calm reigned last night, as markets took time to digest the previous dayâ€™s
news and plotted the next course. There was little new data to spook prices, the
slightly lower US trade
deficit an expected outcome from depressed global trade and waning consumer
demand. US equities
(S&P500) tracked sideways throughout the session, unchanged as we write.
European indices behaved much the same. Commodities retained yesterdayâ€™s more
pessimistic tone, WTI oil down 1.2%, and copper -2.3% on a report showing Chinese
imports of copper fell 19% in January. Safe-haven bids saw gains in gold (+3%)
and 10 year US treasuries
(-5bp). The US dollar moved little overall, European currencies displaying some
volatility. Swedenâ€™s central
bank cut rates by 100bp to 1.00%, zero mooted as eventually possible.
sideways within a 0.52 to 0.53 range, and is comfortably inside that currently.
Yesterdayâ€™s card transactions report was mildly weaker than expected, indicating
consumersâ€™ preference to save rather than spend.
was similarly horizontal, albeit with more volatility and a slightly weaker bias.
0.6480 to 0.66 contained the action, but it threatens the downside as we write,
perhaps looking forward to this morningâ€™s important January employment report.
AUD/ NZD dipped to a lower 1.2430 to 1.2530 range, poised to test the support.
EUR lost ground
after Europeâ€™s high of
1.30, as the bad press on European banksâ€™ exposure to emerging credits
continued. BoE comments on the economy were downbeat, mentioning quantitative
easing as a possibility, and resulted in GBP falling to
1.4320. JPY continues to strengthen on repatriation,
trade deficit narrows to $39.9bn in Dec. The trade deficit narrowed
further as roughly similar percentage declines in exports and imports meant a
steeper fall in the value of imports. Exports were down sharply across the
board (except for civilian aircraft with the Boeing strike over) reflecting the
collapse in global trade flows. Imports also showed declines in almost all
categories, due to weak domestic demand. The lower oil price also helped pull
down imports, despite a sharp increase in the volume of oil imports. Indeed
that was a factor contributing to an 8.3% increase in the real trade deficit,
higher than assumed by the Commerce Dept in the advance GDP report for Q4, so
here is another reason to expect a downward revision to the growth rate for
Swedish central bank cut rates by 100bp to 1.0%. Governor
Ingves said that â€ślowering the rate to zero percent is a scenario that we canâ€™t
excludeâ€ť. The Bankâ€™s own projections imply a 75-80% chance of a further 25bp
cut at the next meeting.
Bank of England
quarterly inflation report found that the UK was in â€śdeep
recessionâ€ť and included substantially downgraded forecasts for growth and inflation.
Indeed the central projection for inflation in the medium term is â€śwell belowâ€ť
the 2% target. As the Bank explains, â€śgiven its remit to keep inflation on
track to meet the 2% target in the medium term, the projections... imply that
further easing in monetary policy may well be required. That is likely to
include actions aimed at increasing the supply of money in order to stimulate
spending.â€ť The Governor spelled it out at the press conference: the BoE is
preparing for quantitative easing which could be detailed as soon as the March
policy meeting, possibly in conjunction with a near zero bank rate. On the data
unemployment jumped 74k in Jan.
trade deficit of C$500mn in Dec. Plunging exports, including â€“19% for energy
and â€“17% for industrial products, delivered Canadaâ€™s first
monthly deficit since 1976. Yet another indicator consistent with the economy
sliding into recession. Separately, Canadian new house prices fell 0.1% in
December, completing their first quarterly decline this decade â€“ another sign
that the housing sector is slowing and the economy is in recession.
The 0.52 to
0.53 range should hold today, potential long-term sellers noted around 0.5350.
Todayâ€™s food price and PMI reports will probably take back seats to Australiaâ€™s employment
report as NZD influences.
Speizer, Senior Market Strategist, NZ, Ph: (04) 470 8266
contributions from Westpac Economics
Release Last Forecast
NZ Jan Food
Prices â€“0.2% â€“
Employment Chg â€“1.2k â€“10k
Unemployment Rate 4.5% 4.6%
Unemployt Expectations 5.0% â€“
Consumer Inflation Expectâ€™s 2.7% â€“
Retail Sales/ex autos â€“2.7%/â€“3.1% â€“1.2%/â€“0.6%
Jobless Claims w/e 7/2 626k 610k
Inventories â€“0.7% â€“1.0%
CGPI %yr 1.1% 0.3%
Industrial Production â€“1.6% â€“2.5%
â€˘ NZ Weekly
Forex Outlook (9 February)
â€˘ NZ Q4 HLFS
Review (5 February)
â€˘ NZ Q4 LCI
and QES Review (2 February)
â€˘ NZ Weekly
Forex Outlook (2 February)
â€˘ RBNZ OCR
Review (29 January)
â€˘ NZ Weekly
Forex Outlook (27 January)
papers/publications are available on Online Research on Westpac
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Mon 18 Dec
10:00 EZ- final HICP Tue 19 Dec
09:00 DE- IFO Survey
13:30 US- Housing Starts/Permits
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