New Overnight Developments Abroad: Markets Correct

June 15, 2009

Valuations concerns have sent the dollar and yen higher and stocks and commodities lower.  G8 finance ministers released a statement after meeting to prepare agenda for July 8-10 summit of leaders.

The U.S. currency rose 1.5% against the Aussie dollar and kiwi, 1.0% relative to the euro, Swissy and Canadian dollar, and 0.7% against sterling.  But the dollar edged 0.1% lower against the yen.  Russia’s finance minister said there’s still no alternative to the dollar.  The Latvian lat fell 0.8%.

In Europe, stocks have lost 2-2.4% in Germany, Britain, France and Italy.  Russian stocks dropped 3.5%.  There were some outsized Asian equity declines, too: 3.2% in Vietnam, 2.6% in Singapore, 3.2% in in Thailand, 2.1% in Hong Kong, 1.1% in South Korea, and 1.0% in Indonesia and Japan.  Stocks rose 2.1% in China and 1.3% in Sri Lanka.

Gilt and bund yields fell 7 basis points.  The 10-year JGB yield settled back another basis point to 1.51%.

Oil prices dropped 1.4% to %71.04 per barrel.  Gold softened 0.8% to $933.10 per ounce, a move consistent with a more robust dollar.

Click here to read the G-8 Saturday statement from Leece, Italy.  Finance Ministers cited firmer stock markets, lower interest rate spreads and improved business and consumer confidence as “signs of stabilization” and discussed contingencies for unwinding policy stimulus.  But they noted significant continuing risks that would make reversal of policies premature now.

Post-election unrest in Iran continues.

Jobs in the euro area fell by 0.8% last quarter and by 1.2% from the first quarter of 2008.  Spanish employment plunged 3.1% from 4Q08 and 6.4% from a year ago.

The combined Swiss PPI/import price index in May slid 0.3% on month and by a greater-than-forecast 5.0% from May 2008.  Swiss officials have been intervening to prevent further appreciation of the franc’s euro cross and thus the importation of deflation.

Oil and gas accounted for most of the drop in Norway’s trade surplus from Nkr 42.1 billion in May 2008 to Nkr 22.1 billion last month. Excluding oil and gas, the deficit widened just Nkr 0.5 billion to Nkr 10.5 billion.

Producer prices in the Czech Republic fell 3.8% in the year to May, the biggest 12-month drop since 1991, after an on-year decline of 3.8% in April.

Retail sales in Singapore fell 3.1% in April and by a greater-than-forecast 11.7% from a year earlier.  The 12-month drop in March was 7.2%.  Weakness was most pronounced in motor vehicles.

Britain’s Conservative Party said real government spending would have to be reduced.  The U.K. business lobbying federation, the CBI, is projecting that real GDP will contract more moderately this quarter and in 3Q09 and hold flat in the final quarter of this year.  A quarter with positive growth is not seen until 2010.

Foreign direct investment in China was 17.8% lower in May than a year earlier.  Such fell 20.4% in January-May.  Chinese domestic demand has quickened, stimulated by government fiscal pump priming.

The U.S. Treasury releases its monthly report on international capital movements later today.  The NAHB index also arrives, and Tarullo, Duke, and Evans of the Fed will be speaking.  Canadian motor vehicle sales and data on manufacturing get released today.

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


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