New Overnight Developments Abroad: Deeper Recessions in Britain and New Zealand

December 23, 2008

Asian stocks fell, led by a drop of 4.9% in China on disappointment interest rates were not cut more sharply. Equities fell 2.9% in Taiwan, 2.8% in Hong Kong, 2.4% in India, 3.0% in South Korea, and 1.2% in Singapore. Thailand (+1.5%) bucked the trend. Australian stocks eased 0.7%.

In Europe, the German Dax and Paris Cac are trading 0.7% higher, while the British Ftse is up 1.0%.

The dollar has declined 0.6% against the Canadian dollar, 0.4% against the euro and Swiss franc, 0.2% relative to the yen and 0.1% against the Australian dollar.

The New Zealand kiwi is off 0.3%, and sterling has dipped 0.1%. New Zealand reported a bigger 0.4% drop in third-quarter GDP, accelerating from -0.2% in 2Q08. Consumption slid 0.2%, and exports tanked 3.1%. British third-quarter GDP was revised to a larger drop of 0.6%, making such the worst quarter since 4Q90. Manufacturing declined 1.6%, services fell by 0.5%, and construction dipped 0.2%. GDP grew just 0.3% in the year to 3Q08, down from 1.7% in the year to 2Q.

Japanese markets were closed for the Emperor’s birthday. 10-year Treasury and Gilt yields slipped 2 basis points.

Oil is steady at $39.93 per barrel. Gold settled back 0.3% to $844.90 per ounce.

The British current account deficit of Gbp 7.72 bn in 3Q08 (-2.1% of GDP) was smaller than forecast, and the 2Q deficit got revised 41.5% lower to Gbp 6.42 bn.

British mortgage approvals reported by the BBA were 60.7% lower in November than a year earlier. Net mortgage loans fell 12% on month. A U.K. index for service-sector output firmed 0.6% in October but was 0.2% lower in August-October than the prior three months.

British productivity dropped 0.2% last quarter, marking the first quarterly drop since 1989.

Polish retail sales slumped 9.0% on month and rose just 2.7% in the year to November. Car sales were especially weak.

Euroland’s current account was -EUR 6.4 billion in October, the sixth consecutive seasonally adjusted deficit in a row but smaller than September’s EUR 8.8 bn gap. The unadjusted current account swung to a deficit of EUR 40.7 bn in the twelve months to October from a EUR 50.1 bn surplus in the previous year. Portfolio investment inflows in October amounted to EUR 121.7 bn, while direct investment outflows totaled EUR 14.1 billion.

French consumer spending surprised on the upside with a 0.3% rise in November (+1.0% from 11/07), but the level is weak and strength was narrowly based.

Italian wages rose 3.5% in the year to November, the fourth consecutive deceleration. But such was still above the 3.4% rise in January-November and November’s rate of CPI inflation. Italy still has extensive wage indexation that will prevent a speedy adjustment to the newly deflationary regional environment.

Italian consumer confidence sagged 0.8 points to 99.6 in December, its third straight drop. Italian retail sales fell 0.3% in October and 0.7% from a year before.

Export orders in Taiwan plunged by a record 28.5% in the year to November. Asia has been sucked into the global downturn through its dependence on trade.

Intervention was again necessary to cap the Hong Kong dollar at its target range ceiling.

The 3-month euribor rate another 3.4 basis points and is now barely above 3.0%.

U.S. data due later today include new and existing home sales, final U. Michigan consumer sentiment, and revised third-quarter GDP.


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