10/23/2007 11:46:40 AM The New Zealand kiwi was weak in trading against the euro on Tuesday. The currency fell in the midday action to a mark of 1.89 against its European counterpart. Euro zone industrial new orders grew 0.3% on month in August, reversing a revised 2.6% fall in July. However, the number came in weaker than the expected 0.9% in August. The industrial new order index for July was revised from 4.0% decline estimated earlier. Excluding ships, railway and aerospace equipment, industrial new orders advanced 0.3%.
Forex - New Zealand Currency Choppy Versus Dollar [NZD/USD]
10/23/2007 11:45:15 AM The New Zealand currency was choppy against its American counterpart in trading in Tuesday's midday. The kiwi bounced between a high of 0.7563 and a low of 0.7496. The pair moved as no major economic reports were scheduled for release Tuesday from the US. Later in the week, a few reports on housing should generate interest. On Wednesday more information on the housing market in the form of existing home sales will be made public.
Forex - Sterling Skyrockets Versus Dollar, Yen As Global Stocks Bounce Back [GBP/USD]
10/23/2007 11:06:25 AM The sterling was broadly stronger against other major currencies Tuesday morning, racing higher versus the dollar to all but erase its losses from Monday's session.
The pound accelerated to the upside versus the dollar Tuesday morning, coming almost all the way back from Monday's dramatic plunge. With confidence restored in global equities markets, traders raced back into riskier higher yielding currencies.
The sterling rose to 2.05 versus its American counterpart by mid-morning Tuesday, a major improvement from Monday's low of 2.0257. A move above the 2.055 mark would bring the sterling to its highest point since late July.
The pound hit a 10-day best versus the euro in early dealing Tuesday, but pared its gains to trade at .6956 by mid-morning. The sterling failed to sustain its early advance to .6946, with traders weighing a slew of economic data from the Euro zone.
Euro zone industrial new orders growth fell to its lowest level since December 2006, official data showed Tuesday. The Eurostat said that industrial new order annual growth stood at 5.1% in August, smaller than the revised 12% rise in July. The number for July was revised up from 10.9% initially estimated. The number came in weaker than the expected annual growth of 6%.
French consumer spending growth accelerated in September from the prior year, official data showed Tuesday. The spending growth also topped expectations in September.
The sterling continued to move away from Monday morning's monthly low versus the yen, improving to 235.40 after pausing near 233 overnight.
Japan's September domestic shipments of consumer electronics products climbed 8 percent on year to 253.6 billion yen, according to data released Tuesday by the Electronics and Information Technology Industries Association.
The U.K.'s balance of firms reporting growth in total orders stood at 9% during three months to October 10, the latest quarterly Industrial Trends survey result of the Confederation of British Industry, or CBI, showed Tuesday. The report said that the balance improved from plus 7% recorded in July, however a slight slowdown was expected over the coming three months.
23.10.2007
Forex - Sterling Skyrockets Versus Dollar, Yen As Global Stocks Bounce Back [GBP/USD]
10/23/2007 11:06:25 AM The sterling was broadly stronger against other major currencies Tuesday morning, racing higher versus the dollar to all but erase its losses from Monday's session.
The pound accelerated to the upside versus the dollar Tuesday morning, coming almost all the way back from Monday's dramatic plunge. With confidence restored in global equities markets, traders raced back into riskier higher yielding currencies.
The sterling rose to 2.05 versus its American counterpart by mid-morning Tuesday, a major improvement from Monday's low of 2.0257. A move above the 2.055 mark would bring the sterling to its highest point since late July.
The pound hit a 10-day best versus the euro in early dealing Tuesday, but pared its gains to trade at .6956 by mid-morning. The sterling failed to sustain its early advance to .6946, with traders weighing a slew of economic data from the Euro zone.
Euro zone industrial new orders growth fell to its lowest level since December 2006, official data showed Tuesday. The Eurostat said that industrial new order annual growth stood at 5.1% in August, smaller than the revised 12% rise in July. The number for July was revised up from 10.9% initially estimated. The number came in weaker than the expected annual growth of 6%.
French consumer spending growth accelerated in September from the prior year, official data showed Tuesday. The spending growth also topped expectations in September.
The sterling continued to move away from Monday morning's monthly low versus the yen, improving to 235.40 after pausing near 233 overnight.
Japan's September domestic shipments of consumer electronics products climbed 8 percent on year to 253.6 billion yen, according to data released Tuesday by the Electronics and Information Technology Industries Association.
The U.K.'s balance of firms reporting growth in total orders stood at 9% during three months to October 10, the latest quarterly Industrial Trends survey result of the Confederation of British Industry, or CBI, showed Tuesday. The report said that the balance improved from plus 7% recorded in July, however a slight slowdown was expected over the coming three months.
Forex - CIBC Comments Retailing Plus For August GDP, But Wholesaling And Manufacturing Are Negatives []
10/23/2007 10:30:19 AM Avery Shenfeld from CIBC World Markets commented on Monday that while retailing will be a big plus for August GDP, wholesaling and manufacturing are two major negatives.
The economist stated that the recent numbers put the month on track for a modest 0.2% real GDP advance, and has Q3 real GDP aiming close to, if perhaps a shade under, his 2.4% projection.
The Bank of Canada likely wants to see a few quarters a bit slower than that pace to unwind inflationary pressures, Shenfeld commented.
Shenfeld also noted that the C$ gained a bit on the news, having rallied strongly overnight on a weaker US dollar backdrop. The results, he remarked, were consistent with his view that the Bank of Canada, seeing a healthy domestic economy, isn't going to be matching Fed rate cuts any time soon.
Forex - Euro Gains On Dollar And Yen Amid Renewed Risk Appetite [EUR/USD]
10/23/2007 9:50:29 AM The euro continued to pare Monday's sharp losses against the dollar and yen Tuesday morning in New York, with traders moving into higher yielding currencies after global equities markets roared back to life overnight.
In economic news, French consumer spending growth accelerated in September from the prior year, official data showed Tuesday. The spending growth also topped expectations in September.
The euro gained against the dollar Tuesday morning, paring a good portion of its dramatic losses from Monday's early retreat. The euro snapped back Monday afternoon following a plunge from record high levels and has followed through on its rebound, hitting 1.4254 just before the opening bell on Wall Street.
The euro plummeted to 1.4125 from an all-time high of 1.4346 on Monday. However, with positive earnings news providing a catalyst for gains in global equities markets, appetite for riskier higher yielding currencies has picked up, sending the euro higher.
The euro raced higher against the yen Tuesday morning, extending its gains from the previous evening. The euro fell sharply over the course of the last week, but hit bottom Monday morning when it made a turnaround from a 5-week low. As of 10 am ET Tuesday, the euro fetched 163.80, having moved well off Monday morning's low of 160.46.
The euro was slightly weaker in choppy trading versus sterling Tuesday morning in New York. The euro dropped to a nearly a 2-week low of .6946 in early dealing, but pared most of losses to fetch .6962 by mid-morning.
The pound accelerated to the upside versus the dollar Tuesday morning, coming almost all the way back from Monday's dramatic plunge. With confidence restored in global equities markets, traders raced back into riskier higher yielding currencies.
The sterling rose to 2.05 versus its American counterpart by mid-morning Tuesday, a major improvement from Monday's low of 2.0257. A move above the 2.055 mark would bring the sterling to its highest point since late July.
The pound hit a 10-day best versus the euro in early dealing Tuesday, but pared its gains to trade at .6956 by mid-morning. The sterling failed to sustain its early advance to .6946, with traders weighing a slew of economic data from the Euro zone.
Euro zone industrial new orders growth fell to its lowest level since December 2006, official data showed Tuesday. The Eurostat said that industrial new order annual growth stood at 5.1% in August, smaller than the revised 12% rise in July. The number for July was revised up from 10.9% initially estimated. The number came in weaker than the expected annual growth of 6%.
French consumer spending growth accelerated in September from the prior year, official data showed Tuesday. The spending growth also topped expectations in September.
The sterling continued to move away from Monday morning's monthly low versus the yen, improving to 235.40 after pausing near 233 overnight.
Japan's September domestic shipments of consumer electronics products climbed 8 percent on year to 253.6 billion yen, according to data released Tuesday by the Electronics and Information Technology Industries Association.
The U.K.'s balance of firms reporting growth in total orders stood at 9% during three months to October 10, the latest quarterly Industrial Trends survey result of the Confederation of British Industry, or CBI, showed Tuesday. The report said that the balance improved from plus 7% recorded in July, however a slight slowdown was expected over the coming three months.
Forex - CIBC Comments Retailing Plus For August GDP, But Wholesaling And Manufacturing Are Negatives []
10/23/2007 10:30:19 AM Avery Shenfeld from CIBC World Markets commented on Monday that while retailing will be a big plus for August GDP, wholesaling and manufacturing are two major negatives.
The economist stated that the recent numbers put the month on track for a modest 0.2% real GDP advance, and has Q3 real GDP aiming close to, if perhaps a shade under, his 2.4% projection.
The Bank of Canada likely wants to see a few quarters a bit slower than that pace to unwind inflationary pressures, Shenfeld commented.
Shenfeld also noted that the C$ gained a bit on the news, having rallied strongly overnight on a weaker US dollar backdrop. The results, he remarked, were consistent with his view that the Bank of Canada, seeing a healthy domestic economy, isn't going to be matching Fed rate cuts any time soon.
Forex - Euro Gains On Dollar And Yen Amid Renewed Risk Appetite [EUR/USD]
10/23/2007 9:50:29 AM The euro continued to pare Monday's sharp losses against the dollar and yen Tuesday morning in New York, with traders moving into higher yielding currencies after global equities markets roared back to life overnight.
In economic news, French consumer spending growth accelerated in September from the prior year, official data showed Tuesday. The spending growth also topped expectations in September.
The euro gained against the dollar Tuesday morning, paring a good portion of its dramatic losses from Monday's early retreat. The euro snapped back Monday afternoon following a plunge from record high levels and has followed through on its rebound, hitting 1.4254 just before the opening bell on Wall Street.
The euro plummeted to 1.4125 from an all-time high of 1.4346 on Monday. However, with positive earnings news providing a catalyst for gains in global equities markets, appetite for riskier higher yielding currencies has picked up, sending the euro higher.
The euro raced higher against the yen Tuesday morning, extending its gains from the previous evening. The euro fell sharply over the course of the last week, but hit bottom Monday morning when it made a turnaround from a 5-week low. As of 10 am ET Tuesday, the euro fetched 163.80, having moved well off Monday morning's low of 160.46.
The euro was slightly weaker in choppy trading versus sterling Tuesday morning in New York. The euro dropped to a nearly a 2-week low of .6946 in early dealing, but pared most of losses to fetch .6962 by mid-morning.
