New Overnight Developments Abroad: Chinese Stocks Sharply Lower

November 24, 2009

Chinese and other equities fell on new worries that banks will have to raise capital following a report that China’s five largest banks had to submit plans to the authorities.  Stocks dropped 3.2% in China, 2.1% in Thailand, 1.9% in Vietnam, 1.5% in Hong Kong, 1.0% in Japan, and 0.7% in Australia.  In Europe, however, the Ftse is up 0.2%, the Dax is flat, and the Paris Cac is off 0.1%.

Keeping with the theme of heightened risk aversion, the dollar slipped 0.4% against the yen but rose by 1.0% against the high-yielding kiwi, 0.6% against the Aussie dollar, 0.5% against sterling, 0.4% against the Canadian dollar and 0.1% each against the Swissy and euro.

Ten-year gilt and JGB yields dipped two basis points.  Treasury yields are down, too, but bunds are unchanged.

Gold firmed 0.4% to $1169.80 per troy ounce. Oil edged 0.1% lower to $77.51 per barrel.

Colombia’s central bank unexpectedly announced a further 50-basis point cut in its key overnight rate to 3.5%.

Russia’s central bank implemented a ninth rate cut since April, reducing its refinancing rate by 50 basis points to 9.0%.

The Bank of Japan’s monthly economic assessment was released, showing an upgrade to “picking up” from “recovering.”  Finance Minister Fujii said monetary policy must assume the key role in fighting Japanese deflation.

South Korean consumer confidence settled back to 113 in November from 117 in October.

South African GDP increased 0.9% annualized last quarter, nearly twice as fast as forecast, signaling the end of that economy’s recession.

Australia’s index of leading economic indicators firmed 0.3% in September, but the coincident index only firmed 0.1%.

Domestic investment in Indonesia was 104.5% greater in January-October than the first ten months of 2008.

Euroland industrial orders advanced 1.5% in September, and the 12-month decline narrowed to 16.5% from 23.2% in August.  September orders were 1.2% higher than their 3Q09 average level.  Orders climbed 7.7% last quarter (34.7% at an annualized rate).  That followed an annualized 6.9% increase in 2Q and a 40.4% annualized plunge in the first quarter.  Orders in 3Q09 were still 3.8% lower than in 4Q08.

German GDP details for 3Q09 were unveiled.  Real growth remains 0.7% from 2Q and a calendar-adjusted 4.8% decline from a year earlier.  Last quarter saw consumption falter 0.9%, government spending firm 0.1%, investment in machinery and construction respectively rise by 0.8% and 1.5%, and exports gain 3.4%.  Inventories easily accounted for the entire rise in GDP with a positive 1.5 percentage point contribution (ppt), mitigated by drags of 0.5 ppts each in consumption and net exports.  Investment enhanced growth by 0.2 ppts.

The IFO German business climate index improved to a 15-month high of 93.9 in November, up 1.9 points from October.  The index bottomed at 82.2 last March.  The present situation component printed at 89.1, up from 87.4 in October, while the forward-looking expectations index increased to 98.9 from 96.8.  Manufacturing, retailing and wholesaling brightened in November, whereas construction suffered a setback.  The IFO index for services weakened to 1.9 in November from 2.4 in October and 3.8 in September, suggesting some loss of momentum this quarter.

Dutch business sentiment improved more than expected to minus 5.6 in November from minus 7.8 in October.

The Swiss UBS consumption indicator rose to 0.87 in October, consistent with mild expansion, from 0.67 the month before.  Swiss jobs climbed 0.2% in the third quarter, defying forecasts of a drop. Finnish unemployment hit 8.2% in October, a tenth more than forecast.  Austrian industrial output posted monthly and yearly declines of 1.0% and 13.7% in September.

British investment spending last quarter was revised upward to a smaller quarterly drop of 3.0%.  Investment was 21.7% below the 3Q08 level.  British banking association figures showed only a 0.4% rise of mortgage loans in October, less than forecast.

Spanish producer prices were flat in October and off 4.2% from a year earlier.  Swedish producer prices rose 0.3% in October but fell 1.5% on year.

French consumer spending on manufactured goods jumped another 1.1% in October, three times more than forecast, and were 3.5% greater than a year before.   However, business sentiment remained at 89 in November, reflecting concern about the strong euro and eventual loss of stimulus.

There’s a big data release calendar in the United States including revised GDP, the Case-Shiller index of house prices, the FHFA house price index, consumer confidence, the Richmond Fed index and the FOMC minutes.  Belgium will report business sentiment, and Malaysia announces a central bank rate decision.

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


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