New Overnight Developments Abroad: Commodity Currencies and Stocks Tumble

January 13, 2009

There has been another spike in risk aversion. Stocks tumbled 4.8% in Japan, 4.2% in Thailand, 2.3% in China, 2.2% in Hong Kong, 3.0% in Italy, 2.6% in France, 2.3% in Germany, 2.4% in Sweden, and 2.2% in Switzerland and Britain.

The dollar advanced 3.9% against the New Zealand dollar and 1.8% against the Australian dollar. S&P cut the credit rating outlook on New Zealand foreign currency debt to “negative.” New Zealand’s business sentiment index deteriorated sharply to -64% in 4Q08 from -19% in 3Q08. Capacity usage fell 2 percentage points.

The Nigerian naira is 4.7% lower against the dollar than last Friday and at a record low. The central bank in the Congo hiked its key rate to 55% from 40% to support its franc. Such was the second sharp jump since Thursday, when it lifted the rate from 28%.

Oil slid another 2.7% to $36.58 per barrel. Gold eased 0.7% to $815.50 per ounce.

Sterling is very soft, falling 1.4% against the dollar. The yen edged 0.1% higher against the dollar to 89.12. The greenback shows gains of 0.5% against the Canadian dollar, 0.4% versus the euro and 0.1% against the low-yielding, safe-haven Swiss franc.

The 10-year JGB yield fell 4.5 basis points to 1.24%. The 2-year yield nearly sank to a 3-year low.

Japan’s current account surplus narrowed 41.2% on month and 65.9% from a year earlier in November. Merchandise exports sank 17.4% on month and by 26.5% from November 2007, twice as fast as the 13.7% on-year drop in imports. Direct and portfolio investment outflows amounted to Y 5.96 trillion in the month.

Japanese M2 growth from a year earlier remained steady at 1.8% in December, but M1 posted a larger 1.0% on-year decline. Bank loans rose 3.7% due to distressful cash demands amid a frozen commercial paper market.

Japan’s Economy Watchers’ index, a gauge of service-sector workers, slumped to 15.9 in December from 21.0 in November, 28.0 in September, 29.5 in June and 35.5 last April. The expectations component fell to 17.6 from 24.7.

Japanese corporate bankruptcies rose 6.7% on-year in December and by 11% in 2008. Associated debt more than doubled (+114.6%) last year.

Germany’s grand coalition agreed on a second fiscal stimulus totaling EUR 50 billion.

Chinese reserves rose $40.4 billion in the fourth quarter to $1.946 trillion at end-2008. Such climbed $418 billion last year after a $462 billion rise in 2007.

Chinese M2 growth accelerated to 17.8% in December, most since May. M1 rose 9.1% y/y, most since September, and M0 grew 12.7%, most since May. Yuan-based loans accelerated to 18.8% from 16.0% in the year to November and 14.1% in June.

German wholesale prices plunged 3.0% in December after monthly drops of 3.3% in November and 1.5% in October. The 12-month pace of WPI inflation sank to minus 3.3%, lowest since March 1999, from minus 0.8% in November and +9.9% last July. The WPI rose 5.41% in 2008, up from 3.5% in 2007. Oil and fuel fell 15.3% in the year to December. Intensifying deflation creates new urgency for the ECB to cut rates rapidly and deeply.

Business confidence in South Africa floundered to 83.8 in December, lowest since mid-2003, from 86.7 in November.

Dutch factory output fell 3.0% m/m and 6.2% y/y in November.

The French budget deficit widened 20.4% in January-November, as spending climbed 2.6% but revenues slumped 3.1%.

Finland’s GDP fell 1.1% in October and by 1.6% from a year earlier.

Swedish consumer prices fell 1.3% in December, much more than anticipated, cutting the 12-month pace to +0.9% from 2.5% in November. Inflation is now below target, assuring that the Riksbank will cut rates further.

Britain’s goods and services trade deficit was bigger than forecast in November at Gbp 4.48 billion. The merchandise trade deficit of Gbp 8.33 billion was a record going back to the late 17th century. Exports and imports fell by 5.8% and 1.8%. Exports to non-EU countries dived 12.5% on the month.

The U.K. DCLG house price measure fell 8.6% in the year to November. The RICs house price balance was at a very low -73.5 last month. Same-store retail sales, according to the British Retail Consortium, fell 3.3% in the year to December, while total sales dropped 1.4%. The Chamber of Commerce reported a worsening home sales balance of -31 in the fourth quarter, a record low after -7 in 3Q, -2 in 2Q, +17 in 1Q and +28 in the final quarter of 2007.

Canada and the United States release monthly trade figures at 13:30 GMT. ECB President Trichet spoke to the EU Parliament but gave no indication of what will happen to interest rates at Thursday’s policy meeting.


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