20.10.2007
U.S. Forex Market Commentary
EURO
The euro came off vis-? -vis the U.S. dollar today as the single currency tested bids around the US$ 1.4245 level and was capped around the $ 1.4320 level. Today??™sintraday high represents a new lifetime high for the common currency.Traders drove the pair higher on expectations that today??™s G7communiqu?© will not make explicit reference to the euro??™s relativestrength. Countries like France and Italy are known to be critical of the euro??™s recent strength while Germany and the U.S. appear more sanguine. The G7??™s statement may instead refer to disorderly exchange rates and/ or Asian currency fundamentals. ECB??™sWeber said high oil prices are an ???upside risk??? for inflation and a???downside risk??? for economic growth while ECB??™s Parama said the ECBcannot permit expectations of mid-term price rises. ECB chief Trichetcharacterized the global pace of economic growth as ???fantastic.??? G7officials may also comment on the relatively high price of oil as crudeprices approach the psychologically-important US$ 90.00 figure. Data released in the eurozone today saw September PPI was up 0.2% m/m and 1.5% y/y. InU.S. news, yesterday??™s Philadelphia Fed manufacturing index fell to 6.8in October from 10.9 in September but the prices paid and pricesreceived sub-indices moved sharply higher. FedChairman Bernanke stressed central banks need to ???strive forpredictability and transparency??? while Cleveland Fed??™s Pianalto saidthe economy is ???holding up??? outside of housing. Euro bids are citedaround the US$ 1.4160/ 05 levels. Euro bids are cited around the US$ 1.4160 level.
JPN/CNY
The yen appreciated vis-? -vis the U.S. dollar todayas the greenback tested bids around the ??114.85 level and was cappedaround the ??115.70 level. Technically, today??™s intraday low was justabove the 61.8% retracement of the move from ??109.00 to ??124.15. Finance minister Nukaga said ???there certainly will be debates over foreign-exchange developments??? at today??™s G7 meeting. Mosttraders believe the G7 will call for more Chinese economic reform andare curious to see if the yen??™s relative weakness and/ or carry tradesare mentioned in the G7??™s communiqu?©. BoJ boss Fukui sees possible sub-par U.S. growth ???for the time being??? and many traders believe the BoJ will delay its next rate hike for several months. Data released in Japan overnight saw the all-industries index rise 1.0% in August. The Nikkei 225 stock index lost 1.71% to close at ??16,814.37. Dollar bids are cited around the ??113.85 level. The euro depreciated vis-? -vis the yen as the single currency tested bids around the ??163.70 level and was capped around the ??165.25 level. The British pound and Swiss franc moved lower vis-? -vis the yen as the crosses tested bids around the ??234.80 and ??97.95 levels, respectively. The Chinese yuan appreciated vis-? -vis the U.S. dollar as the greenback closed at CNY 7.5080 in the over-the-counter market, down from CNY 7.5111.
STERLING
The British strengthened vis-? -vis the U.S. dollar today as cable tested offers around the US$ 2.0525 level and was supported around the $2.0405 level. Technically, today??™s intraday low was right around the 76.4% retracement of the move from $2.0655 to $1.9650. Cablewas higher on preliminary Q3 U.K. GDP data that saw a quarterly growthrate of 0.8%, the fourth consecutive quarter with that growth rate andthe seventh in a row it??™s been above the trend growth rate of 0.6% to0.7%. Cable bids are cited around the US$ 2.0420/ 2.0350 levels. The euro moved lowervis-? -vis the British pound as the single currency tested bids aroundthe ?‚¤0.6960 level and was capped around the ?‚¤0.7000 figure.
SWISS
The Swiss franc depreciated vis-? -vis the U.S. dollar today as the greenback tested offers around the CHF 1.1735 level and was supported around the CHF 1.1655 level. Dollar offers are cited around the CHF 1.1750 level. The euro came off vis-? -vis the Swiss franc as the single currency tested bids around the CHF 1.6685 level while the British pound gained ground vis-? -vis the Swiss franc and tested offers around the CHF 2.4015 level.
AUD/NZD
The Australian dollar weakened vis-? -vis the U.S. dollar today as the Aussie tested bids around the US$ 0.8890 level and was capped around the US$ 0.8995 level. Data released in Australia today saw the Q3 import price index fall 0.8% q/q. Australian dollar bids are cited around the US$ 0.8840 level. The New Zealand dollar came off vis-? -vis the U.S. dollar today as the kiwi tested bids around the US$ 0.7430 level and was capped around the $0.7555 level. New Zealand dollar bids are cited around the US$ 0.7420 level.
CAD
The Canadian dollar appreciated vis-? -vis the U.S. dollar today as the greenback tested bids around the C$ 0.9630 level and was capped around the C$ 0.9755 level. Data released in Canadatoday saw the September consumer price index accelerate to +2.5% y/yfrom +1.7% y/y, its highest reading since May 2006. Bank of Canada??™sMonetary Policy Report was released yesterday and predicted economicgrowth will decelerate this quarter with headline consumer pricespeaking around 3%. U.S. dollar offers are cited around the C$ 0.9810/60 levels.
The euro came off vis-? -vis the U.S. dollar today as the single currency tested bids around the US$ 1.4245 level and was capped around the $ 1.4320 level. Today??™sintraday high represents a new lifetime high for the common currency.Traders drove the pair higher on expectations that today??™s G7communiqu?© will not make explicit reference to the euro??™s relativestrength. Countries like France and Italy are known to be critical of the euro??™s recent strength while Germany and the U.S. appear more sanguine. The G7??™s statement may instead refer to disorderly exchange rates and/ or Asian currency fundamentals. ECB??™sWeber said high oil prices are an ???upside risk??? for inflation and a???downside risk??? for economic growth while ECB??™s Parama said the ECBcannot permit expectations of mid-term price rises. ECB chief Trichetcharacterized the global pace of economic growth as ???fantastic.??? G7officials may also comment on the relatively high price of oil as crudeprices approach the psychologically-important US$ 90.00 figure. Data released in the eurozone today saw September PPI was up 0.2% m/m and 1.5% y/y. InU.S. news, yesterday??™s Philadelphia Fed manufacturing index fell to 6.8in October from 10.9 in September but the prices paid and pricesreceived sub-indices moved sharply higher. FedChairman Bernanke stressed central banks need to ???strive forpredictability and transparency??? while Cleveland Fed??™s Pianalto saidthe economy is ???holding up??? outside of housing. Euro bids are citedaround the US$ 1.4160/ 05 levels. Euro bids are cited around the US$ 1.4160 level.
JPN/CNY
The yen appreciated vis-? -vis the U.S. dollar todayas the greenback tested bids around the ??114.85 level and was cappedaround the ??115.70 level. Technically, today??™s intraday low was justabove the 61.8% retracement of the move from ??109.00 to ??124.15. Finance minister Nukaga said ???there certainly will be debates over foreign-exchange developments??? at today??™s G7 meeting. Mosttraders believe the G7 will call for more Chinese economic reform andare curious to see if the yen??™s relative weakness and/ or carry tradesare mentioned in the G7??™s communiqu?©. BoJ boss Fukui sees possible sub-par U.S. growth ???for the time being??? and many traders believe the BoJ will delay its next rate hike for several months. Data released in Japan overnight saw the all-industries index rise 1.0% in August. The Nikkei 225 stock index lost 1.71% to close at ??16,814.37. Dollar bids are cited around the ??113.85 level. The euro depreciated vis-? -vis the yen as the single currency tested bids around the ??163.70 level and was capped around the ??165.25 level. The British pound and Swiss franc moved lower vis-? -vis the yen as the crosses tested bids around the ??234.80 and ??97.95 levels, respectively. The Chinese yuan appreciated vis-? -vis the U.S. dollar as the greenback closed at CNY 7.5080 in the over-the-counter market, down from CNY 7.5111.
STERLING
The British strengthened vis-? -vis the U.S. dollar today as cable tested offers around the US$ 2.0525 level and was supported around the $2.0405 level. Technically, today??™s intraday low was right around the 76.4% retracement of the move from $2.0655 to $1.9650. Cablewas higher on preliminary Q3 U.K. GDP data that saw a quarterly growthrate of 0.8%, the fourth consecutive quarter with that growth rate andthe seventh in a row it??™s been above the trend growth rate of 0.6% to0.7%. Cable bids are cited around the US$ 2.0420/ 2.0350 levels. The euro moved lowervis-? -vis the British pound as the single currency tested bids aroundthe ?‚¤0.6960 level and was capped around the ?‚¤0.7000 figure.
SWISS
The Swiss franc depreciated vis-? -vis the U.S. dollar today as the greenback tested offers around the CHF 1.1735 level and was supported around the CHF 1.1655 level. Dollar offers are cited around the CHF 1.1750 level. The euro came off vis-? -vis the Swiss franc as the single currency tested bids around the CHF 1.6685 level while the British pound gained ground vis-? -vis the Swiss franc and tested offers around the CHF 2.4015 level.
AUD/NZD
The Australian dollar weakened vis-? -vis the U.S. dollar today as the Aussie tested bids around the US$ 0.8890 level and was capped around the US$ 0.8995 level. Data released in Australia today saw the Q3 import price index fall 0.8% q/q. Australian dollar bids are cited around the US$ 0.8840 level. The New Zealand dollar came off vis-? -vis the U.S. dollar today as the kiwi tested bids around the US$ 0.7430 level and was capped around the $0.7555 level. New Zealand dollar bids are cited around the US$ 0.7420 level.
CAD
The Canadian dollar appreciated vis-? -vis the U.S. dollar today as the greenback tested bids around the C$ 0.9630 level and was capped around the C$ 0.9755 level. Data released in Canadatoday saw the September consumer price index accelerate to +2.5% y/yfrom +1.7% y/y, its highest reading since May 2006. Bank of Canada??™sMonetary Policy Report was released yesterday and predicted economicgrowth will decelerate this quarter with headline consumer pricespeaking around 3%. U.S. dollar offers are cited around the C$ 0.9810/60 levels.
Bank-led 'super fund' risks may exceed benefits, says Greenspan
WASHINGTON (Thomson Financial) - Former Federal Reserve chairman Alan Greenspan has warned that the recently announced Master Liquidity Enhancement Conduit fund, or M-LEC, may not provide the hoped for benefits.
The fund, devised by Citigroup Inc, JPMorgan Chase & Co and Bank of America Corp, is designed to spread out balance sheet losses over time and prevent dramatic swings in asset valuations that could unbalance financial markets.
The banks hope the creation of the M-LEC will prevent turmoil in mortgage-backed securities from further spilling into other parts of the credit market.
But Greenspan said in an interview with Emerging Markets magazine that "it's not clear to me that the benefits exceed the risks."
"The experiences I've had with that sort of intervention are two-sided," he said.
It could make conditions affecting investor psychology adverse because "if you believe some sort of artificial non-market force is propping up the market you don't believe the market price has exhausted itself," he told the magazine.
"What creates strong markets is a belief in the investment community that everybody has been scared out of the market, pressed prices too low and they're wildly attractive bargaining prices there.
"If you intervene in the system, the vultures stay away. The vultures sometimes are very useful," he said.
The fund, devised by Citigroup Inc, JPMorgan Chase & Co and Bank of America Corp, is designed to spread out balance sheet losses over time and prevent dramatic swings in asset valuations that could unbalance financial markets.
The banks hope the creation of the M-LEC will prevent turmoil in mortgage-backed securities from further spilling into other parts of the credit market.
