Saturday, April 30, 2011

5 Major Currency Showed Significant Result Both technical and Fundamental

25-30 April, Today, I would like to make a summary of 5 major currency mover toward USD both technical and fundamental factors. Along this week there had some important indicator which will influence trader to make right decision before “BUY” or “SELL”. 5 summary of indicators below can be used as a insight what had been happened.

Technical factors

EUR/USD, German prelim cpi m/m showed the same in what people expected about 0,2% (actual). Gfk german consumer climate was slightly dropped from 5,9 (forecast) to 5,7 (actual) .Industrial new order m/m dropped from 1,3% to 0,9%. French consumer spending m/m was in zone negative from 0,9% (previous) to -0,7% (actual). German Unemployment Change had reduced from previous (-55K) to actual (-37K) . M3 money supply rose slightly from 2,1% to 2,3%. Cpi flash estimate y/y was good which more than expected about 2,8%. German retail sales m/m was bad result from -0,4% to -2,1% . Unemployment rate was remain unchanged still about 9,9%


AUD/USD, Cb leading index m/m 0,1% to 0,6%. Cpi q/q rose from 1,2% (forecast)  to 1,6% (actual). Trimmed mean cpi q/q was good from 0,7% to 0,9% more than expected. Private sector credit m/m was more than expected about 0,6% the same with previous result.


GBP/USD, CBI Industrial Order Expectations dropped very bad from previous (5) to actual (-11). MPC Member Sentance Speaks. BBA Mortgage Approvals was good from 30,6K to 31,7K (actual) more than expected. GfK Consumer Confidence was bad from 28 to -31. Prelim GDP q/q -0,5% to 0,5%


USD/JPY, Retail Sales y/y was bad from -5,7% (forecast)  to -8,5% (actual). Household Spending y/y also dropped from -6,6% (forecast) to -8,5% (actual). Tokyo Core CPI y/y improved from -0,3% to 0,2%. Unemployment Rate raised 4,8% (forecast) to 4,6% (actual). Prelim Industrial Production m/m -10,5%  to -15,3% worse than expected. Overnight Call Rate was still the same about <0,10%.


USD/CHF, Trade Balance was not like people expected which dropped from forecast 2,27B to actual 1,09B. UBS Consumption Indicator rose from 1,45 to 1,66. SNB Chairman Hildebrand Speaks. KOF Economic Barometer improved and exceed forecast about 2,29 compared with forecast 2,20


Fundamental factor

Both French and German are two country that the most influence for EUR currency, this can be seen on consumer spending fell in march as bad as German retail sales especially for Food, drink and tobacco sales lower than in March 2010, while non-food turnover was down 2.4% over the same period. For Euro zone inflation rose further above the European Central Bank's target in April, increasing the chances of an interest rate rise in June, despite a weakening of economic sentiment and household demand. A GfK consumer climate report also pointed to growth in employment, which, along with the "excellent economic situation," was helping to ease employment worries and keep buying propensity at a high level. Meanwhile, decline in jobless fears in Germany in March will involve EUR currency. on this week economic of japan still in recession. At this time BOJ need to focus on downside risks to the economy from the quake's impact, BOJ Governor Masaaki Shirakawa said the central bank still needed time to examine the effects on the economy of its monetary easing last month. The BOJ is planning to take the decisive step of increasing asset buying in March. Looking at economic of aussie is still showing good sign. Today's figures show an unsurprising spike in inflation caused by summer floods and Cyclone instead of high food price. Moreover, the price increases would have been stripped out of the underlying inflation result. while the strength of the Australian dollar will continue to keep imported inflation low and curb Aussie export industries. read more here. If we look at Swiss franc,  the new car registrations were the main driver of the increase (up 34.3% compared to the previous month). This was the highest number of car registrations recorded in March since 2001. The trend in overnight stays of domestic visitors saw a reversal. Low interest rates, improvements in the labor market and ongoing immigration continue as pillars of private consumption and the broader economy. While investments are the main growth drivers, private consumption also represents an important mainstay. Hildebrand said price stability might be threatened by higher commodity prices, a weakening franc and the central bank’s expansionary policy. “Should the Swiss franc weaken again rapidly, rising commodity prices could also have an impact in our country,” Hildebrand said at the central bank’s annual general meeting in the capital Bern. “Furthermore, the expansionary monetary policy carries long-term risks for price stability.” "Budget for Growth" failed to soothe fears about looming spending cuts and squeezes on real incomes. Production costs have jumped markedly during the last 3 months, rocketing ahead after a full year of already rapid cost inflation. Beneath the headline figure, however, the figures reveal core areas of the economy growing healthily and bouncing back strongly from the weather affected Q4 downturn. Growth was led by transport, storage and communication output, as well as business services and finance. There was also strong growth in manufacturing. Weak trading activity is discouraging businesses from borrowing to expand and most are oriented towards repaying debt and reducing their operating costs; larger corporates are also using the capital markets less." and Householders also remain focused on paying down debt, leading to a net contraction of unsecured borrowing and low net mortgage lending, although new mortgage lending is holding up fairly well read more here. In other side, we look at this week of USD currency, some of high impact indicators showed good result, but it does not mean the US economic is in the good position right now. This can be seen on US currency was still low toward others currency in the past two years.

