New Overnight Developments Abroad: Lower Dollar Ahead of ECB Press Conference

September 3, 2009

The dollar is down 0.8% against the kiwi, 0.7% relative to sterling, 0.6% versus the Aussie dollar, 0.5% against the Canadian dollar, and 0.2% against the euro and Swissy.  But it has gained 0.2% against the yen.  FOMC minutes released yesterday were guardedly optimistic.

Stocks in China leaped 5.6%.  Those in Thailand, Indonesia, Hong Kong, Taiwan and South Korea climbed 1.8%, 1.6%, 1.2%, 0.9%, and 0.7%.  Equities eased, however, in Vietnam, India, Pakistan, Australia and Japan (the latter by 0.6%).  European bourses show trivial change.

Gold soared another 0.9% to $987.00 per ounce on reported Chinese demand. Oil is 1.6% higher at $69.12 per barrel.

10-year yields firmed in the U.S. and Europe but are unchanged at 1.32% in Japan.

The Brazilian Selic interest rate was left unchanged at 8.75% as expected.  This decision was halted after a 50-bp cut on July 22nd. Rates fell 500 basis points altogether earlier in 2009.

Bank Indonesia kept its reference interest rate unchanged at 6.5% as analysts expected.  The decision broke a streak of nine straight monthly reductions totaling 300 basis points and came after an uptick in Indonesian CPI inflation.

The Swedish Riksbank made no further change in its 0.25% repo rate but offered $13.8 billion in continuing liquidity.  There had been 450 basis points of rate reductions from October 2008 through July 2009.

The OECD revised projected 2009 GDP growth upward and now expects contractions this year of 2.8% in the U.S., 3.9% in Euroland, and 5.6% in Japan.

Many service-sector PMIs were released, corroborating rising optimism for the most part.

  • Euroland scored 49.9 in August, up from a flash indication of 49.5 and a July reading of 45.7.  Euroland’s composite PMI was 50.4, surpassing 50 for the first time since May 2008 and 3.4 points above July’s reading.
  • The German composite PMI was 54.0, up 5 points from July.  Its services PMI printed at 53.8, up from 48.1 in July.
  • The French composite PMI was 51.3, up from 47.3, as the services index climbed to 49.3 from 45.5 in July.
  • The Italian services PMI of 46.4 connoted the slowest rate of contraction since September 2008.
  • Spain’s services PMI reading of 45.3, though above July’s 40.8, led officials to caution that sustained recovery remains a long way away.
  • Ireland’s services PMI improved to 46.7, best since March 2008, from 42.4 in July.
  • The British services PMI advanced to 54.1 from 53.2, surpassing 50 for a fourth consecutive time.
  • Australia’s PSI services jumped to 48.0 from 44.1 in July and 33.6 last February.
  • China’s services PMI reached 60.6, above its long-term average and best since September 2008.
  • The Japanese PMI-services index of 48.1 showed the slowest rate of drop in activity since February 2008 and was 2.4 points higher than in July.
  • India posted composite and service PMI readings of 55.0 and 54.9 after July scores of 55.6 and 54.7.
  • The Russian services PMI of 52.2 was up 3.7 points and above 50 for the first time in ten months.

Real retail sales in the euro area dipped 0.2% in July because of a 0.5% drop in food, drink and tobacco.  Sales in Spain dropped 1.2%, exerting the greatest drag.  Sales in the 16-nation bloc fell 1.8% from July 2008 and were 0.3% lower than the 2Q average level.

Ahead of a meeting tomorrow and Saturday in London of G20 finance ministers, British Chancellor of the Exchequer Darling warned of premature withdrawal of fiscal stimulus.

Greek GDP firmed 0.2% on quarter in 2Q09 but slid 0.3% from 2Q08.

South Korean GDP increased 2.6% last quarter but slid 2.2% from a year earlier.

Australia’s trade balance in goods and services showed a much bigger-than-expected A$ 1.56 billion deficit in July compared to A$ 540 million in June and A$ 1.06 billion a year earlier.  Exports fell 1.4% on month, while imports went up 3.5%.

South Africa’s current account shortfall equaled 3.2% of GDP in 2Q, down from 7.0% of GDP in 1Q09.

French unemployment climbed to 9.5% last quarter from 8.9% in 1Q.  Dutch consumer prices firmed 0.3% in the year to August.  Czech wages rose 2.8% y/y in 2Q.

The ECB is expected to leave rates unchanged again but to imply no urgency to begin tightening just yet.  Press conference starts at 12:30 GMT.

Scheduled U.S. data include weekly jobless claims and the services PMI index.

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


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