New Overnight Developments Abroad: Financial Shares Lead Stock Tumble in Asia and Europe

November 18, 2008

Japan’s Nikkei-225 fell another 2.3%. Stocks elsewhere in Asia fell by 7.4% in China, 4.5% in Hong Kong, 4.1% in South Korea and between 3% and 4% in Indonesia, India, Singapore, the Philippines, Thailand, and Taiwan. Stocks dropped 3.6% in Australia. In Europe, the Paris Cac, British Ftse, and German Dax are trading 1.6%, 1.5%, and 1.3% lower.

Japan’s largest bank reported a plunge in profits of 64%. More banks announced large job cutbacks.

The dollar is narrowly mixed, with rises of 0.2% against the euro, Swiss franc and Australian dollar but drops of 0.1% versus sterling, the yen, and kiwi. Dollar’s largest movement has been a 0.5% advance against the Canadian dollar.

Oil prices are 0.9% lower at $54.43 after hitting a 22-month low of $54.13. Iran wants Opec to agree to more production cuts. Cartel will meet on November 29 in Cairo. Gold eased 1.0% to $734.90 per ounce.

The yield on 10-year JGB’s slid 0.5 basis points to 1.49%. Sovereign bond yields fell more sharply in Europe and North America. The 3-month euribor rate continued to ease, reaching 4.15%, a 16-month low, compared to 4.22% last Friday. China’s central bank introduced a new facility to ease money market strains.

Minutes from the Australian monetary policy meeting early this month, which cut rates by 75 basis points to 5.25%, contain a worried tone, expressing a need to establish a neutral policy stance quickly despite a softer exchange rate and predicting that macroeconomic stimulus from both the monetary and fiscal side will not offset the drags from distressed global financial markets, lower commodity prices, and falling household wealth. Officials had considered a 50-bp rate cut but chose a bigger reduction. The next meeting on December 2nd is likely to produce another cut of at least 50 basis points.

Japan’s economics minister said growth may be negative in the fiscal year to March 2010. Officials have not budgeted for negative calendar year growth in at least 53 years. Japanese department store sales tumbled 6.8% in the year to October following a 4.7% drop in the year to September.

Britain’s mega-retailer John Lewis reported a 14% on-year decline in sales last week.

British consumer price inflation fell to 4.5% in October from a cyclical peak of 5.2% in September. Prices dipped 0.2% m/m, more than forecast. RPI inflation fell to 4.2% from 5.0%, the biggest month-to-month deceleration since early 1993. Energy and food led the improvement, but core CPI also eased to 1.9% y/y from 2.2% in September.

The Italian trade deficit widened 20.2% m/m and 72.6% y/y in September. The January-September shortfall was 28% greater than a year earlier.

Russian industrial production rose just 1.6% in October from a year earlier.

The volume of Swiss retail sales rose by 2.4% y/y in September, more than expected.

Brazilian retail sales advanced 9.4% in the year to September.

The U.S. releases producer prices at 13:30 GMT, TIC capital flow data at 14:00 gmt, and the NAHB index at 18:00 GMT. Weekly chain store sales also arrive today, and Fed Chairman will be testifying in Congress.


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