New Overnight Developments Abroad: Obama To Reappoint Fed Chairman Bernanke Today

August 25, 2009

Overnight movements of the dollar have been narrowly mixed, with gains of 0.2% against the loonie and 0.1% versus sterling, no change against the euro and Australian dollar, and declines of 0.3% relative to the yen and 0.1% against the kiwi and Swiss franc.

Chinese stocks suffered another big decline, falling 3.7%.  Most other Pacific Rim bourses moved less than 1%: Japan off 0.8%, South Korea down 0.7%, Hong Kong off 0.5% and Malaysia -0.3% but Thailand up 0.4%, Singapore up 0.3% and Indonesia and India each up 0.2%.  Australia fell 0.5%.  In Europe, the Ftse has slid 0.2%, while the Dax and Cac40 have edged 0.1% lower.

Japan’s 20-year JGB auction was well bid on worries over worsening deflation.  The 10-year yield stayed at 1.34%.  Bund and gilt yields dipped.  Finance Minister Yosano said it will be hard to cut back on bond sales.

Gold rose 0.5% to $948.20 per ounce, while oil eased 0.4% to $74.04 per barrel.

Most economists are welcoming news that President Obama has decided to reappoint Ben Bernanke to another 4-year term as Fed Chairman.  Obama’s economic advisors are believed to have been unified in recommending that action, including Larry Summers who some thought had a chance to get the nod.

The Bank of Israel become the first central bank to hike interest rates after a streak of easing moves.  It’s benchmark rate was lifted 25 basis points to 0.75%.  The Bank of Israel is led by Stanley Fisher, who once worked at the Fed and retains strong ties with the U.S. central bank.

German 2Q GDP growth was confirmed at 0.3% from 1Q, minus 7.1% from 2Q08 and minus 5.9% from 2Q08 after adjusting for working day variation.  The unexpected return to positive growth followed quarterly drops of 3.5% in 1Q, 2.4% in 4Q08, 0.3% in 3Q08 and 0.6% in 2Q08, and it reflected substantial fiscal stimulus.  Not only did government spending rise 0.4%, but also personal consumption increased 0.7%, and construction investment went up 1.4%.  These boosts were mitigated by declines in machinery and equipment investment and exports of 0.5% and 1.2%, respectively, and a negative GDP contribution from inventories of 1.9 percentage points.  Imports tumbled 5.1%, so net exports augmented GDP growth by 1.6 percentage points.

Germany accrued a first-half budget deficit of EUR 17.3 billion versus a surplus in 1H08 of EUR 7 billion.  Spending climbed 3.5%, while revenues dropped 1.1%.

German real construction orders fell 7% in the year to June.

British mortgage approvals jumped 76.6% in July from a year earlier to a 17-month high of 38.2K according to the British Bankers Association.  However, net mortgage lending of Gbp 1.6 billion was 57% below the level in July 2008 and at a 105-month low.

Hong Kong’s trade deficit of HK$ 21.6 billion was 61% larger than anticipated after June’s HK$ 16.5 billion shortfall.  Compared to July 2008, exports sank 19.9%, while imports dropped 17.8%.  These were much bigger declines than posted in June.

Spanish producer prices slipped 0.2% in July and fell 6.7% from a year earlier.  Finnish unemployment fell to 7.7% in July from 9.1% in June as students found jobs.  The UBS Swiss consumption indicator sagged to 0.77 from 0.95.  Swiss total employment slid 0.3% in 2Q09 from 2Q08.

Polish retail sales posted gains in July of 6.9% from June and 5.7% from July 2008, which were much greater than forecast.  Polish unemployment edged up a tenth to 10.8% in July.  Hungarian retail sales firmed 0.5% in June but were still 2.2% less than the year-earlier level.  The Czech economic sentiment index worsened to minus 10.6 in August from minus 9.8 in July.

Japanese opinion polls point to a landslide lower house parliamentary victory this Sunday for the Democratic Party of Japan.  The LDP has ruled uninterruptedly since 1955 with the exception only of one 10-month period in the 1990’s.

U.S. data today include two measures of house prices, the Case Shiller survey and the FHFA index as well as the Richmond Fed index and Conference Board consumer confidence gauge.  Belgium’s business climate index will be reported, and Malaysia’s central bank is not expected to change policy after its interest rate meeting.

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


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