Investors retreated further from risk during a
session. The last few days have seen a clear split between sentiment in local
time, where China's fiscal stimulus package has boosted confidence in the Asia region, and in the overnight session where the focus has been on the
bad news in the economy and particularly in the corporate world. Concerns about
the solvency of US car makers were exacerbated by the news that Volkswagen had
gone to the ECB for liquidity. The ongoing slide in oil prices, reaching their
lowest levels since March 2007, also favoured the USD over the other majors.
NZD initially held steady within the 0.58-0.59 range,
but weakness in European equity markets eventually translated into a lower open
for the US market, and the currency slide began. NZD quickly
slipped below 0.57, before a late pickup in equities saw the currency recover
back to 0.5750 at the time of writing.
AUD followed a similar path, hitting a two-week low
under 0.65 before pulling back to 0.6590. The NZD/AUD cross moved in NZD's
favour after yesterday's weak Australian business confidence survey, and
generally held on to those gains overnight.
EUR fell to a two-week low around 1.25 as it
continued to follow equity markets and risk appetite direction. JPY benefited
again from the increased risk aversion, but only made slight gains this time.
US IBD-TIPP consumer comfort index jumps from 41.1 to
50.8 in Nov. Plunging gasoline prices, some stabilisation in equity markets and
optimism that President-elect Obama may be able to effect change for the better
saw this first confidence measure for November soar to its highest since March last
year. We are forecasting decent bounces for the other major sentiment indicators
for November too, including UoM later this week.
Japanese current account surplus tops JPY1trn in
September. The JPY1005bn result was above August's JPY903bn and expectations of
a JPY970bn surplus in Sep. The trade surplus continues to shrink however, to
JPY247bn in Sep, down a whopping 86% on a year ago. That said, rising oil
prices were still a factor through the month, with a 2.1% rise in exports
swamped by a 32.7% rise in imports (crude oil up 61.7% alone).
Japanese bank lending up 2.2%yr in October. What
credit crunch? This was the strongest surge in credit in just over 2yrs. The
acceleration in bank lending is seen as somewhat counter-cyclical though as
households and businesses seek credit to smooth reduced income flows. Either
way, supply is clearly not an issue.
German ZEW index recovers from -63.0 to -53.5 in Nov.
The 300 or so German analysts and investors who respond to this survey were a
little less pessimistic this month, probably reflecting the recent ECB rate
cuts and government moves to bolster the banking sector. Talk of fiscal
stimulus may have eased concerns about the severity of the coming recession.
UK housing news remains bleak. The RICS (chartered
surveyors) reported continuing house price declines and the slowest sales pace
since at least 1978 in October. Also in that month, the British Retail
Consortium reported falling retail sales, and back in September, house prices
fell 5.1% yr according to a government report. In other news, the trade deficit
narrowed from â‚¬8.0bn to Â£7.4bn in Sep, largely due to volatility in the traded
We are neutral on NZD in the short term. Early signs
of an improving risk environment point to some unwinding of recent selling
against USD, but it is also likely to lose ground against AUD. Longer term, NZD
will need to remain below average for an extended period to soften the blow of
a weaker world economy.
Country Release Last Forecast
12 Nov NZ
RBNZ Financial Stability Review
Westpac-MI Cons Sentiment 82 â€“
Price Index %qtr 1.2% 1.1%
Secretary Ken Henry speaks
Eur Sep Industrial
Production 1.1% â€“0.8%
Unemployment Change 32k 40k
Quarterly Inflation Report
13 Nov NZ Q3
Real Retail Sales â€“1.5% â€“1.5%
Sales 0.4% 0.6%
Economic Overview November 2008 (11 November)
â€¢ NZ Weekly
Forex Outlook (4 November)
â€¢ NZ Q3 HLFS
Review (6 November)
â€¢ NZ Weekly
Forex Outlook (4 November)
â€¢ NZ Q3 LCI
and QES Review (3 November)
â€¢ NZ Q3
Labour Market Preview (29 October)
â€¢ NZ Weekly
Forex Outlook (28 October)
papers/publications are available on Online Research on Westpac
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