But Greenspan said in an interview with Emerging Markets magazine that "it's not clear to me that the benefits exceed the risks."
"The experiences I've had with that sort of intervention are two-sided," he said.
It could make conditions affecting investor psychology adverse because "if you believe some sort of artificial non-market force is propping up the market you don't believe the market price has exhausted itself," he told the magazine.
"What creates strong markets is a belief in the investment community that everybody has been scared out of the market, pressed prices too low and they're wildly attractive bargaining prices there.
"If you intervene in the system, the vultures stay away. The vultures sometimes are very useful," he said.
13.10.2007
Business Events for the Coming Week
AP) - Major business events and economic events scheduled for the coming week (some dates are tentative):
MONDAY, Oct. 15
STOCKHOLM, Sweden -- The 2007 Nobel Memorial Prize in Economic Sciences is announced.
WASHINGTON -- Treasury bill auction.
NEW YORK -- Citigroup Inc. releases third-quarter financial results.
EL SEGUNDO, Calif. -- Mattel Inc. releases third-quarter financial results.
SAN FRANCISCO -- Charles Schwab Corp. releases third-quarter financial results.
SOUTH SAN FRACISCO, Calif. -- Genentech Inc. releases third-quarter financial results.
TUESDAY, Oct. 16
WASHINGTON -- Federal Reserve reports on industrial production for September, 9:15 a.m.
JACKSONVILLE, Fla. -- CSX Corp. releases third-quarter financial results.
ATLANTA -- Delta Air Lines Inc. releases third-quarter financial results.
SANTA CLARA, Calif. -- Intel Corp. releases third-quarter financial results.
ARMONK, N.Y. -- International Business Machines Corp. releases third-quarter financial results.
NEW BRUNSWICK, N.J. -- Johnson & Johnson releases third-quarter financial results.
SACRAMENTO, Calif. -- The McClatchy Co. releases third-quarter financial results.
GEORGE TOWN, Cayman Islands -- Seagate Technology releases first-quarter financial results.
EDEN PRAIRIE, Minn. -- Supervalu Inc. releases second-quarter financial results.
MINNEAPOLIS -- US Bancorp releases third-quarter financial results.
SAN FRANCISCO -- Wells Fargo & Co. releases third-quarter financial results.
SUNNYVALE, Calif. -- Yahoo Inc. releases third-quarter financial results.
WEDNESDAY, Oct. 17
WASHINGTON -- Labor Department reports on consumer price index for September, 8:30 a.m.; Commerce Department reports on housing starts for September, 8:30 a.m.; Federal Reserve releases beige book, its survey of regional economic conditions, 2 p.m.
ABBOTT PARK, Ill. -- Abbott Laboratories releases third-quarter financial results.
NORTHBROOK, Ill. -- Allstate Corp. releases third-quarter financial results.
NEW YORK -- Altria Group Inc. releases third-quarter financial results.
FORT WORTH, Texas -- AMR Corp. releases third-quarter financial results.
ATLANTA -- Coca-Cola Co. releases third-quarter financial results.
SAN JOSE, Calif. -- eBay Inc. releases third-quarter financial results.
NEW YORK -- E-Trade Financial Corp. releases third-quarter financial results.
MCLEAN, Va. -- Gannett Co. releases third-quarter financial results.
NEW YORK -- JPMorgan Chase & Co. releases third-quarter financial results.
MILWAUKEE -- Manpower Inc. releases third-quarter financial results.
NEW YORK -- Merrill Lynch & Co. releases third-quarter financial results.
PHILADELPHIA -- Sovereign Bancorp Inc. releases third-quarter financial results.
HARTFORD, Conn. -- United Technologies Corp. releases third-quarter financial results.
SEATTLE -- Washington Mutual Inc. releases third-quarter financial results.
THURSDAY, Oct. 18
NEW YORK -- Conference Board reports its monthly Leading Economic Indicators Index, 10 a.m.
WASHINGTON -- Labor Department reports on weekly jobless claims, 8:30 a.m.; Freddie Mac, the mortgage company.
LOS ANGELES -- E3 electronics show at LA Convention Center.
SUNNYVALE, Calif. -- Advanced Micro Devices Inc. releases third-quarter financial results.
CHARLOTTE, N.C. -- Bank of America Corp. releases third-quarter financial results.
NEW YORK -- Bank of New York releases third-quarter financial results.
DEERFIELD, Ill. -- Baxter International Inc. BAX releases third-quarter financial results.
MCLEAN, Va. -- Capital One Financial Corp. COF releases third-quarter financial results.
HOUSTON -- Continental Airlines Inc. releases third-quarter financial results.
NEW YORK -- Dow Jones & Co. releases third-quarter financial results.
INDIANAPOLIS -- Eli Lilly & Co. releases third-quarter financial results.
MOUNTAIN VIEW, Calif. -- Google Inc. releases third-quarter financial results.
HERSHEY, Penn. -- Hershey Co. releases third-quarter financial results.
RICHMOND, Va. -- Media General Inc. releases third-quarter financial results.
CHARLOTTE, N.C. -- Nucor Corp. releases third-quarter financial results.
NEW YORK -- Pfizer Inc. releases third-quarter financial results.
DALLAS -- Southwest Airlines Co. releases third-quarter financial results.
OMAHA, Neb. -- Union Pacific Corp. releases third-quarter financial results.
MINNETONKA, Minn. -- UnitedHealth Group Inc. releases third-quarter financial results.
MADISON, N.J. -- Wyeth releases third-quarter financial results.
FRIDAY, Oct. 19
ST. PAUL, Minn. -- 3M Co. releases third-quarter financial results.
NATICK, Mass. -- Boston Scientific Corp. releases third-quarter financial results.
PEORIA, Ill. -- Caterpillar Inc. releases third-quarter financial results.
MILWAUKEE -- Harley Davidson Inc. releases third-quarter financial results.
MORRISTOWN, N.J. -- Honeywell International Inc. releases third-quarter financial results.
OAK BROOK, Ill. -- McDonald's Corp. releases third-quarter financial results.
NEW YORK -- Schlumberger releases third-quarter financial results.
CHARLOTTE, N.C. -- Wachovia Corp. releases third-quarter financial results.
STAMFORD, Conn. -- Xerox Corp. releases third-quarter financial results.
MONDAY, Oct. 15
STOCKHOLM, Sweden -- The 2007 Nobel Memorial Prize in Economic Sciences is announced.
WASHINGTON -- Treasury bill auction.
NEW YORK -- Citigroup Inc. releases third-quarter financial results.
EL SEGUNDO, Calif. -- Mattel Inc. releases third-quarter financial results.
SAN FRANCISCO -- Charles Schwab Corp. releases third-quarter financial results.
SOUTH SAN FRACISCO, Calif. -- Genentech Inc. releases third-quarter financial results.
TUESDAY, Oct. 16
WASHINGTON -- Federal Reserve reports on industrial production for September, 9:15 a.m.
JACKSONVILLE, Fla. -- CSX Corp. releases third-quarter financial results.
ATLANTA -- Delta Air Lines Inc. releases third-quarter financial results.
SANTA CLARA, Calif. -- Intel Corp. releases third-quarter financial results.
ARMONK, N.Y. -- International Business Machines Corp. releases third-quarter financial results.
NEW BRUNSWICK, N.J. -- Johnson & Johnson releases third-quarter financial results.
SACRAMENTO, Calif. -- The McClatchy Co. releases third-quarter financial results.
GEORGE TOWN, Cayman Islands -- Seagate Technology releases first-quarter financial results.
EDEN PRAIRIE, Minn. -- Supervalu Inc. releases second-quarter financial results.
MINNEAPOLIS -- US Bancorp releases third-quarter financial results.
SAN FRANCISCO -- Wells Fargo & Co. releases third-quarter financial results.
SUNNYVALE, Calif. -- Yahoo Inc. releases third-quarter financial results.
WEDNESDAY, Oct. 17
WASHINGTON -- Labor Department reports on consumer price index for September, 8:30 a.m.; Commerce Department reports on housing starts for September, 8:30 a.m.; Federal Reserve releases beige book, its survey of regional economic conditions, 2 p.m.
ABBOTT PARK, Ill. -- Abbott Laboratories releases third-quarter financial results.
NORTHBROOK, Ill. -- Allstate Corp. releases third-quarter financial results.
NEW YORK -- Altria Group Inc. releases third-quarter financial results.
FORT WORTH, Texas -- AMR Corp. releases third-quarter financial results.
ATLANTA -- Coca-Cola Co. releases third-quarter financial results.
SAN JOSE, Calif. -- eBay Inc. releases third-quarter financial results.
NEW YORK -- E-Trade Financial Corp. releases third-quarter financial results.
MCLEAN, Va. -- Gannett Co. releases third-quarter financial results.
NEW YORK -- JPMorgan Chase & Co. releases third-quarter financial results.
MILWAUKEE -- Manpower Inc. releases third-quarter financial results.
NEW YORK -- Merrill Lynch & Co. releases third-quarter financial results.
PHILADELPHIA -- Sovereign Bancorp Inc. releases third-quarter financial results.
HARTFORD, Conn. -- United Technologies Corp. releases third-quarter financial results.
SEATTLE -- Washington Mutual Inc. releases third-quarter financial results.
THURSDAY, Oct. 18
NEW YORK -- Conference Board reports its monthly Leading Economic Indicators Index, 10 a.m.
WASHINGTON -- Labor Department reports on weekly jobless claims, 8:30 a.m.; Freddie Mac, the mortgage company.
LOS ANGELES -- E3 electronics show at LA Convention Center.
SUNNYVALE, Calif. -- Advanced Micro Devices Inc. releases third-quarter financial results.
CHARLOTTE, N.C. -- Bank of America Corp. releases third-quarter financial results.
NEW YORK -- Bank of New York releases third-quarter financial results.
DEERFIELD, Ill. -- Baxter International Inc. BAX releases third-quarter financial results.
MCLEAN, Va. -- Capital One Financial Corp. COF releases third-quarter financial results.
HOUSTON -- Continental Airlines Inc. releases third-quarter financial results.
NEW YORK -- Dow Jones & Co. releases third-quarter financial results.
INDIANAPOLIS -- Eli Lilly & Co. releases third-quarter financial results.
MOUNTAIN VIEW, Calif. -- Google Inc. releases third-quarter financial results.
HERSHEY, Penn. -- Hershey Co. releases third-quarter financial results.
RICHMOND, Va. -- Media General Inc. releases third-quarter financial results.
CHARLOTTE, N.C. -- Nucor Corp. releases third-quarter financial results.
NEW YORK -- Pfizer Inc. releases third-quarter financial results.
DALLAS -- Southwest Airlines Co. releases third-quarter financial results.
OMAHA, Neb. -- Union Pacific Corp. releases third-quarter financial results.
MINNETONKA, Minn. -- UnitedHealth Group Inc. releases third-quarter financial results.
MADISON, N.J. -- Wyeth releases third-quarter financial results.
FRIDAY, Oct. 19
ST. PAUL, Minn. -- 3M Co. releases third-quarter financial results.
