New Overnight Developments: Risk Aversion Is Back

May 26, 2009

There’s been a big rise of the dollar and a big decline in stocks on two factors: 1) North Korea firing two more short-range missiles and 2) heightened jitters about German banks.

Stocks fell 2.1% in South Korea, 2.3% in India, 1.8% in Indonesia, 1.4% in Thailand, 1.2% in China, 0.8% in Hong Kong and 0.4% in Japan.  In Europe, the German Dax, Paris Cac, and British Ftse are down by 2.1%, 1.9%, and 1.3%.

The dollar has gained 1.8% against the kiwi, 1.4% relative to the Australian dollar, 1.1% against the euro, 0.9% against the Swiss franc, 0.8% against sterling, and 0.5% against the Canadian dollar.  The dollar is steady against the yen, another currency that benefits from surges in risk aversion.

Oil fell 3% to $59.82 per barrel, while gold is down 1.5% at $944.20 per ounce.

Sovereign bond yields are lower especially for German bunds.

Japanese corporate service prices slid 0.2% in April and posted a 12-month decline of 2.4% after decreasing 2.1% in the year to March.

French consumer spending on manufactured goods rose 0.7% in April on top of a downwardly revised 0.6% increase in March.  Such rose 0.6% from April 2008.

German consumer confidence had a 2.5 reading for a fourth straight time in June.

German import prices fell 0.8% in April and by 8.8% from a year earlier.  The 12-month drop represents a swing from a climb of 8.3% in the year to August 2008.

German real GDP was confirmed as first flagged in preliminary figures to have dropped 3.8% in 1Q on drops of 9.7% in exports and 7.9% in investment.  Consumption firmed 0.5%.  Net exports and domestic demand accounted for 2.2 percentage points (ppts) and 1.5 ppts of the negative real growth rate.  GDP fell 6.9% from 1Q08 adjusted for variations in the number of working days.

Industrial orders in Euroland dropped 0.8% in March and posted a 12-month plunge of 26.9%.  Orders fell 39.3% at a seasonally adjusted annualized rate last quarter after tumbling by 55.9% saar in the final quarter of 2008.  Orders would have dropped even more steeply in March if not for a 3.3% increase in Germany.

Euribor interest rates, which had been trending lower since last autumn, recorded a fifth consecutive daily uptick.

Icelandic consumer price inflation eased to 11.6% in May from 11.9% in April.

Polish retail sales rose 1.0% in the year to April.  The jobless rate ticked down to 11.0% from 11.2% but was above its year-earlier level of 10.5%.

South African real GDP fell 6.4% saar last quarter and by 1.3% from 1Q08.  That greater-than-expected decline of activity paves the way for a larger-not-smaller rate cut later this week than consensus expectations.

Expected inflation in New Zealand continues to recede and is now below 2% according to the latest survey.  New Zealand recorded a trade surplus in 1Q09 for the first time in five years as imports tumbled.

Italian trade to non-EU countries improved to a deficit of EUR 4.63 billion in January-April from an EUR 8.64 billion gap a year earlier.

Euroland’s seasonally adjusted current account deficit narrowed for a fourth straight month to EUR 6.5 billion in March, but the unadjusted deficit was EUR 101.8 billion in the 12 months to March compared to just EUR 8.7 billion in the year to March 2008.

The Swedish jobless rate climbed to 8.3% in April from 6.0% a year earlier.

Dutch business sentiment ticked up a tenth to a still very weak minus 17.3 reading in May.

Hungary’s central bank left its key rate unchanged yesterday as expected.

Switzerland’s consumption indicator compiled by UBS fell further to 0.92 in April from 0.99 in March.  The long-term trend is 1.50.  Swiss employment of 3.96 million in the first quarter was unchanged and greater than forecast.

Bank Negara Malaysia left its key rate at 2.0% as expected.  A statement from central bank officials anticipates economic recovery.

Hong Kong posted a trade deficit of HK$ 16.4 billion in April after HK$ 18.2 billion in March.  Singapore industrial output fell just 0.5% in the year to April after a drop of 32.8% y/y in March, but the result was distorted by one item.

The U.S. and U.K. are open today after Monday holidays.  The Chicago, Dallas and Richmond Feds release survey indices today.  U.S. consumer confidence and the Case-Shiller house price index also get reported today.

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


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