New Overnight Developments Abroad: Commodities Keep Weakening

November 12, 2008

Stocks fell in Asia but rose in Europe. Nikkei -1.3%. Thailand -1.5%. Hong Kong and Indonesia -0.7%. Australia -0.9%. The British Ftse is trading 1.2% higher, and the German Dax and Paris Cac show gains of 0.5% and 0.7%.

Copper, oil and gold have fallen by 5.9%, 1.5%, and 0.4%. Oil is below $59/barrel.

Sterling lost 0.8% against the dollar. The U.S. currency otherwise fell 0.7% against the kiwi, 0.6% against the Australian dollar, 0.2% against the yen and euro, and 0.1% relative to the Swiss franc. The Canadian dollar slid 0.2%. From Tuesday’s lows, the Aussie and New Zealand dollars have recovered 2% and 1.2%.

Sovereign bond yields are lower in Britain but up 3 basis points to 1.52% in Japan.

The Bank of England’s quarterly inflation report points to more rate cuts, projecting sub-1% CPI inflation if no more cuts occur. Inflation target is 2%. The report shows negative GDP growth of -2% in the first half of 2009. British unemployment advanced 36.5K in October, similar to the increases in August and September. The ILO unemployment level reached an 11-year high. Average wage earnings in 3Q rose 3.3% y/y, lowest in over five years. Bank of England Governor King said the Monetary Policy Committee is prepared to cut rates again as inflation softens, and he gave a qualified endorsement to a fiscal stimulus.

Industrial production in the euro area fell 1.6% in September. All major sectors declined. Despite a rise in August, output in 3Q08 fell 3.4% saar. Output fell 2.4% in the year to September.

Germany’s five wise men, that country’s council of economic advisors, released its annual forecast, projecting zero GDP growth in 2009, with domestic demand dipping 0.1% and exports firming 0.4%. A budget deficit equal to 0.2% of GDP is forecast. The group recommends more fiscal and monetary stimulus.

Australian hourly wage earnings rose 0.9% in 3Q. Such advanced 4.1% from 3Q07. These results were a shade lower than expected.

Japanese consumer confidence sank to a record low in October of 29.4 versus 31.4 in September and an average reading of 44.7 in 2007. This diffusion index has been below 50 since April 2006. Japan’s largest advertising agency reported a large decline in earnings.

Chinese money growth slowed to a 3-year low. M2 advanced 15.0% in the year to October versus 15.3% in September and 18.9% in January. M1 increased 8.9% y/y, down from 21.7% in the year to November 2007. Yuan lending held up, however, at 14.6% y/y after 14.5% in September and 14.3% in August. So did retail sales, which rose 22.0% nominally in the year to October, same as the gain in January-October from a year earlier. Retail sales in 2007 rose 16.8%. Chinese corporate goods price inflation fell to only 4.0% y/y in October from 7.0% in September and 10.3% last April.

The press in Germany is reporting a tentative engineering workers’ wage agreement covering 15 months to April 2010 and amounting to an effective annualized pay rise of around 3.8%. The union, which is a bellwether for other agreements, had sought an 8% wage increase.

Euribor rates fell further, with the 3-month hitting a 15-month low of 4.286%.

Indian industrial production rose 4.8% in the year to September, well below the 8.1% increase last fiscal year.

The head of the Danish central bank said downward pressure on the krone has lessened. The central bank had increased the premium of its benchmark rate over the ECB’s to alleviate the need for intervention.

Retail sales volume in South Africa fell 5.0% in the year to September. A downturn in South Africa’s 12% central bank repo rate is nearing.

Spanish consumer price inflation fell to 3.6% y/y in October from 4.5% in September. The core rate eased, too.


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