New Overnight Developments Abroad: More Optimism in International Markets

October 14, 2009

Stocks and bond yields are higher, and the dollar is broadly lower.  Gold touched $1070.80, a new record high.

Euro area industrial production advanced 0.9% in August following gains of 0.2% in July, 0.9% in June and 0.1% in May.  On-year drop moderated to 15.4%.

Bank of Japan Governor Shirakawa hints bank may end special corporate credit support after December after central bank upgrades assessment for second straight time.  BOJ claims economy has “begun to pick up” and that the drop in investment spending is moderating.  A rift between the government may be widening, however, as Finance Minister Fujii says conditions are “more serious” than BOJ assessment implies.  The BOJ Policy Board voted 8-0 to retain a target interest rate of 0.1% and did not take any immediate action on quantitative easing.

The Reserve Bank of New Zealand removed some temporary emergency credit facilities and announced a consolidation of the rest.

Consumer confidence in Australia jumped another 1.7% in October, undeterred by that country’s rate increase early this month.  It was the fifth improvement in a row after a 5.2% jump in September and left the level at a 2+ year high.

British unemployment rose less than forecast.  The claimant count advanced 20.8K and was at 5.0%, not 5.1% as predicted.  The ILO measure of joblessness dipped 1K, the first drop in over a year.  Average earnings, a gauge of wage pressures, rose by a very subdued 1.6% on year in June-August, down from 1.8% in May-July.

Chinese imports fell just 3.5% in the year to September compared to a 17% drop in the year to August.  The 12-month 15.2% decline of exports was also less than assumed and the smallest decrease in nine months.  China posted a $12.93 billion trade surplus, down form $15.7 billion in August and $15.3 billion per month in the first seven months of 2009.

Chinese new loans leaped by yuan 516.7 billion in September, 17.4% greater than forecast and 26% greater than in August.  M2 advanced by a greater-than-expected 29.3% from a year earlier, further pointing to very brisk economic growth ahead.

In response to all the above good news, stocks rose 2.0% in Hong Kong, 1.6% in Indonesia, 1.5% in Singapore, 2.7% in Vietnam, 1.1% in Malaysia, 1.3% in Taiwan, 1.2% in South Korea, 1.0% in Australia and 1.2% in India.  In Europe, the Dax is up 2.0%, and the Cac40 and Ftse are trading 1.8% higher.  The Japanese Nikkei dipped 0.2%, however.  Stocks in Thailand closed 2.0% lower, failing to join in the better trend because of political concerns.

Ten-year bund and gilt yields are higher by 5 and 6 basis points, whereas the 10-year JGB remained steady at 1.30%.

Oil gained another 1.0% and is just below $75/barrel.  Gold settled back after hitting a new all-time high and is 0.2% lower on balance.

The dollar shows widespread losses of 0.6% against the Australian dollar, 0.4% against sterling and the yen, and 0.3% relative to the Swiss franc, Canadian dollar, kiwi, and euro.

Japanese domestic corporate goods prices edged 0.1% higher in September and posted a 12-month drop of 7.9%.  The BOJ’s assessment of CPI inflation is that the 12-month rate of drop will soon stabilize and deflation in the medium-term should moderate.  But price risks, like growth risks, remain skewed to the downside amid high uncertainty.  Japanese consumer confidence improved less than assumed to 40.7 in September from 40.4 in August.

South Africa reported a seventh straight drop of retail sales, -7.0% in August from a year earlier.  The governor of the Reserve Bank earlier in the day said that the central bank had provided “sufficient monetary accommodation” already.

New Zealand house sales jumped 43.7% in the year to September.

Finnish consumer prices firmed 0.2% but fell 1.0% on year in September.  Spanish consumer prices dipped 0.2% last month and by 1.0% from September 2008.  Core CPI inflation in Spain eased to just 0.%.

Greek unadjusted unemployment jumped to 9.6% in July from 8.6% in June. South Korean joblessness slid to 3.6% in September from 3.8%.  Czech retail sales fell 0.3% in August and were 3.5% lower than a year earlier.

A big day for U.S. data lies ahead with the release of retail sales, import prices, business inventories and the FOMC minutes.  Canadian motor vehicles sales are due, too.

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


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