dipped slightly last night, but broadly remains in a consolidative phase.
Global equity indices were unchanged, on average, but bank stocks continued to
be sold (-4%), providing a clue regarding the next move in risk. Europe was again
in the spotlight - press conference comments from Germanyâ€™s Merkel
engendering little market confidence that any Euro-zone recovery is afoot, and
the Bundesbank reiterating Germany is in
severe recession. UK PM Brown
said G20 will look at helping Eastern Europe, in a nod
to that zoneâ€™s impact on the UK and
Euro-zone banking sector. Inventory reports drove oil again, up 11% to $38,
while copper ignored the growing stockpile data, bouncing 2%. Looming supply
remains the main driver in the US treasuries
market, the 10 year note
6bp to 2.82%.
NZD followed EUR
higher, to 0.5190, but ran out of steam and flopped to 0.51, where it hovers. AUDâ€™s
rally reached 0.6520 before resting around 0.6450. AUD/NZD
to the top of the recent broad range just above 1.26, but shows no signs of
sustaining a breakout yet.
EUR rose to
1.2760 on stimulus hopes, but faded to 1.2670 on a lack of specifics from
Merkel, and ECB comments (Bini Smaghi) that the zone shouldnâ€™t use currency
weakness to gain economic advantage. The ECB comments had the opposite effect
on GBP, pushing it to 1.4450, but it too could not
hold on and sits back at 1.4303. The Japanese Governmentâ€™s downgrade (for the
fifth month in a row) drove USD/JPY higher
still, now at 94.40.
Philly Fed slumped from â€“24 to â€“41 in Feb, more than reversing its two month
upswing around the turn of the year. Orders, shipments and especially jobs were
all weaker, pointing to a severe contraction in factory activity in the northeast.
PPI surprised to the upside last month, rising 0.8%, though given that January is
the month many firms make annual adjustments to prices, there may be a
seasonality issue at play. Excluding food and fuel, the core PPI rose 0.4%.
Intermediate and crude prices continued to fall, but less rapidly than in late
2008. Overall, a stronger than expected measure of factory gate prices at the
start of the year, but not enough to alter our view that the US economy is entering
a significant period of disinflation.
leading index posted a second consecutive gain in January, up 0.4%, due
mostly to the money supply component which added 0.5 ppts and interest rates
which added 0.2 ppts. These recent positives are telling us that the outlook should
be improving - that is, if the economy were to respond â€śnormallyâ€ť to lower
interest rates and expanding money supply. But it clearly isnâ€™t.
jobless claims held steady at 627k last week, which coincided with the
non-farm payrolls survey week for February. In the same week in January, claims
were at 585k. The 4 week moving average for claims rose from 518k to 619k over
the same period. Add in the slumping regional business survey jobs picture, and
the surge in continuing claims in the prior week, and the case can be made for
a payrolls loss of closer to 700k per month than 600k per month.
money supply M4 expanded at a 17.5% yr pace in January, up from 16.2%
yr in December, most likely due to the liquidation of riskier assets outside the
M4 definition into cash or deposits captured by M4. Also, the accrued public
sector net credit requirement as at the year to January was ÂŁ20.1bn, up from
ÂŁ8.5bn in the same period last year, neatly illustrating the rapidly
deteriorating state of the UK public
No change to
our view that the NZD is consolidating in a sideways range, except that the
range is now slightly wider than yesterday, at 0.5060 to 0.5180. The next move
is expected to be a break down towards strong 0.50 support.
Speizer, Senior Market Strategist, NZ, Ph: (04) 470 8266
contributions from Westpac Economics
Release Last Forecast
US Jan CPI â€“0.7%
Jan Core CPI
Jpn Dec All
Industry Index â€“2.3% â€“2.7%
Eur Feb PMI
Factory Adv 34.4 34.2
Services Adv 42.2 42.0
UK Jan Retail
Sales %yr 4.0% 2.1%
Can Jan CPI
%yr 1.2% 1.1%
Jan CPI BoC
Core %yr 2.4% 2.2%
â€˘ NZ Weekly
Forex Outlook (16 February)
â€˘ NZ Q4
Retail Sales Review (13 February)
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)
papers/publications are available on Online Research on Westpac
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