New Overnight Developments Abroad: Lower Stocks Lift Dollar

October 22, 2009

Symptomatic of heightened risk aversion, the German Dax, Paris Cac and British Ftse have traded 1.6%, 1.5% and 1.3% lower. Share prices closed down by 0.6% in Japan, 1.4% in South Korea, 1.1% in The Philippines and Thailand, 0.5% in Hong Kong and Australia, 0.7% in China, 1.2% in Taiwan, 1.3% in India, 1.8% in Indonesia and 1.0% in Pakistan.  Lower stocks reflect fears prior rallies are excessive, speculation that a turn in monetary policy is near is some economies, and a downgrade of Wells Fargo by a well-known bank stock analyst.

Government officials in South Africa denied a story on Sake24 Financial News that the minister of economic development is considering a fixed peg for the rand.  The currency nonetheless fell 1.2% against the dollar.  Against other commodity-sensitive currencies, the greenback advanced 0.9% against the kiwi, 0.7% against the Australian dollar, and 0.6% against the Canadian dollar.  The South African Reserve Bank is holding a policy meeting today and expected to retain a 7.0% benchmark interest rate.  The Bank of Canada releases a semi-annual Monetary Policy Report later today.

Ten-year bond yields are sharply higher, especially in Europe and the United States.  JGB yields climbed 2 basis points to 1.38%.  Gilts are above 1.7%.

Oil eased 1.6% to $80.09 per barrel.  Gold slid 0.6% to $1056.60 per ounce.

Brazil’s monetary policy-makers, COPOM, retained an 8.75% target Selic rate as expected by a unanimous vote and did not modify their previous statement.

The Swedish Riksbank as expected left its repo rate steady at 0.25%, said that a recovery has begun, but added that this low repo rate level is likely to be maintained until the autumn of 2010.

There’s been a deluge of economic data around the world, even as markets await U.S. weekly jobless claims and the monthly FHFA house price index, monthly Canadian retail sales, and the Bank of Canada policy report.  The Belgian business conditions index, a good bellwether of Euroland, also will be released.

Chinese GDP growth accelerated to an on-year rate of 8.9% in 3Q from 7.9% in 2Q and 6.1% in 1Q.  The latest pace was close to analyst expectations.

Chinese industrial production climbed 13.9% in the year to September, more than the 12.3% on-year gain in August and better than a forecast rise of 13.1%.  Retail sales jumped 15.5%, in line with expectations.  Fixed asset investment soared 33.4% in January-September from a year earlier, a bit above forecasts.

Chinese consumer prices slid 0.8% in the year to September, while the PPI slumped 7.0%.  Analysts had anticipated drops of 0.8% and 7.4%.

Japan posted a seasonally adjusted trade surplus of Y 59 billion in September after Y 173 billion in August, as exports slid 0.8% while imports rose 1.9%.  Compared to September 2009, exports fell 30.7% in value terms and 21.8% in volume terms, the smallest drops of 2009.  Imports fell 36.8% on year.  Stock and bond transactions generated a Y 126.6 billion outflow last week.

Britain reported disappointing retail sales for September, showing no monthly change in either value or volume terms.  Real retail sales had also been flat in August, but they gained 0.9% in the third quarter after rising 0.8% in 2Q and 0.2% in 1Q.  On-year growth in real retail sales was 2.4% in September, 2.5% in 3Q and 1.1% in 2Q.

Euroland’s current account swung back to a deficit of EUR 1.3 billion in August from a EUR 3.7 billion surplus in July.  A deficit was posted in each month of 1H09, and the unadjusted deficit over the last twelve reported months totaled EUR 98.8 billion, 86% greater than in the year to August 2008.

Japan recorded a better-than-forecast 0.9% increase in the all-industry index during August, similar to July’s 0.8% gain and twice what had been forecast.  Industrial output climbed 1.6%, and the tertiary index increased 0.3% in August.

Polish GDP increased 1.1% in the year to 2Q09.

The Swiss trade surplus widened 11.6% between August and September.  The Swedish jobless rate was 8.3% last month.  Jobs fell 1.9% from September 2008.

Italian retail sales edged down 0.1% in August and fell 2.9% from August 2008, a bigger on-year decline than in July or January-August.  Italy’s trade gap with non-EUR countries of EUR 513 million in September was 84.4% smaller than a year earlier. Imports (down 29.4%) fell twice as much as exports.

French business sentiment improved more than anticipated to 89 in October from 86 in September and a low of 69 in March.

Countries in the euro area had a fiscal deficit to GDP ratio of 2.0% in 2008, up from 0.6% in 2007 and a debt/GDP ratio of 69.3%, up from 66.0%.

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


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