New Overnight Developments Abroad: Dollar and Stocks Mixed

March 24, 2009

The dollar is down 1.5% against the Canadian dollar and 0.7% relative to sterling but shows strong gains of 1.3% against the yen, 1.1% versus the kiwi, 0.9% against the Australian dollar, and  0.8% against the euro.  The buck edged 0.2% higher against the Swissy. The yen hit lows 134.51 per euro and 98.56 per dollar.

Obama will hold a prime-time news conference today.  Geithner and Bernanke testify about AIG at 14:00 GMT.

Asian markets followed the cue of yesterday’s stock market rally, with gains of 3.3% in Japan, 3.4% in Hong Kong, 2.5% in Singapore, 2.1% in Indonesia, 2.3% in Taiwan and 1.9% in South Korea.  But in Europe, the Ftse is trading 1.3% lower, the Cac40 has eased 0.3%, and the Dax is up only 0.1%.

Japanese sovereign bond yields were volatile. Yields rose in Europe.

Gold slid 1.6% to $937.00/ounce, while oil dropped 0.7% to $53.40 per barrel.

Preliminary PMI readings for March in Euroland were better than expected but still indicated sharp rates of decline.  Germany’s composite index improved to 37.7 from 36.3 in February, with a 0.3 point increase in manufacturing to 32.4 and a 0.4 point gain in services to 41.7.  The French composite jumped to 39.6 from 36.7, as manufacturing rose 1.5 points to 36.3 and services advanced 2.7 points to 42.9.  The composite reading for Euroland as a whole improved by half a point to 34.0 instead of dipping a tenth as projected.

Minutes from the Bank of Japan meeting in mid-February showed that finance ministry officials had put some pressure on the central bank to expand quantitative easing, which it did.  In comments today, BOJ Governor Shirakawa urged banks to rebuild capital and called corporate financial conditions severe. Japanese household wealth fell 5.7% last year to Y 1433 trillion.

Today’s biggest data surprise was news that British consumer prices increased 0.9% last month and by 3.2% in on-year terms, up from 3.0%.  This above-target reading mandated Governor King to send a letter of explanation to Chancellor of the Exchequer Darling.  King blamed the effects of sterling depreciation but stuck to the views that inflation would sink below target on the sharp drop in aggregate spending, lower energy costs and deficient money growth. Core CPI also rose to 1.6% year-on-year from 1.3% in January.

The British Bankers’ Association released data showing a 30.6% on-year drop in mortgage approvals in February.  The Bank of England’s dove, Blanchflower, warned that soaring unemployment could subject the housing market to a further contraction.

Euroland’s seasonally adjusted current account deficit widened to EUR 12.7 billion in January from EUR 7.6 billion in December.  The unadjusted deficit of EUR 70.4 billion in the 12 months to January represented a EUR 87.7 billion adverse swing from the previous twelve months.

Icelandic CPI inflation slowed to a 12-month rate of 15.2% in March from 17.6% in February.

Polish retail sales fell 1.6% both monthly and on year in February.  Poland’s jobless rate ticked up to 10.9% in February from 10.5% in January. Minutes showed that the 75-bp rate cut in January to 4.0% was decided by a split 7-3 vote.

French business sentiment held steady at 68 in March after dropping six points in February.  French consumer spending sank 2.0% last month, erasing a 1.7% rise in January.  Such has fallen in two of the last three months. February’s decline was the most in ten months.

A member of the ECB Governing Council suggested that room remains to cut all of the central bank’s key rates.

Swedish producer prices slid 0.2% in February and to a 12-month increase of 3.4% from 3.9% in January.

Taiwanese industrial production fell 27.1% in the year to February, while orders dropped by 22.3%. The Vietnamese dong fell 1.4%, most in 3 months.

In the U.S., weekly chain store sales data, the Richmond Fed index and the FHFA house price gauge get released today. The Reserve Bank of South Africa has a policy meeting and is likely to cut its 10.5% benchmark rate significantly further. Belgium releases business sentiment.

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


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