New Overnight Developments Abroad: Stocks Much Lower

April 8, 2009

Stocks fell by 2.7% in Japan, 3.0% in Hong Kong, 3.8% in China, 2.9% in South Korea, 3.9% in Pakistan, 2.7% in Vietnam and 2.3% in Australia. The German Dax, Paris Cac, and British Ftse are down 0.9%, 1.1% and 0.9%, and another U.S. equity price drop is indicated at the open.  Latest impetus for decline comes from news of a second straight quarterly loss at Alcoa ($497 million or a greater-than-expected 59 cents per share) and a claim from the TARP advisory panel that the government assumptions are too optimistic and some banks will have to be liquidated.

The dollar is narrowly mixed, dropping 0.5% against the yen (risk aversion play) and 0.2% relative to the Canadian dollar, but rising by 0.3% against the Swiss franc and Australian dollar and by 0.2% against sterling and the euro.  The kiwi is unchanged against the dollar.

Oil has recorded a fourth consecutive daily drop, losing another 3.3% to $47.54, while gold firmed 0.8%.

Sovereign bond yields are lower in Europe and North America, but ten-year Japanese JGB yields firmed 2.5 basis points to 1.455% on jitters about a proposed fiscal stimulus equal to 2% of GDP.

Iceland’s central bank rate was cut by 150 basis points to 15.5%.  Such is the second easing after an IMF-mandated leap to 18% last autumn.  The rate had been cut by 100 basis points last month in an initial retreat from that peak.

The Bank of Thailand lowered its one-day repo rate by 25 basis points to 1.25%. Analysts were split between expecting a drop of 25 bps (the majority view) and a bigger cut of 50 basis points.

German industrial orders again tumbled more than assumed, plunging 3.5% in February following a 6.7% decline in January, which was revised inward from an 8% drop reported last month.  The heaviest weakness was in intermediate goods (down 6.5%) and consumer durables (off 8.7%).  Orders in January-February combined were 37.6% below their year-ago level.  Domestic capital goods orders, a harbinger of business investment, fell 3.4%.

The German current account surplus in February of EUR 5.6 billion was marginally less than expected.  The seasonally adjusted trade surplus improved to EUR 8.9 billion from EUR 6.8 billion in January, as imports tumbled 4.2% and exports fell just 0.7% further.  Nevertheless, that was the fifth straight monthly decline for exports, which have contracted 21.6% or 44% at an annualized rate since September.  In January-February, exports and imports posted on-year drops of 23% and 15%.

Japan’s current account returned to surplus in February, but its Y 1117 billion size was 55.6% smaller than in February 2008.  The trade surplus narrowed 80% on year, as exports fell 50.4% y/y and imports lost 44.9%.  Japan recorded a deficit in its Basic Balance (current account plus long-term capital flows).  Exports in March 1-20 were 47.1% lower than a year earlier.  Stock and bond transactions in March generated a Y 4.13 trillion net capital outflow.

Japan’s Economy Watchers’ index, a survey of service sector workers that captures retail sector trends, recovered to 28.4 in March from 19.4 in February and a record low of 15.9 in December. 

In Britain, the Nationwide gauge of consumer confidence slid to 41 last month from 43 in February.  The National Institute of Economic and Social Research estimates that GDP in the first quarter will post a 1.5% non-annualized drop, almost identical to the 1.6% decline in the fourth quarter of 2008.  The British Retail Consortium reported a 2.0% on-year increase in same-shop sales, similar to the result in January and much better than 4Q08 trends.

The French trade deficit widened to EUR 4.107 billion in February from an inwardly revised EUR 3.71 billion deficit in January. Exports fell 1.5% on month.

The Bank of France measure of business sentiment in the industrial sector rose 2 points to 73 in March, but its service sector counterpart fell by 2 points. The central bank revised its projected GDP growth rate for the first quarter to a bigger decline of 0.8%.

In South Korea, bank lending and money stock data showed lessening growth, but the big picture is of more stable credit markets in 1Q09 than in 4Q08.

Turkish industrial production plunged by 23.7% in the year to February, most in over ten years.

South African business sentiment worsened to a 7-year low of 78.9 in March from 84.5 in February.

Norwegian inflation continues to recede. Core CPI posted a 12-month rise of 2.7% in in March, down from 3.0% in February.  Producer prices slid 0.1% and by 0.3% from March 2008.

German residential house prices rose 2.0% in the year to February.  There were 9.8% fewer bankruptcies in January than a year earlier.

Japanese bankruptcies advanced 14.1% in the year to March and by 12.4% last fiscal year.

Australian housing finance firmed 0.4% in February, only a fifth as much as expected.  A gauge of Australian consumer confidence improved to 92.7 in April, 8.3% better than the 85.6 reading in March.

FOMC minutes will be released later today, as will U.S. data for wholesale inventories and energy stocks.  Canada reports housing starts, and Peru and Nigeria report central bank rate decisions.

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


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