New Overnight Developments Abroad: Fresh Concern About Banks Hits Stocks, Lifts Dollar

November 3, 2009

There has been a wave of risk aversion plays amid upwardly revised loss estimates for commercial banks.

Japan was closed for Culture Day, but stocks elsewhere in the Pacific Rim fell 1.8% in Hong Kong, 3.1% in India, 1.6% in Indonesia, 3.9% in Vietnam, 1.3% in Thailand, 0.6% in South Korea and 0.9% in Singapore.  Trading remains ugly in Europe, where the Dax, Ftse and Cac40 are respectively 1.8%, 2.0%, and 2.1% lower.

Treasury, bund, and gilt yields are down between two and four basis points.

Commodity currencies are weaker.  The dollar has strengthened 1.2% relative to the Australian dollar despite a second rate hike by the Reserve Bank of Australia.  The dollar is up 1.0% against the kiwi and 0.6% relative to the Canadian dollar.  The buck also shows gains of 1.0% against the Swiss franc, 0.9% against the euro and 0.6% versus sterling.  Risk aversion has boosted the yen 0.3% against the dollar.

Oil slid 1.2% to $77.17 per barrel.  Gold firmed 0.3% to $1056.70 per ounce.

The Reserve Bank of Australia became the first central bank to implement more than one rate hike since the global recession, lifting its cash rate to 3.5% from 3.25%.  The first increase of 25 basis points from a 49-year low was done in October.  A released statement spoke of a need for a prudent, gradual take-away of monetary stimulus now that the emergency is passing.

Romania’s central bank left its benchmark interest rate unchanged at 8.0% as expected.  No cut had been anticipated in light of the weak exchange rate.  An inflation target of 3% (plus or minus 1%) was announced for 2011.

The EU Commission released its autumn economic forecasts, which embody a very gradual recovery in 2010-11 with a continuing rise of unemployment.  GDP in the euro area, which rose 0.6% in 2008, is projected to fall 4.0% this year, then rise 0.7% in 2010 and 1.5% in 2011.  Quarterly rises of GDP will be constrained to 0.2% in the present quarter, 0.1% each in 1Q10 and 2Q10, and 0.2% in 3Q09.

A top Czech court cleared the Lisbon Treaty.

Consumer confidence in India fell 0.7% to 110.0 in October from 110.8 in September.  But there was good news from trade statistics, where exports fell just 13.8% in the year to September versus a drop of 28.5% in April-September from a year earlier.

The Norwegian PMI unexpectedly fell to 45.8 in October from a downwardly revised 47.1 in September.

South African motor vehicle sales fell 16.9% in the year to October, the smallest on-year drop since April 2008.  Such had decline 22.4% in the year to Sept.

Consumer confidence in Spain slipped further to 69.2 last month from 70.3 in September.

The British construction-sector purchasing managers index reflected sharper contraction in October with a sub-50 reading of 46.2 after 46.7 in September.

Italy’s budget gap of EUR 11.80 billion in October was EUR 1.0 billion greater than the deficit in September.

Labor costs in New Zealand increased 0.4% last quarter.  That was up from a gain of 0.3% in 2Q.  Analysts had expected another 0.3% rise.

Scheduled U.S. data today includes factory orders and motor vehicle sales.  The FOMC begins a two-day meeting today.  No rate increase is expected.  Today is also Election Day.  Governors will be chosen in New Jersey (close race) and Virginia (likely Republican win).  Mike Bloomberg is projected to win a third term as New York City mayor easily.

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


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