New Overnight Developments Abroad: Fitch Warns About British Credit Rating

November 10, 2009

Sterling lost 0.4% against the dollar as the Fitch credit rating service claimed the U.K. is at greater risk than other triple A rated nations of losing that status.  A huge government deficit was cited.

The dollar otherwise is unchanged against the euro, Swiss franc and Canadian dollar, up 0.1% against the yen and 0.2% higher relative to the Australian and New Zealand dollars.

Ten-year bund and gilt yields settled back four basis points, while the 10-year JGB yield is holding steady at 1.48%.

Stocks in the Pacific Rim are mixed with drops of 1.0% in Indonesia, 2.0% in Pakistan, and 0.4% in India but gains of 0.6% in Japan, 0.8% in Taiwan, 0.5% in Singapore and Malaysia, 0.4% in South Korea, 1.3% in Australia and 0.2% in China.  The German Dax, Paris Cac and British Ftse have edged up by 0.3%, 0.1%, and 0.2%.

Oil and gold edged 0.1% lower to $79.35 per barrel and $1100.60 per ounce.

Japanese M2 and M3 growth accelerated by more than forecast to on-year gains of 3.3% and 2.4% in October.  Bank lending growth slowed a tenth, however, to 1.5%.  Japanese stock and bond transactions in October, the first month of the second fiscal half, generated a Y 1.7 trillion inflow.  Japan recorded a Y 1.568 trillion current account surplus in September, almost identical to the September 2008 surplus.  The merchandise trade surplus of Y 599 billion was 87% wider, as imports (down 37.7% from September 2008) fell more sharply than exports (off 32.1%).  The seasonally adjusted current account surplus of Y 1.338 trillion was 8.4% wider than in August.  The trade surplus in October 1-20 swung to a Y 222 billion surplus from a Y 189 billion deficit a year earlier.  The on-year decline in exports and imports remained steep but is trending in an improving way.

Japan’s Economy Watchers index suffered a setback in October with a print of 40.9 after 41.3 in September, 41.7 in August and 42.4 in July.  The index bottomed at 15.9 last December.  Japanese corporate bankruptcies posted a smaller on-year drop of 13.1% in October.  Associated liabilities were down 74.3%.

Britain’s trade deficit in September widened considerably because of a big jump in car imports.  The merchandise trade shortfall of Gbp 7.19 billion represented an 8-month high.  The goods and services gap widened to Gbp 3.47 billion from Gbp 2.15 billion in August.

The U.K. DCLG house price index fell 4.1% in September.  That was better than forecast.  The RICs house price balance jumped from 21% in September to a 34-month high of 34% in October.  Same-store sales, according to the British Retail Consortium, were 3.8% greater than a year earlier in October.  Total sales rose 5.9% on year.  These comparisons improved partly because of very weak sales in October 2008.

Italian industrial production fell 5.3% in September — bigger than expectations of a 4% drop — and by 15.7% from a year earlier.

French industrial output also disappointed with a decline of 1.5% after a rise of 2.8% in August.  Such were 10.4% lower than a year earlier.  Factory production fell 1.6% and by 11.0% from a year before.

Finnish industrial production fell 1.7% in September and by 23.0% from a year earlier, continuing the pattern of weakness at the end of 3Q09.

Swedish industrial output rose 0.2% in September but was 15.7% lower than a year earlier.  That too was weaker than assumed.  Industrial orders advanced 0.7% in September but was 12.1% less than in September 2008.  Sweden’s all-inclusive activity index slid 0.3% and by 3.6% in the year to September.

German consumer prices firmed 0.1% between September and October, same as their preliminary reading, and were unchanged from October 2008.  The German WPI fell 0.4% in October but registered a smaller 12-month drop of 7.0% after falling 8.1% in the year to September.

The ZEW Institute reported unexpected setbacks in investment sentiment toward both the German and euro area economies.  The expectation index in Germany fell 4.9 points to 51.1 in November, while that for Euroland lost 5.1 points to 51.8.  This erosion of optimism occurred despite improved current circumstances of minus 65.6 after minus 72.2 in Germany and minus 70.3 after minus 75.4 in Euroland.

Norwegian consumer prices posted an on-year rise of 0.6% in October, half as much as in the year to September and less than forecast.

Danish consumer prices were steady in October and just 0.6% higher than a year earlier.

Australian business confidence improved to a reading of 16 in October from 14 in September.  Business conditions increased more dramatically to a score of 12 from 3 in September.

South African manufacturing output fell 11.4% in the year to September, slightly less than expected.

Malaysian industrial production fell 6.0% on year in October after a drop of 7% in the year to August.

Indonesian real GDP jumped 3.9% last quarter and by 4.2% from 3Q08.

The ruling Conservatives in Canada won two by-elections.

Fed Governor Tarullo expressed doubt that dividing commercial banking from investment banking would reduce risks of systemic financial risk.

No significant U.S. data releases are scheduled today.

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

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