment also went up 2 points to minus 30, as did sentiment in services to minus 18.  Retail sector sentiment climbed 4 points to minus 13, while construction sentiment was unchanged from June’s reading of minus 33.  Analysts had been looking for economic sentiment to be around 75.

Bloomberg released new retail PMI scores.  Euroland’s index slid two-tenths unexpectedly in July to 47.3 because of drops of 3.4 points to 46.0 in France and of 1.4 points to 45.6 in Italy.  The French and Italian scores were four-month lows, whereas the German reading jumped 3.8 points to 49.8.  Sub-50 territory implies a contracting trend.

German labor market data for July were better than forecast because of a change in measuring the jobless that restricts more people in training.  Unemployment fell 6K to 3.462 million and remained at a steady 8.3% of the labor force.

The British Nationwide house price index increased 1.3% in July, four times as much as expected, which cut the on-year decline to 6.2% from a drop of 9.3% in the year to June and a tumble of 17.6% in the year to February.  The U.K. housing market seems to be stabilizing, but will this improvement last?

Norwegian unemployment climbed to 3.0% in July as expected from 2.7% in June and 1.8% a year earlier.

Spanish consumer prices fell by 1.4% in the year to July after a 1.0% drop in the year to June.  The decline was somewhat more than anticipated.

Belgian consumer prices fell 1.68% in the year to June after a 1.1% on-year drop in May.

The household savings rate for Euroland was 15.6% in the first quarter of 2009, up from 14.9% in 4Q08.

Swedish economic sentiment improved sharply to 87.1 in July from 80.3 in June.  Consumer confidence jumped 6.3 points to minus 3.7.

Hourly wage growth in Italy eased to 2.8% year-over-year in June from 3.0% in May.  That’s a 14-month low but still considerably above CPI inflation.

Japanese industrial production advanced 2.4% in June according to preliminary data and by 37.6% at a seasonally adjusted annual rate in 2Q after tumbling by 38% saar in 4Q08 and 63.2% in 1Q09.  Based on survey evidence, officials expect output in July-August to be 6.8% greater than the 2Q level not annualized.  Production still was 23.4% less in June than a year earlier.  The inventory-to-sales ratio tumbled by 9.8% last month.  In the year to 1H09, global auto production fell by 43.1% at Toyota, 40.0% at Nissan and 33.7% at Honda.

South African producer prices went up 1.5% in June but posted a larger 4.1% on-year drop after declining 3.0% in the year to May.

Japanese stock and bond transactions generated a Y 243 billion net inflow last week.  In the first ten days of July, exports and imports posted on-year declines of 37.2% and 36.9%.  A small Y 38 billion trade deficit resulted.

Australian building approvals recovered 9.3% in June after falling by 11% in May and posted a robust 14.3% advance from June 2008.  Domestic credit growth in New Zealand slowed to 3.5% on-year in June from 3.8% in the year to May.

U.S. weekly jobless claims and Canadian producer price figures are due at 12:30 GMT.

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

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