New Overnight Developments Abroad: Less Risk Aversion

February 13, 2009

Risk aversion subsided on hopes that the U.S. government will help troubled mortgage borrowers. Following yesterday’s late recovery in U.S. stocks, the Nikkei rose 1.0%, and stocks elsewhere in Asia went up 3.5% in China, 2.8% in Taiwan, 2.5% in Hong Kong, 1.8% in India, 1.7% in Malaysia, 1.1% in South Korea, 1.2% in Thailand and 1.2% in Singapore. Australian share prices gained 1.3%, and the German Dax, Paris Cac, and British Ftse are up 1.6%, 2.2% and 1.4%.

In foreign exchange, sterling (+1.8%) and commodity-sensitive currencies are stronger (kiwi +2.0%, AUD +1.7% and CAD +1.5%). So is the Russian rouble, whose advance of 4.6% this week was the best weekly gain in just over 10 years. The yen, on the other hand, fell 0.9% against the dollar. The greenback edged down 0.1% against the euro and Swiss franc.

Sovereign bond yields held steady in Japan but rose in Europe. Oil firmed 1.4% to $34.47 per barrel. Gold retreated 1.0% to $939.40 per ounce.

Euroland fourth-quarter economic growth was more negative than feared, dropping by a record non-annualized 1.5% from 3Q and by 1.2% from 4Q07. GDP rose only 0.7% in 2008 as a whole.

  • German real GDP fell 8.2% at a seasonally adjusted annual rate after dropping 2.2% saar in 3Q and 2.0% in the second quarter.
  • French GDP declined 1.2% last quarter not annualized despite a 0.5% gain in personal consumption. There was a big inventory drawdown, business investment slumped 1.5%, and exports collapsed 3.7%.
  • Italian fell 1.8% from 3Q and by 2.6% from a year earlier.
  • Spanish GDP dropped 1.0% compared to 3Q and by 0.7% from 4Q07.
  • Belgian GDP fell 1.3% quarterly and by 0.5% on-year.
  • Dutch GDP posted a quarterly drop of 0.9% and an on-year loss of 0.6%.
  • Austrian GDP edged 0.2% lower and eked out a 0.5% rise from 4Q, down from 1.4% in the year to 3Q.
  • Greek GDP firmed 0.3% and was 2.6% higher than a year earlier.

Egypt’s central bank cut its benchmark deposit and lending rates by 100 basis points each to 10.5% and 12.5%, citing decelerating inflation and growth. These were the first cuts since April 2006.

The belated passage of a new A$ 42 billion fiscal stimulus in Australia boosted the Ozzie dollar.

New Zealand retail sales fell 0.6% last quarter, somewhat less than forecast and the prior quarter’s 0.9% decline. New Zealand house prices dropped another 1.1% in January and by 4.6% from a year earlier. Home sales plunged 13.9% m/m and 28.5% from January 2008.

Fitch downgraded the Ukraine’s credit rating.

Japanese stock and bond transactions generated a Y 1474 billion outflow last week after a Y 1610 billion outflow in the week to January 31.

The Swiss PPI/import price index declined in January by 0.8% and recorded a 0.9% drop from a year earlier.

Singapore’s retail sales fell 1.6% in the year to December.

The 3-month euribor rate touched a record low of 1.943%.

Swedish capacity usage fell to 83.9% last quarter from 89.5% in 3Q.

French employment fell 0.6% last quarter. The French budget gap jumped over 61% in 2008 as revenues fell 4.8% and spending rose 2.8%.

A two-day meeting of G-7 finance minsters and central bankers in Rome began today. See chronology of prior meetings posted Thursday.

Obama’s second choice for Commerce Secretary, Republican Senator Judd Gregg, withdrew his name from consideration, citing philosophical differences. The University of Michigan consumer sentiment gauge will be released.  U.S. Treasury markets will close early today and be shut for President’s Day on Monday.

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


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