Wednesday, February 25, 2009

Daily Sources 2/25

1. Michiyo Nakamoto at the Financial Times reports that Japanese exports fell by an astonishing 45.7% in January as compared to January 2008.
"Exports to Asia sank by 46.7%, the fourth straight month of decline, with shipments to China falling by 45.1%. ... Automobile exports, which comprise about 20% of all exports, suffered a particularly large decline, falling 66% year-on-year."
MacroMan provides a helpful illustration:

Imports fell more slowly than exports, leaving Japan with a trade deficit for the fourth straight month. Japan's prime minister, Taro Aso, is in Washington DC today and gave an interview with the Washington Post in which he had the following to say about the likelihood that China will seek other currencies for their foreign exchange reserves:
"I do not think such a thing would happen. First of all, the reserves of foreign currency that China holds are almost entirely in dollars. I believe they would not take action that could risk devaluation of the dollar. ...

In the case of the US, as long as the [Federal Reserve's] balance sheet is clean, as long as you are able to maintain confidence in the dollar, there's no chance of the US dollar going into a critical situation; I'll guarantee that. . . . Compared to the dollar, the only foreign currency that is strengthening right now is the yen. All the other currencies have only weakened versus the dollar."
His remarks are well worth reading in full.

2. Andrew Batson at China Journal has posted a translation of excerpts from the People's Bank of China's quarterly monetary policy report published this week. Some excerpts of the excerpts:
"China has a problem of high savings and low consumption. For a long time our country’s economic growth has been mainly driven by investment and exports, and the ratio of final consumption [in gross domestic product] has been in a gradual declining trend. The share of investment [in GDP] has steadily risen from 36.6% in 1992 to 43.5% percent in 2008, while the share of consumption has dropped from 62.4% in 1992 to 48.6% in 2008, well below the world average. The high share of investment and exports and the low share of consumption are not conducive to the healthy and stable development of the economy.

The significant slowdown in global economic growth and the great downside risks for the future will directly affect China’s exports and investment in the tradable [goods] sector. Since external demand is inadequate, the driver for economic growth must come from increasing investment or consumption."
"Therefore it is necessary to, in accordance with the requirements of the 'scientific outlook on development,' speed up the transformation of our economic development model, and strengthen consumption as a driver of economic growth, in order to achieve a balanced growth pattern based consumption, investment and exports."
Worth reading in full.

3. Der Spiegel reports that a new report authored by a commission headed by former governor of the Bank of France Jacques de Larosiere was submitted to the European Commission today. The report recommends the establishment of two new "watchdog" groups--the "European Systemic Risk Council" (ESRC), to be chaired by the European Central Bank, and the "European System of Financial Supervision" (ESFS) to "coordinate the transfer of information and supervision throughout the 27-member bloc." The report states:
"The group believes that the world's monetary authorities and its regulatory and supervisory financial authorities can and must do much better in the future to reduce the chances of events like these happening again."
Worth reading. NRC Handelsblad carries an informative interactive map describing the financial situation throughout the EU. An example image showing the debt load of each EU nation:

4. Ambrose Evans-Pritchard at the UK Telegraph reports that credit default swaps on German five-year sovereign debt touched 90 basis points (0.9%) yesterday and looks ready to become more expensive than CDSs on French sovereign debt. The spreads widened partially in response to a warning by Deutsche Bank that the German economy will likely contract by 5% in 2009.
"'The entire Landesbanken system is rotten,' said Hans Redeker, currency chief at BNP Paribas. 'Credit will collapse if they are allowed to fail so they have to be recapitalized. But it is not just the banks in trouble: Germany’s entire export structure has been hit drastically.'

'German CDS spreads are going massively higher. German bank exposure to Eastern Europe, although less than Austria, is still very high. The markets have started to price in a de facto bail-out of Eastern Europe and they think that Germany that will have to pay the bill.'"
5. Pawel Kozlowski and Katarzyna Klimasinska at Bloomberg report that the Polish treasury minister, Aleksander Grad, told the journalists that Warsaw plans to accelerate the scheduled sale of state assets in response to the financial crisis. The government will try to raise 2 billion zloty (~$3.4 billion) from the sales, the proceeds of which will go to the corporations as opposed to the central government.
"'One could always wait for better times, but the market is what it is, and companies need funds for investment now,' Grad, 46, said in an interview in his Warsaw office late yesterday. 'Some companies may lose value in two years if they stop investments or fail to acquire a private investor.'"
Worth reading in full.

