New Overnight Developments Abroad: Narrowly Mixed Dollar

August 5, 2009

The dollar firmed 0.3% against the Swiss franc and Canadian dollar, 0.2% against the Australian dollar and 0.1% against the yen and euro, but the greenback lost 0.3% against sterling and 0.1% against the New Zealand kiwi.  Sterling was buoyed by supportive British data and talk that the Bank of England probably will end its bond buying program.

Stocks in the Pacific Rim fell fairly sharply.  Drops amounted to 1.1% in Japan, 1.8% in Indonesia, 1.6% in Taiwan, 1.5% in Hong Kong, 1.0% in Australia and 0.4% in South Korea.  In Europe, the Paris Cac is 0.7% higher, and the British Ftse (0.3%) and German Dax (0.1%) have risen, too.

Ten-year Treasury, Bund and Gilt yields are higher.  The 10-year JGB has dipped 2 basis points to 1.44%.

Oil is quoted at $71.08 per barrel, off 0.5%.  Gold remains elevated at $968.10 per ounce.

British factory output increased 0.4% in June, while industrial production went up 0.5%.  Analysts expected each to have held steady.

Britain’s PMI-services index improved more than expected to a 17-month high of 53.2 in July from 51.6 in June, the third reading in a row above 50.  An above-50 manufacturing PMI index (50.8%) was reported on Monday.  The Nationwide gauge of consumer confidence rose to 60 in July from 59 in June.  But softer shop price inflation underscores the weakness of retail pricing power.  According to British Retail Consortium data, such slid 0.1% on month in July and rose by just 0.5% on year, down from 0.7% in the year to June.

Euroland service sector activity is lagging manufacturing in promoting recovery.  Whereas the manufacturing PMI improved to 46.3 in July from 42.6 in June and 36.8 in April, the services PMI was 45.7 in July compared to 44.7 in June and 43.8 in April.  Still, services posted their smallest rate of contraction since October.  Euroland’s composite PMI was 47.0 in July, best since last August and up from 44.6 in June and 41.1 in April.

  • All service sector PMI scores in Euroland remained below 50, connoting contraction.
  • The German services PMI was 48.1, up from June’s 45.2.  The composite index (embodying manufacturing and services) rose five points to 49.0.
  • The French services PMI sank to  a 4-month low of 45.5 from 47.2 in June.  The composite index dropped to 47.3 from 47.8.  Job losses are not yet slowing.
  • The Italian services PMI improved from 42.3 to 44.5, still conveying rapid contraction.
  • Spain’s services PMI was even worse at 40.8 in July after 41.2 in June and 39.1 in May.
  • Ireland’s services PMI was 42.4 versus 42.3 in June and 39.5 in May.

The Russian PMI services index settled back to 48.5 in July from 49.7 in June.

Australia’s PSI-services index slumped to 38.0 from 44.1.

Japan’s PMI-services improved to 45.7 from 42.6 in June and 41.1 in May but the jobs component deteriorated.  Japan’s composite PMI went up to 48.0 from 46.8.

Australia reported a smaller-than-forecast trade deficit of A$ 441 million in June compared to A$ 737 million in May, but such was still greater than a gap of A$ 371 million a year earlier.

Bank Indonesia cut its key target interest rates by 25 basis points to 6.5% but released a statement indicating a likely higher rate of inflation next year, leaving the implication that this may be the last rate reduction of the cycle.  It was the ninth consecutive monthly cut, cumulating to 300 basis points.

Taiwanese consumer prices fell 2.33% in the year to July, most in nearly 40 years.  Consumer price inflation in the Philippines slowed to an on-year rate of 0.2% in July from 1.5% in June.  Core inflation slowed to 3.6% from 3.9%.

Canadian Finance Minister Flaherty worried yesterday about the rapid appreciation of the Canadian dollar.  That’s a problem for all the commodity-sensitive economies.

U.S. data today include the ADP private employment report, factory orders, and the service-sector PMI.

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

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