New Overnight Developments Abroad: Yen Soared and Stock Prices Swoon

December 1, 2008

Stocks in Europe are down by 3.3% in Germany, 3.2% in Italy, 2.7% in Sweden, 2.6% in Switzerland, 2.5% in France, and 2.2% in Britain. They fell 1.6% in Australia, 1.4% in Japan, 2.7% in Thailand, 2.8% in India, 1.5% in Indonesia, 1.6% in South Korea, 2.4% in Singapore and 2.0% in Malaysia. Chinese equities rose 1.9%.

The dollar fell 1.7% against the yen and 0.6% against the Swiss franc but is trading up by 2.1% against sterling, 2.8% against the kiwi, 2.0% against the Aussie dollar, 0.6% against the Canadian dollar, and 0.2% against the euro.

The Chinese yuan slumped 0.9%, its biggest one-day drop since the July 2005 revaluation, and hit a five-month low.

While the 10-year JGB yield is flat at 1.4%, sovereign bond yields are sharply lower in Europe and North America.

Euribor rates continued to ease. Three-month rate is now at 3.82%.

Oil fell 4.3% to $52.09 per barrel, and gold dropped 2.8%, sliding under $800 to $795.70 per ounce.

Rate cut fever is intensifying, spurred by more shockingly weak data. This will be an active week for central bank meetings. The first big announcement is set for 03:30 GMT Tuesday (22:30 EST tonight) from Australia where at least -75 bps is presumed and -100 bps is expected by an increasing number of analysts.

The Euroland PMI-manufacturing score of 35.6 in November was below flash indication of 36.2, October score of 41.1 and September’s 45.0. Subindices for production dropped to 32.6. That for orders was 28.8 after 36.2 in October. Input price index at 39.9 versus 51.4. Record low PMI diffusion index readings seen in Germany of 35.7, France of 37.3, Italy of 34.9, and Spain of 29.4.

British PMI fell to 34.4 from 40.7 in October (lowest since at least 1992 start of data series) and 54.4 a year ago. British mortgage approvals returned to August’s low of 32K in October. Mortgage lending was only a quarter of what had been expected. Consumer credit was 53% lower than a year before. The Hometrack house price index fell 1.1% m/m in November and by 8.1% from November 2007. On-year M4 growth shot up to 15.3%, most since mid-1990.

Spanish car sales slumped 50% y/y. German retail sales volume (excluding the automotive sector) fell 1.6% in October and by 1.5% from October 2007.

Other manufacturing PMI scores mostly fell. Poland 40.5, down from 43.7 and worst reading since at least mid-1998. China posted a record low of 38.8 after 44.6 in October and 51.2 in September. South Africa’s reading was 30.6, down from 42.5 and also a record low. Australia’s reading fell to 32.7 from 40.4 in October and at a record low. India’s PMI fell to 45.8 in November from 52.2 the month before. Australia also reported an inflation gauge of 3.0% on-year, down from 3.9% in October and 4.8% in midyear.

Chinese President Hu warned of a deepening slowdown.

Bank of Japan Governor Shirakawa and Economics Minister Yosano spoke of deteriorating growth, a rising risk of deflation, and increasingly scarce financing for corporations. The Bank of Japan’s policymakers are holding an emergency session Tuesday to discuss and implement news ways to boost liquidity. A rate cut is not expected but always possible after an emergency meeting. Japanese wage earnings slid 0.1% in October on weak overtime and special pay.

Japanese motor vehicle sales plunged 18.2% on-year in November after -6.6% y/y in October. January-November sales were off 4.2%.

South Korean exports sank 18.3% in the year to November, worst in seven years.

Thai consumer price inflation receded to 2.2% in November from 3.9% in October and over 9% in July. Australia’s commodity price index dropped 2.7% in SDR terms in November. South Korea’s CPI eased to 4.5% from 4.8% and fell by 0.3% on a month-on-month basis in November. Indonesian consumer prices showed comparative stickiness, easing only to 11.7% from 11.8% in October because of a weak rupiah.

Hong Kong retail sales volume slumped 4.3% in the year to October. Norwegian retail sales fell 0.9% in real terms in October, three times more than forecast.

Exports fell 12.1% in the year to October in India.

Canadian 3Q growth gets reported at 13:30 GMT. Opposition parties in Canada have united in an effort to bring down the minority Conservative government led by Stephen Harper.


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