New Overnight Developments Abroad: Central Banks Escalate Effort to Reduce Libor Rates

October 15, 2008

The ECB, Bank of England, and Swiss National Banks are now offering unlimited dollar liquidity. $254 billion supplied under the scheme. Libor rates, however, remain substantially above central bank benchmark overnight rates, as banks await implementation of recapitalisation plans.

But global stocks have been battered anew.  Nikkei, up 1.1%, was an exception.  But the German Dax (-2.7%), Paris Cac (-2.8%) and British Ftse (-3.3%) are sharply lower.  Earlier in Asia, stocks fell 5.9% in India, 5.0% in Hong Kong, 1.1% in China, 0.8% in Australia, 3.9% in Thailand, 2.0% in South Korea, 3.2% in Singapore and 1.6% in the Philippines.

Sovereign bond yields are lower across the board.  10-year JGB slid 1 basis point to 1.575%.  Declines were steeper in Europe.

Commodities and the dollar are lower.  Oil slipped 1.1% to $77.80 per barrel.  the dollar shows losses of 0.9% against sterling, 0.7% versus the yen, 0.2% against the euro and Swiss franc, and 0.1% against the kiwi.  The dollar is up 0.3% against the Canadian dollar and 0.1% higher versus the Aussie dollar.  Gold firmed 1.0% to $847.80/ounce.

Canadian Prime Minister Harper’s Conservative Party strengthened its parliamentary seat total to 143 seats from 127 seats in the old parliament, but that total still fell short of the 155-seat threshold for a majority government.  The Liberals, Bloc Quebecois, and NDP won 76 seats, 50 seats, and 37 seats.

Japan’s current account surplus slumped 52.5% year-on-year to Y 989 billion, depressed by high energy imports and weakening export demand.  Total imports rose 20.2%, while exports advanced just 0.9%, producing Japan’s first merchandise trade deficit in nearly three years.

Japanese stock and bond transactions in September generated an outflow of Y 1909 billion.

Comments by the presidents of the San Francisco and Saint Louis Feds revealed a personal reluctance by each to cut interest rates.

Monthly British labor statistics were pretty dismal.  No sign that high inflation (5.2% CPI) is bleeding though into wages, which increased 3.4% in the year to June-August, least since July 2003, and 3.2% in the year to August.  Unemployment rose 31.8K in September after gain of 35.7K in August.  Jobless rate on ILO calculation jumped a half-percentage point to 5.7%, in June-August from March-May, the sharpest rise since 1991.

A leading index of employment in Australia points to easing labor market conditions there, too.

Japan’s government has nominated BOJ executive director Yamaguchi to fill the slot of Deputy Governor, and DPJ oppositions leaders said they will not block that appointment.  There will still be one vacancy on the 9-person Policy Board. Revised industrial production of -3.5% in August was the same as the preliminary estimate.  Inventories jumped 7.7% as a percent of shipments.  Capacity usage fell 3.5% in August.

The central bank in Iceland slashed its key interest rate by 350 basis points to 12.0%.  Norway’s Norges Bank will announce its latest interest rate decision at 12:00 GMT and is likely to cut rates at least by 50 bps.

German consumer prices slid 0.1% m/m in September.  Their 12-month rise eased to 2.9% from 3.1%.  These results confirmed preliminary indications.

Harmonized Euroland consumer prices rose 0.2% m/m and 3.6% y/y in September, down from 3.8% in August and 4.0% in June and July.  Core inflation eased a tenth to 2.5%.

Retail sales in South Africa fell 5.5% in the year to August.

European new car registrations fell 8.2% in the year to September.

At a summit of European leaders in Brussels, U.K. Prime Minister Brown called for an overhaul of the IMF.  Leaders have committed $3 bn equivalent of euros to the banking crisis.

Obama and McCain hold their last debate tonight at 21:00 GMT.  A new national poll shows Obama with a 53%/39% lead in voter preferences.


One Response to “New Overnight Developments Abroad: Central Banks Escalate Effort to Reduce Libor Rates”