New Developments Abroad: Euroland Retail Sales Lower

August 5, 2008

The dollar is stronger except against the yen, with gains of 1.4% against the Australian dollar, 0.8% against the Canadian dollar, 0.6% against the euro and Swiss franc, and 0.4% versus sterling.  The yen rose 0.3% against the U.S. currency.  The FOMC is not expected to change rates.  Its announcement is due at 16:15 GMT.

Equities are widely mixed in Europe and Asia.  China -2.5%.  Hong Kong 02.5%.  India +2.6%.  Germany +2.4%.  Japan -0.1%.  France and Britain +1.8%.

Oil traded as low as $118.77/bbl, 19.7% below the July 14th peak.  It is currently off 1.7% overnight at $119.39.  Gold fell 1.8% overnight.

The 10-year JGB yield rose 4 basis points to 1.545%. Other sovereign bond yields are marginally higher.

The Reserve Bank of Australia retained a 7.25% cash rate but adopted an easing bias, escalating expectations of a rate cut next month.

The Governor of the Reserve Bank of New Zealand indicated there is more scope to cut rates.  No surprise there.

For a fourth straight meeting, the central bank in Indonesia raised its key rate.  It is now 9.0%, up 25 basis points.

Retail sales in Euroland fell 0.6% m/m and by 3.1% in the year to July, the greatest 12-month drop since at least 1996.

Euroland’s final PMI-services printed at 49.7, same as the preliminary flash indication and down from 49.1 in June and 58.3 in July 2007.  The composite PMI for both manufacturing and services was at 47.8, down from 49.3 in June and 57.7 a year before.  That was the weakest composite reading since November 2001.

Germany‘s PMI-services improved in July to 53.1 from 52.1 in June.  Italy‘s index fell sharply to 45.6 from 48.5. The French services PMI was at 47.5, connoting a slower contraction than indicated in the initial flash report of 47.0.  Spain‘s index was extremely weak at 37.1 but above June’s 36.7 score.

British industrial production slid 0.2% in June and by 1.6% y/y.  Factory output fell for a fourth consecutive month and dropped 0.8% in 2Q from both 1Q and 2Q07.  The U.K. PMI-services index firmed to 47.4 in July from 47.1 in June, but both new orders and business expectations fell to their lowest levels since at least 1996, when this data series began. 


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