Markets Focused on Jackson Hole

August 27, 2010

Currencies are marking time ahead of Fed Chairman’s 10:00 EDT address at the Jackson Hole Symposium.  The dollar is unchanged against the euro and up 0.1% relative to sterling, the Canadian dollar and the Swiss franc.  The yen settled back 0.4% but remains pricey at 84.7 per dollar.  The greenback slid 0.3% against the kiwi and 0.2% versus the Aussie dollar, and China’s yuan is steady at 6.7992 per dollar.

Equities are likewise mixed.  Japan’s Nikkei recovered 1.0%, but stocks fell by 1.3% in both Indonesia and India.  Equities rose 1.6% in Thailand, 0.3% in Australia and China, 0.7% in Sri Lanka and 0.4% in Singapore and Taiwan, but they dipped 0.4% in New Zealand and 0.1% in Hong Kong.  In Europe, the British Ftse and German Dax have edged down 0.2%, while the Paris Cac has lost 0.3%.

With month-end approaching, the ten-year JGB yield jumped seven basis points to 1.01%, but comparable German bund and British gilt yields slid by three and two basis points.

Oil and gold prices ticked up 0.3% and 0.1% to $73.59 per barrel and $1238.80 per ounce.

In Japan, where a new fiscal stimulus appears imminent, statistics were released for consumer prices, the labor market, and household spending and income.

  • The jobless rate unexpectedly eased back to 5.2% in July from 5.3% in June.  Such was also 5.2% in May.
  • Employment was unchanged from a year earlier after recording on-year declines of 1.1% in June and 0.7% in May.
  • The job offers to seekers ratio edged up to 0.53 from 0.52 in June and 0.50 in May.
  • Consumer prices in seasonally adjusted terms fell between June and July by 0.3% for all items and also when seasonal foods are excluded.  The non-food, non-energy CPI dipped 0.1% on the month.  On-year deflation deepened to 0.9% on the headline CPI and 1.1% excluding seasonal foods, while remaining at 1.5% on what other countries call core (that is, excluding both food and energy).
  • Tokyo consumer prices posted a 0.1% seasonally adjusted monthly rise but were 1.0% lower than a year earlier.
  • Real household spending in July fell 0.7% on month but rose 1.1% on year.  Real income and real disposable income posted on-year drops of 1.0% and 0.3%.

German import prices slid 0.2% in July and recorded their biggest on-year advance (9.9%) since November 2000.  Non-energy import price inflation stood at 7.5%.  The 4.1% on-year advance in export prices was the most since June 1982.  Based on five reporting German states, consumer prices in August recorded monthly changes ranging from zero in Saxony to 0.2% in Brandenburg and North Rhine Westphalia.  On-year inflation slowed in each of the five states and averaged about 1.0%.

British second-quarter GDP growth was revised up a tenth to a non-annualized 1.2% from 1Q and 1.7% from the second quarter of 2009.  Investment fell 2.4% after climbing 4.5% in 1Q.  Exports and consumer spending rose by 1.1% and 0.7%.  Government spending went up just 0.3% on quarter by by 2.6% on year.  Manufacturing jumped 1.6%, more than twice as fast as the 0.7% increase in service-sector GDP.  The GDP price deflator was 4.1% higher than a year earlier, another sign of more inflationary pressure in Britain than other advanced economies.

A separate estimate of U.K. business-sector investment produced disappointing results.  Such dropped 1.6% on quarter and rose only 1.9% on year.  Analysts had looked for a quarterly rise of 3-3.5%.

Swedish real retail sales increased 0.5% in July and by 2.0% from a year earlier.  There had been a 2.3% on-year increase in the first half of 2010.  Finnish consumer confidence of 21.9 in August surpassed expectations.  The Swiss index of leading economic indicators settled back to 2.18 in August after back-to-back 2.23 readings in June and July.  Retail sales in Spain were 2.2% lower in July than a year before.

South Korea’s current account surplus of $5.88 billion was 15% wider than in June and constituted a 14-month high.  Exports and imports recorded on-year increases of 28.3% and 28.0%.

Investors anticipate that Bernanke in a speech at 14:00 GMT will confirm a return to quantitative easing at the Fed.  The Chairman is unlikely to provide as much information as markets would hope and to talk mainly about the U.S. economy’s conditions and prospects.  The U.S. will release revised GDP at 12:30 GMT, which could be a percentage point or more weaker than the preliminary 2Q indication of 2.4%.  U. Michigan’s estimate of consumer confidence also gets released today about the same time as the start of Bernanke’s address.

Copyright Larry Greenberg 2010.  All rights reserved.  No secondary distribution without express permission.

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