6. Edward Hugh at Fistful of Euros reports that in the latest statement by the Russian economic minister he indicated that the economy had contracted by an annual rate of 8.8% in January.

7. Jane Perlez at the New York Times reports that the Pakistani Supreme Court barred the largest opposition party's leader--former prime minister Nawaz Sharif--from ever holding elective office, on the premise that he had been convicted of a crime. The court also banned Sharif's brother, Shahbaz Sharif, from staying in office as chief minister of Punjab Province--Pakistan's most important province and the only province not administered by a member of president Zardari's party. However, the legitimacy of the Supreme Court's rulings are in dispute as the government has yet to reinstall Iftikhar Mohammad Chaudhry as Chief Justice, despite the role that the lawyers' revolt had in removing General Musharraf from power. (This is presumably because the former Chief Justice had ruled against Zadari in the past.)
"Mr. Sharif ... has ... pledged to join protesting lawyers in a long march from Lahore to Islamabad next month, and to take part in a planned sit-in in the capital. The lawyers are campaigning to restore Chief Justice ... Chaudhry."
8. Shashank Shekhar at Emirates Business 24/7 reports that the CEO of the Dubai Mercantile Exchange, Thomas M Leaver, told the journalist that he was sure that Saudi Aramco would move the pricing benchmark of its crudes to the Oman contract sooner or later:
"I don't know whether it will happen soon, but it will definitely happen. ... We believe that if Saudi Aramco incorporates the DME price into its pricing methodology, other national oil companies in the region will follow."
The credit crisis and the fall in oil prices from the Summer of 2008 have served as a catalyst for national oil companies in the Gulf to look at the DME as a pricing option.

The settlement price of the Oman contracts is somewhat exotic, with the price being settled not by the last sales price but rather by the weighted average prices in the "nearby contract month" between 4-4:30 pm Singapore time.

9. Reuters reports that Saudi Aramco shipped its first cargo of crude to the Fujian refinery recently upgraded in its joint venture with Sinopec and Exxon. The cargo was 900,000 barrels of Arab Extra Light. Fujian is currently running at 80 kb/d and should begin running at 240 kb/d later this year. Sinopec hopes to further expand the refinery to a capacity of 480 kb/d between 2010 and 2015.

10. Carlos Camacho at Platts reports that Venezuelan finance minister Ali Rodriguez today said in a television interview that Caracas would push for a further supply cut in the March 15 meeting in Vienna.

11. Eric Watkins at the Oil & Gas Journal reports that Bolivian president Evo Morales has accused the national oil firm--Yacimientos Petroliferos Fiscales Bolivianos [YPFB]--of having been infiltrated by the CIA. YPFB has been subject to a corruption investigation which has embarrassed Morales because one of his major political collaborators was more or less caught red handed receiving half a million in kickbacks from the company.

12. Lester Pimentel at Bloomberg reports that Jakarta plans to sell dollar denominated bonds to mature from 2014 and 2019 on the international markets in order to fund the stimulus plan passed by the parliament yesterday.
"Indonesia’s parliament yesterday approved a 73.3 trillion rupiah ($6.1 billion) stimulus package and endorsed the 2009 budget, paving the way for the country to sell as much as $4 billion of dollar-denominated debt to finance a budget deficit of 139.5 trillion rupiah, or 2.5% of gross domestic product."
13. The New York Times carries a transcript of President Obama's speech last night, which was optimistic in tone. Extremely long, but worth reading if you have time.

14. Courtney Schlisserman at Bloomberg reports that the National Association of Realtors said today that sales of previously owned homes fell by 5.3% to an annual rate of 4.49 million.

15. Rebecca Wilder at News N Economics has an analysis of the latest consumer confidence survey, which hit a record low for the fifth consecutive month in a row of 25. Her graph of the survey's performance over time:

Worth a look.

16. The EIA reports that crude oil stocks grew by 700,000 barrels in the week ended February 20 to 351.3 million barrels. The stock levels are well above the historical range and the build was below Wall Street expectations, as per a Bloomberg survey, of a 1.25 million barrel build. Gasoline stocks fell by 3.4 million barrels versus analyst expectations of stocks staying at the same level. Distillate stocks rose by 800,000 barrels and are well above the historical five year range for this time of year. Taken in isolation, the news is mixed, and the draw in gasoline stocks should be more than compensated for by the unusually high stock numbers.

No comments: