New Overnight Developments Abroad: Risk Averse Mood as Investors Await U.S. Labor Report

October 2, 2009

The dollar continues to show a better tone on doubts about global growth prospects and raft of supportive comments.  Notably, Treasury Secretary Geithner reaffirmed yesterday that a “strong dollar is important.”  Confusion surrounds tomorrow’s Istambul meeting of G7 finance ministers and central bankers.  Maybe this group, which for over twenty years has issued closely watched comments on currency policy, will not even release a statement.  Yet it is unclear how often G-20 finance ministers and central bankers plan to meet as a group.

The yen remains stronger than 90 per dollar despite passing of fiscal-half support from capital repatriations.  Dollar/yen is down another 0.2%.  The dollar has also lost 0.2% against the Swiss franc.  The franc had initially faltered Wednesday when the Swiss National Bank reiterated its intervention threat.

The dollar otherwise has risen 0.7% against the Aussie dollar, 0.6% against the Canadian dollar, 0.4% against sterling, and 0.3% relative to the kiwi.  EUR/USD is holding steady.

Hong Kong’s Monetary Authority intervened against excessive Hong Kong dollar appreciation, reaffirming its determination to keep the pegged parity against the U.S. dollar.  Commodity currencies are weaker.  The South African rand suffered its largest weekly decline since May.

The Nikkei plunged another 2.5% to 9732. It has lost 908 points since August 26th close, including 534 points this week.  Further evidence of resurgent risk aversion was seen in other stock markets.  Equities dropped 2.8% in Hong Kong, 3.4% in Vietnam, 1.8% in Taiwan, 1.7% in South Korea, 2.1% in Australia, 1.1% in New Zealand, and 2.0% in Singapore.  Stocks are trading lower by 1.4% in South Africa, 1.3% in France, 0.9% in Great Britain and 0.7% in Germany.

The ten-year JGB yield slumped 5 basis points to 1.255%.  Comparable bunds and gilts are down 3 bps and 4 bps.

Oil slid under $70, losing 1.5% to $69.77 per barrel.  Gold edged 0.2% lower but more importantly eased below $1000 to $998.7 per ounce.  Copper fell.

U.S. auto sales in the year to September fell 23%, led by drops of 45% in GM and 42% in Chrysler.  Analysts have made last-minute upward revisions in the size of the expected drop of jobs that will be reported at 12:30 GMT today.  A higher unemployment rate is anticipated, too.

Japanese overnight data were better than forecast, on the other hand.  The jobless rate receded two-tenths to 5.5%.  Employment recorded a smaller 1.7% on-year decline in August than the 2.1% decrease in the year to July, and the job offers ratio did not deteriorate any further, holding at 0.42.

Japan also reported a 2.0% monthly advance and a 2.6% on-year jump in real household spending for August.  Analysts had predicted a 0.1% dip, and real disposable incomes did print poorly with a 3.0% on-year decline.  Finally, Japan’s monetary base went up 4.5% in the year to September, which was less than the increase of 6.1% in August.

Euroland producer prices firmed by an as-expected 0.4% in August but fell 7.5% from a year earlier.  The monthly gain was led by a 1.5% increase in energy, while non-energy prices ticked up only 0.1% and were 4.2% lower than a year earlier.

The British Nationwide house price index recorded a fifth consecutive increase, rising 0.9% in September and showing no change from a year earlier.  Britain’s housing market has stabilized.  Britain’s construction-sector PMI reading fell a point in September to 46.7, however, and was worse than forecast.

German new car registrations were 20% higher in September than a year earlier.

Italy’s budget deficit fell to 3.3% of GDP in 2Q from 9.3% of GDP in 1Q but was much higher than a year earlier when such equaled just 1.3% of GDP.

Romania’s PPI firmed 0.7% in August but fell 1.1% from a year earlier.

U.S. factory orders get released today as well as the highly awaited monthly labor force survey.

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


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