New Overnight Developments Abroad: Dollar Mostly Marking Time Ahead of Fed Decision
September 23, 2009
The FOMC will release its statement around 18:15 GMT. The pledge to keep a very accommodative policy for some time longer is not likely to be modified, but the statement probably will paint a somewhat better picture of economic conditions.
Meanwhile, the dollar is unchanged against the Swiss franc, up 0.1% relative to the yen and euro, down 0.2% against the Australian dollar and off 0.1% versus the Canadian dollar. The two biggest dollar moves are drops of 0.8% against the kiwi and 0.4% versus sterling.
Japanese markets were closed for a third straight day, observing the autumn equinox. They will reopen Thursday and see the release of customs trade figures, supermarket sales, and the all-industry index. There will be some Chinese holiday closures next week.
The ten-year bund yield has firmed 2 basis points, while gilts are steady.
Gold is steady at $1014.40 per ounce, while oil has dropped 0.5% to $37.37 per barrel.
Equities closed mixed in the Pacific Rim, with drops of 2.3% in China, 1.0% in India, 1.2% in Taiwan, and 0.5% in Hong Kong but gains of 2.1% in The Philippines, 0.9% in Thailand, 0.7% in Indonesia, and 1.5% in Australia. In European trading, the British Ftse, Paris Cac and German Dax are up 0.4%, 0.2%, and 0.1%.
Flash Ezone, German, and French PMI readings were released for September:
- Euroland composite score edged up 0.4 to 50.8, a 16-month high. The services index surpassed 50 for the first time in 16 months with a 50.6 reading after 49.9 in August. The manufacturing PMI was 49.0, a 15-month high after 48.2.
- Germany’s composite score settled back to a 2-month low of 52.2 from 54.0 in August. The services index was 52.2, down 1.6 points, while the factory PMI was 49.6 after 49.2.
- France posted a preliminary composite PMI of 53.9, an 18-month high after 41.3 in August. Manufacturing (52.5) and services (52.2) had similar above-50 readings after scores of 50.8 and 49.3 in August.
- The data in general depict a recovery that remained intact at end-3Q but point to below-trend economic expansion ahead.
Industrial orders in Euroland recorded a second consecutive big improvement, climbing 2.6% in July after a 4.0% rise in June. Orders rose by 3.6% in Italy, 2.5% in Germany, 2.9% in Portugal, 3.1% in Holland, and 2.0% in France, but such fell 8.5% in Ireland and 3.4% in Spain. Total orders were 5.0% greater than their 2Q09 average level but 24.3% lower than in July 2008. Core orders, excluding heavy transportation equipment, went up 3.1% on the month but fell 23.1% on year.
New Zealand GDP edged up 0.1% in the second quarter, ending a five-quarter streak of decline. Real GDP fell 2.1% from a year earlier after dropping 2.6% in the year to 1Q09. In 2Q, personal consumption firmed 0.4% and business investment gained 1.3%. Net exports enhanced growth by 2.5 percentage points but were met mostly out of inventories, which exerted a 2.3 percentage point drag on the growth rate. Government spending fell 1.0%, and residential construction slumped 2.6%.
Taiwan reported on-year declines in industrial production and export orders of 9.62% and 11.96% in August. Both drops were bigger than those in July and what analysts had been forecasting. Consumer prices in Singapore fell 0.3% in the year to August, their fifth consecutive on-year drop.
The Bank of England minutes from this month’s policy meeting revealed no dissents, unlike the August meeting. All nine members agreed to retain a 0.5% Bank Rate and to keep a ceiling of Gbp 175 billion on asset purchases. That ceiling is likely to be raised in 4Q, in my view.
According to data from the British Bankers Association, mortgage approvals in August dipped 0.2% to 38.095K and were below forecasts. Net mortgage lending, on the other hand, rose 47% to Gbp 2.8 billion and to a 5-month high. Bank loans to non-financial firms swung back to a gain from a drop in July.
French business sentiment improved to 85 in September from 82 in August and 79 in July. French consumer spending on manufactured goods were disappointing, however, with a 1.0% monthly drop in August instead of the 0.3% rise that had been expected. Such fell 1.3% from a year earlier.
Skilled job vacancies in Australia rose 1.2% in September but were still 50.4% less than a year earlier.
Poland’s jobless rate held steady at 10.8% in August, 1.7 percentage points higher than in August 2008. Polish retail sales advanced 5.2% in the year to August, less than in July and not as much as predicted. Real retail sales in Hungary fell 2.3% monthly in July and by 6.6% from a year earlier. That was a steeper on-year decline than seen in the first half of 2009. Russia’s government projects an 8.5% drop in GDP this year, followed by a 1.6% recovery in 2010.
The People’s Bank of China governor stressed that yuan stability remains a top objective of monetary policy.
South African producer prices firmed 0.3% last month but posted a deeper 3.4% on-year drop than had been forecast.
Ahead of the G-20 summit, officials from several countries made pledges not to end macroeconomic stimulus prematurely. French Finance Minister Lagarde said stimulus will be retained until unemployment starts falling. IMF chief Strauss-Kahn urged a sustained effort, warning that the crisis is not totally ended. The Canadian central bank governor warned that global growth is not yet on a self-sustaining path. Australia’s Treasury Secretary said growth could stall if stimulus were removed now.
Besides the Fed, Norway’s central bank is scheduled to make a rate announcement today. Its key rate of 1.25% is not likely to change. The Belgian business climate index, a Euroland bellwether, gets released today.
Copyright Larry Greenberg 2009. All rights reserved. No secondary distribution without express permission.
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