Stocks Rebound in Asia and Europe on Bottom-Fishing

July 6, 2010

U.S. traders returning after the Independence Day holiday weekend will find the dollar marginally softer than its closing levels last Friday, with drops of 0.8%  and 0.6% against the Australian and New Zealand dollars, 0.4% against the Canadian dollar, but just 0.3% versus the euro and 0.1% relative to the Swiss franc and sterling.  Dollar/yen is 0.1% firmer than at the end of last week.

Overnight dollar movements are declines of 1.0% against the Aussie dollar, 0.6% versus the kiwi, 0.4% against the euro and pound, 0.5% against the loonie, and 0.2% against the Swissy.  The dollar is 0.2% stronger against the yen than at Monday’s close.

Feeling that equities had fallen too far, investors bid stocks up by 2.0% in China, 1.5% in Taiwan, 1.3% in Australia, 1.2% in Hong Kong and Indonesia, 1.4% in Thailand, 0.8% in Japan and Singapore and 0.7% in the Philippines.  In Europe, stocks have recovered 2.8% in Spain, 2.6% in France, 2.0% in Britain and 1.9% in Germany.

Ten-year yields advanced three basis points each in Germany and Britain but were steady at 1.12% in Japan.

Oil prices rose 1.2% to $73.00 per barrel, while gold firmed 0.3% to $1211.80 per troy ounce.

The Reserve Bank of Australia left its cash rate steady at 4.5% as analysts anticipated.  A statement from the central bank, which since October had increased the cash rate by 150 bps in total, called policy settings “appropriate” but predicted above-trend economic growth and core inflation in the upper half of its target corridor for the coming year.

The Australian trade surplus in April was revised sharply upward to AUD 1.123 billion from AUD 0.134 billion reported initially, and May’s surplus widened additionally to AUD 1.654 billion, more than three times greater than projected.  Exports jumped 6.0% between April and May, eclipsing a 3.9% increase of imports.

New Zealand business sentiment slid to 18% in 2Q from 22% in 1Q according to a gauge of the Institute of Economic Research, which warned that the recovery may be “stalling.”

Japan’s index of leading economic indicators fell 3.1 points to 98.7 in May, a four-month low, and the diffusion leading index of 55.0 was its weakest signal since April 2009.  The coincident index only dipped a tenth to 101.2, and the lagging index rose 0.7 points to 83.6.

Philippine consumer price inflation slowed more than expected to an on-year pace of 3.9% in June from 4.3% in May.  There was a 0.2% monthly rise in the CPI.

TD Securities forecasts a continuing depreciation of EUR/USD to $1.08 billion by end-December and projects near-parity at the bottom sometime in 2011.

British new car registrations were 10.8% greater in June than a year earlier.  That was a smaller pace of rise than 19.9% posted in January-June.

The U.K. Halifax house price index dipped 0.1% in April but recorded the largest on-year advance (6.6%) since October 2007.  The index lies 8.7% above its low-point reached in April 2009 but remains 16% lower than its cyclical peak in August 2007.

The British Chamber of Commerce released results of a quarterly survey that found manufacturing sales leaping 29 points to +30, a 3-year high, but services still sluggish with a sales reading of +12 after +6 in 1Q10.  The report expects no central bank rate hike before May 2011.

The European Union’s purchasing managers index for productivity softened to 55.3, a nine-month low, in June from 56.1 in May and 56.6 in April.  The level of the index still connotes a good productivity performance.

Swiss consumer price inflation unexpectedly sagged back to 0.5% in June from an on-year increase of 1.1% in May.  This sign of possible residual deflation fanned fears of renewed Swiss National Bank intervention to counter upward pressure on the franc.

The U.S. Institute of Supply Management will release its non-manufacturing purchasing managers survey for June at 14:00 GMT.  On Monday, many other PMI-services results were announced.  Britain’s index fell to 54.4, lowest since August 2009, from 55.4, and Euroland recorded a 55.5 reading after 56.2 in May.  The most attention was directed to the Chinese index, which slid 0.8 points to a 15-month low of 55.6, but India’s index jumped 5.8 points to a two-year high of 64.

Copyright Larry Greenberg 2010.  All rights reserved.  No secondary distribution without express permission.

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