Equities Firmer, Euro Softer
September 27, 2010
In the Pacific Rim, the strength of equities seen in North America on Friday was extended as investors take on more risk. Stocks rose 1.7% in China, 2.1% in Indonesia, 1.1% in Thailand, 1.4% in Japan, 1.6% in Australia, 0.9% in New Zealand, 0.8% in South Korea and 0.7% in Singapore.
European trading shows greater caution. The British Ftse is unchanged after softer-than-expected U.K. house price data, and the German Dax and Paris Cac are up only 0.2%. The euro is 0.3% weaker against the dollar following Moody’s downgrade of Anglo Irish unsecured senior bonds. French Finance Minister Legarde expects GDP to rise 1.5% or more this year, followed by 2% in 2011 and 2.5% in 2012.
German 10-year bunds and British 10-year gilts are five basis points softer than on Friday. The 10-year JGB yield is a basis point lower at 1.00%.
China’s yuan advanced 0.2% against the dollar, moving past 6.70/USD to 6.6934. The U.S. currency otherwise dipped 0.1% against sterling and the Canadian dollar but is unchanged against the yen, Australian dollar, and kiwi. The dollar is 0.1% firmer relative to the Swiss franc.
Oil and gold prices are 0.1% higher at $76.57 per barrel and $1298.70 per ounce.
Japanese corporate service prices dropped another 0.4% in August. While on-year CSP deflation is just 1.1%, corporate service prices have declined by a sharp 2.7% annualized during the past five reported months, indicating an intensification of downward pressure. Bank of Japan Shirakawa reiterated today that the central bank will take timely and appropriate policy actions if needed to counter deflation and will pay more attention to downside risks than upside ones. Investors wait clarification of Japan’s intervention policy. Dollar/yen of 84.26 clearly remains beyond the comfort level of officials. Another consideration is that Japan’s fiscal half, an important corporate accounting date, ends on Thursday.
Japan’s customs trade surplus of JPY 103 billion in August was 37.6% smaller than a year earlier as imports (+17.9%) went up faster than exports (+15.8%). On-year export volume growth slowed further to 14.4% from 25.5% in July, 34.4% in 2Q10, and 43.7% in the first quarter of this year. The seasonally adjusted trade surplus of JPY 590 billion in August was little changed from July’s downwardly revised JPY 595 billion. Both exports and imports contracted on month in seasonally adjusted terms.
Britain’s Hometrack house price index dropped 0.4% on month in September, the greatest month-on-month decline since March 2009, and the 12-month rate of increase slowed to merely 1.0% from 1.5% in the year to August.
Euro area money and credit growth accelerated in August but remained low. M3 was 1.1% higher than a year earlier after a 0.2% uptick in the year to July. M3 in June-August was 0.5% above the year-earlier level. Bank lending to the private sector was 1.2% higher than in August 2009 versus a 0.8% increase in the year to July. Loans to households rose 2.9%, while lending to non-financial firms contracted 1.1% over the past year.
Sweden’s trade balance slid to a deficit of SEK 2.8 billion in August from surpluses of SEK 10.2 billion in July and SEK 4.9 billion in August 2009. The year-to-August surplus of SEK 40.6 billion was 41.5% narrower than in January-August 2009. The latest seasonally adjusted surplus of SEK 3.6 billion was 16% smaller than the surplus recorded in July.
Dutch business sentiment weakened in September to minus 0.1 from +0.4 in August.
Hong Kong’s trade deficit of HKD 11.9 billion last month was 61.6% smaller than the deficit posted in July. Taiwan’s index of leading economic indicators posted a score of minus 0.3% in August for the second month in a row.
U.S. data due today will be limited to the Dallas Fed manufacturing index. Central bank rate decisions are due from Hungary and Israel. Israeli Finance Minister Steinitz made unconventional and interfering remarks ahead of the Bank of Israel’s decision, warning against a further rise in the 1.75% key rate, which he believes would drive up the shekel and harm Israeli exporters. Analysts do not expect any change today in the Magyar Nemzeti Bankk’s key 5.25% rates.
Copyright Larry Greenberg 2010. All rights reserved. No secondary distribution without express permission.
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