New Overnight Developments Abroad: Stocks Recover, Dollar Mostly Lower

July 14, 2009

The dollar eased 0.7% against sterling, 0.6% versus the Canadian and Australian dollars and 0.2% relative to the kiwi.  EUR/USD is unchanged.  Dollar/yen firmed 0.2%, and dollar/Swissy edged up 0.1%.

Stocks advanced in Asia and Europe.  Equities gained 3.7% in Hong Kong, 3.5% in Australia, 3.4% in India, 2.8% in China, 2.3% in Japan, 1.9% in Singapore, 1.8% in Indonesia, and 1.7% in Taiwan.  The German Dax, British Ftse, and Paris Cac have traded up 0.9%, 0.7%, and 0.6%.

Ten-year Treasury and JGB yields are three basis points higher at 3.39% and 1.34%.

Oil climbed back above $60 to $60.41 per barrel, up 1.2%, while gold edged off 0.1% to $921.70 per ounce.

The Governor of New Zealand’s central bank express optimism that New Zealand will be among the first economies to enter recovery.

Australian business sentiment improved six points to plus 4, the first positive reading in 18 months, while business conditions went up a dozen points to minus two in June.

British house price data were better but still conveyed a weak sector.

  • The RICs housing sentiment index improved 25.7 points to -18.1 in June.
  • The DCLG house price index in May was down 12.5% on year, after 12-month drops of 13.0% in April and 13.6% in March.
  • Price Waterhouse Coopers doesn’t expect house prices to flatten until 2011 and anticipates only a gradual upturn thereafter.

British consumer prices in June rose 0.3% and 1.8% from June 2008, the first sub-target 12-month pace since September 2007.  Retail prices sank 1.6% from June 2008, the biggest negative print since at least 1948, following a 1.1% decline in the year to May.  The RPIX, which the Bank of England used to target, went up 1.0% y/y after 1.6% in the year to May.  A business sentiment index calculated by Lloyds improved to minus 3 in June from minus 32 last December.

The ZEW Institute reported that German sentiment index among investors fell unexpectedly.  The expectations component settled back to 39.5 in July from 44.8 in June, 31.1 in May and 13.0 in April.  A reading of 47.8 was anticipated.  Current conditions remained very depressed at minus 89.5 after minus 89.7 in June.  The ZEW indices for Euroland were 39.5 for expectations after 42.7 in June and minus 90.7 for current conditions, the same as June’s print.

Euroland industrial production also was weaker than projected, gaining 0.5% in May despite gains of 3.7% in Germany, 2.1.% in Holland and 2.6% in France.  Output was flat in Italy and down by 2.9% in Spain, 2.2% in Finland, and 0.7% in Portugal.  Production fell 17% from May 2008, and Euroland’s output in April-May was 2.6% lower than the 1Q09 level.

Hungarian consumer price inflation unexpectedly ticked down a tenth to a 12-month pace of 3.7% in June.  Core inflation printed at 3.2%.  The Czech current account deficit of 11.72 billion koruna in May was some three times greater than expected.

Singapore achieved solid second-quarter GDP growth of 20.4% at a seasonally adjusted annualized rate.  This good news followed a severe recession and typifies what has happened in many Asian economies.  Real GDP still posted a 3.7% drop from 2Q08.  Officials revised up projected full-2009 growth to minus 4 to minus 6% from an earlier worst-case scenario of minus 9%.

This is a big day for U.S. economic data — retail sales, producer prices and business inventories — plus investors eagerly await the quarterly earnings announcement of Goldman Sachs, which is likely to be very strong.  Canadian motor vehicle sales will also arrive today.

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


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