Asian Stocks and Dollar Are Weaker

July 15, 2010

The dollar fell by 0.7% against the euro, 0.6% against the Swiss franc and sterling and 0.2% versus the yen and Canadian dollar.  The U.S. currency firmed 0.2% against the kiwi and 0.1% against the yuan and Australian dollar.

Equities in the Pacific Rim lost 1.7% in China, 1.5% in Hong Kong, 1.1% in Japan, 0.5% in Malaysia, 0.8% in New Zealand and 0.4% in South Korea and Australia.  Conditions improved after a well-bid EUR 3.0 billion Spanish bond auction which produced a 2.57 bid:cover ratio.  The German Dax is up 0.1%, while stocks in Paris and London are off just 0.1% and 0.3%.

The yield on 10-year JGBs fell six basis points to 1.09%.  German bund yields are off just 1 bp, and British gilts are steady.

Gold and oil prices advanced 0.6% and 0.3% to $1213.60 per ounce and $77.23 per barrel.

Released Chinese data confirm the cool-down is progressing.

  • Real GDP in the second quarter was 10.3% greater than a year earlier.  That’s a slightly smaller rise than forecast and follows on-year growth readings of 11.9% in 1Q10, 10.7% in 4Q09, 9.1% in 3Q09 and a low-point of 6.2% in the first quarter of 2009.  First-half 2010 growth averaged 11.1%.
  • Industrial production growth slowed to a four-month low of 13.7% in June from 16.5% in May and 18.1% in March.
  • Retail sales increased 18.3% in the year to June after on-year gains of 18.5% in April and 18.7% in May.
  • CPI inflation of 2.9% in June was below forecasts of 3.3% and May’s 3.1%.
  • PPI inflation of 6.4% was down from 7.1% in May and 6.8% in April.
  • Fixed asset investment growth of 25.5% in 1H10 was down from 25.9% in January-May and 30.9% in full-2009.
  • Foreign direct investment was an exception to this slowing pattern.  An on-year gain of 39.6% in June was slightly more than twice expectations.

The Bank of Japan Policy Board unanimously agreed to leave monetary policy including a 0.1% target interest rate on overnight money unchanged.  This was as expected.  Officials did not change their economic assessment but revised up projected fiscal 2010 growth.  In a subsequent press conference, Governor Shirakawa expressed concern about the strong yen and weak Nikkei.

The central bank in The Philippines also left policy steady, keeping the overnight deposit rate at a record low of 4.0%.

Swedish Riksbank minutes from the July 1 meeting that implemented an initial rate hike to 0.5% support expectations of 2 or 3 more 25-bp increases in 2010, although officials spent time examining the downside growth and price risks posed by fiscal austerity in the euro area.

The ECB July Bulletin rehashes the remarks President Trichet made on July 8.  This is standard.

Japan’s former finance ministry official Sakakibara, once known as Mr. Yen for his frequent comments on currency matters, had some disparaging remarks to say about the euro and U.S. growth prospects.

On-year growth in Japanese machine tool orders was revised slightly upward to 143.8% in June from 138.8% reported a week ago.

Australian auto sales sank 1.2% in June on top of a 3.2% drop in May, halving their on-year advance to 8.2%.  A measure of expected consumer price inflation in Australia ticked down a tenth was still over target at 3.3%.

New Zealand’s purchasing managers index in manufacturing improved strongly to 56.2 in June from 54.0 in May.  That was the tenth straight reading above 50, connoting expansion.

Turkish unemployment fell more than anticipated to 12.0% in April from 14.9% a year earlier.

Investor sentiment toward Switzerland, according to the Swiss ZEW index, slumped sharply to 2.2 in July from 17.5 in June and 40.5 in May.  A reading of zero divides optimism from pessimism.

Norway’s NOK 25.4 billion trade surplus was smaller than the monthly average of NOK 29.7 billion in January-May. 

European car registrations were 6.9% lower than a year earlier in June.  That was the third straight negative result and cut car sale growth to just 0.2% in 1H10.

Swedish house prices firmed 2.0% last quarter and by 8.0% from 2Q09.

Czech producer prices rose 0.5% in June and accelerated to a 12-month 2.0% rate of rise form 1.5% in May.

Danish wholesale prices climbed 0.4% and 4.8% on year in June after a 5.2% increase in the year to May.

Dutch retail sales were 0.9% lower than a year earlier in May.

The slate of scheduled U.S. data today will be combed for signs of weakening growth.  The releases include producer prices, jobless claims, industrial production, producer prices, capacity usage, the Empire State manufacturing index, and the Philly Fed index.  Canada reports its monthly manufacturing survey results.  Turkey’s central bank meeting is unlikely to result in a policy change.

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

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