New Overnight Developments Abroad: Waiting for U.S. Employment Figures

March 6, 2009

The dollar has relinquished ground, dropping most sharply against the Swiss franc (1.3%) and yen (1.2%) but also by 0.9% against the euro, 0.7% against sterling, 0.6% versus the kiwi, 0.4% against the Canadian dollar, and 0.1% relative to the Australian dollar.

In Japan, the Nikkei fell another 3.5%, and the Topix closed at a 25-year low.  Stocks also fell 2.4% in Hong Kong, 1.4% in Australia, 1.3% in Malyasia, and 0.8% in China despite further assurances by Beijing officials that steps will be taken to assure 8% growth in 2009.  In Europe, the Paris Cac is 0.6% lower, and the German Dax and British Ftse are down 0.3%.  Market concerns center around GM and the financial shares.  Citi is now a penny stock.

Under no U.S. prior president did the DOW decline by 20% as quickly as it has under Obama.  He has met more political resistance than expected to his wide-ranging agenda, and progress in appointing top officials especially in the key Treasury Department has been very poor.

The yield on 10-year JGB’s slid 1.5 basis points to 1.295%.

Gold recovered by a further 1.4% to $940.90 per ounce.  Oil also firmed 1.4% to $44.30 per barrel.

Swiss and British price data showed more residual inflation than foreseen.

  • Swiss consumer prices firmed 0.2% in February, lifting the 12-month change from -0.1% in January to +0.2%.  The Swiss National Bank is nonetheless still expected to halve its key interest rate to 0.25% on March 12th.
  • British producer output prices firmed 0.1% in February and by 3.1% from Feb 2008.  Core posted a 12-month advance of 3.7%, down from 4.0%.  Producer input prices increased 0.6% on month, much more than expected, and by 0.5% y/y. Its core index went up 9.0% from February 2008.

The 3-month Euribor rate dropped another 9.9 basis points this week.

Norwegian factory output dropped 1.3% in January and by 4.0% from a year earlier.

As expected, Peru’s central bank announced late yesterday a 25-basis point cut in its key rate to 6.0%. It was the second reduction of 2009.

Uganda’s central bank reduced its key rate by 39 basis points to 15.88%.

British real construction spending fell 7% last quarter.

The OECD index of leading economic indicators dropped a full point to 92.3 in January to just 0.6 points above the all-time low for this 44-year-old data series.  That low was seen in the 1974-75 recession.  Deterioration in the OECD index was widespread but sharpest in the cases of Russia and Brazil.

The Bank of Mexico will step up intervention support for the peso.

German service-sector jobs rose 0.9% in the year to 4Q08 but fell by 1.6% from the third quarter.

The U.S. February labor survey will be released at 13:30 GMT.  All signs point to another employment drop of at least 600K.

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


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