Share This Story
ECONOMIC DATA ANALYSIS - MARKET UNCERTAINTY RISES OVER GLOBAL MONETARY POLICY
ECONOMIC DATA ANALYSIS FRIDAY 7 JUNE 2013
MARKET UNCERTAINTY RISES OVER GLOBAL MONETARY POLICY
• Financial market volatility focused on central bank policy uncertainty
• US to post more resilient figures as focus moves beyond manufacturing?
• UK labour market easing suggests productivity rise as recovery becomes more entrenched
Market volatility and policy uncertainty ...Today’s payrolls report added to financial market volatility. Uncertainty over global central bank policy has led to a sizable reversal in global bond markets. 10-year yields have risen by around 40bps in the US, UK and euro area since the start of May. Equities have also weakened, with the US S&P down 3% from highs three weeks ago and the UK FTSE down 7½%. Our risk appetite index, covering a range of global assets, slumped 60% illustrating rising financial market uncertainty since Fed Chairman Bernanke’s testimony and growing fears of the Fed tapering QE. Yesterday’s
ECB conference added to the uncertainty.
US’s non-manufacturing resilience.?... Today’s payrolls dispelled some of the worst fears for the US economy, in turn influenced by weak news from a range of manufacturing-focused survey evidence. The coming week should show that beyond manufacturing, the economy is resilient. May’s retail sales look likely to rise, even allowing for the gasoline price effect, and consumer confidence is forecast to remain around May’s post-financial crisis high. Households are showing little adverse reaction to fiscal tightening so far this year. We forecast consumption growth of 2% in Q2, underpinning our 1.7% GDP forecast. This resilience should keep the tapering debate live.
China’s monthly evidence ... The Chinese economy appears to be showing signs of slowing as the authorities use macroprudential tools to restrain lending. The coming week’s numbers may surprise to the upside, but will mask ongoing
adjustment. May’s yuan lending is expected to remain solid (RMB 800bn), but growth is slowing. Industrial production looks set to accelerate to 9.5% (from 9.2%), but we attribute this to a base effect. Annual retail sales growth will likely edge lower and although this should buoy the trade balance, this is likely to reflect softer imports. If this trend continues we would be minded to see
annual GDP growth closer to 7½% this year.
BoJ steady for now ... The BoJ also meets in the coming week. However, having bolstered stimulus significantly in April, this meeting looks set to focus on technical operational issues. The policy debate in Japan has moved to the ‘third arrow’ of Abe’s stimulus - structural reform – after this week’s national growth strategy speech.
Domestic recovery more entrenched ... In the UK, further signs of improvement over the past week have raised expectations over the UK’s recovery prospects, including the rise in all three PMIs into expansionary territory. Yet similar to the US, services appears to be outperforming more externally-oriented manufacturing. The coming week’s industrial output for April may mirror this. Manufacturing output contracted in Q1 as a whole, and we look for a modest fall in April. However, domestic manufacturing appears more resilient than some global trends. We expect industrial production to boost Q2 GDP, but are wary of recent global softness restraining a more wholehearted recovery across H2.
Spare capacity to spur future policy? ... The UK also posts labour market updates. We expect the recent softening in the labour market to continue in the coming week. We look for another small fall in employment, the start of a process that is likely to bolster productivity growth gradually over the coming quarters. Yet spare capacity in the UK economy, particularly the labour market, remains high. With BoE Governor King having led his last MPC meeting this week, market focus now turns to the arrival of Mark Carney. There is a widespread expectation that he will initiate further stimulus to address this spare capacity, with our expectation for some form of forward policy guidance. Over the coming months MPC policy may add to financial mark
This document, its contents and any related communication (altogether, the 'Communication') does not constitute or form part of any offer to sell or an invitation to subscribe for, hold or purchase any securities or any other investment. This Communication shall not form the basis of or be relied on in connection with any contract or commitment whatsoever. This Communication is not intended to form, and should not form, the basis of any investment decision. This Communication is not and should not be treated as investment research, a research recommendation, an opinion or advice. Recipients should conduct their own independent enquiries and obtain their own professional legal, regulatory, tax or accounting advice as appropriate. Any transaction which a recipient of this Communication may subsequently enter into may only be on the basis of such enquiries and advice, and that recipient’s own knowledge and experience. This Communication has been prepared by, and is subject to the copyright of, Lloyds. This Communication may not, in whole or in part, be reproduced, transmitted, stored in a retrieval system or translated in any other language in any form, by any means without the prior written consent of Lloyds. This Communication is provided for information purposes only, and is confidential and may not be referred to, disclosed, reproduced or redistributed, in whole or in part, to any other person. This Communication is based on current public information.
Whilst Lloyds TSB ank plc (“Lloyds TSB”) and Bank of Scotland plc ("Bank of Scotland") have exercised reasonable care in preparing this material and any views or information expressed or presented are based on sources it believes to be accurate and reliable, no representation or warranty, express or implied, is made as to the accuracy, reliability or completeness of the facts and data contained herein.
This material has been prepared for information purposes only and Lloyds TSB, Bank of Scotland, their directors, officers and employees are not responsible for any consequences arising from any reliance upon such information. Under no circumstances should this material be treated as an offer or solicitation to offer, to buy or sell any product or enter into any transaction. If you receive information from us which is inconsistent with other information which you have received from us, you should refer this to your Lloyds TSB or Bank of Scotland Relationship Manager for clarification.
Lloyds Bank Corporate Markets, Lloyds TSB Corporate Markets and Lloyds TSB are trading names of Lloyds TSB Bank plc, Lloyds TSB Scotland plc and Bank of Scotland plc. Lloyds TSB Bank plc. Registered Office: 25 Gresham Street, London EC2V 7HN. Registered in England and Wales no. 2065. Lloyds TSB Scotland plc. Registered Office: Henry Duncan House, 120 George Street, Edinburgh EH2 4LH. Registered in Scotland no. 95237. Bank of Scotland plc. Registered Office: The Mound, Edinburgh EH1 1YZ. Registered in Scotland no. SC32700. Authorised and regulated by the Financial Services Authority under registration numbers 119278, 191240 and 169628 respectively
Forex Trading News
Daily Forex Market News
Forex news reports can be found on the forex research
headlines page below. Here you will find real-time forex market news reports
provided by respected contributors of currency trading information. Daily forex
market news, weekly forex research and monthly forex news features can be found
Real-time forex market news reports and features providing
other currency trading information can be accessed by clicking on any of the
headlines below. At the top of the forex blog page you will find the latest
forex trading information. Scroll down the page if you are looking for less
recent currency trading information. Scroll to the bottom of fx blog headlines
and click on the link for past reports on forex. Currency world news reports
from previous years can be found on the left sidebar under "FX Archives."