Generally, 5 major currency had raised along this week and showed a good result toward USD. This because of both fundamental and technical gave a positive indicators.

Source: Forexfactory

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Thursday, April 28, 2011

RPT-BOJ Shirakawa: deputy gov proposed boosting asset buying

(Reuters) - Bank of Japan Governor Masaaki Shirakawa said on Thursday that one of his deputies proposed increasing asset purchases from the current 10 trillion yen ($121.6 billion) under a broader scheme that sets aside 40 trillion yen for asset buying and market operations to support the economy. 

But the proposal was turned down at Thursday's BOJ policy meeting, as others on the board still wanted to examine the effects of the BOJ's March monetary easing on the economy. 

"The BOJ took the decisive step of increasing asset buying in March and actual purchases have only just begun," Shirakawa told a news conference. 

"It's important to examine the effects of the move for the time being," he said. ($1 = 82.220 Japanese Yen) (Reporting by Leika Kihara, Tetsushi Kajimoto and Stanley White; Editing by Edmund Klamann) 

Source: Reuters

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EUR/USD: Trading the US GDP Publication

The first release of the GDP for the first quarter holds very low expectations. Is the US economy slowing down? On this background, there’s room for a surprise and a lot of price action in currencies. Here are the details and 5 scenarios for the action in EUR/USD.

On Thursday, April 28th, at 12:30 GMT, the first estimation of US GDP will be published. This is the the preliminary release, followed by a revision and a final release. The first release has the strongest impact as the range of the outcome is wider.

2010 saw moderate growth, not as good as expected. A small acceleration was seen in the last quarter, as GDP rose to an annual rate of 3.1%. This was a promising quarter, as the economy “ate” a lot of inventories. This means that these inventories will have to be rebuilt.

Purchasing managers’ indices released during the first quarter are also positive – for all sectors, meaning that strong growth was seen across the US. More support for a strong GDP comes from the improvement in the labor market. Non-Farm Payrolls rose nicely in recent months, and the unemployment rate fell to 8.8%.

But the money that workers make was somewhat eroded by the pickup in inflation, weighing on consumption. Higher prices of oil hit consumers hard. Activity in real estate has been low.

The negative factors overpowered the positive ones in economists’ forecast. Expectations stand on a growth rate of 1.9% (annualized), which is quite low.

Sentiment and Technical Levels

The sentiment in the markets remains anti-dollar. The fiscal problems in the US, and the aforementioned price of oil continue to be big burden on the greenback all over. On the other side of the Atlantic, things aren’t too good either – the Euro-zone has a high unemployment rate, and a worsening debt crisis.

But while Greece is on the brink of a default, the rising interest rate in Europe makes the sentiment bullish on EUR/USD, at least for now – at least until the loose monetary policy in the US stops.

Technical levels of support and resistance from top to bottom: 1.5144, 1.5020, 1.48, 1.47, 1.4650, 1.4580, 1.4520, 1.4450, 1.4375, 1.4282, 1.4160.

