New Overnight Developments Abroad: High Concerns About Greek and Dubai Debt

December 9, 2009

The dollar eased broadly but mildly overnight.  There’s been a lot of continuing chatter that Greece is the next Dubai following its downgraded Fitch debt rating to BBB+.  Revised Japanese GDP statistics showing a humongous downward correction of third quarter growth to 1.3% from 4.8% annualized triggered a 1.3% drop in the Nikkei and sent JGB yields lower  but didn’t prevent the yen from gaining 0.4% against the dollar.  Germany, France, and Britain released trade figures.  Britain’s pre-budget statement will be delivered later today.  Polls continue to point to the Labour government’s ouster in next spring’s elections.

Dollar losses amount to 0.7% against the kiwi, 0.5% against the Aussie dollar, 0.4% against the yen, 0.3% versus the Canadian dollar, 0.2% relative to the Swissy and euro and 0.1% against the pound.  Ten-year sovereign debt yields firmed in Europe but eased to 1.24% from 1.28% in Japan.

Aside from the Nikkei’s 1.3% tumble to a hair above 10K, stocks also lost 1.9% in China, 1.4% in Hong Kong, 1.0% in the Philippines, 0.7% in Australia, 0.6% in Thailand and India, 0.4% in Germany and 0.2% each in Britain and France.

Oil prices advanced 1.4% to $73.67 per barrel, whereas gold eased another 0.2% to $1141.60 per troy ounce.

Japanese GDP growth got revised to 1.3% at an annualized rate (saar) in 3Q from 4.8% reported initially.  Business investment, which sank 10.6% saar, accounted for 2.4 percentage points (ppts) of the revision.  Inventories and government spending were responsible for 1.2 ppts and 0.6 ppts of the revision, which was mitigated by an upward correction of personal consumption to 3.8% saar.  GDP fell 5.1% from 3Q08 and 6.4% from the same quarter two years earlier (3Q07) when the global financial crisis first began.  The personal consumption price deflator plunged 2.9% between 3Q08 and 3Q09.  Japanese Finance Minister Fujii made the ludicrous remark that deflation will be over five years from now.  The Democratic Party government has scrapped former Prime Minister Koizumi’s brainchild reform of privatizing the postal service.  Japan is regressing on many fronts, and upward pressure on the yen, stemming from the global economic situation and not improvement in Japan, is making prospects for that economy a lot worse.

Germany reported trade, CPI, and real sales of manufactured goods.

  • The current account (EUR 11.0 bln) and trade (EUR 13.6 bln) surpluses in October were larger than expected and bigger than September’s figures.  The seasonally adjusted trade surplus of EUR 12.9 billion compared to quarterly averages of EUR 11.1 bln in 3Q, EUR 10.3 bln in 2Q and EUR 8.2 bln in 1Q09.  Exports rose 2.5% on month, while goods imports fell by 2.4%.  But both were slightly over 15.0% lower than a year earlier.
  • Consumer prices slid 0.1% on month but rose 0.4% on year, their first on-year increase in five months.  These final results were each a tenth above preliminary indications.  Inflation remains much lower if one excludes motor fuels, which rose 2.3% on month and 5.6% on year.
  • Real manufacturing turnover fell by a disappointing 0.7% in October and by 13.9% from a year earlier.  Turnover in January-October was down 13.9% from a year ago.

The British merchandise trade deficit of Gbp 7.1 billion in October represents a nine-month high.  The goods and services deficit widened to Gbp 3.2 billion from Gbp 3.1 bln in September.  The Nationwide gauge of U.K. consumer confidence remained steady, printing at 73 in November, same as in October and off from 74 in September.  According to the British Retail Consortium, shop prices firmed 0.2% last month.

The French trade deficit of EUR 4.39 bln in October was 57% wider than in September and twice as much as forecast.

Swiss unemployment held steady at 4.1% last month.

Swedish industrial production fell 2.7% in October, while industrial orders expanded 1.5%.  Their on-year changes, respectively minus 16.1% and minus 13.3%, were similar.  Sweden’s activity index eased 0.3% in the month.

Australian consumer confidence fell in December by 3.8% but remained comparatively strong.  The Aussie trade deficit of A$ 2.379 billion in October was 29% greater than in September.  Exports (down 3%) fell more sharply than imports (down 1% on the month).  Australian mortgage approvals fell 1.4% on month but rose 25.5% on year in October.  The value of housing loans eased 0.6% from September but were 32.4% greater than a year earlier.

Czech GDP grew 0.8% last quarter but was still 4.1% lower than in the third quarter of 2008.

South Korean producer prices firmed 0.4% on month in November but were down 0.4% on year.  The Bank of Korea meets tomorrow and is unlikely to change its 2.0% benchmark rate.

The British Pre-Budget speech is not expected to make any big cuts into the huge deficit.  Modest growth of 1-1.5% is expected to be predicted for 2010.

South African retail sales fell 6.5% on year in October, more than the 4.9% drop in the year to September.

U.S. wholesale inventories get reported today.

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


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