New Overnight Developments Abroad: Week Starts Quietly

August 25, 2008

The Olympic games and K.C. Fed’s Jackson Hole annual symposium are over.  Britain is closed for its late-summer Bank holiday.  U.S. existing home sales, due at 14:00 GMT, are the only data release of note today.  The Democratic Party national convention begins in Denver.  Not much is happening.

The dollar is narrowly mixed, with drops of 0.2% against the yen and 0.1% relative to the Swiss franc and A-dollar but gains of 0.2% against the kiwi and 0.1% versus the euro and pound. The C-dollar is unchanged.  China’s yuan fell on the first post-Olympics day.

The Nikkei jumped 1.7%, but the Paris Cac (-0.8%) and German Dax (-0.3%) are lower.  Stocks rose 3.5% in Hong Kong and 1.7% in Australia.  They fell 1.8% in Pakistan, 0.6% in Malaysia, and 0.3% in Thailand.

Sovereign bond yields are lower in Europe.  The 10-year JGB yield in Japan touched a 4-month low of 1.405% but is off just 0.5 bp net at 1.425%.

Gold fell 1.0% to $824.90/ounce, whereas oil firmed 0.6% to $115.23 per barrel.

Germany’s export climate, according to the IFO Institute, plumbed to its lowest level since May 1993.

Bank of Japan Governor Shirakawa predicted continuing sluggish growth but no deep downturn.  ECB President Trichet said the world is still undergoing a financial market correction.  The Danish central bank bought out Roskilde Bank.

Professor Robert Mundell, an expert on optimal currency areas, called the euro overvalued and the world currency system in need of a fix.

Danish consumer confidence sank to its lowest level in August since 1990.  Spanish producer price inflation of 10.2% in July was at a 23-year high.

Industrial output in Taiwan rose just 1.1% y/y in July.  Thai GDP grew 0.7% in 2Q08.

The Greek trade deficit narrowed 4.7% y/y in 1H08.  The Swedish trade surplus rose 4.4% m/m in July.

Chinese and Japanese officials are reportedly preparing fiscal stimulus packages of around $50 billion and $25 billion.


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