New Overnight Developments Abroad: Gold Above $1000

September 8, 2009

In a further sign of receding risk aversion, gold has spiked, stocks gained, and the dollar is off to a bad start in the autumn season of trading.

The dollar has fallen by a further 1.1% against sterling, the Swiss franc and Australian dollar.  It lost 0.9% against the euro, 0.8% relative to the yen and 0.5% against the Canadian and New Zealand dollars.  The UN has joined the call for a new reserve currency.

Stocks rose 2.5% in Vietnam, 2.2% in China, 1.2% in Taiwan, 1.3% in Indonesia, 1.0% in Malaysia, 1.9% in Sri Lanka, 1.4% in Thailand, 1.6% in Australia, 2.1% in Hong Kong, and 0.7% in Japan and India.  The German Dax, British Ftse and Paris Cac are trading up 0.6%, 0.5%, and 0.4%.

Bund and gilt yields are higher.  The 10-year JGB yield dipped 2 basis points to 1.34%, however.

Gold advanced 1.0% to $1006.70 per ounce.  Oil jumped 2.1% to %69.45 per barrel.

Japan reported a 19.4% drop in the current account surplus from a year earlier to Y 1266 billion in July.  The seasonally adjusted surplus fell 35.6% from a month before.  Exports increased 1.4% but were swamped by a 9.1% surge in imports.  During August 1-20, exports and imports were 37.1% and 41.9% below their year-earlier levels.  Stock and bond transactions last month generated a Y 290 billion inflow.

Japanese money and credit growth remains disappointing.  M2 and M3 posted on-year growth in August of 2.8% and 2.0%, but broad liquidity remains moribund with a gain of just 0.1%.  Bank lending increased 1.9% in the year to August (1.8% including Shinkin banks).  Those increases compare unfavorably with 2Q rises of 3.1% and 2.9%.

Japan also announced an unexpected dip of the economy watchers index, a gauge of service sector activity, to 41.7 in August from 42.4, which broke a streak of eight improvements in a row.  Corporate bankruptcies rose 2.4% y/y in August but were associated with 66.2% fewer liabilities than in August 2008.

Unlike industrial orders, German industrial production unexpectedly fell 0.9% in July, reversing June’s 0.8% gain, and was 17% weaker than a year earlier.  Capital goods output slumped 3.2% in the latest month.  This setback should be temporary.  On Monday, gains of 3.5% for total orders and 3.2% for capital goods orders were reported.

Moreover, Germany’s seasonally adjusted trade surplus continued to improve in July, rising to EUR 12.5 billion from EUR 10.9 billion in June, EUR 10.0 billion per month in 2Q and EUR 8.2 billion in 1Q.  Exports over the past three reported months recovered 8.7%, outstripping a 3.7% increase in imports.

Spanish industrial production fell 17.4% in the year to July, more than the 16% drop in the year to June.  Romanian industrial output fell by a smaller 6.9% in the year to July than the 8.9% drop in June.  Romanian retail sales fell 13.8% in the year to July.

A 0.9% rise in British factory output in July was the sharpest monthly gain since May 2006, and a 0.2% advance in May-July was the best three-month over three-month comparison in 11 months.  Industrial production climbed 0.5% in July and posted a smaller on-year drop of 9.3%.

According to the British Retail Consortium, same-store sales disappointingly dipped 0.1% in the year to August, but total sales firmed 2.2%.  A survey by Lloyds indicated a third straight rise in business sentiment to 32% in August from 30% in July.  Britain’s top Treasury officials warned against a premature cut in fiscal stimulus.

Norwegian consumer confidence improved sharply to 11.7 in the third quarter from 0.5 in 2Q09.

Finnish real GDP fell 2.6% in the second quarter and by 9.4% from a year earlier.

Swiss unemployment edged up to 4.0% in August from 3.9% in July.

Chinese car sales increased 90% in the year to August.

Australian business sentiment jumped to +18 in August, its best reading since October 2003, from +10 in July.  Business conditions improved three points to +4.

New Zealand residential construction fell 6.5% last quarter from the level in 1Q and to an 8-year low.

Czech GDP firmed 0.1% in 2Q but was still 5.5% lower than a year earlier.  This was a downward revision.  Revised Hungarian GDP slid 0.2% and fell 7.5% from 2Q08.  Hungarian industrial production fell 0.7% in July and 19.4% from a year before.  Portuguese GDP rose 0.3% in 2Q but fell 3.7% from 2Q08.

French business sentiment improved two points to 89 in September from 87 in July.  The Bank of France, which compiles this index, also predicted that GDP would climb 0.3% in the third quarter, matching the 2Q result.

The U.S. will announce monthly consumer credit today.  Canada releases building permits data.  Chile’s central bank meets but is not expected to change policy.

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

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