New Overnight Developments Abroad: Dubai Scare Subsiding

December 1, 2009

Risk aversion has ebbed as investors conclude that Dubai doesn’t represent a systemic threat.

Typical currency pattern with yen and dollar on back foot.  The greenback gained 0.6% against the yen but has lost 1.6% versus the kiwi, 0.9% against the Canadian and Australian dollars, 0.7% relative to sterling, 0.5% against the Swiss franc and 0.4% versus the euro.

Stocks climbed in Asia and Europe, with rises totaling 2.4% in Japan, 3.0% in Thailand, 1.4% in China, 1.3% in Hong Kong, 2.0% in Germany and France, and 1.6% in Britain.

The Bank of Japan’s Policy Board held a surprise meeting, raising hopes of a big quantitative stimulus or return to intervention.  But in the end, officials merely announced Y 10 billion of short-term cheap loans to help around the yearend period.  The yield on 10-year JGBs fell 7 basis points to 1.20%, opposite of the directional increase in Treasury, gilt and bund yields.

Gold tested $1200 per troy ounce for the first time and shows a net advance of 1.1%. Oil rose 1.3% to $78.30 per barrel.

The Reserve Bank of Australia raised its cash rate by 25 bps to 3.75%, matching consensus expectations.  The statement suggested that inflation may be contained because of its prompt rate increases.  This reaction seems overly hopeful.  My interpretation is that officials will be ready to act a fourth time when it next meets in early February, but increases will stay small in size.

Many PMI-manufacturing readings have been reported for November.

  • The final Euroland (51.2), German (52.4), and French (54.4) scores were slightly above preliminary indications.  Italy (50.1) had a reading above 50 for the first time since February 2008, and the Dutch index advanced to 51.9 from 50.5.  The data solidify the view that Euroland as a whole is in recovery, although Spain (45.3, down from 46.3) is in a deepening recession.  Likewise, the Greek index of 47.3 worsened from 48.0 in October and remains below 50.  The Irish PMI edged closer to 50, punching in at 48.8 after 48.0.
  • The British PMI reading of 51.8 surpassed 50 for the fourth time in five months but was lower than October’s 53.4.
  • The Swiss index was very strong at 56.9 and up from 54.0 in October.
  • Australia’s PMI was 51.2, down from 51.7.  Strong Aussie dollar appreciation is a negative factor.
  • China’s 55.7 reading was the best in five years.  India’s 53.0, though down from 54.5, showed solid growth, too.
  • Poland (52.4 after 48.8) and the Czech Republic (50.6 after 49.8) showed increases through the expansion or contraction line of demarcation, but Hungary’s index (47.5 after 48.3) slid further below that threshold.  Russia’s reading slid to 49.1 from 49.6 in October and 52.0 in September.
  • Taiwan’s 58.4 reading was high but below October’s two-year peak of 59.8.  South Korea’s 52.6 after 52.5 confirmed recovery there.
  • Turkey’s index of 51.8 was a seventh straight reading above 50, and South Africa’s 50.3 was above 50 after 19 months below that level.

Unemployment in Euroland stabilized at 9.8% in October, matching forecasts. September’s rate was revised up a tenth.  Joblessness had been at 7.9% in October 2008 and reached 10.2% in the United States in October this year.

German unemployment dipped a tenth to 8.1%, and the number of unemployed went down another 7K instead of rising moderately as expected.

German retail sales at long last seem to be stabilizing.  Volumes recovered 0.5% in October after a smaller 0.2% dip in September, which was less than reported initially.  Sales were 0.1% lower than their 3Q average level, but that’s an improvement over annualized negative growth of 2.8% in 3Q versus 2Q.

Swiss GDP climbed 0.3% last quarter, reversing the second-quarter contraction, and posted an on-year drop of 1.3%, down from a decline of 2.0% in the year to 2Q09.

Britain’s Nationwide house price index firmed 0.5% in November and was 2.7% above the level in November 2008.  The trend is now moderately upward.

Retail sales in Hong Kong shot up 8.2% in volume terms in the year to October.  Nominal sales posted on-year growth of 9.8%.  Thai consumer price inflation accelerated to 1.9% in November.  Indonesia’s trade surplus in October of $2.41 billion was 90% wider than that the month before.  Exports and imports were both livelier.  South Korea’s trade surplus of $4.1 billion last month was 13% greater than in October.

Japanese auto sales were 36% higher in November than a year earlier, accelerating from on-year growth of 12.6% in October.

Spanish car sales also picked up last month.

Peruvian consumer prices edged down 0.1% in November.

President Obama delivers a significant prime time speech on U.S. war plans in Afghanistan at 20:00 EST tonight.  Scheduled U.S. data today include construction spending, pending home sales, auto sales, and the manufacturing PMI survey of the Institute for Supply Management.

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


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