the US Senateâ€™s rejection, on Friday, of a bailout of the US auto
industry, would initiate a new phase of global credit contraction was
responsible for a sell-down of risk-currencies on Friday around the NZ close.
Commodity currencies fared badly, and the main Asian and European equity
indices were down around 5% and 3%, respectively. By the start of the US session,
markets calmed down, and the news that some of the bank bailout money may be
used for the auto bailout saw the S&P500 close up 0.7%. US data
releases; retails sales, PPI, and consumer sentiment; were no worse than
expected, and neutral on the day for currencies.
on Friday afternoon, to around 0.5550, was abruptly checked by the auto news,
and by early Europe, had lost
1.3 cents. After soothing noises on alternative bailout routes, the panic
subsided, and at 0.5460 in early NZ, looks to continue recovering Fridayâ€™s
The AUD fared
slightly worse than the NZD on Friday night, losing 2.4 cents to a low of
0.6490, but is recovering at the NZ open to around 0.6640. The NZD/AUD rose and
fell during the volatility, largely unchanged at around 0.8240.
Interestingly, the USD against a basket of
currencies (the dollar index) did not rise during the panic, the second time
last week that the USD failed to assert its safe haven status. The EUR was
unscathed by the panic, and maintained its recent 1.33 to 1.34 range. The JPY behaved in
true safe-haven fashion, and gained around 3% before fear of BoJ intervention
pushed it back above 91.
retail sales down 1.8% in Nov. Retail sales posted another steep fall,
weighed down by weak auto sales and the ongoing price-driven slump in the value
of sales at gas stations. But core retailing (excluding those two components)
unexpectedly posted its first gain for three months, though that was mostly
offset by downward revisions worth 0.3 ppts to the prior two months.
3.8 pt rise in the UoM sentiment measure in Dec, reflecting a
near 12 pt surge in the current assessment of the economy, is surprising. We
suspect the continued sharp fall in gasoline prices, captured by lower inflation
expectations, is the driving factor behind the improved result.
fell 2.2% on sharply lower energy prices in Nov, with
wholesale gasoline prices down around 25% in both October and November. Food
prices were unchanged and core prices edged up 0.1%, matching their softest gain
for the year so far due in part to falls in both auto and light truck prices.
Falling intermediate and input prices point to further disinflationary pressure
from the industrial sector heading into 2009. Note that the headline PPI annual
rate in November was just 0.4% yr, down from 9.9% yr in July, four months
industrial production down 1.2% in Oct. Following very weak IP data out
of France, Italy and Germany, it was no
surprise that Euroland industrial production fell sharply again in October. It
has fallen in five out of the past six months and the 5.3% yr annual pace of
decline is the weakest since 1993. And finally, something to worry the European
Central Bank: Euroland labour costs accelerated sharply from 2.8% yr to 4.0% yr
in Q3, their highest since before the euro was introduced in 1999. It remains
to be seen whether the weaker labour market feeds through to lower costs in
auto sales fell 0.9% in October, in line with guidance that sales â€śedged downâ€ť;
StatCan guidance for November was more specific: they indicated that sales fell
should continue its pre-auto-panic rise today, and march back towards 0.5550,
with 0.5420 guarding the downside. Todayâ€™s economic releases (services performance,
manufacturing activity) are not market-movers.
Country Release Last Forecast
15 Dec NZ Q3
Real Manufacturing Sales â€“1.0% â€“1.5%
US Dec NY Fed
Factory Index â€“25.4 â€“30.0
Oct TIC Data
$bn 66.2 40.0
Industrial Production 1.3% â€“2.0%
Housing Market Index 9 7
Tankan Large Manufacturers â€“3 â€“23
Non-Manufacturing 1 â€“9
UK Dec House
Prices %yr â€“7.1% â€“8.0%
16 Dec Aus
Q3 Dwelling Starts â€“3.7% â€“5.0%
CPI/Core â€“1.0%/â€“0.1% â€“1.5%/flat
â€˘ NZ Q3
Terms of Trade (10 December)
â€˘ NZ Agribiz
December 2008 (9 December)
â€˘ NZ Weekly
Forex Outlook (8 December)
â€˘ RBNZ MPS
Review (4 December)
â€˘ NZ Weekly
Forex Outlook (1 December)
â€˘ RBNZ MPS
Preview (28 November)
papers/publications are available on Online Research on Westpac
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