Sterling Weakens on Debt Warning

March 15, 2010

A warning from the Moody’s rating agency that Britain and the United States are closer to losing their AAA ratings hit the pound but not the dollar.  Sterling fell 1.0% against the greenback, which otherwise firmed 0.3% against the euro and 0.2% against the yen, Swiss franc and Australian dollar.  The Canadian and New Zealand dollars are unchanged against their U.S. counterpart.

Stocks fell by 1.5% in China and Taiwan on speculation that Beijing will soon introduce restraints to cool economic growth.  Stocks fell also by 0.8% in South Korea, 0.7% in Australia, 0.9% in Malaysia, and 0.6% in Hong Kong.  The Paris Cac, British Ftse, and German Dax are off 0.4%, 0.3%, and 0.2%.

Ten-year British and German sovereign bond yields slid by 3 and 2 basis points.  Japanese JGBs are steady.

Oil prices eased 0.4% to $80.92 per barrel.  Gold prices firmed 0.2% to $1104.20 per troy ounce.

Opinion polls over the weekend in Britain suggest the Labour Party may retain more parliamentary seats than the Conservatives win, but neither party seems likely to capture a majority.  Prime Minister Brown said Conservative policy proposals would abort Britain’s recovery.

Premier Wen of China has made provocative remarks to fan trade tensions with the United States and other world leaders.  Wen denied the yuan is undervalued.

EU Finance Ministers, known as Ecofin, are meeting in Brussels, but the finance ministers of Germany (Schaeble) and France (Lagarde) said an aid package for Greece would not result from the meeting.  Schaeble raised the possibility of tossing countries that cannot meet fiscal standards out of the common currency area.

Japan’s government lifted its monthly economic assessment to “picking up steadily and weakly self-sustaining.”  That was the first upgrade in eight months.

Euroland employment fell by a smaller 0.2% last quarter after dropping 0.8% in 1Q09 and by 0.5% in both the second and third quarters.  Jobs were 2.0% lower than in the final quarter of 2008.  Employment declined 1.8%, or 2.72 million, in 2009 as a whole.

The British Rightmove house price index edged up 0.1% in March but posted a smaller 5.3% on-year advance after climbing 6.1% in the 12 months to February.

Japanese consumer confidence printed 0.8 points higher at 39.8 in February, which was also above the fourth-quarter mean value of 39.2 but marginally less than a mean score of 40.0 in 3Q09.  Such had crested at 40.5 last September and October.

The Swiss PPI/import price index fell 0.3% in February and by 1.0% from a year earlier.  These results were less than forecast.

Norway’s trade surplus narrowed 5.3% on month to NOK 32.4 billion in February.  That was still greater than a NOK 30.2 billion surplus a year earlier.  The non-energy trade balance was in deficit by NOK 6.2 billion last month and NOK 9.0 billion in January-February against a shortfall of NOK 20.1 billion in the first two months of 2009.

In Finland, consumer prices were only 0.1% higher in February than a year earlier.  Real retail sales in January were 0.9% lower than a year before.  Danish wholesale price inflation slowed to 2.3% in February from 2.8% in January.  Czech producer prices fell by 0.3% on month and 2.0% on year in February.  The Dutch trade surplus in January narrowed marginally to EUR 2.0 billion.

Chinese foreign direct investment inflows were only 1.1% greater in February than a year earlier.  That rise was considerably less than expected. Indian wholesale prices were 9.9% higher in February than a year earlier.  Turkish unemployment of 13.5% in December was lower than assumed.  Nigerian real GDP expanded 6.9% last year.

Today’s U.S. data calendar is atypically big for a Monday, consisting of the Treasury report on capital flows, the NAHB house price gauge, the Empire State manufacturing index, industrial production and capacity utilization.  Note too that the time difference between the United States and Europe is one hour smaller.  Eastern Daylight time is four hours from time in London and five hours from the time in Paris or Frankfurt.  Likewise the time difference with Tokyo is now 13 hours instead of 14 before U.S. clocks were moved an hour forward.

Copyright Larry Greenberg 2010.  All rights reserved.  No secondary distribution without express permission.



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