New Overnight Developments Abroad: G-7 Fails to Inspire Confidence

February 16, 2009

The Valentine’s Day G-7 statement speaks in generalities. No concrete coordinated steps announced. Calls global downturn and financial turmoil “ongoing and severe.” Softens criticism of Chinese foreign exchange policy and did not mention sterling, the yen, euro or dollar. Monday trading opened on a risk averse note, with lower share prices and a strengthening yen and dollar.

The dollar is off 0.3% against the yen but up 1.4% against the Australian dollar, 0.9% against the kiwi, 0.8% against the euro, 1.0% relative to sterling, and 0.6% against the Canadian dollar and Swiss franc.  The Polish Zloty touched a 5-1/4 year low against the euro.

Share prices are down 3.4% in India, 1.3% in Singapore, 1.4% in South Korea, 0.7% in Hong Kong, France, and Germany, 0.9% in the U.K., and 0.4% in Japan.

U.S. markets will be closed for Presidents Day. The Canadian provinces of Ontario, Alberta, and Saskatchewan will observe Family Day, but the national government is open and will release its monthly manufacturing survey.

The yield on 10-year JGB’s firmed 3.5 basis points to 1.29%. Oil firmed 0.3% to $37.64/barrel. Gold edged a tenth higher to $943.40 per ounce.

Japanese real GDP plunged 12.7% at a seasonally adjusted annual rate last quarter and fell 4.6% from 4Q07.  Exports plummeted 45.0% saar. Investment sank 19.5. Consumption fell 1.6%, while government spending rose 3.7%.  Inventories enhanced growth by 0.4 percentage points. The GDP price deflator rose for the first time in a decade, +0.9% from 4Q07, but fell 0.9% in 2008 as a whole.  Real GDP dropped 0.7% in 2008.

Japanese revised industrial production fell 9.8% in December and by 20.8% from end-2007.  The ratio of inventories to shipments increased 6.5% from November and by 33.4% from December 2007.  Capacity usage fell 11.8% and by 24.4% from  year earlier. There were calls for Finance Minister Nakagawa’s resignation after he seemed to be drunk at a G-7 press conference.  A stimulus package remains stalled in the Diet, and the Prime Minister’s approval rating is under 10%.

The British Rightmove house price index fell 9.1% in the year to February.

Producer prices in New Zealand rose 1.4% on an output basis but fell 2.2% m/m on an input basis last quarter. Gains from 4Q07 amounted to 9.9% and 9.7%.

South Korea’s trade gap was revised to a larger $3.36 billion in January.  Exports plunged 33.8% year-over-year.

Foreign direct investment into China recorded a 32.6% on-year decline in January after falling 5.7% in the year to December.  The drop was augmented by the Lunar New Year’s earlier timing but still reflects a clear deterioration in underlying trend.

The head of the Reserve Bank of Australia’s Foreign Department called the weaker Ozzie dollar appropriate and helpful.

Russian industrial production plummeted 19.9% and by 16% on-year in January. Factory output plunged 24.1% from December and by 32.7% from January 2008.

Indonesian real GDP rose by a smaller-than-expected 5.2% in the year to 4Q08.  a 5.7% gain had been forecast.  Bulgaria’s real GDP growth slowed to 3.6% from a year earlier in the fourth quarter, down from 6.8% in 3Q.

Speculation persists about a possible Irish debt default.  S&P may downgrade India’s rating to below investment grade following an interim budget that projects a budget deficit in 2009/10 of around 6%.

Norway’s trade deficit, excluding oil and gas, narrowed 15.4% last month from December but was 8.8% wider than in January 2008.

Trichet mentioned the possible use of “non-standard measures.”  Another ECB policymaker said growth and price forecasts from December are under review.

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


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