New Overnight Developments Abroad: Markets Open Week in Risk Averse Mood

April 20, 2009

European stocks are sharply lower: German Dax -2.5%, Paris Cac -2.4%, and British Ftse -1.2%.  Asian stocks earlier closed mixed, with losses of 4.6% in Vietnam, 1.1% in Singapore and 0.8% in India but gains of 2.2% in China, 2.1% in Thailand and 1.0% in Hong Kong.  Japan’s Nikkei edged up 0.2%. Australia down 0.2%.

The yen advanced 0.6% against the dollar, which otherwise posted gains of 2.3% against the Australian dollar, 1.7% relative to sterling, 0.9% against the Canadian dollar and kiwi, 0.7% against the euro and 0.5% versus the Swiss franc.  A drop in U.S. equities at the open is indicated by futures.

Speculation about an internal dispute on the ECB Governing Council continues to undermine sentiment toward the euro, which hit its lowest levels against the dollar and yen since last month.  Comments by Bini Smaghi place him in the camp resisting further policy easing, but Trichet said a 25-bp rate cut is possible.  Three-month euribor rates did not decrease for the first time since October 9th.

Gilt and bund yields are lower, but the 10-year JGB yield rose 2 basis points to 1.48%.

Oil slumped 3.6% into sub-$50 territory of $48.50/barrel.  Gold edged 0.3% higher but remains below $900 at $870.80 per ounce.

New Zealand’s service sector PSI index improved to 47.1 from 46.3 but remains below 50, thus connoting continuing contraction.

The day’s biggest data surprise comes from Australian producer prices, which fell 0.4% last quarter instead of rising 0.6% as expected.  The on-year change fell to 4.0% from 6.4% in the final quarter of 4Q08.  Domestic producer prices dropped 1.0% from 4Q and to an on-year rise of just 1.8% from 4.9%.  The data give the Reserve Bank enhanced leeway to cut interest rates.

Japanese convenience store sales increased 4.2% in the year to March, twice as much as February’s pace but similar to a 4.5% advance in 2008.  Bank of Japan Governor Shirakawa  said financial conditions remain severe.

Danish consumer price inflation slowed to 1.6% in March from 1.7% in February.  Nigerian consumer prices increased 14.4% in the year to March.

Turnover in Spain’s service sector plunged 20.5% in the year to February.

The British Rightmove house price index rose 1.8% in April but posted a smaller 12-month drop of 7.3% after a decline of 9.0% in March.  The CBI business lobby revised projected British growth in 2009 to a larger contraction of 3.9% and looks from GDP to tick up only 0.1% in 2010.

Bernanke and Evans of the Fed are speaking today. The U.S. index of leading economic indicators and Chicago Fed Activity Index get released.  Other country data releases include Polish industrial output and producer prices and Russian retail sales.  Hungary’s central bank holds a policy meeting that is not likely to cut its 9.5% benchmark rate.

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


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