New Overnight Developments Abroad: OECD Upgrades Projected U.S. Growth

June 24, 2009

Investors await FOMC statement today around 18:15 GMT and also get U.S. data for new home sales, durable goods orders, and energy stocks.

The dollar is unchanged against the yen, euro, and Swiss franc but has declined by 0.5-0.7% against sterling and commodity-sensitive currencies.

Better tone in Asian stocks: Indonesia up 4.3%, Vietnam up 4.0%, Thailand up 2.0%, Singapore up 2.4%, The Philippines up 1.9% and Malaysia up 1.3.

Gains in the Japanese Nikkei (0.4%), German Dax (0.8%), Paris Cac (0.7%) and British Ftse (0.2%) have been more limited.

The 10-year JGB yield in Japan eased another 3 basis points to 1.39%.

Gold firmed 0.6% to $929.60/ounce, while oil eased 0.5% to $68.90 per barrel.

The OECD revised its growth forecasts.  For 2009, it now looks for contractions of 2.8% in the United States, 4.8% in Euroland, 6.8% in Japan, and 4.3% in Britain. It is less bearish about the United States but shows deeper drops in Europe.  The forecast for the whole OECD 30-nation bloc is a drop of 4.1%, revised from a decline of 4.3%.  Growth in China and India are now put at 7.7% and 5.9% in 2009 and 9.3% and 7.2% next year.  OECD growth in 2010 is penciled in at 0.7%, with Euroland flat but the U.S. and Japan showing GDP increases of 0.9% and 0.7%.  The OECD urges the ECB to cut interest rates again next month.

Japanese customs exports sank 40.9% in the year to May and by 36.0% in volume terms (similar to April’s 35.9% drop).  Imports fell 42.4%, and the trade surplus of Y 300 billion was greater than forecast and down just 12% from May 2008.  Japanese corporate service prices slid 0.3% in May and posted a bigger-than-expected 3.0% drop from a year earlier.  The CSPI had eased 0.6% in 2008 and by 2.4% in the year to April 2009.  Transportation and advertising show the largest on-year declines.  Bank of Japan Governor Shirakawa said the economy has begun to level out.

Italian retail sales eased 0.4% in April and by 0.6% from a year earlier.  But Italian consumer confidence unexpectedly jumped a half point to an 18-month high of 105.4 in June.

New Zealand consumer confidence similarly hit an 18-month high of 106 in 2Q09, up from 96 in the first quarter.

Euroland’s seasonally adjusted current account deficit narrowed to a 12-month low of EUR 5.9 billion, as the merchandise trade position swung from a EUR 1.7 billion deficit in March to a EUR 2.6 billion surplus in April.  The unadjusted current account deficit widened nine-fold to EUR 104 billion in the 12 months to April 2009 from EUR 11.6 billion in the previous 12 months to April 2008.  The Bloc’s Basic Balance (current account plus long-term capital movements) had a deficit of EUR 16.4 billion in April after a surplus of EUR 63 billion in March.

In Britain, the CBI monthly survey of retailers showed an unchanged negative balance in June of -17%. The April reading had been in the black (+3%) in April after negative large readings averaging minus 43 in December through March.  Bank of England Governor King urged politicians to be cautious about implementing further fiscal stimulus.

South African consumer price inflation slowed to 8.0% in May from 8.4% in April.  While still above the 3-6% target, the Reserve Bank of South Africa is expected to cut its key rate to 7.0% from 7.5% tomorrow.

Central Bank rate announcements are due today from the Fed and National Bank of Poland.

Norwegian unemployment slid to 3.1% in March-May from 3.2% in February-April.

The German cabinet approved next year’s budget, embodying an 81% increase in net borrowing.

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


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