New Overnight Developments Abroad: Dollar and Yen Higher

February 4, 2009

Risk aversion reasserted itself on the possibility that the U.S. Senate may reject (delay?) passage of the big fiscal stimulus.

The yen is 0.4% higher against the dollar, which in turn recovered 2.1% against the Australian dollar, 1.6% versus the kiwi, 1.5% against the Swissy and 1.3% relative to the euro. The dollar also rose 0.7% against the Canadian dollar and 0.6% versus sterling.

The Nikkei jumped 2.7%. Stocks also rose 2.7% in China, 2.8% in South Korea and 2.3% in Hong Kong but fell 2.0% in Australia, 0.9% in Vietnam and 0.3% in Singapore and Malaysia. In Europe, the Paris Cac is up 1.1%, and the German Dax (0.8%) and British Ftse (+0.6%) are higher, too.

Sovereign bond yields rose. For instance, the 10-year JGB yield gained 6 basis points to a fresh 2009 high of 1.36%.

Oil advanced 2% to $41.60 per barrel, and gold is 0.8% higher at $899.70 per ounce.

The central bank of Indonesia cut its benchmark BI rate by 50 basis points to 8.25% and indicated more relief in the future.

The Kazakhstan tenge was devalued 18% after heavy recent spending to defend it.

Japan’s service sector PMI fell 2.9 points to a new low of 34.1 in January. Russia’s PMI-services index ticked up to 36.8 from 36.4.

Euroland real retail sales were unchanged in December and down 1.6% from December 2007. Such still dropped 3.4% at a seasonally adjusted annual rate last quarter after holding flat in the third quarter. The data point to very weak real GDP in 4Q08.

Australian retail sales surprised sharply on the upside, jumping 3.8% in December, most in 100 months and more than twice forecasts.

But Australian building approvals slumped 2.9% in December and by 32.9% from a year earlier, which was much weaker than assumed. Australia’s service PSI index ticked higher from 39.3 in December to 41.0 last month, which still connotes a sharp contraction. Also, motor vehicle sales fell 6.8% m/m and by 18.5% in the year to January. That follows yesterday’s news that U.S. motor vehicle sales sank 37% y/y.

China’s manufacturing PMI improved to 45.3 in January from 41.2 in December and 38.8 in November. Yuan lending surged by a record 1.2 trillion last month, 55% greater than new yuan lending in December.  Chinese corporate goods prices fell 3.1% in the year to December. The data suggest that last quarter will be China’s weakest but that a deflationary threat must be monitored.

Euroland’s composite PMI for January was 38.3, two-tenths less than the preliminary reading and a tick higher than December’s 38.2.  The services PMI was revised down 3/10ths to 42.2, which also was a tenth above its December score. Individual country service PMI’s in Euroland were 45.2 in Germany, down from 39.5 in December; 42.6 in France, up from 40.6 in December; 41.1 in Italy after 40.3 in December and a record low of 39.5 in November; and 31.8 in Spain following 32.1 in December and a record low of 28.2 in November.

The British PMI-services reading improved to a 4-month high of 42.5 in January from 40.2 in December and 40.1 in November. A roughly unchanged reading had been expected. British shop prices rose 1.1% in the year to January, twice as much as the 12-month gain in December.  The Nationwide gauge of British consumer confidence sank to a record low in January of 40 from 48 in December, 52 in November, 55 in October and 81 in January 2008.  Take home pay for U.K. manufacturers rose just 1.4% in the year to January. The gain for service-sector workers was 3.1%. The National Institute of Economic and Social Research projects a 2.7% drop in U.K. real GDP this year.

New Zealand export commodity prices fell 26.5% in the year to January and by 4.3% from December.

Within the hour, the Norges Bank is expected to cut Norway’s 3.0% benchmark rate. Releases from the United States today include the ADP measure of private employment and the ISM PMI reading for service-producing industries.

Copyright 2009 Larry Greenberg.  All rights reserved.  No secondary distribution without express permission.


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