The main news overnight is the US Federal Reserve
committing an additional USD800 billion to stimulate lending: $600 billion to
buy housing-finance company debt, and $200 billion to support consumer and
small business loans. This news had a direct and positive effect on non-US
currencies, as well as US interest rates. The euphoria over Citibank's bailout
appears to have evaporated after a day, the Dow currently down 1% from
yesterday's close. US data was mixed, with consumer confidence higher amid
lower fuel prices, but GDP revised lower.
The NZD remains above the key 54 cent level. It
spiked to 0.5588 on the Fed news, and currently is around 0.5470. Yesterday
afternoon's RBNZ inflation expectation survey was lower than expected, at 2.7%,
and should add weight to a 100bp OCR cut being delivered on 4 December. There
are no data releases today.
The AUD also spiked much higher on the Fed news,
touching 0.6618, and settling back around 0.6450. BHP's proposed takeover of
fellow miner Rio Tinto has been withdrawn, citing deterioration of the
near-term global economic conditions.
EUR's spike took it to 1.3081, and it has held its
gains better than other currencies, currently at 1.30. French president Sarkozy
announced the likelihood of a rescue package for the country, joining the
growing list of national bailouts. JPY strengthened to 95.16 against the USD,
largely on the weaker US data releases.
US Q3 GDP was revised from -0.3% to -0.5% on the second
estimate. As before, weak consumer spending in real terms (due to surging
prices) and a sharp fall in residential construction were mostly offset by an
improvement in the trade position and increased government spending. The
balance of revisions was as expected, though the details suggest some downside
risk to Q4 growth forecasts: private consumption was revised down substantially
in Q3, led by spending on services, and a slower rundown of inventories than previously
thought suggests there is more scope for production cutbacks.
US Conference Board consumer confidence surprised
with a bounce from 38.8 to 44.9 in November - though this was still the second
lowest read on record. The survey contrasted with higher-frequency confidence
surveys suggesting that optimism early in November had since faded. The ongoing
market turmoil and mounting job losses likely weighed sentiment, but the cost
of living continues to be a major factor as well - expected inflation one-year
ahead fell from 6.8% to 5.9% as gasoline prices tumbled.
The US S&P/Case-Shiller house price index fell
17.4% in the year to September, the fastest pace yet in this slowdown. Rising
foreclosures and difficulties in accessing credit have seen the pace of monthly
declines pick up again in the last three months, having eased off through the
first half of the year.
The Richmond Fed manufacturing index, fell to a fresh
record low of -38 in November. Details were weaker across the board, but there
was a particularly sharp fall in the number of employees and average hours worked,
providing yet another signal that the official payrolls figures are set to get
a lot worse in coming months.
Japan October corporate services price index (CSPI)
plunged 1.2%mth to -1.4%yr from 0.1%yr, steepest drop in 5 years. The CSPI
swung back to negative annual growth for the first time in nearly 2 years,
after an average increase of 1.2% during 2007 interrupted 8 straight annual declines.
German Q3 GDP was unchanged at -0.5% in its final
estimate, though thedetails were slightly more encouraging. All of the domestic
demand components were revised up, with a particularly sharp improvement in capital
investment, while imports were revised from a 1.4% drop to a 3.8% gain.
Industry data on UK mortgage approvals for October suggested a stabilisation
over the last few months, though they remain at about a third of pre-credit
Optimism levels have fallen slightly from yesterday,
and we continue to watch for the Dow's ability to stay above 8000 as the main
clue for NZD direction. On the day, 54 cents should provide support, while 55.5
cents should hold on the topside. Longer-term sentiment for the currency
Release Last Forecast
Construction Work Done β2.6% 1.0%
US Oct Core
PCE Deflator 0.2% flat
Income 0.2% flat
Spending β0.3% β1.2%
Goods Orders 0.8% β6.0%
Jobless Claims w/e 22/11 542k 560k
Nov Chicago PMI 37.8
Consumer Sentiment (F) 57.9a 56.5
Oct New Home
Sales 2.7% β7.0%
Ger Nov CPI
Prelim %yr 2.4% 1.9%
UK Q3 GDP
Revision β0.5%a β0.5%
β’ NZ Weekly
Forex Outlook (24 November)
β’ NZ Weekly
Forex Outlook (17 November)
β’ NZ Q3
Retail Sales Review (13 November)
Economic Overview November 2008 (11 November)
β’ NZ Weekly
Forex Outlook (11 November)
β’ NZ Weekly
Forex Outlook (4 November)
papers/publications are available on Online Research on Westpac
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