Tuesday's Developments

May 19, 2009

The dollar is weaker, depressed by weaker-than-forecast U.S. housing starts and permits and by a further drop in general risk aversion. From late Monday, the U.S. currency is down 1.1% against the pound, 1.0% versus the Australian dollar, 0.4% against the euro and Canadian dollar, 0.2% relative to the yen and 0.1% against the Swiss franc.

Stocks had risen in Asia (Nikkei +2.8%, Hang Seng +3.1%) and Europe (Dax +1.6%) before U.S. housing starts figures were released. Sovereign bond yields firmed, and commodity prices advanced on lessening risk aversion. Goldman Sachs, J.P. Morgan, and Morgan Stanley are said to be seeking early repayment of Tarp loans.

Japanese capacity usage rose 0.8% in March but was 41.2% lower than in March 2008. Capacity slid 0.3% on month and increased 0.5% on year. Industrial production was unchanged with a rise of 1.6% on Month. The inventory ratio fell 5.3% from February.

U.S. housing starts plunged 54.2% in the year to April and by 12.8% from March. Weakness was concentrated in multi-unit housing (-46%). Likewise, housing permits fell 3.3% but by 20% for multi-unit facilities. The data still leave single-family housing in a bottoming-out phase.

The German ZEW index of investor expectations improved to 31.1 in May from 13.0 in April. Such is again above the long-term average of 26.2. However, current conditions worsened 1.2 points to minus 92.8. The Euroland ZEW expectations index rose to 28.5 from 11.8. Current conditions firmed 0.2 points to minus 93.2.

Norwegian mainland GDP contracted 1.0% last quarter after dropping 0.8% in 4Q08.

British consumer price inflation slowed to 2.3% in April from 2.9% in March and 5.2% last September. Consumer prices firmed 0.2% from March. Retail prices fell 1.2% in the year to April.

Minutes from the Australian monetary policy meeting of May 5 revealed no surprises. Although rising unemployment and falling inflation are projected over the coming year, substantial fiscal policy and monetary policy stimulus is seen helping Australia to perform better than most advanced economies. After debating whether to cut rates, officials decided it was best to leave policy unchanged and to continue monitoring the situation instead.

Belgian consumer confidence rose 3 points to minus 19 in May.

Russian industrial output fell 16.9% in the year to April.
Copyright 2009 Larry Greenberg. All rights reserved. No secondary distribution without express permission.


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