Bank of England Minutes Contain a Surprise Dissenting Vote

June 23, 2010

The dollar fell 0.7% against sterling and by 0.8% against the kiwi.  Other dollar moves were small: up 0.3% against the loonie but down 0.2% against the yen and 0.1% relative to the euro and Aussie dollar.  The Swiss franc is steady.  So is the yuan after climbing 0.4% on Monday and retreating 0.2% on Tuesday.

Following Tuesday’s tumble in U.S. stocks, equities fell 1.9% in Japan, 1.6% in Australia, 0.9% in China and Sri Lanka, 0.4% in South Korea and Taiwan and 0.3% in Indonesia.  In Europe, stocks are off 0.5% in Paris, 0.4% in London and 0.1% in Madrid and Frankfurt.

Sovereign bond yields have declined two basis points in Germany and Japan and one basis point in Britain.

Oil and gold respectively fell and rose by 0.4% to $77.54 per barrel and $1245.20 per ounce.

The Bank of England vote for steady policy earlier this month was split 7-1, as committee member Andrew Sentance preferred a 25-basis point rate increase to 0.75%.  This was the first dissent cast by anybody since August 2008.  However, Mr. Sentance is no stronger to casting hawkish dissents.  He did so at the first policy meeting he ever attended in October 2006 and again in February 2007, April 2007, June 2007, and April 2008.  In dissenting this month, he called the recent pattern of above-target inflation “resilient” and observed the recoveries of both export and domestic demand to be strong.  All other policymakers on the Monetary Policy Committee felt that economic risks had not been altered sufficiently to warrant a rate increase this soon and preferred in particular to see details of the new government’s revised budget plan.

Investors await the FOMC’s decision due about 18:15 GMT today.  Central banks in Norway and the Czech Republic are also scheduled to make rate announcements.  Norway’s Norges Bank may tighten.  The FOMC could downgrade its economic assessment.  No changes are expected from Czech officials.

Iceland’s Sedlanbanki implemented another cut of the key central bank rate, this time by 50 basis points to 8.0%.

Flash purchasing manager indices were released for the euro area, Germany, and France.  While pointing to stronger second-quarter growth of 0.6-0.7%, they also indicate lost momentum as midyear approached, foreshadowing slower growth in the second half of this year.

  • Euroland’s composite PMI slid to a 3-month low of 56.0 from 56.4 in May.  The manufacturing and services components had similar readings in June of 55.6 and 55.4 after May scores of 55.8 and 56.2.  The second-quarter average reading of 56.6 was 2.1 points higher than the first-quarter mean score.
  • Germany recorded a composite PMI of 56.6 after 56.4.  But manufacturing slid to 58.1 from 58.4 in May, 61.5 in April, and 60.2 in March, and factory orders fell to a six-month low.  The services index was 54.6 in June after 54.8 in May and 55.2 in April.
  • France posted an unchanged composite index of 60.1.  Manufacturing slid to 54.9 from 55.8, while services rose to 61.6, a 46-month high, from 61.4.

German consumer confidence stayed at 3.5 in July instead of dipping to 3.3 as forecast.

French business sentiment according to INSEE fell two points, not one, to 95 in June.  Sentiment for all sectors eased from 97 to 96, which also was marginally under the consensus of analysts.

According to the British Bankers Association, mortgage approvals rose to 36.7K in May.  That’s up 7.1% from a year earlier and better than forecast.

The monthly CBI survey of British retailers produced news of an unexpected improvement to minus five in June from minus eighteen in May.

Sweden’s PPI/import price index was unchanged on month and down 0.5% on year in May.  Domestic producer prices dipped 0.5% on month but rose 2.2% on year.  Import prices fell 0.7%, but export prices rose 0.4% on month.  Swedish consumer sentiment improved to 22.0 in June from 18.8 in May.  Economic sentiment rose to 112.0 from 110.1. 

Italian consumer confidence weakened further to a 16-month low of 104.4 in June from 105.4 in May.  Norwegian unemployment of 3.7% in April was a bit higher than expected.  Greece posted a EUR 3.0 billion current account deficit in April, same as in March.

South African consumer price inflation decelerated for a fifth straight month, printing at an on-year rate of 4.6% in May after 4.8% in April.

Singapore’s CPI rose 0.6% on month in May but remained at a 3.2% 12-month rate of rise.  Such had been unchanged between December 2008 and December 2009.  Taiwanese industrial production reached a record level in May, 2.45% higher than in April and 30.67% above the year-earlier level.

New Zealand’s one-year rolling current account deficit of NZD 4.46 billion in March was only 2.4% of GDP, smallest since the year to September 1989.  For 1Q10 alone, there was a NZD 176 million current account surplus after a deficit in 4Q09 of NZD 3.41 billion.

Scheduled U.S. data today are new home sales and oil inventories.  The Fed funds target is universally expected be kept at 0-0.25%.  Remember all the talk a few months ago about a likely Fed rate increase near end-summer?  That speculation has vanished.  Canadian retail sales figures get reported at 12:30 GMT.

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

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