NATICK, Mass. -- Boston Scientific Corp. releases third-quarter financial results.
PEORIA, Ill. -- Caterpillar Inc. releases third-quarter financial results.
MILWAUKEE -- Harley Davidson Inc. releases third-quarter financial results.
MORRISTOWN, N.J. -- Honeywell International Inc. releases third-quarter financial results.
OAK BROOK, Ill. -- McDonald's Corp. releases third-quarter financial results.
NEW YORK -- Schlumberger releases third-quarter financial results.
CHARLOTTE, N.C. -- Wachovia Corp. releases third-quarter financial results.
STAMFORD, Conn. -- Xerox Corp. releases third-quarter financial results.
Colombia's Stock Market Falls, Led By ISA; Peso Weakens
Colombia's Stock Market Falls, Led By ISA; Peso Weakens
BOGOTA (Dow Jones)--The Colombian stock index ended lower on Friday, pulled down by state-run electricity grid operator Interconexion Electrica SA (ISA.BO), or ISA.
The IGBC stock index fell 0.7% to close at 10,557.27 points, bringing the index down 5.4% so far this year.
"Pension funds and other institutional investors are not buying shares these days because they are waiting for the shares of Ecopetrol to start trading in November," said Nicolas Pardo, a market analyst with local brokerage Valores Bancolombia.
The Colombian government sold a 10.1% stake in state-run oil company Ecopetrol in August and September, raising about $2.8 billion. Ecopetrol will start trading on the stock market in November.
Ecopetrol's price is likely to rise, since demand was strong during the sale, Pardo said.
The most heavily-traded share Friday was ISA, which fell 1% to 6,710 Colombian pesos ($3.40), as COP9.1 billion worth of shares changed hands.
"ISA is a typical share for long-term investors such as pension funds," Pardo said.
The second most-traded share was financial holding company Suramericana de Inversiones SA (SURAMINV.BO), which fell 1% to COP19,320.
The peso weakened to COP1,972.5 to the dollar from COP1,969.25 on Thursday. The yield on the benchmark peso-denominated bond maturing in 2020 fell to 10.150% from 10.158% Thursday.
-By Inti Landauro, Dow Jones Newswires; 57-310-867 65 42; colombia@dowjones.com
BOGOTA (Dow Jones)--The Colombian stock index ended lower on Friday, pulled down by state-run electricity grid operator Interconexion Electrica SA (ISA.BO), or ISA.
The IGBC stock index fell 0.7% to close at 10,557.27 points, bringing the index down 5.4% so far this year.
"Pension funds and other institutional investors are not buying shares these days because they are waiting for the shares of Ecopetrol to start trading in November," said Nicolas Pardo, a market analyst with local brokerage Valores Bancolombia.
The Colombian government sold a 10.1% stake in state-run oil company Ecopetrol in August and September, raising about $2.8 billion. Ecopetrol will start trading on the stock market in November.
Ecopetrol's price is likely to rise, since demand was strong during the sale, Pardo said.
The most heavily-traded share Friday was ISA, which fell 1% to 6,710 Colombian pesos ($3.40), as COP9.1 billion worth of shares changed hands.
"ISA is a typical share for long-term investors such as pension funds," Pardo said.
The second most-traded share was financial holding company Suramericana de Inversiones SA (SURAMINV.BO), which fell 1% to COP19,320.
The peso weakened to COP1,972.5 to the dollar from COP1,969.25 on Thursday. The yield on the benchmark peso-denominated bond maturing in 2020 fell to 10.150% from 10.158% Thursday.
-By Inti Landauro, Dow Jones Newswires; 57-310-867 65 42; colombia@dowjones.com
09.10.2007
A run for the money
IS A FULL-BLOWN BUYING-PANIC ABOUT TO ENSUE, OR ARE WE APPROACHING A NEAR-TERM, OR PERHAPS A MORE SIGNIFICANT CRESTING TERMINAL OF MAJOR IMPORT?
The answer is painfully clear. Nobody knows but the esteemed Mr. Price.
We have learned a long, long time ago ??“ that virtually ANYTHING is possible regarding both short and longer-term outcomes in financial markets.
Fundamentals, logic, technical??™s, as well as the most perfectly counted Elliott Wave Patterns have a sinister way of breeding deception with alarming frequency.
In defiance of the majority??™s immediate expectation bias, the ???PRICE-ACTION??? remains the most fruitful common denominator in determining both the short and long-term intent of nominal-values.
As one speculates amid this rather perverse, and psychologically-driven price discovery process, emotions and bias run high. Due to this unavoidable human condition, it is crucial that one find a disciplined means to step-back and view price action for what it is, and not what one thinks, or hopes it will be.
Once this means is attained, an individual regiment must then be adopted to enter and exit positions based purely on boundaries, targets, risk tolerance, and personal trading preferences.
Following our short-term trading recap below, we will wrap up with a longer-term briefing of the major indices in our regular market update.
All The Right Stuff
A small handful of our clients have alluded that although we masterfully lay all of the ground-work relative to elected entry-locations and exit-targets, that we do not prognosticate or express staunch enough predictive bias to either support or dissuade them from taking or holding onto positions.
As we layout the evolving price landscape, there is simply no time for hand-holding or table pounding banter. In our view, such emotional endeavor is a simply a waste of valuable time and a huge drain on productive energy.
As the dynamic landscape is drafted, all one is called upon to do is to align one??™s money management criteria and trade preferences with the dynamic boundaries and price targets set forth - then get all of the appropriate orders in front of the market and manage their trades ??“ win, lose, or draw.
Upon impartial assessment of wave-structures in concert with traditional chart analysis, we continue to successfully-plot forward-looking navigational landscapes based solely upon the reality that ???PRICE-ACTION??? dictates.
Thereafter, we apply the balance of our technical acumen to confirm or negate longer-term prospective wave structures whilst keenly observing success or marginalization of our shorter-term proprietary trade-trigger boundaries.
Below is a recent account of trade-triggers and price-target outcomes from Elliott Wave Technology??™s Near Term Outlook. The results speak for themselves.
You Get Out of it, What You Put into it
Bear in mind that the chart landscapes we furnish are archived in clear graphic form, and include a full compliment of consistent and impartial commentary assessments.
By no means do we predict prices, nor do we issue specific buy and sell recommendations in advance of trade-triggers electing, or upon price-targets achieving objectives.
Although we graphically identify explicit entry-triggers along with point-values and price-target objectives, decisions to place orders and manage trades through fruition are the sole the responsibility of each individual.
The Near Term Outlook covers the short-term Dow, S&P, and NDX five-days-per-week, and issues near-term updates for the Dollar, Gold, Crude Oil, and the HUI two times per week.
In addition, NTO subscribers receive an Interim Monthly Forecast, as well as our longer-view Millennium Wave Quarterly reports to balance one??™s perspectives in every time-horizon.
Subscription premiums for the NTO are currently a scant $50.00 per month. The Interim Monthly Forecast and Millennium Wave Quarterly reports are currently available as stand-alone subscriptions for $19.00 per month and $25.00 per quarter respectively.
Consistency and outstanding achievement in accurately drafting both short and long-term market landscapes has ballooned our subscriber-base more than three-fold in recent months. Growing demand dictates that we soon raise our three subscription premiums to $75.00, $29.00, and $38.00 respectively. As such, there is no time better than the present to try one of our outstanding publications.
That said, let??™s take a longer-term view of what is currently taking place in the financial sphere.
The Past 15-yrs in Brief:
The NASDAQ 100
The NDX:
HOPE MARCHES ON
As the ticker on CNBC runs those annoying orange blurbs for days-on-end stating that the Dow or S&P is so many points above or below a historic high, we often wonder why they do not include one that reflects the NDX is still 3000 points below its former peak.
Such a shout-out may bring to light one possible reason why participants appear to be chasing what they perceived to be the most undervalued, risk-free asset class - with the most upside potential.
Chants for NDX 3000 (some 40% above current levels) would somehow fail to cut the mustard considering that 5000 would be the appropriate level to chant about.
For now, the NDX appears to have its radar locked on the 2300 level, with an eye toward 3000 should the king-fiat currency devaluation really start digging in.
Breaching 15-year lows, The Dollar resides in the hyperinflationary danger zone below the 80-level. Should 80 mark a permanent ceiling, the dollar is on its way to 40, heading inevitably toward its intrinsic value of $0.00.
Not surprisingly, The Dow is a near mirror image of the dollar. Whether or not this reflection will remain consistent in the aftermath of extreme dollar devaluations is questionable. For now, ???letting the dollar go??? is still perceived as bullish.
Although Gold may have gotten a bit ahead of itself at the highs back in 2006, its long-term trend is overwhelmingly bullish. The five or more hugging base-line touches between 2002 and 2005 were extraordinarily bullish, and rather telling. Given Gold??™s tight ride along the lower trend channel boundary, the $300 dollar explosion in 2005-2006 came as no major surprise. Even though the 2006 spike-high marked an interim top, the market has now recaptured this level in 2007.
Trailing markedly behind the leadership of the Dow, The S&P is taking another crack at breaking above its 2000-2002 bear-market trading range. In contrast to the Dow, note how close the S&P came to breaching its five-year uptrend at the recent August low. Likewise, note how the Dow has broken decisively above its previous bull-market highs and has stayed there for more than a year, while the S&P continues to struggle at its similar respective crest.
Should readers have interest in obtaining access to Elliott Wave Technology??™s blog-page, kindly forward the author your e-mail address for private invitation.
The answer is painfully clear. Nobody knows but the esteemed Mr. Price.
We have learned a long, long time ago ??“ that virtually ANYTHING is possible regarding both short and longer-term outcomes in financial markets.
Fundamentals, logic, technical??™s, as well as the most perfectly counted Elliott Wave Patterns have a sinister way of breeding deception with alarming frequency.
In defiance of the majority??™s immediate expectation bias, the ???PRICE-ACTION??? remains the most fruitful common denominator in determining both the short and long-term intent of nominal-values.
As one speculates amid this rather perverse, and psychologically-driven price discovery process, emotions and bias run high. Due to this unavoidable human condition, it is crucial that one find a disciplined means to step-back and view price action for what it is, and not what one thinks, or hopes it will be.
Once this means is attained, an individual regiment must then be adopted to enter and exit positions based purely on boundaries, targets, risk tolerance, and personal trading preferences.
Following our short-term trading recap below, we will wrap up with a longer-term briefing of the major indices in our regular market update.
All The Right Stuff
A small handful of our clients have alluded that although we masterfully lay all of the ground-work relative to elected entry-locations and exit-targets, that we do not prognosticate or express staunch enough predictive bias to either support or dissuade them from taking or holding onto positions.
As we layout the evolving price landscape, there is simply no time for hand-holding or table pounding banter. In our view, such emotional endeavor is a simply a waste of valuable time and a huge drain on productive energy.
As the dynamic landscape is drafted, all one is called upon to do is to align one??™s money management criteria and trade preferences with the dynamic boundaries and price targets set forth - then get all of the appropriate orders in front of the market and manage their trades ??“ win, lose, or draw.
Upon impartial assessment of wave-structures in concert with traditional chart analysis, we continue to successfully-plot forward-looking navigational landscapes based solely upon the reality that ???PRICE-ACTION??? dictates.
Thereafter, we apply the balance of our technical acumen to confirm or negate longer-term prospective wave structures whilst keenly observing success or marginalization of our shorter-term proprietary trade-trigger boundaries.
Below is a recent account of trade-triggers and price-target outcomes from Elliott Wave Technology??™s Near Term Outlook. The results speak for themselves.
You Get Out of it, What You Put into it
Bear in mind that the chart landscapes we furnish are archived in clear graphic form, and include a full compliment of consistent and impartial commentary assessments.
By no means do we predict prices, nor do we issue specific buy and sell recommendations in advance of trade-triggers electing, or upon price-targets achieving objectives.
Although we graphically identify explicit entry-triggers along with point-values and price-target objectives, decisions to place orders and manage trades through fruition are the sole the responsibility of each individual.
The Near Term Outlook covers the short-term Dow, S&P, and NDX five-days-per-week, and issues near-term updates for the Dollar, Gold, Crude Oil, and the HUI two times per week.
In addition, NTO subscribers receive an Interim Monthly Forecast, as well as our longer-view Millennium Wave Quarterly reports to balance one??™s perspectives in every time-horizon.
Subscription premiums for the NTO are currently a scant $50.00 per month. The Interim Monthly Forecast and Millennium Wave Quarterly reports are currently available as stand-alone subscriptions for $19.00 per month and $25.00 per quarter respectively.
Consistency and outstanding achievement in accurately drafting both short and long-term market landscapes has ballooned our subscriber-base more than three-fold in recent months. Growing demand dictates that we soon raise our three subscription premiums to $75.00, $29.00, and $38.00 respectively. As such, there is no time better than the present to try one of our outstanding publications.
That said, let??™s take a longer-term view of what is currently taking place in the financial sphere.
The Past 15-yrs in Brief:
The NASDAQ 100
The NDX:
HOPE MARCHES ON
As the ticker on CNBC runs those annoying orange blurbs for days-on-end stating that the Dow or S&P is so many points above or below a historic high, we often wonder why they do not include one that reflects the NDX is still 3000 points below its former peak.
Such a shout-out may bring to light one possible reason why participants appear to be chasing what they perceived to be the most undervalued, risk-free asset class - with the most upside potential.
Chants for NDX 3000 (some 40% above current levels) would somehow fail to cut the mustard considering that 5000 would be the appropriate level to chant about.
For now, the NDX appears to have its radar locked on the 2300 level, with an eye toward 3000 should the king-fiat currency devaluation really start digging in.
Breaching 15-year lows, The Dollar resides in the hyperinflationary danger zone below the 80-level. Should 80 mark a permanent ceiling, the dollar is on its way to 40, heading inevitably toward its intrinsic value of $0.00.
Not surprisingly, The Dow is a near mirror image of the dollar. Whether or not this reflection will remain consistent in the aftermath of extreme dollar devaluations is questionable. For now, ???letting the dollar go??? is still perceived as bullish.
Although Gold may have gotten a bit ahead of itself at the highs back in 2006, its long-term trend is overwhelmingly bullish. The five or more hugging base-line touches between 2002 and 2005 were extraordinarily bullish, and rather telling. Given Gold??™s tight ride along the lower trend channel boundary, the $300 dollar explosion in 2005-2006 came as no major surprise. Even though the 2006 spike-high marked an interim top, the market has now recaptured this level in 2007.
Trailing markedly behind the leadership of the Dow, The S&P is taking another crack at breaking above its 2000-2002 bear-market trading range. In contrast to the Dow, note how close the S&P came to breaching its five-year uptrend at the recent August low. Likewise, note how the Dow has broken decisively above its previous bull-market highs and has stayed there for more than a year, while the S&P continues to struggle at its similar respective crest.
Should readers have interest in obtaining access to Elliott Wave Technology??™s blog-page, kindly forward the author your e-mail address for private invitation.
Minutes of the FOMC meeting held on 18 September may explain the big interest-rate cut
Fundamental highlights this week
Germany: industrial orders, August - Monday
The order intake fell by 7% in July after rising solidly over the preceding months.
Given the strong euro and slowing growth in the US, a turn to the better does not seem imminent.
The order index of the PMI also points to additional falls, but it is far from a one-to-one correlation between PMI and the order intake.
The US: minutes of the FOMC meeting held on 18 September - Tuesday
The Fed lowered its Fed-funds rate by half a percentage point on 18 September, which was a surprisingly big cut..
It was the first time in a very long time that the Fed surprised the markets, and the minutes will be scrutinised for signs of more interest-rate cuts and explanations why the Fed made this surprise move.
In particular, market participants will look out for assessments of whether the financial turmoil will affect the rest of the economy.
The US: retail sale September ??“ Friday
One of this week's absolutely most important indicators, since it indicates whether the financial crisis has spilled over into consumer spending.
A credit tightening will primarily affect consumer buying of durable consumer goods such as cars, PCs, furniture etc.
Retail sales grew at the trend growth rate in August, and we expect retail sales to grow at a slower pace than the trend rate growth of .3%, mainly due to lower car sales.
Expected Exchange Rates
United States Dollar EUR/USD USD/DKK
The highlight of the week is the minutes from the monetary policy meeting held on 18 September.
The latest statements show that 95% of the market participants on a daily basis predict a continued weaker dollar. However, according to market psychology this can very well be a sign of a future trend turnaround.
The USD index reached a new all-time low on 1 October and strengthened afterwards.
We expect as a minimum a small strengthening of USD in the coming week.
Great Britain Pound EUR/GBP GBP/DKK
Macroeconomic highlights: industrial production and RICS.
As expected, since the end of last week we have witnessed a strengthening of GBP from the lowest level since April 2006 towards 69 against EUR.
We are expecting a relatively quiet week dominated by technical trades, since it seems that the Northern Rock affair has calmed. However, new stories about crises in the UK can spark off financial turmoil again..
Japanese Yen EUR/JPY JPY/DKK
Carry trades have been the predominant theme for a couple of weeks now. Still, we feel that the weakening of JPY will prompt some investors to buy at these low levels. Hence we find that the risk of a correction lower on EURJPY has increased
This week's main event will be the monetary-policy meeting at BoJ on Wednesday
We expect the BoJ to adopt a waiting stance and leave rates unchanged until mid 2008.
Swiss Franc EUR/CHF CHF/DKK
There are not many important macroeconomic releases in Switzerland in the coming week.
As in the case of EURJPY, we feel that the risk of a correction lower in EURCHF has increased
The currency cross has moved along a positive trend for a while now and is currently trading around the mid- July highs.
This will prompt some investors to take profit on long positions
Norwegian Krone EUR/NOK NOK/DKK
NOK has strengthened substantially over the past weeks on the back of rising oil prices and a relatively hawkish monetary policy stance by Norges Bank.
We find that the decline of EURNOK will prompt some investors to take profit on short positions ahead of the release of the Norwegian CPI on Wednesday.
We expect that overall inflation will pick up although the strong NOK will pull in the opposite direction
Swedish Krona EUR/SEK SEK/DKK
EURSEK has been trading sideways for some time now, and we expect this tendency to last until the release of the Swedish CPI on Thursday
The rising capacity utilization and the higher wage increases that are expected in relation to the agreements to be made in the spring will continue to contribute to a sustained inflationary pressure.
The Riksbank has been rather hawkish until now ??“ therefore SEK will strengthen in case the rise in CPI is substantially above expectations
Germany: industrial orders, August - Monday
The order intake fell by 7% in July after rising solidly over the preceding months.
Given the strong euro and slowing growth in the US, a turn to the better does not seem imminent.
The order index of the PMI also points to additional falls, but it is far from a one-to-one correlation between PMI and the order intake.
The US: minutes of the FOMC meeting held on 18 September - Tuesday
The Fed lowered its Fed-funds rate by half a percentage point on 18 September, which was a surprisingly big cut..
It was the first time in a very long time that the Fed surprised the markets, and the minutes will be scrutinised for signs of more interest-rate cuts and explanations why the Fed made this surprise move.
In particular, market participants will look out for assessments of whether the financial turmoil will affect the rest of the economy.
The US: retail sale September ??“ Friday
One of this week's absolutely most important indicators, since it indicates whether the financial crisis has spilled over into consumer spending.
A credit tightening will primarily affect consumer buying of durable consumer goods such as cars, PCs, furniture etc.
Retail sales grew at the trend growth rate in August, and we expect retail sales to grow at a slower pace than the trend rate growth of .3%, mainly due to lower car sales.
Expected Exchange Rates
United States Dollar EUR/USD USD/DKK
The highlight of the week is the minutes from the monetary policy meeting held on 18 September.
The latest statements show that 95% of the market participants on a daily basis predict a continued weaker dollar. However, according to market psychology this can very well be a sign of a future trend turnaround.
The USD index reached a new all-time low on 1 October and strengthened afterwards.
We expect as a minimum a small strengthening of USD in the coming week.
Great Britain Pound EUR/GBP GBP/DKK
Macroeconomic highlights: industrial production and RICS.
As expected, since the end of last week we have witnessed a strengthening of GBP from the lowest level since April 2006 towards 69 against EUR.
We are expecting a relatively quiet week dominated by technical trades, since it seems that the Northern Rock affair has calmed. However, new stories about crises in the UK can spark off financial turmoil again..
Japanese Yen EUR/JPY JPY/DKK
Carry trades have been the predominant theme for a couple of weeks now. Still, we feel that the weakening of JPY will prompt some investors to buy at these low levels. Hence we find that the risk of a correction lower on EURJPY has increased
This week's main event will be the monetary-policy meeting at BoJ on Wednesday
We expect the BoJ to adopt a waiting stance and leave rates unchanged until mid 2008.
Swiss Franc EUR/CHF CHF/DKK
There are not many important macroeconomic releases in Switzerland in the coming week.
As in the case of EURJPY, we feel that the risk of a correction lower in EURCHF has increased
The currency cross has moved along a positive trend for a while now and is currently trading around the mid- July highs.
This will prompt some investors to take profit on long positions
Norwegian Krone EUR/NOK NOK/DKK
NOK has strengthened substantially over the past weeks on the back of rising oil prices and a relatively hawkish monetary policy stance by Norges Bank.
We find that the decline of EURNOK will prompt some investors to take profit on short positions ahead of the release of the Norwegian CPI on Wednesday.
We expect that overall inflation will pick up although the strong NOK will pull in the opposite direction
Swedish Krona EUR/SEK SEK/DKK
EURSEK has been trading sideways for some time now, and we expect this tendency to last until the release of the Swedish CPI on Thursday
The rising capacity utilization and the higher wage increases that are expected in relation to the agreements to be made in the spring will continue to contribute to a sustained inflationary pressure.
The Riksbank has been rather hawkish until now ??“ therefore SEK will strengthen in case the rise in CPI is substantially above expectations
07.10.2007
Fed Most Likely on Hold at October 30-31 FOMC Meeting
Civilian Unemployment Rate: 4.7% in September vs. 4.6% in August
Payroll Employment: +110,000 in September, net gain of 118,000 new jobs after revisions of payroll estimates for July and August, with government sector tally accounting for 113,000 net new jobs
Hourly earnings: +7 cents to $17.57, 4.09% yoy change, cycle high was 4.28% yoy change in Dec. 2006.
