New Overnight Developments Abroad: Fresh Surge in Risk Aversion on Fear of Pandemic Flu

April 27, 2009

All markets reflect higher risk aversion: bonds up, stocks down, yen and dollar up, commodities down.

Swine flu has spread to Asia and North America.  Investors disregarding signs of lessening economic decline and now worried about how a pandemic might aggravate world recession.

The dollar is off 0.6% against the yen but has risen 1.8% against the kiwi, 1.2% against the Australian dollar, 0.7% against the euro, 0.5% against sterling and 0.4% relative to the Swiss franc.

In Asia, stocks fell by 1.9% in Singapore, 2.3% in China, 2.4% in Hong Kong, 3.0% in Taiwan, 1.8% in Sri Lanka,1.0% in Indonesia and 0.9% in the Philippines. While Japan’s Nikkei edged 0.2% higher, the German Dax, Paris Cac and British Ftse are trading 1.5%, 1.6%, and 1.0% lower in Europe.

Treasury, gilt, and bund yields are lower.  The 10-year JGB is an exception, with a gain of 3 basis points to 1.465%.

Oil fell 4.9% and is below the key $50 level.  Gold is steady at $913.80/ounce.

The G-7 statement declared, “recent data suggest that the pace of decline in our economies has slowed and some signs of stabilization are emerging.” But it cautioned that downside risks persists and underscored that banks must be fixed.  Forex language was the same as in the February statement when the group last met.

Britain’s Hometrack house price index posted its smallest drop in 11 months, dipping 0.3% in April and by 10.1% from a year earlier.  According to the British Banking Association, net mortgage loans in March of 26.1K were 25.3% lower than a year earlier.  Net mortgage lending slowed to Gbp 3.7 billion from Gbp 3.9 billion in February.

Chinese yuan lending in January-April surpassed 5 trillion yuan.

Polish retail sales fell 0.8% in the year to March, while the jobless rate increased to 11.2% in March from 10.9% in February.

Japan’s government projects a 3.3% decline of GDP this fiscal year and says such will fall by 5.2% without the latest proposed fiscal stimulus.  The forecast looks for drops of 23.4% in industrial production, 27.6% in exports and 14.1% in investment but sees private consumption rising by 0.3%.  GDP last fiscal year through March 2009 is seen dropping 3.1%, a downward revision from minus 0.8%.  Government officials expect consumer prices to fall 1.3% in fiscal 2009, the most in at least 38 years.

German consumer confidence held steady at 2.5 for a third straight month in May. German import prices fell more sharply than expected in March, dropping 0.4% and by 7.1% from March 2008.  That was the greatest 12-month decline since April 1987 and represents a shift from +8.3% in the year to August 2008.  Non-oil import prices declined 1.8% on year after falling 0.3% in the year to February.

In Mexico, the epicenter of the flu epidemic, the peso fell to a 3-week low.

Hong Kong exports and imports posted 12-month declines in March of 21.1% and 22.7%, somewhat more than expected.

Sweden’s trade surplus narrowed to SEK 8.1 billion in March from SEK 9.5 billion in February.

Italian consumer confidence unexpectedly jumped to a 16-month high of 104.9 in April from 94.8 in March.

U.S. data today are limited to just the Dallas Fed factory index.  Israel’s central bank has an interest rate policy meeting.

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


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