New Overnight Developments Abroad: Stocks Tumble as Investors Await BOE and ECB

November 6, 2008

Speculated likely interest rate cuts by the Bank of England at 12:00 GMT and ECB at 12:45 GMT has moved higher. One former Bank of England policymaker, Buiter, said the situation demands a rate reduction of 150 basis points.

Stocks tumbled in Asia and Europe. Nikkei -6.5%. Hang Seng -7.1%. Indonesia -4.3%. India -3.7%. German Dax (-4.2%), Paris Cac (-4.2%) and British Ftse (-4.1%) are down by nearly identical amounts. Likewise for stocks in Australia, off 4.3%.

Sovereign bond yields in Europe are lower. Ten-year JGB yield dropped 4.5 bps to 1.495%.

The yen gained 0.5% against the dollar. The U.S. currency otherwise is up 1.1% against the Canadian dollar, 0.7% against the Australian dollar, 0.6% relative to the euro, 0.5% against the Swissy, and 0.4% against sterling.

Oil fell 1.1% to $64.55/barrel. Gold is off 0.5% at $738.50 per ounce.

New data shockers from Europe. German orders fell in volume by 8.0% in September and 3.9% in 3Q (-14.6% saar). Foreign orders for German capital goods plunged 27% at a seasonally adjusted annualized rate in 3Q08. total orders fell 2.7% in the year to September. Orders had been forecast to fall about 1.5%.

Spanish industrial production fell 8.8% in the year to September, greater than the 6.7% on-year decline in August.

Britain’s Halifax house price index dropped 2.2% between September and October and by 14.9% in the year to October, the biggest decrease of this series going back to 1983.

British new car sales tumbled 23% in the year to October. Australian new car registrations fell 11.4% y/y.

Swedish industrial output and orders fell in September by 2.0% and 4.7%, producing 12-month declines of 4.9% and 7.2%.

Trading on the Russian bourse was stopped for an hour after an initial 8% decline.

Obama may name his Treasury Secretary as early as today.

Japan’s indices of leading and coincident indicators remained very weak and consistent with a worsening economy. October 7th BOJ minutes revealed that the government wanted the central bank to cut rates then in concert with other central banks.

Iceland’s central bank met and kept its benchmark rate at 18%. Policy is focused on stabilizing the krona.

The IMF approved a $16.5 bn loan for the Ukraine.

Indonesia kept its benchmark interest rate at 9.5%.

South Korea reported the smallest monthly increase in bank lending to households since January. The Bank of Korea is likely to cut rates as much as 50 bps tomorrow.

The Reserve Bank of Australia broadened the range of collateral it will accept. The central bank in Vietnam widened the exchange rate’s daily trading band.

Chinese car sales rose 8.4% in the year to October after posting on-year drops in both August and September related to the Olympics.

The French government revised down projected growth to 0.2-0.5% in 2009 and 2% in 2010.

Euribor rates eased further.

In a surprise, Australia reported a brisk 34.5K rise in jobs last month. Employment climbed 225K in the year to October. The jobless rate held steady at 4.3%.


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