New Overnight Developments Abroad: Sharp Drop in Stocks

August 17, 2009

Risk aversion roared back with a vengeance.  Stocks down in Asia and Europe.  U.S. futures point to lower open.  Dollar broadly stronger.  Bond yields and commodities are lower.  Doubts mounting that recovery can be sustained without fiscal impulse.

The dollar has advanced at least 1% against the Australian dollar (1.6%), kiwi (1.4%), sterling (1.3%), and Canadian dollar (1.0%).  The greenback is up 0.7% against the Swiss franc, 0.6% against the euro and 0.3% versus the yen.  EUR/JPY touched a 2-week low and is quoted now at 133.1025.  The Russian rouble fell sharply.

Stocks slumped 6.1% in China, 4.3% in India, 3.1% in Japan, 3.3% in Singapore, 2.8% in the Philippines, 3.4% in Thailand, 2.1% in New Zealand, 3.6% in Hong Kong, 2.0% in Taiwan and 1.6% in Australia.  In Europe, the German Dax (off 2.1%), Paris Cac (-2.4%) and British Ftse are each at least 2% lower.

The 10-year JGB yield lost another 3 basis points to 1.35%, 12 bps lower than a week ago.

Oil and gold are 2.5% and 1.1% weaker at $65.79 per barrel and $938.20 per ounce.

Japanese real GDP expanded 3.7% at a seasonally adjusted annual rate last quarter, and the declines in 1Q09 and 4Q08 were revised downward.  However, GDP still fell 6.4% from the second quarter of 2008.  Personal consumption augmented GDP by 1.9 percentage points (ppts).  Net exports were responsible for 6.5 ppts of growth, and government spending added 1.1 ppts.  Inventory runoffs and business investment subtracted 2.1 ppts and 2.4 ppts.  The 3.7% growth rate was marginally less than expected.

Euroland recorded a seasonally adjusted EUR 1.0 billion trade surplus in June as imports stagnated and exports dipped 0.1%.  The unadjusted EUR 4.6 billion surplus was near to a 2-year high but reflected on-year slumps of 22.2% in exports and 25.6% in imports.  The first-half deficit of EUR 1.6 billion was down from EUR 13.3 billion in the first half of 2008.

The British Rightmove house price index sank by a greater-than-forecast 2.2% in August, but its on-year decline of 3.1% was a 13-month low.

News of a 35.7% on-year plunge of foreign direct investment in China contributed to the largest stock market drop there in nine months.

Swiss retail sales rose 0.9% in volume terms in the year to June and by 0.5% in 1H09.

Czech producer prices fell 0.4% last month and by 4.9% from July 2008.  Export prices and import prices fell 1.5% and 3.3% in the year to June.

Ukrainian GDP fell 18% in the year to 2Q09.

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


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