5 Scenarios
  1. Within expectations: +1.6% to +2.3% – the dollar loses ground, with a potential of EUR/USD rising above resistance.
  2. Above expectations: +2.4% to 3.1% (previous quarter’s result) – the dollar rises, and has a good chance the pair breaking below support.
  3. Well above expectations: 3.2% or higher – this can’t be ruled out due to all the factors explained above – the dollar rises, with Euro/Dollar breaking below one support line and potentially another one.
  4. Below expectations: +1% to +1.5%. Weak growth sends the dollar down, with EUR/USD likely to rise above resistance.
  5. Well below expectations: +0.9% or lower – Less than 1% on an annual basis is terrible for the dollar – two resistance levels can be broken by EUR/USD.
Source: Forex Crunch

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Saturday, April 23, 2011

5 Major Currency Raised Significantly


On 17-22 of April 2011, along this week, we are going to look at what some indicators that will influence 5 major currency movement. By reviewing what had happened on this week, the decision maker or broker can get more comprehensive analysis both technical as well as fundamental before taking “Buy” or “Sell” decision. Some below were summary: (for more detail result can refer to www.forexfactory.com)


GBP/USD. The movement of Pound sterling toward US dollar is influenced by some important indicator like rightmove HPI m/m was good result from previous 0,8% to actual 1,7% (http://www.rightmove.co.uk/news/house-price-index/april-2011). MPC meeting minute remained unchanged about 3-0-6. Retail sales m/m rised from -0,5% to -0,2% this was good for AUD currency . Public sector net borrowing was bad result about 16,4B which still deficit. Prelim mortgage approvals was not like people forecasted before (48K) meanwhile, the actual was 44K read more here. The Graph currency mover of GBP/USD can be seen below:


AUD/USD, in this week, some important indicators are monetary policy meeting minutes read more to here. MI leading index m/m increased slightly from 0,3% to 0,4%. Import prices q/q also showed a good result about 1,4% more than forecast (0,8%). PPi q/q was going up than forecast (1,0%) to actual (1,2%) this because some reason (please refer to here to get more detail information).  the Graph currency mover of AUD/USD can be seen below:


USD/JPY, there have only two that you must look, one was tertiary industry activity m/m was more than expected 0,2% (forecast) to 0,8% (actual) and second was trade balance still showed bad result about 0,10T below expectation about 0,33T, it was because the export oriented was still low (read more here). The graph currency mover of USD/JPY can be seen below:



EUR/USD, some of indicators which give big influence are French flash service PMI was good result from 60,4 to 63,4. German flash manufacturing PMI also raised from 60,9 to 61,7. in contrary, Current Account showed bad result from 5,6B to -7,2B. German PPI m/m was bad from 0,8% dropped to actual 0,4%. German ifo business climate was remain stable, stand around 110,4. Belgium NBB business climate was getting down gradually from 6,2 to actual 2,8. this can influence EUR currency mover in this week.
The graph currency mover of EUR/USD can be seen below:



USD/CHF, for swiss currency movement, no have important indicator in this week, so that nothing to be reported for taking a decision. The graph currency mover of USD/CHF can be seen below:


As a result, If we look at all 5 major currency mover in this week showed good currency. Means that some indicators gave a positive impact which raised the currency up significantly toward USD. This definitely give a good sign for trader, time by time is getting better and might back to the normal condition in the long term.

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Thursday, April 21, 2011

Australia final PPI rose 1.2% in March qtr

Australia's producer price index at the final stage of production rose 1.2 per cent in the March quarter, for an annual rise of 2.9 per cent. That compared with a 0.1 per cent rise in the December quarter. In the March quarter, at the intermediate stage, the PPI was up 2.3 per cent, while at the preliminary stage it rose 2.6 per cent, the Australian Bureau of Statistics said on Thursday. Over the year to March, at the intermediate stage the PPI rose 4.4 per cent and at the preliminary stage it was up 5.5 per cent. Economists' forecasts had centred on the March quarter PPI to rise 1.0 per cent for an annual rise of 2.7 per cent.

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German Business Confidence Fell for a Second Month in April

German business confidence fell for a second month in April after oil prices rose to the highest in 2 1/2 years, damping the global economic outlook and threatening to curb domestic consumer spending

The Ifo institute in Munich said its business climate index, based on a survey of 7,000 executives, dropped to 110.4 from 111.1 in March. Economists expected a decline to 110.5, according to the median of 38 forecasts in a Bloomberg News survey. The index rose to 111.3 in February, the highest since records for a reunified Germany began in 1991. 

Crude oil climbed above $112 a barrel this month, the most since September 2008, on political unrest in North Africa and the Middle East. While market researcher GfK AG says rising prices are eroding German consumer confidence, the Bundesbank estimates economic growth accelerated in the first quarter as companies increased spending and hiring to meet export orders from emerging nations such as China. 

“The Ifo has now peaked, though it’s still at a remarkably high level,” said Andreas Moeller, an economist at WGZ Bank in Dusseldorf, whose forecast matched the reading. “While growth remains robust, German companies will have to get used to the fact that the pace of growth will slow.” 

Ifo’s gauge of the current situation rose to 116.3 from 115.8, while an index measuring executives’ expectations fell to 104.7 from 106.5. The euro, which has climbed 9 percent against the dollar this year, eased to $1.4615 after Ifo’s report from $1.4641 beforehand.

Losing Momentum

Nick Kounis, head of macro research at ABN Amro in Amsterdam, said Ifo’s expectations indicator broadly tracks changes in quarterly gross domestic product. 

“The recent decline may be a sign that the German economy is losing some of its momentum,” he said. “Indeed, we think that higher oil prices, the rise in the euro, fiscal consolidation and some cooling of global growth could see the pace of the recovery slow in the coming months.” 

The German government predicts growth of 2.6 percent this year after a record 3.6 percent in 2010. Rising oil prices may put a brake on the global recovery and fan inflation as companies pass on higher input costs. Higher energy costs pushed German inflation to 2.3 percent last month.

Faster Inflation

The European Central Bank, which aims to keep inflation below 2 percent across the 17-nation euro region, this month raised interest rates from a record low. It left the door open for further moves even as a sovereign debt crisis damps growth in peripheral euro-area nations such as Greece, Portugal and Ireland. 

“German companies are not really going to be hit by tighter monetary policy,” said Holger Schmieding, chief economist at Berenberg Bank in London. “It’s still going to be loose for a booming economy.” 

German carmaker Volkswagen AG on April 15 posted record first-quarter sales, powered by deliveries in China, Europe and the U.S. Daimler AG and Bayerische Motoren Werke AG said this month they expect double-digit growth in China this year. 

Robert Bosch GmbH, the world’s largest automotive industry supplier, said April 14 that it expects record sales of 50 billion euros ($73 billion) in 2011 and plans to hire 15,000 workers globally.

Rates ‘Too Low’

The benchmark DAX share index has gained 5.4 percent this year. German factory orders and industrial production jumped in February. 

“ECB rates are too low, and I don’t see that the ECB will raise rates in the near future to a level that’s appropriate for the German economy,” Ifo economist Kai Carstensen said in a Bloomberg Television interview. 

According to the Bundesbank, Europe’s largest economy may have expanded as much as 1 percent in the first three months of the year and will probably maintain its growth momentum in the current quarter. 

“The oil price is putting pressure on both companies and consumers,” said Alexander Koch, an economist at UniCredit Group in Munich. “But for now the economy is booming, and that is unlikely to change in the near future.” 

Source: Bloomberg 

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Surprise retail sales of GBP rise fails to lift gloom


 (Reuters) - Retail sales rose unexpectedly in March, helped by stronger food sales but doing little to alter a picture of fragile consumer demand that is deterring the Bank of England from raising interest rates.

Other data showed the government borrowed slightly less in the 2010/11 fiscal year than its fiscal watchdog had predicted last month, but the finance ministry said this did not lessen the need for it to press on with hefty public spending cuts.

The Office for National Statistics said retail sales volumes including automotive fuel rose 0.2 percent last month, confounding forecasts for a 0.5 percent fall, after February's 0.9 percent decline.

Analysts had been braced for a weak number after a very poor British Retail Consortium survey last week, and the pound hit a fresh 16-month high versus the dollar and strengthened against the euro after the data.
But on the quarter, sales volumes were just 0.3 percent higher, showing the sector poised to make only a modest contribution to first-quarter GDP data due next week.

"These figures and those from the last couple of months are not really showing the retail sector as being a picture of health," said Victoria Cadman, economist at Investec.

"I suspect the Monetary Policy Committee will not see this as a sign that consumer demand is gathering pace."
Year-on-year, retail sales were 1.3 percent higher. Economists had forecast a month-on-month fall of 0.5 percent and an annual rise of 0.9 percent.

The ONS said the monthly increase was driven by the strongest rise in food store sales since June. Sales at garden centres and sports good stores were boosted by better weather this March than last year. Non-store sales, which includes internet retailing, also rose strongly.

Retailers have been complaining about tough conditions on the High Street as consumers face rising prices, higher taxes and muted wage growth. The biggest public spending cuts in a generation also prompt worries about job security for many.

Supermarket chain Tesco said this week it failed to meet its UK profit expectations for the last year and expected conditions to remain challenging.

