Equities weaken into close. US reporting season continued and the likes of
Macdonalds and Wells Fargo beat expectations though guidance from Wells was
less upbeat and Morgan Stanley posted a bigger than expected loss. Wall street
did register gains in the region of 1% through mid day though this eroded into
the close and we are closing with losses in the region of 1%. The UK budget was handed down last night and was
generally given the thumbs down by economists. Growth forecasts for 2011 were
not seen as credible: +3.5% growth was only seen at the peak of the housing
bubble earlier this decade. If that is what we are heading for given all the
liquidity that Central Banks are pumping, then it is indeed a worrying sign!
The UK budget deficit is set to peak at close to 13% in 2009-10 and then ease
gradually from 2010-11 onwards and the top marginal tax rate was increased from
40% to 50% on incomes over GBP150k, starting next April. Commodities lost
further ground with Copper down another 2% and NYMEX crude slightly softer
after EIA and product builds.
Risk currencies gave back gains through
the tail end of the NY session as stocks faded. The NZD was much more
subdued registering highs in NY of only 0.5597 while the AUD hit a high
of 0.7118 in NY but is currently trading round the 0.70550/60 level while. AUD/NZD
had a strong session pushing to a high of 1.2738.
US FHFA house prices up 0.7% in Feb. This lesser watched government house price
measure is less impacted by the sale of foreclosed properties, and gives a
higher weight to non-urban house prices (which boomed less and hence are now
not falling as steeply). Still, the two monthly gains so far this year (though
Jan was revised down from 1.7% to 1.0%) add to the modest collection of
evidence that suggests the housing market might be finding some kind of base.
There will be further house price updates from the National Association of
Realtors tonight and S&P Case-Shiller next week.
Japan trade balance surprises with a small surplus or much smaller than expected deficit in
adjusted terms. Coming in at JPY97.1bn, the March adjusted trade deficit was
much smaller than expected. Exports did edge up 2.8%mth and while there was a
firming in imports, it was not enough to prevent an improvement in the overall
The UK 2009 Budget was handed
down by Chancellor Darling. It
makes grim reading. The 2009 economic growth forecast of -3.5% is credible
(Westpac is on -3.4%) but his forecast of 1.25% next year (Westpac 0.4%)
implies a fairly rapid recovery in private sector spending that we suspect is
unrealistic. Then in 2011 he is forecasting 3.5%! That pace of growth was only
seen at the peak of the housing bubble earlier this decade when banks were
lending like crazy and mortgage equity withdrawal was boosting spending power
by nearly 2% of GDP. We don't publish a 2011 forecast but it looks excessively
optimistic given the deleveraging that is going, and that financial services
which make up nearly a third of the economy is not likely to bounce back that
quickly. Meagre stimulus this year of about 0.5% of GDP gives way to gradual
fiscal tightening from next year onwards. There simply is no money available to
do much more. Even so that sees the public sector net borrowing (budget
deficit) rise from GBP90bn (6.4% of GDP) in 2008-09 to a peak of GBP175bn (12.7% of GDP) in 2009-10!
The Bank of England minutes to the April policy meeting showed a unanimous 9:0 vote to keep
the bank rate unchanged at 0.50% and continue the quantitative easing program
begun in March: "the initial effects of the Committee's asset purchase
programme had been encouraging". On the data front, unemployment rose 74k
in March and earnings growth slumped from 3.0% yr at end 2008 to just 0.1% yr
in February, the weakest on record.
Canadian leading index down 1.3% in
March, continuing to fall away
sharply, consistent with the Bank of Canada's forecast that the economy will
shrink 3% this year.
The market is clearly looking
forward/positioning for the RBNZ next week. We would expect to see this theme
continue into next week, with the OIS market pricing in 40bps for the RBNZ, the
NZD is set to trade heavily ahead of the policy meeting a week today.
Country Release Last Forecast
23 Apr NZ
Mar Credit Card Transactions 0.5% β
Motor Vehicle Sales β3.5% β4.0%
Jobless Claims w/e 18/4 610k 610k
Home Sales 5.1% β1.5%
Eur Apr PMI
Manufacturing Adv 33.9 35.0
Industrial Orders β3.4% β3.0%
Account s.a. β12.7 β10.7
Monetary Policy Report
Sales 1.9% β0.3%
24 Apr US
Mar Durable Goods Orders 3.4% β0.3%
Mar New Home
Sales 4.7% 0.9%
β’ NZ Weekly
Forex Outlook (14 April)
β’ NZ Q1 CPI
Review (17 April)
β’ The money
tree (17 April)
β’ NZ Weekly
Forex Outlook (14 April)
β’ NZ Q1 CPI
Preview (8 April)
β’ NZ Q1 QSBO
Review (7 April)
papers/publications are available on Online Research on Westpac
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