Swine flu the new stress test? Last week the focus was all on stress
tests. At least for the Monday session, it was swine flu. The WHO announced 40
lab confirmed cases in the US, 26 confirmed cases in Mexico and 7 deaths and
one reported case in Spain. However, wires reported that Mexico had confirmed 149 deaths and closed all schools
suggesting the story was deteriorating. Late in the day, rumours swirled of
over 100 cases at a private school in NY. This continued the theme that started
in the Asian session. Stocks fell, but in a more subdued fashion. If this
wasn't enough, wire reported Nowotny comments from Reuters hammered EUR lower.
NZD held better with losses beneath the 0.5650
level limited. We would expect to see the NZD continue lower into the RBNZ OCR
later this week.
AUD traded heavily late in the NY session and fell
to the 0.7100 level with lows just beneath.
The EUR spent much of last week
clawing its way higher from sub 1.30 to a high just above 1.33 on Friday night.
We gave back all those gains yesterday with Nowotny comments one of the key
drivers. He said the ECB stood "ready to use unconventional measures of
quantitative easing". And finally, we had low flying planes to contend
with, though this turned out to be Air Force One flying low over the Statue of
Liberty for a photo op. But this didn't help market nerves and the US$ was stronger pretty much across the board.
Commodities slipped with oil and copper down sharply and others following the
US Dallas Fed factory index up from
-49 to -32 in Apr. The
Dallas Fed manufacturing survey showed further improvement this month, easily
beating the consensus forecast of 44 and even surpassing Westpac's top of the
range -35 forecast. The production and orders components were sharply improved
although the jobs measure, while less weak, remained in the recent range. This
result is broadly similar to the other regional Fed surveys (NY, Philly)
released thus far for April. So, while only 101 firms actually responded to the
Dallas survey, add this result to those other
regionals and you build up a fairly consistent picture of improving
manufacturing sentiment along the eastern seaboard and stretching down to the
south. These results still imply falling output and orders, but the pace of
decline in Q2 may be less steep than in Q1.
General Motors announced a further
6,800 job cuts (on top of
15,200 already announced), the dropping of the Pontiac brand, the planned sale
of the Saturn unit, dealership closures and an equity for debt swap in a effort
to avoid bankruptcy on June 1.
German consumer confidence (surveyed early April but labelled May) was
unchanged this month, but still down sharply from 5.6 a year ago. Rising German
unemployment would be a factor at play - it bottomed at 7.6% in late Q3 but has
since risen to 8.1%. Also import prices continue to drift lower, though the
2-4% monthly declines of late 2008 have slowed to more marginal falls, now that
energy prices have stabilised. Even so the annual pace of decline of -7.1% yr
is the steepest drop since April 1987.
UK bank mortgage lending update. The number of new mortgages issued last month
by banks was down 7.1% on February, but still up 46% on the low point of just
under 18k back in November last year. Still, to put that into perspective,
March's 26k compares to 80k new loans a month at the peak of the market in
2006, and almost 90k in the previous boom in 2003. So while it seems that the
partial nationalisation of several of the major banks is leading to some
"unfreezing" of the housing finance market, things are still very
sluggish. It was also reported separately today that the best mortgage deal
available in the UK now "only" required a 25% deposit whereas previously
potential borrowers had to stump up a huge 40% of the price of the property.
We are bearish on NZD crosses short term,
especially with the RBNZ decision looming, threatening to push rates lower
along the yield curve.
Country Release Last Forecast
28 Apr US S&P/CS
Feb House Prices %yr β19.0% β19.0%
Consumer Confidence 26.0 30.0
Fed Factory Index β20 β15
Retail Trade %mth β0.2% β1.0%
Ger Apr CPI
Prelim %yr 0.5% 0.6%
UK Apr CBI
29 Apr NZ
Mar Merchandise Trade NZDmn 489 450
Business Confidence β39.3% β
US Q1 GDP
Advance % Annualised β6.3% β5.0%
Decision 0.25% 0.25%
Money Supply M3 %yr 5.9% 5.7%
β’ NZ Weekly
Forex Outlook (27 April)
β’ RBNZ OCR
Preview (23 April)
β’ NZ Weekly
Forex Outlook (20 April)
β’ NZ Q1 CPI
Review (17 April)
β’ The money
tree (17 April)
β’ NZ Weekly
Forex Outlook (14 April)
papers/publications are available on Online Research on Westpac
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