New Developments Abroad: Biggest Tumble in Euroland Sentiment Since October 2001

July 30, 2008

Overnight changes in the dollar are mixed.  Its greatest drop was against sterling (-0.5%), but gains were posted of 0.6% against the Aussie dollar and 0.5% against the kiwi.  The dollar slid 0.2% against the yen and by 0.1% versus the Canadian dollar but firmed 0.1% relative to the Swiss franc. EUR/USD unchanged.

The ten-year JGB yield fell 1.5 basis points to 1.525%, a 3-month low.  Sovereign bond yields fell even more sharply in Europe.

Equities in Asia and Europe, except for China and Thailand, rose.  Nikkei +1.6%.  Australia +1.8%.  India +3.7%.  German Dax +0.6%.  British Ftse +1.4%.

Oil rebounded 0.3% but is still 16.8% below the July 11th peak.  Gold is little changed at $926.60/ounce.

Overall economic sentiment fell by 5.3 points to 89.5 in July.  Consumer confidence dropped 3 points to -20.  Industrial sentiment also lost 3 points to -8.  Sentiment in services collapsed to +1 from +9 in June.  Retail fell 5 points.  Construction dropped 3 points.  Expected inflation advanced among corporations but slid marginally among consumers.

The monthly European retail PMI scores calculated by  Bloomberg improved in July but remained under 50, connoting contraction.  Euroland’s index was 46.0, up two points.  Germany’s score was 46.4 after 44.9.  Italy’s rose to 38.2 from 36.3.  Only France’s index surpassed 50 at 51.3 versus 48.7 in June.

Australian home approvals sank 7.8% in the year to June.  Such dipped 0.7% from May instead of rising about 1% as forecast.

In New Zealand, total household borrowing rose only 0.3% in June, and the central bank governor, Bollard, said weak growth should foster a series of rate cuts over the coming two years.

German real plant and machinery orders fell 5% y/y in June but rose 5.0% between 2Q07 and 2Q08.

A 7.9% drop in Spanish retail sales in the year to June was the greatest on-year drop in at least four years.  Spanish building permits plunged 57% y/y in May.

Japanese industrial production fell 2.0% m/m in June and posted an on-year uptick of just 0.2%.  Production fell by 0.7% each in 1Q08 and 2Q08, the first time such dropped in consecutive quarters since 2001.  Corporate surveys suggest industrial output is likely to post monthly declines in both July and August.

A regional Japanese economic assessment by the finance ministry made downgrades for 5 of 11 regions.

South African consumer prices rose 1.3% m/m and 12.2% y/y in June.  Targeted CPIX rose 1.1% m/m and 11.6% y/y.  These gains were a bit higher than forecast.

The Swiss KOF index of leading economic indicators worsened more sharply than expected to 0.90 in July from 0.99 in June.

Italian producer prices rose an as-expected 0.8% m/m in June, lifting the 12-month rate of PPI inflation to a 65-month high of 8.2% from 7.5% in May.

Chinese consumer sentiment slid to 92.0 in July from 95.1 in June.  Talk persists that Beijing officials plan a slower rate of yuan appreciation.

Belgian consumer prices rose 0.5% m/m in July and 5.9% y/y, most in 24 years.

Portugal’s business sentiment dropped another 2.4 points in July to a 62-month low. Greek retail sales rose 1.4% y/y in May, down from April’s 2.3% gain. The Bank of Spain expects GDP to grow just 0.1% in 2Q and 0.3% in 3Q.  Finance Minster Solbes warned of zero growth.

In the U.S., candidate Obama endorsed Fed independence. ADP private jobs data are due at 12:15 GMT, and energy inventories will be announced at 14:30 GMT.  Canadian producer price figures arrive at 12:30 GMT.


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