Sportswear retailer Sports Direct, however, Thursday posted higher sales and profit, helped by growth in its core UK business.

PUBLIC BORROWING DOWN

Britain is pressing on with spending cuts aimed at eliminating the budget deficit over the next four years and separate data showed the government's preferred measure of public borrowing fell to 141.1 billion pounds compared to 145.9 billion predicted at last month's budget.

"As this week's action by S&P (on the United States) has shown, concerns over deficits persist for even the largest economies, and we need to stick to our plan to pay off the nation's credit card," a Treasury spokesman said.

The Debt Management Office said it would cut the amount of bonds it will issue in 2011/12 by 1.5 billion pounds to 167.5 billion, due to the lower 2010/11 borrowing figures.

Separate figures released by the Bank of England showed that major lenders approved 44,000 mortgages for house purchase in March, up from 43,000 in February.

Despite the modest rise, approvals are still running at around half their long-run levels. The net lending flow tobusinesses fell by 0.4 billion pounds in February, versus a 2.7 billion pound decline in January.

"The housing market clearly is still very weak, which does not bode well for house prices," said Howard Archer, economist at IHS Global Insight.

Source: By Fiona Shaikh and David Milliken 

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Wednesday, April 13, 2011

U.K. March Jobless Claims Unexpectedly Rise on Benefit Rules


U.K. jobless claims unexpectedly rose in March, led by women as a change in benefit rules pushed people into the labor market.

Jobless benefit claims rose by 700 from February to 1.451 million, the Office for National Statistics said today in London. That compared with the median forecast of 22 economists in a Bloomberg News survey for a drop of 3,000. Unemployment measured by International Labour Organization methods slipped to 7.8 percent in the quarter through February from 7.9 percent in the three months through November.

Payrolls rose to the highest in two years in the quarter, which may add strength to Prime Minister David Cameron’s argument that the economy can withstand a government budget squeeze that will cut more than 300,000 public-sector jobs. While the Bank of England is aiding the recovery by keeping its key interest rate at a record low, consumer confidence remains weak on concern that unemployment may increase.

“The data is mixed. The fall in the unemployment rate is fairly good news, but we have to bear in mind that most of the public-sector job losses are still to come,” said Hetal Mehta, a London-based economist at Daiwa Capital Markets Europe. “Combined with the fact that average earning growth is low, the Bank of England won’t be in a rush to put up interest rates.”

The pound pared its gain against the dollar after the report. It traded at $1.6274 as of 11:40 a.m. in London, up 0.1 percent from yesterday. Bonds declined, with the yield on the 10-year gilt rising 4 basis points to 3.74 percent.

Single-Parent Benefits

In March, 4,400 men came off jobless benefits and 5,100 women joined the register. The statistics office said a change in eligibility for single-parent benefits, which disproportionately affects women, pushed more people into the labor market to seek work. The U.K. claimant count rate stayed at 4.5 percent in March.

U.K. policy makers left their benchmark interest rate at 0.5 percent this month. While inflation is double the Bank of England’s target, it eased to 4 percent in March from 4.4 percent in February, data yesterday showed.

Today’s report showed that pay growth slowed in the quarter through February, supporting the central bank’s argument that above-target inflation isn’t fueling demands for higher pay.

Weekly pay including bonuses rose 2 percent in the quarter from a year earlier, compared with a 2.3 percent gain in the previous three months. The slowdown was led by financial services and manufacturing. Excluding bonuses, pay growth eased to 2.2 percent from 2.3 percent.

Pay Squeeze

“With pay growth still well below the rate of inflation, the continued squeeze on real pay suggests that the recent weakness of consumer spending is unlikely to let up any time soon,” said Vicky Redwood, an economist at Capital Economics in London. This “further reduces the chances” of the Bank of England raising interest rates next month.

Employment rose by 143,000 in the three months through February to 29.23 million, the highest in two years, the statistics office said. That left the employment rate at 70.7 percent. Unemployment measured by ILO methods fell by 17,000 to 2.48 million in the quarter from the previous three months.

Britain’s unemployment rate compares with 9.9 percent in the euro region, 8.8 percent in the U.S. and 4.6 percent in Japan, the statistics office said.

“These figures are another step in the right direction,” Employment Minister Chris Grayling said in a statement. “However, there are challenges ahead and our priority is to continue to support the economy, by reducing the deficit and putting in place measures to encourage growth.”

