New Overnight Developments Abroad: Dollar Lower and Stocks Higher

March 10, 2009

The dollar dropped 1.5% against the Australian dollar, 1.2% versus the kiwi, 0.8% against the Canadian dollar and euro, 0.6% relative to sterling, 0.5% against the yen and 0.3% against the Swiss franc.  East European currencies recovered some further ground.

The Dax, Cac40 and Ftse are trading higher by 1.1%, 0.7% and 0.3%.  While stocks in India, the Philippines and Japan fell by 2.0%, 0.9%, and 0.4%, most Asian bourses closed up with rises of 3.1% in Hong Kong, 1.9% in South Korea, 1.7% in China, 1.5% in Thailand and 1.1% in Indonesia.

Ten-year sovereign bond yields advanced in North America and Europe. The 10-year JGB firmed a basis point to 1.305%.

Gold lost another 0.8% to $910 per ounce, while oil settled back 0.3% to $46.91 per barrel.

Japan’s index of leading economic indicators decreased 2.3 points in January to 77.1, 12.2 points below its September level, indicating a possible further intensification of the recession. The LEI diffusion index has not been above 50 since July 2007. The coincident index declined to 89.2 from 92.2 in December and 100.0 in August, and its diffusion index posted a fifth consecutive zero reading. The lagging diffusion index has been 50 or lower since January 2008 in this longest-ever post-war recession.

Australian business conditions fell ten points to -22 in February, while business sentiment had its weakest reading (minus 20) since mid-1992 and was 9 points below the January score.  Australian job ads tumbled 10.4% in February.

China recorded negative on-year changes in its February CPI (-1.6% versus +1.0% in January and +8.7% in Feb 2008) and PPI (-4.5% after -3.3% in January and a 13-year high of +10.1% last August). Officials denied deflation, blaming the drop on seasonal distortions related to the Lunar New Year and less imported inflation.  They also noted the robust growth of lending in China to refute any danger of deflation.

British industrial production slumped 2.6% in January and posted an 11.4% on-year decline.  A drop of 9.6% in Nov-Jan from a year earlier was the greatest 3-month fall since 1Q74.  Factory output plunged 2.9% on month and 12.8% on year, most since the start of 1981.  These drops were twice as much as forecast.  Same-store sales fell 1.8% in the year to February, according to the British Retail Consortium, while total sales edged just 0.1% higher.

French industrial production fell 3.1% on month in January and by 10.9% from January 2008.  Factory output plummeted by 4.1% on month.

The French trade deficit leaped 54% on month in January as exports fell 6.7% while imports rose 9.5%.  The budget gap in January was 23% greater than in January 2008 due to a 10.3% plunge in tax revenues.

Norwegian consumer prices in February rose 0.8% m/m and 2.5% from a year earlier.  Core CPI of 3.0% on-year also surpassed expectations.  Producer prices, however, fell 2.3% on month, which cut the 12-month increase to 0.2% from 3.9% in January and 20.2% in the year to February 2008.

The German current account surplus dived to EUR 4.2 billion in January from EUR 12.7 billion in December and EUR 15.6 billion in January 2008.  The seasonally adjusted trade surplus was 34% smaller than the fourth-quarter monthly mean surplus. Exports decreased 4.4% on month after a 4.0% slide in December. Final German CPI figures confirmed a 0.6% monthly rise in February and a 12-month advance of 1.0%. Non-energy consumer prices rose 0.6% from January and 1.3% from a year earlier.

Italian producer prices fell 0.8% in January and by 2.0% from January 2008.  These bigger-than-forecast declines partly reflect rebasing of this data series to year 2005 from year 2000.  Bini Smaghi of the ECB said the central bank is prepared to implement zero interest rates if necessary to abort a deflation threat.

The Japanese finance minister said officials will do anything to support growth, but the reality is that parliament is hopelessly stalemated.

Danish consumer price inflation edged up to 1.9% on-year from 1.8% in January.

Swedish industrial output and orders dived by 22.9% and 31.9% in the year to January.  Finnish industrial production fell 19.5% in the year to January.

On today’s U.S. calendar are testimony by Fed Chairman Bernanke, weekly chain store sales, and wholesale inventories.

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


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