New Developments Abroad: Asian Equities Higher

July 21, 2008

Equities advanced strongly in Asia by 3.4% in China, 3.5% in South Korea, 2.6% in Thailand, 2.5% in Indonesia, 3.0% in Hong Kong, 3.5% in Australia, and 1.6% in India.

Japanese markets were closed for Ocean Day.  In Europe, the Paris Cac is 1.7% higher, but the British Ftse (+0.2%) and German Dax (0.0%) are more subdued.

The dollar is mostly softer with dips of 0.6% against the Austraian dollar and 0.2% each against the yen, C-dollar, euro, Swissy, yuan and kiwi.  Dollar edged up 0.1% against the beleaguered pound.  Bank of England policymaker Blanchflower in a Guardian interview warned of a severe and prolonged British recession, urged hasty rate reductions, and claimed that both the U.K. and U.S. face their biggest economic problem since the Great Depression.

The South Korean won eased in the absence of currency intervention.  Foreigners continued to sell South Korean equities.

Nuclear talks with Iran stalled in Geneva, eliciting a fresh warning from U.S. Secretary of State Rice and sending oil prices up 1.2% to $130.42/barrel.

Gold prices firmed 0.9% to $966.30/ounce in sympathy with the reversal of oil prices.

Ten-year sovereign bond yields are steady in Britain and up 2 basis points in Germany.

The Rightmove U.K. house price index fell 1.8% m/m in July, most in seven months, and by 2.0% y/y, worst since at least 2002.  The Right move index had shown an on-year increase of 5.8% in February and +13.2% in the year to July 2007.

Swiss producer prices climbed 4.5% y/y in June, up from 3.4% in May and more than expected.

Consumer price inflation in Hong Kong accelerated to 6.1% in June from 5.7% in May as food costs soared 11.3%.  Results exceeded expectations.

But in Australia, producer price inflation slid to 4.7% y/y in 2Q from 4.8% in 1Q.  The quarterly 1.0% increase was less than a forecast rise of 1.6%.  Aussie dollar appreciation depressed import prices.  However, intensifying cost strains were evident in intermediate producer prices, which rose 7.1% y/y versus 6.0% y/y in 1Q08 and in the PPI for crude products, which accelerated to 8.5% from 6.9%.

An official from the German Economics Ministry said GDP, due August 14th, will show a distinct drop.  An official from Singapore denied his country is experiencing stagflation.


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