New Overnight Developments Abroad: U.K. GDP Plunged 1.9% Last Quarter

April 24, 2009

Sterling and the dollar are weaker. The dollar lost 1.0% against the yen, 0.8% against the Swiss franc, 0.5% against the euro and kiwi, 0.3% against the C-dollar, and 0.1% against the Aussie dollar.  But the greenback rose 0.9% against sterling following news that British GDP sank more than forecast last quarter.

U.K. real GDP fell 1.9%, greater than the 1.6% drop in 4Q08 and by the most since 3Q79.  On-year negative growth of -4.1% was the biggest decline since 4Q80. A 5.5% drop in output from production industries was the greatest quarterly decline since at least 1948.  Services (down 1.2%) had their worst quarter since 3Q79.

Asian stocks were mixed but mostly lower, with declines of 1.6% in Japan, 1.1% in South Korea, 1.7% in Vietnam, and 0.8% in China.  Australia’s bourse slid 0.8%. In Europe, however, equities are up by 1.2% in Germany and 1.1% in France and Britain.

Bond yields have eased in Japan, Europe and the United States.  The 10-year JGB slid a basis point to 1.425%.

Gold firmed 0.4%, aided by news that China is acquiring more of the metal.  Chinese gold reserves of 1054 tons have risen 132% since 2003.  Oil advanced 0.6% to $49.90 per barrel.

The volume of British retail sales rose unexpectedly in March, a gain of 0.3% from February and 1.5% on year.  Sales went up 0.9% in 1Q from 4Q08 and by 2.0% from 1Q08.  Auto production plunged 51.3% in the year to March and by 56.6% y/y in the first quarter, however.

Japan’s all-industry index, a monthly supply-side estimate of GDP, fell 2.0% in February and by 12.5% from a year earlier.  Industrial output sank 8.8% and 38.5% from a year earlier, while services fell by 0.8% m/m and 6.1% on year.  The all-industry index in Jan-Feb was 5.2% below its 4Q08 level.

Japanese corporate service prices advanced 0.9% in March on seasonal increases in advertising, but the index still posted a 2.1% drop from a year earlier.

The German IFO index of business climate printed higher in April at 83.7, up from 82.2 in March and exceeded forecasts.  Both current conditions and business expectations went up. The improvement was spread across manufacturing, wholesaling, and retailing, but construction gave back gains seen in March.  A separate IFO index of services mirrored the more widely watched business sector’s improvement, with a 3-point advance to minus 7.

As on Wednesday and Thursday, the Hong Kong Monetary Authority had to intervene several times to hold the HK$ at its target ceiling.

South Korean GDP avoided a second consecutive drop, edging 0.1% higher in 1Q09 but still falling by 4.3% from 1Q08.  Real GDP had advanced 5.5% in the year to 1Q08.  Investment, exports, and imports all fell last quarter.

China’s current account surplus widened 14.6% to $426 billion in 2008, equal to 9.7% of GDP, from $372 billion in 2007.

Philippine imports sank 31.9% in the year to February.  Singaporean factory production plunged 33.9% in the year to March.

The South African rand climbed to 8.8066 per dollar, highest since last October 7th, as the ANC captured 67% of the nation’s vote.

A top Swiss National Bank official expressed concern about money growth, casting some doubt on how committed authorities are to preventing further franc appreciation against the euro.

Norwegian corporate bankruptcies increased 88% between 1Q08 and 1Q09.

Business sentiment in the Netherlands improved by 3.4 points to -17.4 in April.  Dutch consumer spending fell 4.3% in the year to February, however.

French consumer spending rose by a greater-than-forecast 1.1% in March and by 0.6% from a year earlier.

The G-7 and G-20 groups hold meetings today in Washington.  U.S. banks reportedly will hear the results of the stress tests today, but such will not be released yet to the public.  U.S. durable goods orders get reported at 12:30 GMT, followed by new home sales at 14:00 GMT. 

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


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