Overnight Developments Abroad: Markets React Well to G-20 Statements

September 7, 2009

Stocks and bond yields rose, while the dollar fell on less risk aversion following the two-day London meetings of G-20 finance ministers, who agreed on steps to boost the quantity and quality bank reserves and to curb irresponsible banking practices.  The ministers released an upbeat general statement on improved economic and financial conditions and a separate communique declaring plans to strengthen the financial system.

Stocks in Asia rose 1.3% in Japan, 1.5% in Hong Kong, 2.1% in India and Thailand, 1.7% in Sri Lanka, 1.0% in Taiwan, and 0.9% in China.  In Europe, the German Dax is up 1.4%, and the Paris Cac and British Ftse are trading 1.3% higher.

U.S. and Canadian markets will be closed today for Labor Day observances.

Bonds reflect lessening risk aversion.  The 10-year JGB yields firmed 3 basis points to 1.36%, and comparable gilt and bund yields are 2 basis points higher.

Oil firmed 0.9% to $68.61 per barrel.  Gold ($995.40 per ounce) continues to hover just under the psychological $1000/ounce level.

Commodity-sensitive currencies rose against the dollar.  The kiwi, loonie, and Aussie dollar gained 0.8%, 0.7%, and 0.5% against their U.S. counterpart.  The greenback also lost 0.3% against the euro and 0.2% versus the Swiss franc and sterling.  The yen, which also suffers when risk aversion subsides, is flat against the dollar.

The volume of German industrial orders increased 3.5% in July on top of a 3.8% advance in June and were 7.6% stronger than their 2Q average level.  Analysts had predicted a 2% rise in orders.  July’s advance was paced by a 17.2% surge in domestic capital goods orders.  All domestic orders went up 10.3%, while export orders, which had risen 6.9% in June, settled back 2.3%.  In the five months between February and July, orders recovered 16.0%, with domestic orders up 18% and foreign orders rebounding 14%.  Nonetheless, July orders were 19.8% below their July 2008 level.  Officials have cautioned that Germany’s bounceback reflects some temporary factors and that tougher sledding may yet lie ahead.

Norwegian industrial production fell 0.5% in July, reversing June’s gain, but the manufacturing and utilities components each strengthened.

Portuguese industrial orders jumped 9.0% in July after an upwardly revised 4.6% increase in June.

The Ezone Sentix Investor Confidence gauge improved to minus 14.6 in September from minus 17 in August.

A Polish monetary policymaker said rising inflation leaves no scope for easing rates.

Britain’s Halifax house price index rose 1.1% in July, its second increase in three months, but was 12.1% lower than a year earlier.

New Zealand house prices firmed for a fourth consecutive time, climbing 0.7% in August but posting a 7.9% on-year drop.  New Zealand’s Treasury said the long recession likely ended this quarter.

Australian job ads advanced 4.1% last month, their first increase since April 2008.

Consumer prices in Taiwan fell 0.8% in the year to August.  Core CPI also dropped 0.8%.  Greek consumer prices fell 0.7% in August and were 0.8% higher than in August 2008.  Estonian consumer prices were unchanged last month and down 0.9% from a year before.

Malaysia’s trade deficit narrowed 14.5% between June and July, but exports were 22.8% smaller than in July 2008.

The Czech trade surplus of CZK 12.25 billion in July surpassed expectations but was smaller than June’s CZK 19.47 billion.  Compared to July 2008, imports fell 21.3%, while exports dropped 17.9%.  The second-quarter current account deficit widened 25% to CZK 29.0 billion from CZK 23.2 billion in 1Q09.


Taiwan’s cabinet resigned over responsibility for its poor handling of the recent typhoon.  Taiwan posted a NT$ 1.96 billion trade surplus in August.  Exports and imports fell by 24.6% and 32.3% from a year earlier.

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


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