New Overnight Developments Abroad: Yen and Dollar Gain Ground

March 27, 2009

The yen rose 0.7% against the dollar. In turn, the dollar advanced 0.9% versus sterling, 0.8% against the Australian dollar and Swiss franc, 0.7% relative to the euro, and 0.4% against the Canadian dollar.

Japan’s Nikkei dipped 0.1%, and the Topix ended a streak of nine consecutive advances.  Other Asian stock markets mostly improved, with gains of 3.0% in Indonesia, 2.6% in the Philippines, 0.8% in China, 0.5% in India, and 0.7% in Australia. The German Dax and Paris Cac have edged off 0.1% and 0.3%, but the British Ftse is up 0.4%.

Gilt and bund yields are lower, while the 10-year JGB firmed 1 basis point to 1.33%. Bank of England Governor King’s warning against further fiscal reflation is generating talk of a rift with Prime Minister Brown.  A designated new monetary policymaker, Miles, also questioned the Gilt market’s tolerance for massive deficit spending in his confirmation hearings.

Oil gave back 1.2%, easing to $53.68 per barrel, while gold lost 1.2% as well to $931.2 per ounce.

Industrial orders in Euroland fell 3.4% in January, only about half as much as street forecast, but December’s drop was revised to 8.0% from 5.2%. Orders were 11.8% below their 4Q08 average level and down 34.1% compared to January 2008.  Orders had collapsed at a 54.4% annualized pace last quarter. Germany, France, Spain, Italy, the Netherlands, and Finland each recorded 12-month declines of at least 30.0%.

Britain’s current account deficit narrowed 8.6% last quarter but surpassed expectations by almost 30%.  The deficit equaled 1.7% of GDP in 2008, down from a gap equivalent to 2.9% of GDP in 2007.  British GDP growth unexpectedly got revised to a slightly greater negative 1.6% last quarter after minus 0.7% in 3Q. In the fourth quarter, business investment tumbled 8.0%, exports fell 4.4%, and overall GDP was 2.0% less than in the final quarter of 2007.

Italian industrial orders  and sales each sank 2.1% in January.  Domestic orders fell by 3.1%.

The buzz after the release of Japanese consumer price data is that deflation is back, although Finance Minister Yosano cautioned against such a preliminary conclusion.  On-year changes for the national CPI in February were -0.1% on the total and ex-food and energy indices.  Consumer prices fell 2.7% at a seasonally adjusted annual rate during the six months to February.

Japanese large-store retail sales tumbled 8.2% in the year to February 2009.  Total retail sales fell 0.3% on month and by 5.8% from February 2008. The latter had posted on-year declines of 2.4% in January and 1.5% in the fourth quarter of 2008.

New Zealand GDP posted fourth-quarter drops of 0.9% from 3Q, led by losses of 14% in construction, 3.3% in exports and 1.8% in business investment, and 1.9% from the final quarter of 2007.  New Zealand’s trade gap was 16% wider in the 12 months to February than a year earlier.

South Korean revised GDP figures showed a massive 5.1% plunge last quarter (-3.4% y/y), as investment and exports posted double-digit declines and consumption fell by 4.6%.

German import prices fell 0.5% in January and recorded their largest on-year decline (5.4%) in 119 months. Non-oil import prices slid 0.3% in the year to January. German state CPI reports for February have been much lower than assumed.  On-year CPI inflation in the most populous state, North Rhine Westphalia, was merely 0.3%.

New forecasts by the OECD due Monday reportedly will predict GDP growth in 2009 for the entire 30-nation bloc of negative 4.2%, revised from minus 0.4%.

Revised French GDP fell 1.1% in 4Q08, led by drops of 3.5% in exports and 2.0% in business investment. An even larger drop this quarter is projected.

The Swiss index of leading economic indicators fell to a record low of -1.79 in March from -1.37 in Feburary and +1.40 a year earlier.

Swedish retail sales fell 0.6% last month and by 1.3% from a year before.  These worse-than-expected results are leading analysts to expect a significant further rate cut by Sweden’s central bank.

A new world currency is reportedly not on the G-20 agenda for the London summit on April 2nd.

European clocks get moved up by one hour this weekend, reestablishing the normal gap with U.S. Eastern time to 5 hours vis-a-vis London and six ours with much of Euroland.

U.S. personal income and consumer expenditures data will be released later, as will the U. Michigan gauge of consumer sentiment.

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


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