New Overnight Developments Abroad: Dubai Default Worries Hammer Markets in Asia and Europe

November 26, 2009

Equities plunged 4.0% in China, 2.8% in Indonesia, 2.0% in India, 1.8% in Hong Kong, 1.4% in Thailand, 4.1% in Vietnam, 1.1% in Singapore, and 0.6% in Japan.  The British Ftse, Paris Cac and German Dax arre 1.9%, 1.8% and 1.7% weaker.  U.S. markets will be closed for Thanksgiving Day.

Amid a resurgence of risk aversion following Dubai’s effort to reschedule debt payments, the yen climbed as high as 86.27 per dollar, strongest since July 1995, and is up 0.7% currently.  The yen’s latest advance prompted Finance Minister Fujii to declare a need for government action against recent “abnormal” foreign exchange movements.  Rumors surfaced that the Swiss National Bank may in fact have intervened today to prevent franc appreciation against the euro.

The Vietnamese dong fell by another 3.4% to a record dollar low.   The U.S. currency has appreciated 1.7% against the kiwi, 1.6% relative to the Australian dollar, 1.0% against sterling, 0.8% versus the Canadian dollar, and 0.4% against the Swiss franc and euro.

Gold touched $1195.13 per troy ounce, another record high, but is presently off 0.2% on balance.  Oil is 0.8% lower at $77.35 per barrel.

Ten-year German bund and British gilt yields are six and five basis points lower.  The 10-year JGB edged 1 bp lower to 1.29%.

Minutes from the Bank of Japan’s October 30th policy board meeting show a predisposition to keep rates very low for some time and a readiness to reimpose emergency lending facilities if that becomes necessary.

News that Australian investment fell 3.9% last quarter after rising 2.1% in the second quarter has created some doubt about the likelihood of a third Australian rate increase next week.  Analysts had predicted a rise in investment spending.

Business sentiment in New Zealand worsened 4.8 points to 43.4 in November.

Filipino GDP posted a quarterly 1.0% rise in 3Q and was 0.3% higher than in 3Q08.  The result was weaker than assumed.

Singaporean industrial output rose 3.6% in the year to October, only about half as much as predicted.

Taiwanese GDP was just 1.3% lower in 3Q than a year earlier, the smallest on-year decline since the year to 3Q08.

Euroland money and credit growth imploded further in October.  M3 recorded on-year growth of just 0.3%, just a tenth as much as in the year to July and only a sixth as much as forecast.  M3 in August-October was up 1.6% from a year earlier, down from a 2.5% increase in 3Q09 from 3Q08.  Private credit and private loans were 0.8% lower and 0.5% higher in October than a year earlier.  Loans to firms and for mortgages were 0.1% and 0.2% less than in October 2008.

CPI reports from four German states so far (North Rhine Westphaia, Hesse, Saxony, and Brandenburg) showed on-year inflation between 0.2% and 0.4%.  The return to positive on-year readings due to base effects (because of plunging oil in late 2008) had been expected.

Dutch consumer spending fell 3.4% in the year to September.  Spanish real retail sales adjusted for variations in work days were 2.7% lower in October than a year earlier.  Italian business sentiment climbed to a 14-month high of 78.8 in November from 77.4 in October.

Hungarian joblessness edged up a tenth to 10.4% in October, most since 1994 and 2.4 percentage points greater than a year earlier.  Danish unemployment rose to 4.2% last month from 4.0% in September.  Sweden’s trade surplus in October was 43% smaller than a year earlier.  Exports and imports recorded on-year drops of 20% and 18%.

The monthly British CBI retailer survey produced a five-point increase to 13, the best reading since November 2007.  Analysts had projected a score of 12.

South African producer prices slid 0.1% in October and were 3.7% lower than a year earlier, their fifth sub-zero on-year reading in a row.

Brazilian unemployment slid two-tenths to 7.5% in October.

U.S. trading desks are closed today and will be operating with skeletal staffing tomorrow.

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


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