New Overnight Developments Abroad: Equities Higher, Dollar and Yen Lower

November 3, 2008

Stocks rose 7.8% in Thailand, 7.6% in Indonesia, 5.1% in Australia, 5.0% in Singapore, 3.8% in the Philippines, and 4.1% in Malaysia. Japanese markets are closed for Culture Day. In Europe, the Ftse (0.7%), Dax (0.6%) and Cac40 (+0.2%) show fractional gains. Chinese equities slid 0.6% to a 2-year low.

The dollar rose 0.5% against the yen. Otherwise, the dollar lost 2.3% against the Australian dollar, 1.5% against the New Zealand kiwi, 1.5% against the Canadian dollar, 0.8% against the euro and  0.7% relative to sterling.

Sovereign bond yields are lower in Europe. Euribor 1-week, 3-month, and 6-month rates continued to move lower. Bank overnight deposits at the ECB hit a record high of EUR 244.9 bn, while bank borrowings from the central bank were 36.4% greater than on Friday. The ECB is expected to cut rates 50 bps on Thursday.

Oil slid 0.5% to $67.47/barrel, but gold is trading 2.5% higher.

Australia released a bunch of weak economic data: lowest PMI-mf’g score (40.4 after 47.2) since at least 1992, a 1.1% drop in retail sales (twice that expected), a 1.8% decline of house prices last quarter, a 5.9% fall in job ads, and the first decrease in an inflation gauge since February 2006. The Aussie commodity price index in SDR’s fell 5.1% in October. In local currency terms, however, such rose 9.5% reflecting the Australian dollar’s plunge last month.

India’s central bank cut its benchmark rate by 50 basis points to 7.5% and also reduced reserve requirements to 5.5% from 6.5%.

Iraq cut its benchmark interest rate to 15% from 16%.

Vietnam’s central bank sliced its base rate to 12% from 13%  and also reduced reserve requirement ratios by a percentage point.

South Korea unveiled another $10.8 bn of fiscal stimulus (79% of which in more spending and 21% in lower taxes). Export growth slowed to a 13-month low in October, while import growth slowed as well. The Bank of Korea is likely to cut rates further on Friday.

China’s PMI-mf’g dropped abruptly to a sub-50 reading of 44.6 from 51.2 in September. It was the lowest score since the survey began in January 2005.

Hong Kong’s PMI fell to 43.1 in October, a 5+ year low, from 46.7 in September. Hong Kong real retail sales rose just 1.8% in the year to September.

Consumer price inflation in Thailand decelerated to 3.9% in October from 6.0% in September.

New Zealand reported a 3.5% on-year rise of wages in September. Unit labor costs climbed more than forecast.

The EU Commission released new forecasts, projecting growth in Euroland of 0.1% next year followed by 0.9% in 2010. It looks for CPI inflation of 2.2% in 2009 and 2.1% in 2010.

Euroland’s PMI-manufacturing index for October was revised to a survey low of 41.1 from a flash estimate of 41.3, 45.0 in September and 41.5 in October 2007.

Within Euroland, the German PMI fell to 42.9 in October from 47.4 in September. France’s PMI was 40.6 after 43.0. Italy’s was 39.7, down from 44.4), and Spain’s slumped to 34.6 from 38.3, with orders at a very low 29.5 after 35.4 in September and 49.8 in October 2007. The Dutch PMI was 45.3, down from 48.3. Ireland had a reading of 39.7 after 43.7. The Greek index was 48.1 (50.8), below 50 for the first time since end-2006.

Britain’s PMI-mf’g unexpectedly improved to 41.5 from 41.2 but was below the 50-line separating expansion from contraction for a sixth consecutive time.

The Swiss PMI weakened to 47.0 from 47.8. Sweden posted a very low 39.0 reading after 42.3. The Czech Republic’s PMI was 41.2 versus 46.5. Denmark’s was 40.5, down from 48.4. Poland’s index slid to 43.7 from 44.9. Factory sector growth is extremely depressed throughout Europe. Inflation components have also declined sharply. Euroland’s output and input price readings in October were at 51.6 and 51.4.

Canada’s Finance Minister Flaherty said the G-7 had not considered currency market intervention.

Opinion polls in the United States show wide variability but on the whole still point to a likely Obama victory tomorrow.


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