Consumers remain concerned about the outlook for employment. A job-security index published by Lloyds Bank Corporate Markets fell 2 points to a 4-month low of minus 27, the bank said on April 4. BAE Systems Plc, Europe’s biggest defense company, said yesterday that it will cut 230 jobs at its vehicle business and close a factory in the U.K.

--With assistance from Mark Evans and Harumi Ichikura in London. Editors: Fergal O’Brien, Andrew Atkinson

Source: Bloomberg By Scott Hamilton 

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GBP/USD Falls on Mixed Employment Data


Claimant Count Change, the fresh employment indicator, has shown a rise of 0.7K in the number of people claiming unemployment benefits in Britain in March. Early expectations stood on a drop of 3.6K. On the other hand, the unemployment rate for February remained dropped from 8% to 7.8%. It was expected to remain unchanged at 8%. GBP/USD is sliding lower.

This rise in the number of people claiming unemployment benefits comes on top of a downwards revision in the the drop reported last month – from 10.2 to 8.5K. The related Average Earnings Index, which also provides an insight about the relation between jobs and prices, is now rising at a pace of 2%, weaker than 2.6% that was expected. This eases inflationary pressures.

Mervyn King, the governor of the BOE, and most of the other members, are reluctant to raise the interest rate in Britain, because of the fragile situation of the British economy. Employment is still very weak and so are retail sales. The unofficial BRC retail sales indicator plunged, showing that British consumers aren’t confident at all.

GBP/USD now trades at 1.6270, slightly lower from 1.6285 before the release.

Yesterday, inflation figures were weaker than expected. The headline CPI figure showed a price rise pace of 4%, significantly weaker than 4.4% that was expected. Also other inflation figures were weaker than expected. This took its toll on the pound which made sharp fall and went as low as 1.6227.

In the meantime, it managed to recover, and rise up to the resistance line of 1.63. It bounced from there to 1.6280 before the release of the employment figures.

Levels to watch on the upside are 1.64 and 1.6450. On the downside, we have 1.6110 and 1.60.  For more technical levels, analysis and upcoming events, see the GBP USD Forecast.

Source: Forex Crunch

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Retail Sales in U.S. Rose in March for Ninth Straight Month


Sales at U.S. retailers rose in March for a ninth consecutive month, showing the improving job market is helping Americans cope with higher costs for fuel and food. 

Purchases increased 0.4 percent following a 1.1 percent February gain that was larger than previously estimated, Commerce Department figures showed today in Washington. The median forecast of 82 economists surveyed by Bloomberg News was a 0.5 percent rise. Sales excluding automobiles and gasoline advanced more than projected. 

Declining unemployment and a cut in payroll taxes for 2011 are helping sustain sales at chains like Macy’s Inc. (M) and Saks Inc. (SKS) At the same time, mounting gasoline and grocery bills are eroding confidence and pinching wallets, making it likely consumer spending, the biggest part of the economy, cooled in the first quarter from the final three months of 2010. 

“The consumer was more resilient in March than some of our concerns,” said John Herrmann, a senior fixed-income strategist at State Street Global Markets LLC in Boston. “Improving labor- market conditions are helping support consumption. This is a very impressive pace of spending, with gains across a diverse range of products.” 

Stock-index futures held earlier gains after the report. The contract on the Standard & Poor’s 500 Index maturing in June rose 0.7 percent to 1,317.7 at 8:46 a.m. in New York. Treasury securities fell, sending the yield on the benchmark 10-year note up to 3.54 percent from 3.49 percent late yesterday.

Survey Results

Retail sales were projected to rise after a 1 percent gain previously reported for February, according to the Bloomberg survey. Economists’ estimates ranged from a drop of 0.5 percent to a 2 percent gain. 

Sales excluding automobiles and service stations climbed 0.6 percent, exceeding the 0.5 percent median forecast of economists surveyed. The February reading was revised up to 0.9 percent from a previously estimated 0.6 percent increase. 

Ten of 13 major categories showed gains last month, led by the biggest increase in furniture demand since 2004 and the largest advance in sales of electronics in a year. 

Filling station sales climbed 2.6 percent. Higher gasoline prices contributed to the projected gain in retail sales, which include purchases at filling stations and aren’t adjusted for inflation.

Gasoline Prices

The cost of regular fuel averaged $3.54 a gallon in March, up from $3.18 the prior month, according to AAA, the nation’s biggest motoring organization. The price jumped to $3.79 a gallon on April 11, the highest since September 2008. 

