New Overnight Developments Abroad: Plunge in Two-Way Chinese Trade Flows

February 11, 2009

The dollar has lost 0.5% against the yen, 0.4% relative to sterling, 0.3% against the euro and kiwi, and 0.1% versus the Australian dollar and Swiss franc. The greenback gained 0.1% against its Canadian counterpart on speculation about a further Bank of Canada rate cut.

The Swedish Riksbank halved its repo rate to 1.0% and projected a future repo rate path that implies another reduction.  Analysts had expected a cut of 50 basis points. The central bank forecast negative 1.6% growth this year with inflation of only 0.5%. Officials said that zero interest rates were possible in the future.

Most stock markets are not down as much as U.S. share prices fell on Tuesday. Japan was closed for Foundation Day. Equities fell by 2.5% in Hong Kong, 1.1% in South Korea, 1.0% in the Philippines, 0.7% in Malaysia, 0.6% in Indonesia, and 2.1% in Vietnam. In Europe, the Dax is 0.1% higher, the Ftse is unchanged, and the Paris Cac has dipped 0.3%.

Sovereign bond yields are lower. Oil recovered 1.3% to $38.05 per barrel, and gold rose 1.1% to $924.50 per ounce.

Chinese exports and imports recorded on-year declines of 17.5% and 43.1% in January. In the year to October, by comparison, such had climbed 19.2% and 15.6%. Chinese imports from Japan fell by 43.5%. Those from the U.S. and EU dropped 29.9% and 21.5%. The trade surplus of $39.1 billion was almost identical to December’s $39.0 billion and November’s $40.1 billion.

Consumer confidence in Australia fell 4.6% in February despite easier monetary policy and a proposed fiscal stimulus, which remains stuck in parliament. Mortgage finance rose 6.4% in December, more than had been expected. A gauge of future labor market prospects deteriorated further.

British labor market data showed the highest level of joblessness since July 1999, a further rise in the claimant unemployment count of 73.8K in January, an unemployment rate of 3.8% on a claimant basis and 6.3% on an ILO basis, on-year wage growth of 3.2% in 4Q08, and a jump in factory sector unit labor costs of 6.6% last quarter.

The Bank of England quarterly inflation report projects sub-target inflation of 0.5% in two years’ time if market rate expectations prevail.  Growth is seen dropping at a 4% pace early this year. The report points to additional rate cuts to near zero, and the press conference stressed that a wide range of asset purchases would be made to ease monetary policy beyond that. Governor King identified deficient money growth as a major problem.

South Korean jobs tumbled by 103K, or 0.4%, last month, which was the biggest drop in over five years. The “L” broad money stock posted slower growth of 10.6% on-year in December, a 25-month trough, after 11.5% in the year to November. Both releases point to a rate cut tomorrow by the Bank of Korea that is likely to exceed prior expectations of 50 basis points from the current 2.5% level.

German final CPI data for January confirmed a monthly 0.5% drop and on-year inflation of 0.9%, down from 3.3% six months earlier. Consumer prices fell 0.9% at a seasonally adjusted annualized rate over the latest six months following a rise of 2.9% saar during the previous six months to last July. Non-energy consumer prices advanced 1.3% in the year to January.

Sri Lanka’s central bank cut its repo rate to 10.25% from 10.5% in the first policy change in two years.

The French current account deficit widened in 2008 to EUR 39.2 billion from EUR 19.6 bln in 2007.

U.S. and Canadian trade data will be released at 13:30 GMT. The U.S. monthly budget figures and Canadian house prices are also due today.

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


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