New Overnight Developments Abroad: Dollar and Yen Softer Ahead of U.S. GDP Report

July 31, 2009

The dollar is up 0.2% against the yen but shows losses of 0.8% against the kiwi, 0.4% against sterling and the Aussie dollar, 0.3% against the euro and Canadian dollar, and 0.2% against the Swiss franc.  It appears the Aussie and New Zealand dollars will be posting their largest monthly gains against the USD since 2004.

The last day of July saw equities around the Pacific Rim close strongly higher: Japan +1.9%, China +2.8%, South Korea +1.5%, Hong Kong +1.7%, Australia +1.3%, Vietnam +3.3%, The Philippines +1.2%, India +1.8%, Malaysia +1.2%, and Indonesia +1.1%.  But in Europe, the German Dax has slid 0.3%, and the Paris Cac and British Ftse are off 0.1%.

Yields are a bit lower on bunds, gilts, and Treasuries but up 2 basis points to 1.40% on JGBs.

Oil is at $66.71 per barrel, off 0.3% after gaining sharply on Thursday.  Gold is 0.1% firmer at $938.90 per ounce.

Japan released its usual barrage of end-month statistics:

  • The factory PMI posted an above-50 reading of 50.4, an 18-month high, after 48.2 in June, 46.6 in May 41.4 in April, 33.8 in March and 29.6 at the start of 2009.
  • The jobless rate reached a 6-year high of 5.4%, just below the October 2002 record of 5.5%.  Such was 5.2% in May and 4.1% in January.  Analysts expected a 5.3% reading.
  • Jobs fell 2.3% in the year to June compared to on-year declines of 2.1% in May, 1.7% in April and 0.5% in January.
  • The job offers-to-seekers ratio slumped to a new record low of 0.43 in June from 0.44 in May, 0.73 in December, and 1.09 in July 2006.
  • Consumer prices fell 0.2% in June and 1.8% from mid-2008. Between Dec 2008 and mid-2009, the CPI fell at annualized rates of 2.0% on all items, 1.6% excluding food, and 1.4% excluding both food and energy.  Tokyo consumer prices in July dropped 0.4% and 1.8% on year.
  • Real household spending firmed 0.2% in the year to June, while disposable incomes sank 3.5%.  Real household spending advanced 3.8% at a seasonally adjusted annual rate in 2Q after a drop of 2.9% saar in 1Q09, foreshadowing a return to positive real GDP growth last quarter.
  • Housing starts plunged 32.4% in the year to June, the third 20-something percent decline in a row.
  • Construction orders fell 20.5% in the year to June.

British consumer confidence failed to rise as hoped and instead remained at a reading of minus 25, still the best since April 2008.

Euroland consumer prices fell by a record 0.6% in the year to July according to preliminary figures.  The drop in June had been 0.1%.

Euroland unemployment firmed to 9.4% in June, but May’s rate was revised down to 9.3% from 9.5%.  Unemployment in mid-2008 stood at 7.5%.

Czech industrial production fell much less in the year to June (12.3%) than in the year to May (22%).

Australia’s leading index of inflation rose 1.0% in July, suggesting latent upside pressures.  But private credit growth of 0.1% in June (+3.4% on year) was disappointing.  The data would have been worse except for a 7.1% increase in housing loans.

The Swiss index of leading economic indicators improved much more than anticipated to minus 0.99 in July from minus 1.49 in June.

Sweden broke a string of four straight quarters of negative GDP growth.  Real GDP was unchanged in the second quarter but still posted a 6.2% drop from 2Q08.  From a year earlier, investment and exports plunged by 18% and 19%, consumption dropped 2.2%, and falling inventories lopped 1.4 percentage points off the GDP growth rate.

Italian consumer prices were unchanged on month and on year in July.  That was the lowest year-over-year pace in 50 years. Italian producer prices also were released, showing a 0.5% gain in June but a 6.3% drop from June 2008.

South Korean industrial production jumped 5.7% in June, more than twice as much as expected, and fell just 1.2% from a year earlier.  Inventories are now excessively lean.  The economy’s index of leading economic indicators recorded its largest on-year increase, 6.0%, in 17 months.  Service sector output increased 2.6% in the year to June.

Thailand’s trade surplus in June was was 60% smaller than in May.  The current account surplus dropped 65.7%.  In the year to June, exports and imports fell by 26.4% and 26.3%.

Unemployment in Singapore stayed at 3.3% last quarter.  There was a 12.4K loss of jobs compared to a 71.4K increase in the second quarter of 2008.

China filed a formal complaint against the EU with the World Trade Organization for the first time.

U.S. 2Q GDP figures and Canadian May GDP are due at 12:30 GMT.  The Chicago and Milwaukee PMI’s are also due today.

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


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