Sterling Lifted by U.K. GDP Data

October 26, 2010

The British pound climbed 1.1% against the dollar on a much stronger-than-forecast initial estimate of 3Q U.K. economic growth.  GDP advanced 0.8% (3.3% annualized), twice as much as expected.  On-year growth was 2.8%, up from 1.7% in the second quarter.  Construction, production, and services each contributed positively to GDP growth last quarter.  Market participants concluded that these data shelve extra Bank of England quantitative easing for now.

The dollar otherwise rose 0.4% against the yen (aided by a new intervention threat from Japanese Finance Ministry officials) and 0.1% against the euro, Canadian dollar, Australian dollar, and yuan.  The dollar is unchanged against the Swiss franc and kiwi.

The yield on 10-year British gilts shot up 11 basis points to 3.03%.  German bunds and Japanese JGBs firmed by five and one basis points, respectively.

Equities are mostly modestly lower, with losses of 0.5% in Australia, 0.4% in India and China, 0.3% in Japan, and 0.1% in Germany, Hong Kong and New Zealand.  Stocks are down 0.7% in Britain and off 0.6% in France.

Oil and gold prices have edged 0.1% and 0.2% lower to $82.43 per barrel and $1336.00 per ounce.

Japanese corporate service price inflation printed at minus 1.1% for a third straight month in September.  The CSPI slid 0.1% on month and at a 3.2% annualized rate between June and September. 

Hong Kong recorded a HKD 24.4 billion trade deficit in September, 37% greater than anticipated.  On year export growth of 24.1% was less than forecast.

Singapore factory output advanced 5.1% on month and by 26.2% on year in September.  Full-2010 GDP growth will be even stronger in Singapore than in China.

South African unemployment of 25.3% last quarter was little changed from the second quarter.

The Swedish Riksbank implemented a third straight 25-basis point hike of the repo rate, following moves on July 1 and September 2.  The repo rate is now at 1.0%, but officials also revised their predicted future rate path downward.

Swedish producer prices rose 0.4% in September and 2.6% from a year earlier.  Sweden posted a SEK 8.1 billion trade surplus last month, up from SEK 4.7 billion in September 2009.  October business sentiment results in Sweden were better than normal in all major industry groups.

German consumer confidence remained at 4.9, same as in October and the best reading since May 2008.  September’s reading was 4.3.

French consumer confidence improved one point to minus 34 in October.  Analysts were looking for a 1-2 point further deterioration.

Italian consumer confidence also surprised expectations, rising 0.5 points to 107.7 in October instead of declining by 0.5-1.0 points as predicted.

Dutch business sentiment rose to +0.5 in October from minus 0.1 in September.

Britain’s services index rose 0.6% in August and by 2.7% from a year earlier.

German import prices increased 0.3% last month, lifting the 12-month advance to 9.9% from 8.6% in the year to August.  Excluding petroleum, import price inflation accelerated to 8.0% from 7.4%.  Export prices also climbed 0.3% on month and posted a 12-month increase of 4.6%.

Spanish business sentiment worsened to minus 17.3 last quarter from minus 14.8 in the second quarter.

Irish producer prices were unchanged on month and up just 0.3% on year in September.

The Greek trade deficit in August of EUR 1.14 billion was 51% smaller than a year earlier and smaller than the average shortfall of EUR 1.78 billion per month in January-July.

Polish retail sales rose 1.2% last month and posted a bigger on-year 8.6% advance than the 6.6% rise in the year to August.  Poland had an 11.5% jobless rate in September, up from 10.9% a year earlier. Iceland’s 6.4% unemployment rate in 3Q10 compares to a 6.0% rate a year before.

A six-month streak of improvement in the Swiss consumption indicator was broken in September as such slid to 1.698 from 1.945 in August.

Scheduled U.S. data today include the FHFA house price index, the Case-Shiller house price index, consumer confidence, weekly chain store sales, and the monthly Richmond Fed manufacturing index.  Hoenig of the Fed, Posen of the Bank of England, and Weber of the Bundesbank and ECB have speaking engagements.

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



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