Softer Chinese Data on FOMC Day

August 10, 2010

Stocks in Asia and Europe got walloped by Chinese data, slumping 2.9% in China, 1.5% in Hong Kong and Thailand, 1.3% in Pakistan, 1.2% in Australia, 0.9% in France, 0.8% in Indonesia and Germany, 0.5% in South Korea, Great Britain, and Spain, and 0.4% in India and Singapore.  Japan’s Nikkei only edged 0.2% lower.

The dollar rose 0.9% against sterling, 0.8% versus the kiwi, 0.6% relative to the Canadian dollar, 0.5% against the euro and Aussie dollar and 0.4% versus the Swiss franc.  Dollar/yen remained steady as the yen benefited from new risk aversion and the Bank of Japan’s decision not to reveal any new stimulus.

Ten-year German bund and Japanese JGB yields firmed two basis points each.

Oil and gold prices fell by 1.3% and 0.4% to $80.42 per barrel and $1198 per troy ounce.

Chinese on-year export and import growth in July of 38.1% and 22.7% were down from 43.9% and 34.1% gains in the year to June.  Analysts had expected less deceleration especially in imports.  The trade surplus of USD 28.73 billion was 43.5% wider than in June and 170% greater than a year earlier.  Chinese real estate prices were unchanged in July after dipping 0.1% in June.  This depressed the 12-month rise of property prices to a six-month low of 10.3%.  Officials had imposed curbs to cool the property market, and they are working.  Chinese car sales grew 13.6% in the year to July, the smallest on-year gain since March 2009.

Bank of Japan Policy Board members deliberated for six hours and seven minutes over two days and voted 9-0 not to modify policy or change the economic assessment.  Officials were preoccupied with the rising yen, but Governor Shirakawa explained that is not the only guide to policy.  He stressed that the economy has handled the strong yen better than it did last November when a 15-year high of 84.83 per dollar was hit.  The overnight money rate target stays at 0.1% where such has been since December 2008.

The house price balance index of the Royal Institute of Chartered Surveyors swung to minus 8 in July from plus 8 in June.  Such was the first negative result since July 2009 and was considerably worse than forecasts of +5 by analysts.  The Department of Community and Local Government house price index was 9.9% higher than a year earlier in June.  The British Retail Consortium reported on-year same-store sales growth of 0.5% in July, down from 1.2% in June.  Total retail sales slowed to a 12-month increase of 2.6% from 3.4%.

The U.K. goods and services trade deficit narrowed 14.6% on month to Gbp 3.26 billion in June.  The 2Q10 deficit, however, of Gbp 10.43 billion was 11.8% bigger than the first-quarter shortfall.  The merchandise trade deficit narrowed to Gbp 7.40 billion in June from Gbp 8.03 billion in May but widened to Gbp 22.86 billion last quarter from Gbp 21.85 billion in 1Q10.  Exports rose 4.3% on month in June, while imports climbed 1.0%.  Export and import growth between the second quarters of 2009 and 2010 amounted to 19.9% and 18.6%.

French industrial production sank 1.7% in June, reversing almost all of May’s 1.9% increase.  Industrial output advanced 0.8% in 2Q as a whole.

German wholesale prices slid 0.3% in July, not enough to prevent the 12-month increase from widening to 5.3% from 5.1%.  The WPI had plunged 10.6% in the year to July 2009.  German consumer prices rose 0.3% last month, posting a 1.2% on-year increase after 0.9% in the year to June and 1.2% in the year to April.  Energy prices fell 0.8% in July but rose 4.7% on year.  Non-energy prices went up 0.4% last month and 0.8% from a year earlier.  Prices for package holidays jumped 13.9% on month. 

Norwegian consumer prices fell 0.5% in July and posted a 12-month increase of 1.9%.  Core inflation in Norway stood at 1.3%.  Producer prices in that economy were flat on month but up 18.1% between July 2009 and July 2010. 

Swiss consumer confidence, a quarterly measure, improved to a 13-quarter high of +16 in July from +14 in April.

Danish consumer prices were steady on month in July and 2.3% higher than a year earlier.

On-year export growth in the Philippines slowed to 33.4% in June from 37.3% in May.  Malaysian industrial production slowed to an on-year 13.3% gain in June from 18.4% in May.

The United States releases quarterly productivity growth, monthly wholesale prices and indices from NIFB and IBD/TIPP, and weekly chain store sales.  But the FOMC statement at around 16:15 GMT will be the day’s main attraction.  No doubt, the economic assessment will get downgraded.  There is also a reasonable possibility that monetary policy will be eased in some way or at least a hint that such is more likely to happen.  Canadian housing starts are due also.

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

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