Sales fell 1.7 percent at automobile dealers, today’s report showed. That’s consistent with industrywide light-vehicle sales, which ran at a seasonally adjusted annual rate of 13.1 million in March, down from 13.4 million the prior month, according to researcher Autodata Corp. 

Nonetheless, auto demand has improved from last year. Sales at Dearborn, Michigan-based Ford Motor Co. (F) climbed 16 percent in March from the same time in 2010, outpacing Detroit-based General Motors Co. (GM)’s 9.6 percent gain. 

“We continue to see good, solid signs of progress despite some of the challenges,” Don Johnson, GM’s vice president of U.S. sales operations, said on an April 1 conference call. “A recovering job market is going to be the most important factor for the U.S. economy at this stage, and we do anticipate that this is going to continue to improve.”

More Jobs

The economy created 216,000 jobs in March, the most since May 2010, while the jobless rate fell for a fourth straight month to a two-year low of 8.8 percent, Labor Department data showed April 1. 

Purchases excluding autos increased 0.8 percent, today’s report showed. They were projected to rise 0.7 percent. 

Excluding autos, gasoline and building materials, which are the figures used to calculate gross domestic product, sales rose 0.4 percent after a 1.1 percent increase the prior month that was almost twice as large as previously estimated. 

Industry reports last week showed stores fared better than forecast. Retailers’ sales at stores open at least a year rose 2.2 percent from March 2010, while the average projection was for a 0.5 percent drop, according to Retail Metrics Inc. Analysts projected a decrease because an early Easter in 2010 had pulled sales into March that would normally have taken place in April. 

Cincinnati-based Macy’s, the second-largest U.S. department- store chain, reported same-store sales rose, while analysts forecast a decline. Luxury retailers Saks, Nordstrom Inc. (JWN) and Neiman Marcus Group Inc. also topped estimates.

Customers Struggling

Wal-Mart Stores Inc. (WMT), the world’s biggest retailer, is among chains saying customers are feeling the pinch from rising fuel expenses. 

“We still see our customer financially strapped,” Rosalind Brewer, president of the Bentonville, Arkansas-based company’s Wal-Mart East division, said in an investor presentation on April 12. We see the shopper’s “wallet being stretched a lot more.” 

Federal Reserve officials noted in minutes of their March 15 meeting that “while participants expected that household spending would continue to expand, the pace of expansion was uncertain.” 

Source: Bloomberg  

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Tuesday, April 12, 2011

Japan Sees Greater Hit to Economy Than First Estimated on Nuclear Crisis


Japan’s Economic and Fiscal Policy Minister Kaoru Yosano said the March 11 earthquake may result in a larger hit to the economy than previously seen, indicating a greater appetite for stimulus one month after the disaster. 

“The damage to the economy may be bigger than we initially expected,” Yosano told reporters today in Tokyo. “In addition to disruptions in the supply chain, we have the added seriousness of the situation with the nuclear power plant,” he said, referring to the Fukushima Dai-Ichi crisis that officials today said has a severity rating matching Chernobyl in 1986. 

Prime Minister Naoto Kan may need to turn to additional debt sales or to tax increases in coming months, given opposition at the central bank to funding deficit spending. A record of the Bank of Japan’s meeting last month showed today that officials refrained from any discussion of specific additional monetary stimulus they would be prepared to endorse. 

Stocks slid on concern that the economy faces a longer slump, with the Nikkei 225 Stock Average falling 1.7 percent. Consumers won’t be willing to spend until funds are deployed to the northeast and government rebuilding take hold, according to economist Noriaki Matsuoka. 

“There’s talk of a tax hike, but that risks exacerbating the drop in consumer confidence,” said Matsuoka, an economist at Daiwa Asset Management Co. in Tokyo. “The BOJ will probably want to avoid increasing its monthly bond purchases because they think that would be similar to monetizing debt.”

Bond Underwriting

The central bank is barred by law from directly buying public debt from the government, and instead purchases 1.8 trillion yen ($21 billion) of the securities from lenders each month, an amount that’s been unchanged for two years. 

Confidence among merchants closest to Japan’s consumers tumbled at the fastest pace in March since the Cabinet Office began tracking the data in 2000, a survey showed last week. 

Analysts from Capital Economics Ltd. are now forecasting the economy will shrink 1.5 percent this year, revised from a previous estimate for gross domestic product to be unchanged. 