Household Survey ??“ The unemployment rate rose to 4.7% in September compared with 4.6% in July and August. The unemployment rate has moved up gradually from a cycle low of 4.4% in March 2007 (see Chart 1). The rise in the unemployment rate was due mainly to a large influx of teenagers into the labor force who were unable to find employment. Thus, the September increase in the unemployment rate is less ominous than would have been the case had it resulted from layoffs of adult workers.
Establishment Survey ??“ Payroll employment advanced 110,000 in September after net upward revisions of 118,000 new jobs in July and August. These upward revisions were concentrated in the government sector (+113,000) and were attributed to school hiring. (As an aside, what does it say about our public school system if administrators have this much difficulty tallying up the number of employees on their payroll?) Total nonfarm payrolls have risen 1.19% on a year-to-year basis in September (see chart 2), the lowest since May 2004. Private sector nonfarm employment shows a similar deceleration from a 2.43% year-to-year gain in March 2006 (peak) to a 1.23% year-to-year increase in September (see chart 2). From June to September, employment growth averaged 90,000 per month; during the first 5 months of 2007, the average monthly gain was 147,000. In 2006, the monthly average increase in nonfarm payrolls was 186,000.Each of these measures sends a message of significant slowing in payroll employment. Moreover, in the 12 months ended September 2007, the birth/death adjustment represented 69% of the increase in nonfarm payrolls; in the 12 months ended September 2006, it represented 42% of the increase in nonfarm payrolls. In sum, the slowdown in nonfarm payroll growth being experienced so far this year may, in reality, be more severe than what is being reported because of an upward bias imparted by ???phantom??? jobs assumed to have been created by start-up businesses not yet covered in the BLS survey.
Factory sector employment fell 18,000 in September; the total number of factory jobs lost in the first nine months of the year is 148,000 jobs versus a reduction of 3,000 in the first nine months of 2006. Total hiring in construction fell 14,000 in September, inclusive of gains in the non-residential sector and losses in the residential sector. In the residential sector, employment declined 20,000. During the first nine months of 2007, jobs in residential construction have dropped 93,000 after adding 16,500 jobs in the same period of 2006 (see chart 3), reflecting the recession in the housing sector.
Service sector payrolls increased 143,000 in September, with government payrolls accounting for one-fourth of the increase. Retail employment fell 5,000, 4,000 jobs were lost in the financial industry, with offsets from 33,000 new health care jobs and 21,000 new hiring in professional and business services. The financial sector has posted a total loss of 28,000 in the August and September months which are most likely related to the financial market crisis. Temporary help, a leading indicator of employment, dropped 34,900 in September, with a loss of 202,900 in the first nine months of the year vs. a reduction of 23,800 jobs during the same period in 2006.
Hourly earnings increased 7 cents to $17.57 in September, putting the year-to-year gain at 4.09%. The earnings and employment numbers suggest an increase in personal income during September that is probably larger than the 0.3% gain reported for August. The steady reading of the manufacturing man-hours index points to a small increase in industrial production during September.
Conclusion ??“ The payroll tally for September, significant upward revisions of employment in July and August, the 0.6% inflation adjusted increase in consumer spending during August, and the nearly steady sales pace of autos in September (16.22 million units vs. 16.26 million units in August) are factors that have reduced the probability of a cut in the federal funds rate on October 31. That said, it is abundantly clear that a growth recession is underway. By cutting the federal funds rate by 50 bps in one fell swoop on September 18, the FOMC has bought itself some time to watch developments in the economy. We believe that further weakness in economic activity will appear in the weeks ahead, which will induce another cut in the federal funds rate at the December 11 FOMC meeting.
Payroll Employment: +110,000 in September, net gain of 118,000 new jobs after revisions of payroll estimates for July and August, with government sector tally accounting for 113,000 net new jobs
Hourly earnings: +7 cents to $17.57, 4.09% yoy change, cycle high was 4.28% yoy change in Dec. 2006.
Household Survey ??“ The unemployment rate rose to 4.7% in September compared with 4.6% in July and August. The unemployment rate has moved up gradually from a cycle low of 4.4% in March 2007 (see Chart 1). The rise in the unemployment rate was due mainly to a large influx of teenagers into the labor force who were unable to find employment. Thus, the September increase in the unemployment rate is less ominous than would have been the case had it resulted from layoffs of adult workers.
Establishment Survey ??“ Payroll employment advanced 110,000 in September after net upward revisions of 118,000 new jobs in July and August. These upward revisions were concentrated in the government sector (+113,000) and were attributed to school hiring. (As an aside, what does it say about our public school system if administrators have this much difficulty tallying up the number of employees on their payroll?) Total nonfarm payrolls have risen 1.19% on a year-to-year basis in September (see chart 2), the lowest since May 2004. Private sector nonfarm employment shows a similar deceleration from a 2.43% year-to-year gain in March 2006 (peak) to a 1.23% year-to-year increase in September (see chart 2). From June to September, employment growth averaged 90,000 per month; during the first 5 months of 2007, the average monthly gain was 147,000. In 2006, the monthly average increase in nonfarm payrolls was 186,000.Each of these measures sends a message of significant slowing in payroll employment. Moreover, in the 12 months ended September 2007, the birth/death adjustment represented 69% of the increase in nonfarm payrolls; in the 12 months ended September 2006, it represented 42% of the increase in nonfarm payrolls. In sum, the slowdown in nonfarm payroll growth being experienced so far this year may, in reality, be more severe than what is being reported because of an upward bias imparted by ???phantom??? jobs assumed to have been created by start-up businesses not yet covered in the BLS survey.
Factory sector employment fell 18,000 in September; the total number of factory jobs lost in the first nine months of the year is 148,000 jobs versus a reduction of 3,000 in the first nine months of 2006. Total hiring in construction fell 14,000 in September, inclusive of gains in the non-residential sector and losses in the residential sector. In the residential sector, employment declined 20,000. During the first nine months of 2007, jobs in residential construction have dropped 93,000 after adding 16,500 jobs in the same period of 2006 (see chart 3), reflecting the recession in the housing sector.
Service sector payrolls increased 143,000 in September, with government payrolls accounting for one-fourth of the increase. Retail employment fell 5,000, 4,000 jobs were lost in the financial industry, with offsets from 33,000 new health care jobs and 21,000 new hiring in professional and business services. The financial sector has posted a total loss of 28,000 in the August and September months which are most likely related to the financial market crisis. Temporary help, a leading indicator of employment, dropped 34,900 in September, with a loss of 202,900 in the first nine months of the year vs. a reduction of 23,800 jobs during the same period in 2006.
Hourly earnings increased 7 cents to $17.57 in September, putting the year-to-year gain at 4.09%. The earnings and employment numbers suggest an increase in personal income during September that is probably larger than the 0.3% gain reported for August. The steady reading of the manufacturing man-hours index points to a small increase in industrial production during September.
Conclusion ??“ The payroll tally for September, significant upward revisions of employment in July and August, the 0.6% inflation adjusted increase in consumer spending during August, and the nearly steady sales pace of autos in September (16.22 million units vs. 16.26 million units in August) are factors that have reduced the probability of a cut in the federal funds rate on October 31. That said, it is abundantly clear that a growth recession is underway. By cutting the federal funds rate by 50 bps in one fell swoop on September 18, the FOMC has bought itself some time to watch developments in the economy. We believe that further weakness in economic activity will appear in the weeks ahead, which will induce another cut in the federal funds rate at the December 11 FOMC meeting.
Market Directions Sunday, October 7, 2007
The stoics-the Bank of England and the European Central Bank
Job growth returns to the US, but not optimism to the Dollar
The ECB wants a strong dollar but not a strong Euro?
The Week in Review October 1 - October 5
It was status quo in the central bank market this week. T he Bank of England, the European Central Bank and the Reserve Bank of Australia a ll left their base rates unchanged. Only the American Federal Reserve has felt the need to chop rates in this post sub-prime world.
In the immediate aftermath of the recent credit problems the currency markets have placed the onus squarely on the Usd. The States were the source of the original problem and the most likely sufferer from its aftereffects. The Fed September rate cut and the admission it represented for the immediate health of the American economy drove the Usd down and down. The skein did not completely unwind until this past Monday when the Euro reached its lifetime high at 1.4280.
The fears that financial markets would freeze up in credit scarcity brought on by defaults in the sub prime housing and asset backed sectors have subsided. And while another large bank or mortgage company failure would make headlines it is unlikely it would incite the worldwide panic of early August. One of the chief fears in August was the unknown extent of the problem. How much questionable debt was held and how much would come due for refinancing in the following weeks. The period until the end of October was seen as crucial. We are now more than two thirds through that period and the credit markets have returned to normal functioning, if not to entirely normal spreads. The Europeans and the British central bankers, while acknowledging the severity of the credit liquidity situation, have demonstrated their resolve. They judge that their economies do not require preventative medicine. The remaining question is the health of the US economy; it weighs heavily on the dollar.
The situation is similar to that of last December. From October to December the then relatively new housing market collapse was expected to crack the wider US economy and produce a severe slowdown if not recession. The dollar sank against the Euro through the last quarter of the year in anticipation of the economic result. However, the US economy did not falter and the statistics improved throughout December. In January the Dollar gained almost 3.4% against the Euro. The case here is not to predict a Dollar recovery but to underline the fact that the market assumption is not yet proven. The speculative urge that is driving down the Usd is produced by anticipation of events not the events themselves. It may prove to be correct and the American economy may slip to neutral or recession. But the two figure fall in the Euro on Thursday reminds traders of the potential fragility of that assumption.
The difference between the economic views of the ECB and the Fed as expressed in their actions and policy are driving the dollar lower. Both are based on projections of current economic trends that are not yet fully substantiated.
United States
The US economy has not rolled over; it is still growing and creating jobs, the basic value for a consumer economy. But most economic numbers are sliding. Both ISM numbers, manufacturing and services, and factory orders were below forecast. The slowing trends that are evident in most US statistics originated before the credit crisis surfaced. However, there does not seem to be a generalized depiction of weakness, moderating growth is still the order of the day. With the Christmas and Holiday season approaching and the credit crisis behind a return to more buoyant spending is always possible. The main forward looking statistics, the purchasing managers indices and the consumer sentiment numbers were no doubt swayed by the emotional effects of the credit market crisis.
The Fed and Chairman Bernanke should be pleased with the NFP report. Job growth was not unduly affected by the credit liquidity crisis and recession fears are reduced as a consequence. Moderate but not dramatic job growth can support consumer spending without aggravating inflation. And while the three month moving average has been falling steadily all year, from +190,000 in January to +97,300 in the latest month this may help spur productivity and forestall rising labor cost pressures. Average Hourly Earning gained in September and with PCE Core Inflation at only +1.4% there is room for an increase in retail spending.
