Big Day for Central Bank Watching

September 6, 2012

The Aussie dollar has rebounded 0.5% against its U.S. counterpart in spite of soft Australian labor market data.

The U.S. currency otherwise is unchanged against the yen and sterling and down by 0.3% against the kiwi, 0.2% relative to the loonie and 0.1% versus the euro, Swiss franc and yuan.

High expectations ahead of the ECB press conference have boosted equities by 1.6% in Spain, 1.3% in Italy and Germany, 0.9% in France and Sweden and 0.6% in Britain.  Share prices closed unchanged in Japan and mixed elsewhere in the Pacific Rim.  Such rose 0.8% in China and Australia and by 0.7% in New Zealand and Indonesia but fell by 1.4% in Malaysia, 0.6% in Taiwan, and 0.4% in Vietnam.

Gold and oil prices jumped 0.9% to $1709.9 per ounce and 1.2% to $96.54 per barrel.

10-year sovereign debt yields firmed three basis points in Britain, two bps in Germany and one basis point in Japan.  Spanish and French debt auctions today produced lower interest rates.

The Bank of England did not modify its interest rate or asset buying settings and released a statement that revealed no information about the latest thinking of policymakers.  Minutes of this week’s meeting will be published September 19.

Bank Negara Malaysia did not change Malaysia’s overnight policy rate, which has been at 3.0% since a 25-bp increase in May 2011.  This decision met market expectations.

Policymakers at the Swedish Riksbank, in contrast, surprised analysts with a 25-basis point cut of the Swedish repo rate to 1.25%.  The move follows up on similarly sized reductions in December 2011 and February 2012 and has been justified by a downward revision to projected 2013 inflation.  The Executive Board’s two most dovish members, Svenssen and Eckholm, preferred a deeper rate cut to 1.0%.

The ECB announcement did not include a rate cut, and Pdt Draghi’s press conference will begin at 12:30 GMT.  Analysts await details of the central bank’s hinted unveiling of a fresh program to buy peripheral bonds.  New macroeconomic forecasts are due.

Euro area GDP growth in 2Q fell 0.2% on quarter and by 0.5% on year according to revised figures.  The preliminary estimate for the on-year drop had been 0.4%.  Consumption and investment respectively fell by 0.2% and 0.8% between 1Q12 and 2Q12.  Inventories exerted a 0.2 percentage point drag on growth, while net exports buoyed such by an equal amount.  Whereas German GDP increased 0.3%, GDP contracted 1.2% in Portugal, 0.7% in Italy, 0.6% in Belgium, 1.1% in Finland, 0.2% in the Netherlands, and 0.4% in Spain.  French GDP was unchanged on quarter.

German industrial orders rebounded just 0.5% in July from a 1.6% decline in June, leaving the July level 0.4% below its 2Q average.  Orders were 4.5% lower than in July 2011.  One bright spot was a 2.6% increase in domestic orders for capital goods.

The German construction purchasing managers index printed below 50 for the fifth consecutive month in August, but the reading of 47.8 was the highest since April.  That said, orders for construction fell at their fastest pace in six months.

Dutch consumer prices edged up 0.1% in August and were 2.3% higher than a year earlier.

Britain’s Halifax house price index posted its second monthly drop in a rose last month, falling by 0.4% from July and by 0.9% on year in June-August.

Greece’s jobless rate in June increased more sharply than anticipated, reaching 24.4% after 23.5% previously.

French ILO unemployment increased to 10.2% last quarter from 10.0% in 1Q12.

Czech industrial production rebounded 1.1% in July and was 4.2% greater than a year earlier.  The Czech and Hungarian trade surpluses in July were smaller than in June.  Italy’s non-EU trade surplus widened 21% in July.

Australian jobs fell by 8.8K in August, surprising analyst expectations of a 5K increase.  All of the drop involved part-time workers.  Hours worked shrank by 0.4%, and a lower unemployment rate of 5.1% after 5.2% in July reflected a smaller labor force.

Japanese stock and bond transactions last week generated a JPY 559 billion net capital outflow, 58% smaller than in the previous week.  BOJ Governor Shirakawa reaffirmed that Japan’s economy is recovering moderately and that monetary policy would support growth and promote the end of deflation.  Nothing new there.

Scheduled U.S. data are the budget and non-manufacturing ISM survey of purchasing managers.  Central bank decisions later today will be announced in Mexico and Peru as well as by the ECB.  President Obama delivers is nomination acceptance speech tonight.

Copyright 2012, Larry Greenberg.  All rights reserved.  No secondary distribution without express permission.

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