New Overnight Developments Abroad: Surprising Calm

February 25, 2009

Markets are surprisingly calm.  Today had the potential to be difficult after Bernanke’s testimony, Obama’s virtual State of the Union Address, and the release of more troublesome data in Asia and Europe.  But the performances of Bernanke and Obama did more good than harm, and markets took a breather.

Dollar movements have been mild: up 0.4% against sterling, 0.2% against the C-dollar, and 0.1% versus the euro; unchanged relative to the Swiss franc; and down 0.5% against the kiwi, 0.3% against the Australian dollar and 0.1% versus the yen.

Share prices are mostly higher, with gains of 2.7% in Japan, 1.9% in Germany, 1.8% in France, 1.5% in Britain, 1.6% in Hong Kong, 0.9% in India and the Philippines and 0.7% in Thailand.

Sovereign bond yields rose in Japan and Europe.  Gold settled back another 1.1%.  Oil firmed 1.7% and is above $40 at $40.64 per barrel.

The Japanese customs trade deficit of Y 952.6 billion in January was 10.6 times larger than a year earlier. Exports plunged 45.7% y/y and on a seasonally adjusted basis dropped 10.4% from December and by 80.6% annualized from October. Imports dropped 31.7% on year.

The Shoko Chukin index of small business sentiment ticked up just 0.2 points to 25.0 in February from January’s record low. Such was at 40.2 in September.

German non-annualized GDP growth was confirmed at negative 2.1% last quarter and -1.7% from 4Q07.  Exports and investment in equipment plunged respectively by 7.3% and 4.9%.  Growth would have been negative 2.6% if not for a 0.5 percentage point boost in unwanted inventories.

German construction orders sank 2.4% in December and 11.9% from end-2007.

British real GDP fell by a non-annualized 1.5% last quarter, most since the second quarter of 1980 and by 1.9% from a year earlier, the greatest on-year drop since the second quarter of 1991.  A 5.1% plunge in factory output was the most since 1Q74, and a 2.3% drop in service-sector output was the worst since 4Q90.

Real GDP in Hong Kong fell 2.5% last quarter, greater than the expected 2% decline and the worst result since 1Q99.  Officials expect negative 2-3% growth in 2009.  The government unveiled a fiscally stimulative budget.

South African consumer price inflation settled back to a 15-month low in January of 8.1% y/y from 9.5% in December.

Swedish consumer confidence recovered to -14.6 in February from -17.5 in January. Manufacturing sentiment slid a point to -35, and overall economic sentiment edged down a tenth to 72.0.  These are all weak numbers.  Minutes from the Riksbank’s February 11th meeting revealed unanimous support for the 100-bp rate cut that was announced. Officials sound likely to ease again at the next meeting on April 20th.

The Bank of Thailand cut its 1-day benchmark repo rate to 1.5% from 2.0%, following up on reductions of 75 basis points on January 14 and 100 basis points on December 3rd.  A released statement implied more cuts are coming, as growth in 2009 will likely be negative.

Australian data depicted more strength than expectedConstruction spending rose 1.7% last quarter and were up 3.0% from 4Q07.  Hourly wage growth of 1.2% in 4Q from 3Q and 4.3% from a year earlier were likewise more resilient than assumed.

Norwegian unemployment averaged 3.0% in November-January, up a tenth from 2.9% in 4Q08.

Expected inflation in New Zealand eased to 2.2-2.3% according to a quarterly survey, paving the way to a likely rate cut on March 12th.

Italian retail sales were unchanged in December and down 1.9% from a year earlier.

Spanish producer prices firmed 0.4% on month but fell 0.6% in the year to January. Icelandic consumer price inflation remained elevated at 17.6% in February.

Hints have been dropped of an easing of Philippino monetary policy.

Finance Ministry officials in South Korea expressed more acceptance for a depreciating won.

Existing home sales and Bernanke’s testimony reprise before the House head the U.S. calendar today.  The Bank of Poland is likely to cut its key rate.

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


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