Eurozone
The ECB program for rate policy is clear and well expressed in the statement accompanying the rate decision. The reference to an "accommodative' rate policy was eliminated and replaced by "upside risks...to price stability". The wording may be different but it is hard to see how the rate stance has changed. Economic "fundamentals...support a favorable outlook for economic activity...on balance risks to the outlook for growth are judged to lie on the downside...[but] these downside risks relate mainly to the potential for a broader impact from the ongoing reappraisal of risk in financial markets..". In brief, except for the financial and credit market problems, the EMU economies are expanding at or above trend, producing a serious future potential for inflation that remains the bank's central concern. By implication, if the credit problems disappear then the bank will have no reason to be other than vigilant against inflation and the governing council will raise rates when and if it deems necessary.
Earlier in the week Jean Claude Trichet, ECB President speaking in Valetta Malta, reminded his audience that the US Treasury and Federal Reserve Bank have historically supported a strong dollar. His point was not to lecture the dignitaries that a strong Euro is good for the EMU economies and that the Europeans should stop complaining, but to remind the US officials of their traditional stance.
On Tuesday French Finance Minister Christine Lagarde had suggested that US Treasury Secretary Henry Paulson should say "loud and clear that a strong dollar is good for the US economy". If a strong Dollar is good for the US economy why wouldn't a strong Euro be good for the EMU economies? Would not all the advantages that a strong currency confers on the US also accrue to the EMU? Are the laws of economics different in the Old world than the New?
Or as one commentator, Barbara Rockefeller of Rockfeller Treasury S ervices put it, as quoted by Market News International, "the chance of ECB or G7 intervention is nearly zero, especially if it depends on the US participation". The Fed does not appear to be worried about the Dollar and the Treasury is unlikely to be either with exports up over 12%. While the US say "a strong dollar [is in its] best interest", it does nothing to support such a policy. "The real policy is let the markets decide". As for the Euro, the European have long said that they wanted a currency that could compete with the dollar's reserve status, "now let them live with it". No major industrial country predicates its economic, fiscal or monetary policy on exchange rates. The overriding operational factor is the health of the domestic economy; the Europeans are no different.
Japan
The Tankan Survey for the third quarter from the Bank of Japan held ground with large manufacturing firms reporting sentiment the same as in the second quarter, 23. Since GDP contracted 1.2% in that quarter according to the latest government figures the status quo reading was a small victory, reflecting strong demand from non US customers.
Economic Releases October 1 - October 5
United States
Monday: the Institute for Supply Management Survey of Manufacturing for September recorded a decline for the third month in a row at 52.0. This is consistent with a 2.5% growth in manufacturing. The median prediction had been 52.9, the same as the August reading. "Prices Paid' fell to 59.0 from 63.0, "New Orders' to 53.4 from 55.3. Only the result for 'Employment' increased to 51.7 from 51.3.
Tuesday: the Pending Home Sales Index from the National Association of Realtors (NAR) plunged 6.5% in August to 85.5. It is down 21.5% from the same period last year. Pending sales are those where a price between the seller and buyer has been agreed but the sale has not closed. The decline reflects the increased difficulty in mortgage financing for retail home buyers. The Pending Index acts as a leading indicator for 'existing home sales' and promises further weakness in the largest category of home purchase in the US. It also underlines the still lively potential for wider economic impact from the year long decline in the residential housing market.
Wednesday: the Institute for Supply Management Non-Manufacturing Index (ISM) at 54.8 was slightly better than the 54.5 forecast but below the August reading of 55.8. Though this was a bit less than the 56.6 average for the past it is nevertheless indicative of continued moderated growth into the fourth quarter. The 'Employment' Index staged a recovery to 52.7 from 47.9 in August; 'New Orders' fell to 53.4 from 57.0.
Thursday: Factory Orders for August underperformed expectations at -3.3% against the median forecast of -2.8%. It was the largest monthly drop since January when they fell 5.7%. The Euro climbed 50 points immediately after the release.
Friday: Non Farm Payrolls returned to positive territory in September as excepted adding 110,000 jobs. More interestingly the August deficit of -4,000 was erased with the adjustment to +89,000 for the month, most of the addition being in government payrolls. July's number was adjusted higher to +93,000 from +68,000 for a total revision of 118,000 over the two months. The unemployment rate moved 0.1% higher to 4.7%. The three months moving average has almost halved since the beginning of the year: January 180.7, February 159.3, March 142.3, April 129.0, May 162.3, June 127.0, July 117.3, August 83.7, September 97.3. Average Hourly Earning moved up 0.4% for the month, now 4.1% annually, a gain of 0.2% over July and August and slightly better than the average for the past year.
Eurozone
Monday: The final issue for the September PMI manufacturing number was 52.3 as expected and unchanged from the preliminary issue. It is the third monthly decline since June registered 55.6 and the lowest reading since February of last year.
Tuesday: the Produce Price Index gained 0.1% in August as expected, flattening the yearly rate to 1.7% from 1.8% in July. Energy prices ebbed 2.2% in August helping to lower the overall result but prices have since surged higher in September and were the chief cause for the spike to 2.1% in the preliminary HICP rate as reported last week. The ECB is unlikely to take much ease with this number. Unemployment in the EMU was steady at 6.9% in August, the third month in a row that it has sustained the historic low for this series which began in 1993. German unemployment fell to 6.2% from 6.4%; French to 8.6% from 8.7%. The jobless rate in the US is 4.6% and in Japan it is 3.8%.
Wednesday: Retail Sales rose only 0.1% in August, a quarter of the +0.4% forecast. The annual rate was +0.5% as predicted. The July result was revised to +0.4 from +0.1% monthly, and to +1.3% from +0.5%. The Euro was unmoved by the disappointing monthly number, the July adjustment negating the August result.
Germany
Monday: the NTC/BME Manufacturing Purchasing Managers Index (PMI) dropped to 54.9 in September 1.1 points lower than August.
Wednesday: the NTC PMI Report on Services registered a sharp drop to 53.1 in September from the August reading at 59.8. It was the lowest result in more than a year. NTC Economics is a private British economics date and research firm that produces a wide array of data on the economies of 20 of the worlds largest industrial countries.
United Kingdom
Monday: the CIPS/NTC Manufacturing Purchasing Managers Index (PMI) for September fell slightly to 55.1 from 56.1.
Wednesday: Reuters Services PMI for September eased to 56.7 from 57.6, a tad below the 56.8 median forecast and the weakest result in 13 months. "Employment' fell to 51.8 from 43.7 and "Prices Charged" jumped to 53.7 from 53.1. The British Retail Consortium (BRC) Shop Price Index in September gained 0.2% and was 0.4% ahead of last year's prices. Food prices were the main culprit, up 0.6% in September, and 2.7% annually. It was the largest increase since last December. In August the yearly inflation rate for food prices was only 2.1%. Non-food prices sank 0.1% in September, a +0.7% annual rate. The 'final' RBS/NTC Report on Services PMI added 0.2 to 54.2, a substantial drop from the 58.0 reading in August. Nationwide Consumer Confidence rose to 99 in September a major improvement over the 94 reading in August. However, the current relevance of the September score is questionable because 90% of the data was collected before the BOE rescue of Northern Rock.
Japan
Monday: The BOJ Quarterly Tankan Report for the third quarter presented a mixed picture for the Japanese economy. Business confidence at large manufacturing companies remained at 23, as it was in the second quarter but better than the forecast of 21. All other major categories of business confidence recorded losses: 'small manufacturing firms' were 20 against 22 in quarter two; 'large service firms' were 20 versus 22 in the second quarter and 'small service sector firms' categories were -10 as opposed to -7 in the second quarter. Firms were polled for their opinion between August 28th and September 28th.
The Week Ahead October 8 - October 12
United States
Monday: Columbus Day Holiday US markets closed
Tuesday: FOMC minutes at 2:00 ET for the September 18th meeting when the Fed unexpectedly cut rate 0.5%.
Thursday: International Trade Balance for August at 8:30 ET; July -$59.2 billion
Friday: Retail Sales for September at 8:30 ET; August +0.3%. Retail Sales ex Food and Auto for September at 8:30 ET; August -0.4%. Producer Price Index (PPI) September at 8:30 ET; August -1.4%. PPI for September at 8:30 ET; August +0.2%. University of Michigan Consumer Sentiment for October at 10:00 ET; September 83.4.
Eurozone
Thursday: GDP for the second quarter (second issue) at 9:00 GMT; first quarter +0.7% q/q, +3.1% y/y. EU Commission GDP forecast at 9:00 GMT; Q3 2007 +0.3%-0.8%, Q4 2007 +0.2%-0.8%, Q1 2008 +0.2%-0.8%.
Friday: Industrial Production for August at 9:00 GMT; Jul +0.6% m/m, +3.7% y/y.
Germany
Monday: Total manufacturing Orders for August at 10:00 GMT; expected +2.0% m/m, +4.3% y/y. July -7.1% m/m, +6.1% y/y.
Tuesday: Industrial Output for August at 10:00 GMT; expected +0.5% m/m, +3.9% y/y. July +0.1% m/m, +4.4% y/y. Manufacturing Sector Output for August at 10:00 GMT. July +0.2% m/m, +5.7% y/y.
Thursday: Wholesale Prices for September a 6:00 GMT. August +0.5% m/m, +2.5% y/y.
United Kingdom
Monday: Manufacturing Output for August at 8:30 GMT; July -0.3% m/m, +0.6% y/y. Industrial Production for August at 8:30 GMT; July -0.1% m/m, +0.9% y/y.
Job growth returns to the US, but not optimism to the Dollar
The ECB wants a strong dollar but not a strong Euro?
The Week in Review October 1 - October 5
It was status quo in the central bank market this week. T he Bank of England, the European Central Bank and the Reserve Bank of Australia a ll left their base rates unchanged. Only the American Federal Reserve has felt the need to chop rates in this post sub-prime world.
In the immediate aftermath of the recent credit problems the currency markets have placed the onus squarely on the Usd. The States were the source of the original problem and the most likely sufferer from its aftereffects. The Fed September rate cut and the admission it represented for the immediate health of the American economy drove the Usd down and down. The skein did not completely unwind until this past Monday when the Euro reached its lifetime high at 1.4280.
The fears that financial markets would freeze up in credit scarcity brought on by defaults in the sub prime housing and asset backed sectors have subsided. And while another large bank or mortgage company failure would make headlines it is unlikely it would incite the worldwide panic of early August. One of the chief fears in August was the unknown extent of the problem. How much questionable debt was held and how much would come due for refinancing in the following weeks. The period until the end of October was seen as crucial. We are now more than two thirds through that period and the credit markets have returned to normal functioning, if not to entirely normal spreads. The Europeans and the British central bankers, while acknowledging the severity of the credit liquidity situation, have demonstrated their resolve. They judge that their economies do not require preventative medicine. The remaining question is the health of the US economy; it weighs heavily on the dollar.
