New Overnight Developments Abroad: Dollar and Yen Weaker Ahead of ECB Announcements
December 3, 2009
The dollar has declined 0.6% against the euro, 0.5% against the Swissy, 0.4% against the Australian and New Zealand dollars, and 0.1% relative to sterling and the Canadian dollar. In contrast, the yen lost another 0.5% against the dollar and 1.1% against the euro. The rand hit a 7-week high against the dollar on rising gold.
A weaker yen goosed the Nikkei, which advanced 3.8%. Elsewhere in the Pacific Rim, stocks rose 1.2% in Hong Kong, 1.5% in South Korea, 1.9% in Thailand, 1.8% in Sri Lanka, and 1.2% in Indonesia where Bank Indonesia again left its benchmark interest rate at 1.25%. The Paris Cac, German Dax and British Ftse show gains of 0.6%, 0.5%, and 0.3%.
Gold touched a new peak of $1226.56 per troy ounce but subsequently settled back to a net gain of 0.4%. Oil advanced 1.0% to $77.16 per barrel.
Ten-year gilt, bund and JGB yields are up by 7, 3 and 1 basis point, and a higher Treasury yield is also indicated.
The ECB policy announcement will be at 12:45 GMT and be followed by a press conference at 13:30 GMT. The short-term refinancing rate of 1% since May will not be changed, but steps to dismantle unconventional stimulus and new economic forecasts are eagerly awaited. See preview.
Earlier today, Euroland released several important indicators.
- Third-quarter GDP growth was confirmed at 0.4% from 2Q and a drop of 4.1% from 3Q08. Consumption sagged 0.2% and exerted a 0.1 percentage point (ppt) drag on GDP growth. Investment dropped 0.4% and also depressed the GDP growth rate by 1 ppt. Net exports boosted growth by 0.2 ppts, and inventories made a positive 0.3 ppt contribution after exerting a drag in the second quarter of 0.6 ppts. Government spending rose 0.5% and accounted for 0.1 ppt of overall growth, but fiscal stimulus will begin to lessen going forward.
- Retail sales volume was flat in October instead of dropping 0.2% as forecast. Retail sales were still 1.9% lower than a year earlier and 0.3% less than the 3Q average. Retail sales had dropped 0.5% (2.1% at an annualised rate) in the third quarter. Spain, which remains mired in recession, saw retail sales drop another 0.6% in October and 2.6% from a year earlier.
- French unemployment of 9.5% last quarter was up a tenth from 2Q and at a 3-1/2 year peak, but it was much lower than forecast.
France was also the star of Euroland service-sector and composite PMI results for November. The composite score of 60.9 was up from a flash indication of 59.8 and respective readings of 58.6 in October, 54.8 in September, 51.3 in August and 47.3 in July. The French service PMI printed at 60.9 versus 57.7 in October.
The euro area composite PMI was 53.7, up from 53.0 in October. Such has exceeded 50 since July, consistent with economic recovery. The service-sector PMI was 53.0, two-tenths less than the preliminary flash indication but the best result since December 2007. Other reported PMIs within Euroland were
- German composite: 53.6 after 52.3. German services: 51.4 after 50.7, consistent with ongoing soggy consumer demand.
- Italy services: 49.8 after breaking above 50 to 52.2 in October. Italy is traveling a bumpy road, but recovery seems at hand.
- Spanish services: 46.1, down from 47.7 in October. With orders falling more sharply, the recession plods onward.
- Irish services: 46.8 after 47.4 in October and 45.5 in September. Like Spain, a still very fragile economy.
Japan’s Ministry of Finance released results of its quarterly corporate survey. Sales fell 1.0% in 3Q and by 15.7% from 3Q08. Profits recovered 26.8% but still were 32.4% lower than a year earlier. Most importantly, investment slumped 8.8% and was 24.8% lower than in 3Q08.
Japan’s service-sector PMI printed below the 50 line separating expansion from contraction for a 23rd consecutive month in November, and the rate of drop steepened. The PMI score was 42.3 after 45.0 in October, 46.0 in September and 48.1 in August. The manufacturing PMI, announced previously, also worsened to 52.3 from 54.3 in October, so the composite PMI of 45.4 in November was well below October’s 48.5.
China announced a services PMI of 57.1 after 56.5 in October. Its composite PMI was 57.4 after 56.9, indicating very robust activity.
Hong Kong’s PMI-services improved too to 55.9 in November from 54.6 in October and 51.8 in September. But the Russian PMI-services index eased back to 53.3 from 54.3.
India‘s PMI-services printed in November at 55.2, between October’s 56.8 and September’s 54.4. It’s a solid score.
Australia‘s PSI-services index fell to 52.5 in November from 54.8 in October but was above September’s 49.3. In a separate release, Australian retail sales increased 0.3% in October, reversing September’s 0.2% setback after a 0.7% increase in August. Sales rose 5.6% from October 2008. New auto sales in November were 9.2% higher than a year earlier. Australia has the only central bank that has raised rates three times already.
The British PMI-services printed at a solid 56.6, just slightly below October’s 26-month high of 56.9. That was the 7th straight reading above 50.
Dutch consumer prices slid 0.1% in November and were 1.0% higher than a year earlier.
New Zealand’s export commodity price index rose more sharply in November than in any month since April 1986.
Romanian GDP fell 0.6% in 3Q09 and was 7.1% lower than a year earlier.
Stock and bond transactions in Japan generated a Y 241 billion outflow last week after an outflow of Y 358 billion in the week to November 21.
Ben Bernanke’s confirmation hearings before the Senate Banking Committee begins at 15:00 GMT. He will get confirmed but not before some very tough questioning, as the Fed faces perhaps the greatest Congressional effort to rein in its power in its entire 96-year history.
Scheduled U.S. data today will include jobless claims, productivity, unit labor costs, and the PMI-services.
Copyright Larry Greenberg 2009. All rights reserved. No secondary distribution without express permission.
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