New Overnight Developments Abroad: Yen Stronger on Risk Aversion

May 6, 2009

The yen rose 0.6% against the dollar, helped by a report that stress test sees need for Bank of America to boost capital by greater-than-assumed $34 billion.  The stress test formal results get released tomorrow.

The dollar otherwise rose 0.4% against the Canadian dollar, but dipped 0.3% against the kiwi and 0.1% versus sterling and the Swiss franc.  Euro and Aussie dollar are unchanged.

Japanese markets again closed for final day of the Golden Week holidays.

Stocks climbed 2.5% in Hong Kong, 1.5% in Indonesia, 3.3% in Thailand, 1.5% in Malaysia and 1.4% in China, but Indian and South Korean stocks fell 1.4% and 0.3%.  In Europe, the Paris Cac, British Ftse and German Dax are higher by 0.9%, 0.6%, and 0.3%.  Aussie stocks eased 0.6%.

Gilt and bund yields extended their uptrend.  Oil firmed 0.6% to $54.16/barrel.  Gold is unchanged at $904.10/ounce.

Retail sales reports from Australia far surpassed expectations, while a similar report from Euroland disappointed.

  • Australian retail sales jumped 2.2% in March, over four times more than forecast.
  • Euroland retail sales sank another 0.6% in March and by 4.2% from March 2008. Such fell 4.1% at a seasonally adjusted annual rate in 1Q09, similar to the 4.3% drop in the fourth quarter of 2008.

Euroland and British PMI-service results for April showed unexpectedly large improvements but remained below 50, connoting continuing contraction.

  • Euroland’s services index was 43.8, a 6-month high and 0.7 higher than its flash release and up from 40.9 in March and 39.2 in February.
  • Germany’s services index improved 1.5 points to 43.8.  The French index rose 2.9 points to 46.5.  Italy’s index went up 2.9 points to 42.0 and was 4.1 points above February’s record-low reading of 37.9.  Spain’s services PMI soared 8.2 points to 42.3, but Ireland’s fell 3.5 points to 32.2.  The sharpest improvement occurred in the business expectations sub-component.
  • Euroland’s composite PMI reading (manufacturing and services) was 41.1 in April, a 6-month high and up from 38.3 in March and 36.2 in February.
  • The British PMI-services printed at 48.7, more than two points better than forecast and up from readings of 45.5 in March and a low in November of 40.1.

The Halifax index of British house prices fell another 1.7% in April, more than forecast, and by 17.7% from a year earlier, similar to the 12-month drop of 17.6% in March.  The Nationwide index of British consumer sentiment jumped to a 23-month high of 50 in April from 42 in March. The NIESR Institute projects a 4.3% drop in British real GDP this year and projects a debt/GDP ratio of 94.5% by FY13/14, even greater than government officials anticipate.  According to the British Retail Consortium, shop prices slid 0.5% last month and were just 1.4% higher than a year earlier.

Australia’s trade surplus widened 43% in March and improved A$ 5 billion compared to March 2008 as exports soared 25% and imports slid 0.4%.  A leading index of the Australian labor market deteriorated further in May.

New Zealand labor costs rose just 0.5% in 1Q09 and posted an on-year advance of 3%.  Wage pressures will not constrain on central bank easing.

Spanish industrial production plunged 24.7% in the year to March, the biggest drop since at least 1994.

Russia’s service-sector PMI weakened in April by 3.5 points to 32.7.

U.S. data releases today include the ADP report on private-sector jobs and energy inventories.  Stern and Yellen of the Fed speak.  Canada releases building permits and the IVEY-PMI index.  Central bank meetings in Norway and Romania are expected to result in interest rate cuts.

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


Comments are closed.