The situation is similar to that of last December. From October to December the then relatively new housing market collapse was expected to crack the wider US economy and produce a severe slowdown if not recession. The dollar sank against the Euro through the last quarter of the year in anticipation of the economic result. However, the US economy did not falter and the statistics improved throughout December. In January the Dollar gained almost 3.4% against the Euro. The case here is not to predict a Dollar recovery but to underline the fact that the market assumption is not yet proven. The speculative urge that is driving down the Usd is produced by anticipation of events not the events themselves. It may prove to be correct and the American economy may slip to neutral or recession. But the two figure fall in the Euro on Thursday reminds traders of the potential fragility of that assumption.
The difference between the economic views of the ECB and the Fed as expressed in their actions and policy are driving the dollar lower. Both are based on projections of current economic trends that are not yet fully substantiated.
United States
The US economy has not rolled over; it is still growing and creating jobs, the basic value for a consumer economy. But most economic numbers are sliding. Both ISM numbers, manufacturing and services, and factory orders were below forecast. The slowing trends that are evident in most US statistics originated before the credit crisis surfaced. However, there does not seem to be a generalized depiction of weakness, moderating growth is still the order of the day. With the Christmas and Holiday season approaching and the credit crisis behind a return to more buoyant spending is always possible. The main forward looking statistics, the purchasing managers indices and the consumer sentiment numbers were no doubt swayed by the emotional effects of the credit market crisis.
The Fed and Chairman Bernanke should be pleased with the NFP report. Job growth was not unduly affected by the credit liquidity crisis and recession fears are reduced as a consequence. Moderate but not dramatic job growth can support consumer spending without aggravating inflation. And while the three month moving average has been falling steadily all year, from +190,000 in January to +97,300 in the latest month this may help spur productivity and forestall rising labor cost pressures. Average Hourly Earning gained in September and with PCE Core Inflation at only +1.4% there is room for an increase in retail spending.
Eurozone
The ECB program for rate policy is clear and well expressed in the statement accompanying the rate decision. The reference to an "accommodative' rate policy was eliminated and replaced by "upside risks...to price stability". The wording may be different but it is hard to see how the rate stance has changed. Economic "fundamentals...support a favorable outlook for economic activity...on balance risks to the outlook for growth are judged to lie on the downside...[but] these downside risks relate mainly to the potential for a broader impact from the ongoing reappraisal of risk in financial markets..". In brief, except for the financial and credit market problems, the EMU economies are expanding at or above trend, producing a serious future potential for inflation that remains the bank's central concern. By implication, if the credit problems disappear then the bank will have no reason to be other than vigilant against inflation and the governing council will raise rates when and if it deems necessary.
Earlier in the week Jean Claude Trichet, ECB President speaking in Valetta Malta, reminded his audience that the US Treasury and Federal Reserve Bank have historically supported a strong dollar. His point was not to lecture the dignitaries that a strong Euro is good for the EMU economies and that the Europeans should stop complaining, but to remind the US officials of their traditional stance.
On Tuesday French Finance Minister Christine Lagarde had suggested that US Treasury Secretary Henry Paulson should say "loud and clear that a strong dollar is good for the US economy". If a strong Dollar is good for the US economy why wouldn't a strong Euro be good for the EMU economies? Would not all the advantages that a strong currency confers on the US also accrue to the EMU? Are the laws of economics different in the Old world than the New?
Or as one commentator, Barbara Rockefeller of Rockfeller Treasury S ervices put it, as quoted by Market News International, "the chance of ECB or G7 intervention is nearly zero, especially if it depends on the US participation". The Fed does not appear to be worried about the Dollar and the Treasury is unlikely to be either with exports up over 12%. While the US say "a strong dollar [is in its] best interest", it does nothing to support such a policy. "The real policy is let the markets decide". As for the Euro, the European have long said that they wanted a currency that could compete with the dollar's reserve status, "now let them live with it". No major industrial country predicates its economic, fiscal or monetary policy on exchange rates. The overriding operational factor is the health of the domestic economy; the Europeans are no different.
Japan
The Tankan Survey for the third quarter from the Bank of Japan held ground with large manufacturing firms reporting sentiment the same as in the second quarter, 23. Since GDP contracted 1.2% in that quarter according to the latest government figures the status quo reading was a small victory, reflecting strong demand from non US customers.
Economic Releases October 1 - October 5
United States
Monday: the Institute for Supply Management Survey of Manufacturing for September recorded a decline for the third month in a row at 52.0. This is consistent with a 2.5% growth in manufacturing. The median prediction had been 52.9, the same as the August reading. "Prices Paid' fell to 59.0 from 63.0, "New Orders' to 53.4 from 55.3. Only the result for 'Employment' increased to 51.7 from 51.3.
Tuesday: the Pending Home Sales Index from the National Association of Realtors (NAR) plunged 6.5% in August to 85.5. It is down 21.5% from the same period last year. Pending sales are those where a price between the seller and buyer has been agreed but the sale has not closed. The decline reflects the increased difficulty in mortgage financing for retail home buyers. The Pending Index acts as a leading indicator for 'existing home sales' and promises further weakness in the largest category of home purchase in the US. It also underlines the still lively potential for wider economic impact from the year long decline in the residential housing market.
Wednesday: the Institute for Supply Management Non-Manufacturing Index (ISM) at 54.8 was slightly better than the 54.5 forecast but below the August reading of 55.8. Though this was a bit less than the 56.6 average for the past it is nevertheless indicative of continued moderated growth into the fourth quarter. The 'Employment' Index staged a recovery to 52.7 from 47.9 in August; 'New Orders' fell to 53.4 from 57.0.
Thursday: Factory Orders for August underperformed expectations at -3.3% against the median forecast of -2.8%. It was the largest monthly drop since January when they fell 5.7%. The Euro climbed 50 points immediately after the release.
Friday: Non Farm Payrolls returned to positive territory in September as excepted adding 110,000 jobs. More interestingly the August deficit of -4,000 was erased with the adjustment to +89,000 for the month, most of the addition being in government payrolls. July's number was adjusted higher to +93,000 from +68,000 for a total revision of 118,000 over the two months. The unemployment rate moved 0.1% higher to 4.7%. The three months moving average has almost halved since the beginning of the year: January 180.7, February 159.3, March 142.3, April 129.0, May 162.3, June 127.0, July 117.3, August 83.7, September 97.3. Average Hourly Earning moved up 0.4% for the month, now 4.1% annually, a gain of 0.2% over July and August and slightly better than the average for the past year.
Eurozone
Monday: The final issue for the September PMI manufacturing number was 52.3 as expected and unchanged from the preliminary issue. It is the third monthly decline since June registered 55.6 and the lowest reading since February of last year.
Tuesday: the Produce Price Index gained 0.1% in August as expected, flattening the yearly rate to 1.7% from 1.8% in July. Energy prices ebbed 2.2% in August helping to lower the overall result but prices have since surged higher in September and were the chief cause for the spike to 2.1% in the preliminary HICP rate as reported last week. The ECB is unlikely to take much ease with this number. Unemployment in the EMU was steady at 6.9% in August, the third month in a row that it has sustained the historic low for this series which began in 1993. German unemployment fell to 6.2% from 6.4%; French to 8.6% from 8.7%. The jobless rate in the US is 4.6% and in Japan it is 3.8%.
Wednesday: Retail Sales rose only 0.1% in August, a quarter of the +0.4% forecast. The annual rate was +0.5% as predicted. The July result was revised to +0.4 from +0.1% monthly, and to +1.3% from +0.5%. The Euro was unmoved by the disappointing monthly number, the July adjustment negating the August result.
Germany
Monday: the NTC/BME Manufacturing Purchasing Managers Index (PMI) dropped to 54.9 in September 1.1 points lower than August.
Wednesday: the NTC PMI Report on Services registered a sharp drop to 53.1 in September from the August reading at 59.8. It was the lowest result in more than a year. NTC Economics is a private British economics date and research firm that produces a wide array of data on the economies of 20 of the worlds largest industrial countries.
United Kingdom
Monday: the CIPS/NTC Manufacturing Purchasing Managers Index (PMI) for September fell slightly to 55.1 from 56.1.
Wednesday: Reuters Services PMI for September eased to 56.7 from 57.6, a tad below the 56.8 median forecast and the weakest result in 13 months. "Employment' fell to 51.8 from 43.7 and "Prices Charged" jumped to 53.7 from 53.1. The British Retail Consortium (BRC) Shop Price Index in September gained 0.2% and was 0.4% ahead of last year's prices. Food prices were the main culprit, up 0.6% in September, and 2.7% annually. It was the largest increase since last December. In August the yearly inflation rate for food prices was only 2.1%. Non-food prices sank 0.1% in September, a +0.7% annual rate. The 'final' RBS/NTC Report on Services PMI added 0.2 to 54.2, a substantial drop from the 58.0 reading in August. Nationwide Consumer Confidence rose to 99 in September a major improvement over the 94 reading in August. However, the current relevance of the September score is questionable because 90% of the data was collected before the BOE rescue of Northern Rock.
Japan
Monday: The BOJ Quarterly Tankan Report for the third quarter presented a mixed picture for the Japanese economy. Business confidence at large manufacturing companies remained at 23, as it was in the second quarter but better than the forecast of 21. All other major categories of business confidence recorded losses: 'small manufacturing firms' were 20 against 22 in quarter two; 'large service firms' were 20 versus 22 in the second quarter and 'small service sector firms' categories were -10 as opposed to -7 in the second quarter. Firms were polled for their opinion between August 28th and September 28th.
The Week Ahead October 8 - October 12
United States
Monday: Columbus Day Holiday US markets closed
Tuesday: FOMC minutes at 2:00 ET for the September 18th meeting when the Fed unexpectedly cut rate 0.5%.
Thursday: International Trade Balance for August at 8:30 ET; July -$59.2 billion
Friday: Retail Sales for September at 8:30 ET; August +0.3%. Retail Sales ex Food and Auto for September at 8:30 ET; August -0.4%. Producer Price Index (PPI) September at 8:30 ET; August -1.4%. PPI for September at 8:30 ET; August +0.2%. University of Michigan Consumer Sentiment for October at 10:00 ET; September 83.4.
Eurozone
Thursday: GDP for the second quarter (second issue) at 9:00 GMT; first quarter +0.7% q/q, +3.1% y/y. EU Commission GDP forecast at 9:00 GMT; Q3 2007 +0.3%-0.8%, Q4 2007 +0.2%-0.8%, Q1 2008 +0.2%-0.8%.
Friday: Industrial Production for August at 9:00 GMT; Jul +0.6% m/m, +3.7% y/y.
Germany
Monday: Total manufacturing Orders for August at 10:00 GMT; expected +2.0% m/m, +4.3% y/y. July -7.1% m/m, +6.1% y/y.
Tuesday: Industrial Output for August at 10:00 GMT; expected +0.5% m/m, +3.9% y/y. July +0.1% m/m, +4.4% y/y. Manufacturing Sector Output for August at 10:00 GMT. July +0.2% m/m, +5.7% y/y.
Thursday: Wholesale Prices for September a 6:00 GMT. August +0.5% m/m, +2.5% y/y.
United Kingdom
Monday: Manufacturing Output for August at 8:30 GMT; July -0.3% m/m, +0.6% y/y. Industrial Production for August at 8:30 GMT; July -0.1% m/m, +0.9% y/y.
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