New Overnight Developments Abroad: Equities Up in Asia and Europe

July 27, 2009

Typical of reduced risk aversion, the dollar has firmed 0.4% against the yen but dropped 0.8% relative to the Australian dollar, 0.5% against the kiwi, 0.4% against the euro, 0.3% against the Swiss franc, 0.2% against the Canadian dollar and 0.1% versus sterling.

Ten-year bund, gilt and JGB yields are up 3 basis points, 2 bps and 1 bp.

In Asia, the Japanese Nikkei advanced 1.5% and closed above the key 10K level.  Equities rallied 3.3% in Vietnam, 2.1% in China and the Philippines, 1.7% in Singapore, 1.4% in South Korea and Hong Kong, 1.1% in Sri Lanka, and 1.2% in Australia and New Zealand.  In Europe, the German Dax is up 1.1%, while the Paris Cac increased 0.8%.  But the British Ftse shows an uptick of just 0.1%.

Both oil prices (up 0.9% to $68.65 per barrel) and gold (+0.3% to $958.90 per ounce) have risen.

German consumer confidence improved to a 14-month high of 3.5 in August from upwardly revised 3.0 in July, 2.6 in June, 2.5 in May and 1.6 last Setpember.

German import prices rose 0.4% in June but fell 11.3% from June 2008, their biggest on-year drop since early 1987.  Non-oil import prices fell 0.6% from May and by 5.7% year-over-year.  Export prices dropped 2.9% from June 2008.

Lending to Euroland’s private sector slowed to an on-year rise of 1.5% in June from 1.8% in May, 2.3% in April and 11.2% in December 2007.  M3 rose 3.5%, down from 3.7% in the year to May, 9.5% in June 2008 and 10.9% in June 2007.  M3 expanded 4.1% on year in the second quarter following on-year growth of 5.6% in 1Q09, 7.9% in 4Q08, 8.9% in 3Q08, 10.0% in 2Q08, 11.0% in 1Q08 and 12.0% in 4Q07.  This was the first quarterly increase to be less than the ECB’s 4.5% reference range since February-April 2001.

The Conference Board index of leading economic indicators in the euro area went up each month in 2Q09, including a 0.5% increase in June, suggesting a mild economic recovery will begin around the end of this year.

U.S. Treasury Secretary Geithner and State Secretary Clinton published a jointly written article in today’s Wall Street Journal ahead of their talks in Washington with senior Chinese officials.  The talks will deal in part with currency policies.  Fed Chairman Bernanke said the best way to support the dollar is through a healthier U.S. economy.  The problem with this claim, which has been made earlier from time to time by U.S. officials, is that the long-term trend of the dollar over the past 35 years has been downward despite relative high real growth.

Britain’s Hometrack house price index was unchanged between June and July and fell by a reduced 7.7% in the twelve months to July following on-year declines of 8.7% in June and 9.6% in May.

South Korean consumer confidence improved in July to its best level since 2002.  Taiwan’s index of leading economic indicators climbed 1.8% in June and at an annualized rate of 8.3% in the first half of this year.

Japanese corporate service prices firmed 0.4% in June but fell 3.2% from a year earlier, the greatest 12-month drop since at least 1985.  Transportation costs declined over 11% y/y, and advertising was down 5.7% from June 2008.

Consumer confidence in New Zealand hit a 16-month high according to the Roy Morgan index.

Sweden’s trade surplus widened 111% in the year to June.  Import growth remains very weak at minus 22%, but the 12-month rate of export decline, 12%, was much less than in January-May.

U.S. new home sales will be reported later today.  Interest rate announcements will be made by central banks in Hungary and Israel.

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


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