New Overnight Developments Abroad: Weak Euroland Money and Credit Growth Data

August 27, 2009

Sterling is weaker, slipping 0.3% against the dollar and more against other currencies.  The dollar is down 0.6% against the yen, 0.4% versus the Aussie dollar, and 0.1% relative to the euro and Swiss franc.  The kiwi and Canadian dollars are unchanged against their U.S. counterpart.

Stocks in the Pacific Rim closed mostly lower on continuing concerns about possible Chinese policy restraint.  Beijing officials plan steps to curtail steel and cement output.  Equities fell 1.6% in Japan, where elections will be held Sunday, and by 0.5% in China, 1.0% in South Korea, Hong Kong and Indonesia, 0.9% in Thailand, and 0.1% in Australia.  The British Ftse and Paris Cac are up 0.1%, while the German Dax has slid 0.1%.

The 10-year JGB yield dipped another basis point to 1.31%, but bund and gilt yields are marginally firmer.

Oil settled back 0.3% to $71.20 per barrel, while gold is 0.1% firmer at $946.80 per ounce.

In spite of aggressive liquidity injections by the ECB which buoyed M1, Euroland M3 growth decelerated further to 3.0% in the year to July from 3.6% in June.  The 3-month growth from a year earlier was 3.4%, down from 4.1% in April-June and 5.6% in the first quarter. Lending to the private sector rose just 0.6% in the year to July, down from 9.4% in the prior statement year.  Loans to non-financial firms slowed to 1.6%, while mortgage lending was 0.2% less than a year before.

Euroland’s retail PMI readings reported by Bloomberg were also disappointing with scores of 47.1 for the whole bloc, the 15th sub-50 outcome in a row and down from 47.3 in July, plus dips of 0.3 to 49.5 in Germany, and 1.6 points to a 5-month low of 44.0 in Italy.  The French retail PMI improved to 47.3 from 46.0 but like the others remained under the 50 line of demarcation between expanding and contracting sales.

German consumer confidence rose to an as-expected 3.7 reading from 3.4.  Italian consumer sentiment jumped from 107.5 in July to 111.8 in August, far higher than forecast and indeed the best reading since March 2007.  Such had bottomed at 99.8.

Euroland’s index of leading economic indicators climbed 1.6% in July on top of gains of 1.4% in June and 1.8% in May.

Dutch business sentiment improved sharply further to minus 9.3 in August from minus 14.8 a month earlier.

Based on reports from four states, German consumer prices seem likely to have risen 0.2% in August, somewhat more than expected.  The on-year drop in the CPI will be smaller than in July.  ECB officials have maintained that positive inflation will return before end-year.

U.K. data were mixed.  British business investment plunged 10.4% in 2Q, about three times faster than expected, and was 18.4% weaker than a year earlier.  The CBI monthly survey of retailers produced an unexpected downtick to a reading of minus 16 from minus 15 in July.  Analysts had looked for -12.  British pay settlements in May-July were smaller than in 2Q09.  The Nationwide house price index increased 1.6% in August, more than twice as much as forecast, cutting the on-year decline to 2.7% from 6.2% in the year to July.

Danish unemployment remained at 3.7% in July, same as in June.  Swedish unemployment was 7.9% in July versus 5.8% a year earlier.  Hungary’s jobless rate ticked up to 9.7% in May-July from 9.6% in 2Q09.

Spanish second-quarter GDP was revised to show drops of 1.1% from 1Q and 4.2% from 2Q08, each a tenth greater than the preliminary estimate.

Icelandic consumer price inflation slowed to 10.9% in August from 11.3% in July.  Prices firmed 0.5% in month-on-month terms.

GDP in the Philippines rebounded 2.4% last quarter after dropping 2.1% in 1Q.  On-year growth improved to 1.5% from 0.6%.  The results were better than expected and conform to the pattern of many other emerging economies in the region.

Australian business investment jumped 3.3% last quarter instead of dropping 5% as forecast.  There was a 4.4% increase from 2Q08.

Japanese stock and bond transactions generated a 484 billion yen outflow last week versus a 303 billion yen inflow in the week of August 15.

New Zealand posted trade deficits of NZ$ 163 million in July and NZ$ 2.48 billion over the last 12 reported months.

South African producer prices fell 3.8% in the year to July, somewhat less than expected after a 4.1% drop in the year to June.

Scheduled U.S. data today include weekly jobless claims, the KC Fed index, and revised 2Q GDP, which is likely to show a bigger drop from 1Q than reported initially. 

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


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