New Overnight Developments Abroad: Concern Mounts Over European Banks

February 10, 2009

Press reports that Russian banks are seeking government assistance to restructure $400 billion of debt sent the euro as low a $1.2811.  The euro rebounded on denials of the story, but confusion persists.  The dollar is up 0.4% against the euro and has also risen by 1.9% against the Australian dollar, 1.0% versus the Canadian dollar, 0.8% relative to the pound, and 0.1% vis-a-vis the kiwi. Typical in times of risk aversion, the yen gained 0.3% against the dollar and by more versus other major currencies.

The Nikkei (-0.3), Dax (-1.5%), Paris Cac ( -1.4%) and Ftse (-1.1%) are weaker.  Stocks also fell 0.6% in South Korea, 1.7% in the Philippines and 1.9% in Vietnam. U.S. futures indicate a drop at the open. Equities rose 1.3% in China and Singapore, 0.8% in Malaysia, and 0.7% in India, however.

Sovereign bond yields mostly softened. The 10-year JGB was flat at 1.305% after a 5-year auction that produced a somewhat lower 3.05 bid-cover ratio.

Oil rose 2.5% and moved back above $40 to $40.55/barrel. Gold advanced 0.4% to $896/ounce.

French industrial production fell 1.8%  in December, a shade less than forecast, and dropped 9.3% on year. November’s decline was revised to 2.8% from 2.4%. Autos and semi-finished goods posted December drops of more than 7%, but capital goods went up 2.6%.

Swedish industrial production plunged 5.1% m/m in December and by 20.3% from end-2007, and November was revised to show a larger 2.7% decline.

Italian industrial production fell more than expected in December (2.5%) and dropped 14.3% from a year earlier, most since at least the start of 1991. In the year to December industrial output fell by 8.3% in Bulgaria and 17.5% in Slovenia.

Britain’s merchandise trade deficit narrowed 9.2% in December to Gbp 7.37 billion, lowest since June 2007, as imports fell 2.5% and exports firmed 0.3%. Real exports dropped 10% last quarter. The goods and services deficit narrowed to Gbp 3.61 billion from Gbp 3.98 billion in November.

The British RICs house price balance index of -76 in January after -74 in December was lower than expected. The British Retail Consortium reported an unexpected 1.1% on-year rise of same-store sales in January, but the rebound was distorted by price discounting and not indicative of the future.

South African factory output slumped 4.0% in December and by 7.0% from a year earlier. Such also fell 6.4% in November, revised from a 4.4% decrease reported initially.

Swiss consumer price inflation slowed to 0.1% in January from 0.7% in December and a 2008 peak of 3.1% last July. Consumer prices fell 0.8% on month.

Chinese consumer price inflation slowed to 1.0% in January from 1.2% in December and 4.6% as recently as September. Producer prices fell 3.3% in the year to January after dropping 1.1% in the year to December and rising 10.1% in the year to August 2008. Chinese consumer confidence weakened to 87.3 in December from 90.2 in November and 93.4 in September.

Australian business sentiment sank to a record low of -32 in January from -20 in December. So much for the bounce in response to a big rate cut. Business conditions also deteriorated to -11 from -6 in December. The death toll from wild fires in Victoria is likely to exceed 200. Meanwhile, a proposed A$ 42 billion stimulus package has encountered resistance in parliament, similar to the U.S. delays.

U.S. Treasury Secretary Geithner will be in the spotlight today, unveiling details of his bank rescue plan at 16:00 GMT. The Senate voted to end a filibuster on the economic stimulus bill, but the House and Senate version still must be reconciled.

Japanese consumer confidence was better than feared in January, posting a 26.4 score after a record low of 26.2 in December.

South Korea’s finance minister revised projected GDP growth in 2009 to minus 2% from plus 3%.

A member of the British cabinet, Ed Ball, said this is the worst recession in a century.

The 3-month euribor rate edged under 2.0% for the first time in around five years.

Norwegian producer price inflation slowed to 3.9% y/y in January from 6.0% in December. Consumer prices fell 0.5% m/m in January, not quite as much as expected. Danish consumer prices rose 0.4% m/m and 1.7% y/y in January.

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


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