New Overnight Developments Abroad: Lower Dollar Ahead of U.S. Employment Report

November 7, 2008

The dollar lost 0.9% against sterling, 0.8% versus the Australian dollar, 0.5% against the euro and 0.4% relative to the yen, Canadian dollar, Swissy and kiwi.

Gilts rallied sharply on outsized Bank of England rate cut. The 10-year Gilt yield is 9 bps lower versus a 2-bp drop in bunds and 2-bp rise of JGB’s.

Japan’s Nikkei fell 3.6%, but European shares are higher (Dax +1.3%, Cac40 +1.1%, and Ftse +2.0%). Elsewhere in Asia, stocks rose 3.3% in Hong Kong, 1.7% in China, 3.9% in South Korea, 2.4% in India and Singapore and 2.3% in Indonesia, but bourses in the Philippines and Vietnam fell 1.0% and by 3.6%. Australia -2.4%.

Money market rates continued to subside in Europe.

Commodities firmed. Oil is 2.6% higher at $62.35 per barrel, while gold gained 1.6% to $744.10 per ounce.

As expected, the Bank of Korea cut its benchmark rate by 25 bps to 4.0%, following cuts of 25 bps on October 9th and 75 bps on October 27th. More reductions are likely. The central bank of the Philippines reduced its regular reserve requirement to 8% from 10%.

Egypt’s central bank retained an 11.5% benchmark interest rate but hinted that cuts may be coming.

German industrial production fell 3.6% in September, nearly twice as much as expected, and recorded a drop of 5.0% in 3Q at a seasonally adjusted annual rate. German household bankruptcies fell 15% in the year to August, a sharper drop than the 10.2% decline in January-August.

The German trade surplus held steady in seasonally adjusted terms at EUR 13.7 bn in September. Such averaged EUR 13.1 bn per month in 3Q08, down from EUR 16.4 bn per month in the second quarter. Both exports (0.7%) and imports (0.9%) rose compared to August after dropping in the prior month. The current account surplus doubled to EUR 15.0 bn from EUR 7.5 bn in August but was 11.8% narrower than its year-earlier level. The January-September current account surplus slid 2.3% from a year earlier.

Australia’s housing construction sector PCI index plunged to a record low of 22.9 in October from 27.9 in September and 63.0 a year earlier.

Stock and bond transactions in Japan generated a Y 2282 bn outflow in the week to November 1st versus a Y 338 bn inflow in the prior week.

The IMF sees a risk of negative growth in the advanced economies for the first calendar year since world war 2 during 2009.

The OECD’s index of leading economic indicators fell 1.6 points to 94.3 in September from 95.9 in August.

French trade flows recorded a deficit in September of EUR 6.25 bn, much more than assumed. Energy accounted for EUR 5.4 bn of the September trade gap.  France accrued a budget gap of EUR 56.6 bn in the first nine months of this year, 8.4% greater than a year before.

Canadian employment rose 9.5K in October, but the jobless rate ticked up to 6.2% from 6.1%.

U.S. labor data arrive at 13:30 GMT and are expected to be the worst yet of 2008. Obama meets with his economic advisory transition group and afterward will hold a press conference at 19:30 GMT where he is thought likely to announce his Treasury Secretary appointee and to unveil some details of a fiscal stimulus.


Comments are closed.