Risk Aversion Spikes as World Bank Sees Deeper Recession

* The USD and JPY rose on increased risk aversion after the World Bank said the global recession will be deeper than previously forecast. Global equity and commodity prices fell while bond prices rose. The yen gained against all key currencies as the S&P 500 index declined 8.19 points to 893.04. Sterling was pressured by falling UK house prices. The commodity currencies were particularly hurt by the spike in risk aversion as commodity prices fell. The Canadian dollar dropped to a 4-week low despite stronger-than-expected capital inflows. The Australian dollar fell below 80 cents on increased speculation the Reserve Bank of Australia may lower interest rates.

* Despite improvement in German investor sentiment for a third consecutive month, the EUR/USD fell on deterioration in overall risk sentiment. European Central Bank President Jean-Claude Trichet said that despite signs of stabilization there are still risks of more financial turbulence and the central bank must remain alert. The EUR/USD broke its short-term uptrend and formed a top. If the 1.38 support is broken, the decline will continue. There are support in the 1.35-1.36 area and resistance at the 1.40 handle.

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Financial and Economic News and Comments

US & Canada

* Canada’s international securities transactions rose to C$9.048 billion in April from an upwardly revised C$7.192 billion in March, Statistics Canada reported.

Europe

* Germany’s business confidence climbed for a third consecutive month in June amid an easing recession, with the Ifo German business climate index increasing more than anticipated to 85.9 from May’s 84.3, data from the Ifo Institute showed. The business expectations index improved to 89.5 from 86.0 while the current conditions index inched down to 82.4 from 82.5.

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* UK house prices were down 0.4% m/m to £226,436 ($372,000) in June, the first decline in five months, after a 2.4% m/m increase in May, Rightmove Plc said. House prices declined 5.5% y/y, following May’s 6.2% y/y decrease.

* UK business service companies will lose more than 300,000 jobs within five years, the Centre for Economics and Business Research reported.

Asia-Pacific

* Japan’s tertiary industry index increased 2.2% m/m to 96.4 in April after an upwardly revised 2.8% m/m decline to 94.3 in March, the Ministry of Economy, Trade and Industry said.

* Japan’s business survey index (BSI) of sentiment at large manufacturers improved to -13.2 in Q2 from a record-low -66.0 in Q1, indicating Japanese business confidence rose for the first time in three quarters, the Ministry of Finance and the Economic and Social Research Institute said. Confidence at all big companies increased to -22.4 from -51.3.

Источник: Hans Nilsson

22.06.2009