New Overnight Developments Abroad: Tankan Survey and European PMI's Released

April 1, 2009

Sterling gained 0.4% against the dollar and more against other currencies.  The dollar has firmed 0.4% against the Swiss franc, 0.3% versus the kiwi and Canadian dollar, and 0.2% against the yen and euro. Aussie dollar is unchanged.

Stocks mostly rose in Asia but are lower in Europe.  Nikkei +3.0%. Equities gained 2.1% in South Korea, 1.9% in Indonesia, and 1.6% in China. The Paris Cac and German Dax are 1.3% and 1.1% weaker, while the British Ftse lost 0.8%. Dissension has emerged within the G-20 a day before its summit.

Oil fell 3% to $48.19.  Gold eased 0.3% to $921.90 per ounce. Sovereign bond yields are softer, including a 1-basis point drop in the 10-year JGB to 1.34%.

The Bank of Japan’s quarterly Tankan survey of business conditions and expectations produced even worse results than anticipated.  The Diffusion indices fell 38 points to a record low of -58 for big manufacturers, 22 points to -31 for big non-manufacturers, and 22 points to -46 for all 10,441 surveyed firms.  Respondents expect a further deterioration of the diffusion index for all firms to -52 by June. This survey introduced expectations of sales, earnings and planned investment in the fiscal year 2009 starting today. All estimates indicate declines, including a likely 14.3% drop in investment spending by all firms. The report reveals extremely distressful credit conditions, projected price deflation, and a product excess supply diffusion index of -59 for big firms and small firms alike. Inventories are substantially excessive.

Japanese non-mini motor vehicle sales fell 31.5% in the year to March, while mini-auto sales dropped by 13.8%.

Australian retail sales in February were weaker than anticipated, dropping 2.0% from January and rising 4.1% from February 2008 after a 5.9% advance in the year to January.  Skilled job vacancies plunged 59.1% in the year to March.  Building permits rebounded 7.8% in February, much better than assumed, but such still dropped 25.5% from February 2008.

Employee confidence in New Zealand slumped to a record low of 93.2 in March from 104.0 at the end of 2008.

Euroland’s factory PMI in March was revised to 33.9 from a 34.0 flash indication. Such was still up from 33.5 in February.  While such a level and its very weak orders, jobs, and output components point to an historic drop of GDP last quarter, the trend suggests that the rate of contraction may be stabilizing. Note that sub-50 scores connote declining activity, and the lower the figure, the faster the rate of decline.

National PMI releases were 32.4 in Germany after 32.1 in February and 32.0 in January; 36.5 in France after 34.8 in February and 37.9 in January; 34.6 in Italy after 35.0 in February and 36.1 in January; and 32.9 in Spain following 31.8 in February and a record low of 28.5 in December. Italian Prime Minister Berlusconi instructed the OECD to “shut up” if it doesn’t have anything upbeat to say.

The British PMI for manufacturers improved much more than forecast to 39.1 in March from 34.9 in February and 35.8 in January.  The sub-component for orders was at a 7-month high.

China’s PMI suffered a slight setback, sliding to 44.8 from 45.1 in February, which was the best since October, and a low of 40.9 in November.

The Swiss PMI was unchanged at a record low of 32.6.  The Swedish PMI rose to 36.7 from 33.9.  Poland’s PMI advanced to 42.2 from 40.8.  South Africa’s PMI fell to a record low of 36.0 from 39.2 in February.  Hong Kong’s PMI improved to 42.7 from 40.6.

The euro area jobless rate increased to 8.5% in February from 8.3% in January, 7.6% last August and 7.2% in February 2008.

German retail sales volume produced yet another disappointment, dipping 0.2% between January and February and dropping by 5.3% from February 2008.  German real engineering orders plunged 49% in the year to February and by 44% in December-February from a year earlier.

Consumer prices in March posted 12-month increases of 7.9% in Indonesia and 3.9% in South Korea, each as forecast. Thai consumer prices fell 0.2% in the year to March, but officials do not think deflation is a danger.

Besides the manufacturing PMI data, U.S. releases today will include construction spending, pending home sales, energy inventories, domestic car sales, and the ADP estimate of private employment.  Obama is said to favor bankruptcies for the automakers.

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


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