messages on US bank nationalisation saw risk being sold and bought back in the
European and US sessions.
Senate banking committee chairman Dodd spoke of the possibility of government
takeovers, while Treasuryâ€™s Baker said a private banking system would be
preserved. US bank shares
are reflecting the former: Citibank fell to $1.95 (they were $55.70 in Dec-06).
The S&P500 dipped to a 754 low, before rebounding to finish down 1%. The
741 level is technically critical, a break below signalling a move into the 600â€™s.
Overall, risk sentiment was weak, witness gold reaching $1006 and US 10yr
treasuries down 6bp.
lower after our domestic session, and made a 0.5010 low, before a sharp rally,
which appeared to be short-covering ahead of the weekend, reaching 0.5155.
AUD started its
rebound from 0.6355, and almost touched 0.65. NZD outperformed during the
rebound, such that the AUD/NZD cross fell from 1.2715 to 1.2560. Queensland state was
downgraded from AAA to AA+ by S&P.
EUR was looking
depressed until Europeâ€™s
afternoon, a rocket-like flight from 1.2650 to 1.2885 ensuing. Many causal
explanations were offered, such as a Der Spiegel article suggesting stronger
Eurozone members may help weaker ones, via Eurozone bond issuance, but the
broad nature of the currency moves (the US dollar was sold against everything,
especially CHF which rose 3.6%) suggests this may have been more a USD story on
the day. USD/JPY was sold from 94.40 to 92.50.
the first time in at least fifty years, the US has
no inflation. The overall Jan price level is exactly the same as it was a year
ago, although of course the mix of prices within the CPI basket is very
different. For example, energy prices are down 20.4% yr compared to January
2008, whereas food prices are 5.3% yr higher and core prices excluding those
components are up 1.7% yr (its slowest since 2004). In January, above trend
price rises for clothing (0.3%), autos (0.2%), medical care (0.4%) and ownersâ€™
equivalent rent (0.3%) were behind the highest monthly core rate of 0.2% since
August, while a 1.7% jump in energy (after five months of declines) pushed the
monthly headline rate back into positive territory at 0.3%. Overall, the main
story is that US inflation
has all but evaporated, even though there was some element of upside surprise
in the latest monthly figure.
dip to new cycle lows. This reflects exceptionally weak news on the real
economy and talk that the banking sector might soon need to reveal a second
swathe of losses, related to loan exposures in emerging markets where economic
growth is now crumbling. The February services PMI was especially weak dwn 3.3
pts to 38.9, the factory PMI was off 0.8 pts to 33.6. According to the official
retail sales volumes have not posted a decline since September, which
contrasts dramatically with the private sector retail surveys which are at or
close to record lows. Last month the Statistician declined to publish a monthly
% change for December sales before of difficulties associated with the VAT cut
and earlier than normal pre-Christmas discounting. This month they have
restored the monthly series (up 0.7% in Jan) but we still question the
credibility of the data, and as such see it as having little sustained impact
on markets or policy-making.
of the past 2 weeks, NZD has fallen from 0.5450 to 0.5010, and then corrected
that move on Friday night, rallying to 0.5155. This week should see the 0.50
area tested for the third time this year, but breaking below it wonâ€™t be easy.
We expect price action to be confined to a 0.50 to 0.52 range during the next
Speizer, Senior Market Strategist, NZ, Ph: (04) 470 8266
contributions from Westpac Economics
Country Release Last Forecast
23 Feb NZ
Jan Credit Card Transactions â€“3.9% â€“
Nationwide House Prices â€“1.3% â€“
24 Feb US Feb
Consumer Confidence 37.7 36.0
Price Index â€“1.8% â€“
Report on Economy & Fed Policy
Minutes for January
Service Price â€“2.5% â€“
Current Account bn â€“16.0 â€“
New Orders â€“4.5% â€“
Ger Feb Ifo
Business Climate 83.0 â€“
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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