“GDP should then rebound as activity recovers from the initial shock and reconstruction spending kicks in, but the recovery will be held back by increases in taxes and cuts in other expenditure required to help pay for the government’s contribution,” economists led by Julian Jessop, chief international economist at Capital Economics, said in a note last week.

Damage Estimate

The Cabinet Office last month estimated damages from the earthquake and tsunami will be as much as 25 trillion yen, prompting several lawmakers to call for a stimulus package as large as 20 trillion yen. Those projections covered destruction to infrastructure while excluding wider implications to the economy, including how radiation will affect food and water supply. 

The government will make sure that victims of the nuclear disaster will be appropriately compensated and has asked Tokyo Electric to indicate when problems afflicting its nuclear reactors will be resolved, Kan told reporters today in Tokyo. He added that he wants opposition parties to help draft the government’s plans for reconstruction. 

Japan raised the severity rating of its nuclear crisis at Tokyo Electric’s Fukushima plant to 7 today, the highest reading. Increasing radiation has prompted the government to widen the evacuation zone and halt shipments of contaminated vegetables produced in regions surrounding the facility. 

Kan is aiming to compile the first stimulus this week that chief spokesman Yukio Edano says may be as much as 4 trillion yen. Finance Minister Yoshihiko Noda has said he wants to avoid selling new bonds to finance that first package, and today reiterated to lawmakers that it’s important for the country to demonstrate its commitment to fiscal discipline. 

Source: Bloomberg

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Traders Bet Rising Interest Rates Delayed as Inflation Ebbs: Mexico Credit

Traders are betting for the first time in four months that interest-rate increases will be delayed after inflation slowed and Mexican central bank Governor Agustin Carstens signaled he’ll keep borrowing costs unchanged.
Futures contracts for the 28-day interbank rate, known as TIIE, show investors expect policy makers will increase the key rate from a record low of 4.5 percent as soon as August, according to data compiled by Bloomberg. As recently as April 4, they predicted Carstens would raise rates in July. In Brazil, where the central bank has boosted borrowing costs 100 basis points this year, futures indicate policy makers will increase the benchmark rate another 25 to 12 percent this month. 

Mexico is the only major Latin American country that hasn’t raised interest rates in the past year as consumer prices increase at the third-slowest pace in the region after Chile and Peru. While rising exports are fueling the expansion in Latin America’s second-largest economy, unemployment and slower private investment growth are helping keep inflation in check, Carstens said at a banking convention in Acapulco, Mexico, on April 7.
“We are seeing better signs of domestic demand recovery, but we still don’t think that’s going to force the hand of authorities to hike in 2011,” Gray Newman, chief Latin America economist at Morgan Stanley in New York, said in a telephone interview. “You can really divide up the region into two camps: the first camp is Mexico and the second camp is everyone else. In Argentina, Chile, Colombia, Peru, Brazil there’s a tremendous boom in private consumption. Mexico is the exception.”

Benchmark Yields

The yield on Mexico’s benchmark peso bonds due in 2021 fell 15 basis points, or 0.15 percentage point, last week and touched a two-month low of 7.43 percent yesterday, according to Banco Santander SA. The yield compares with 3.58 percent for 10-year U.S. Treasuries and 12.83 percent for similar-maturity Brazilian bonds denominated in reais. 

Inflation in Mexico slowed to 3.04 percent in the 12 months through March, the lowest level since May 2006. The rate is half the 6.3 percent recorded in Brazil, the region’s largest economy. Consumer prices in the U.S. rose 2.1 percent in February from a year earlier. 

“The Mexican economy still has enough slack to grow as it has been without generating inflationary pressures,” Carstens said on April 7, citing the country’s unemployment rate. 

Mexico’s jobless rate was 5.38 percent in February, compared with 3.24 percent in May 2008, according to the national statistics agency.

‘Mistake’

Mexico’s 6.1 percent contraction in 2009, the worst since 1995, means the economy still isn’t at levels from before the global financial crisis, according to Benito Berber, an emerging-market analyst at Nomura Securities in New York. Berber predicts the central bank won’t raise rates until the first three months of next year, in line with the median forecast in a survey of economists by Citigroup Inc.’s Banamex unit. 

“People are making a mistake when they compare Mexico to other countries in the region,” Berber said in a telephone interview. “Mexico never had the consumer demand they had. You have to remember that while Mexico contracted these other countries didn’t.” 

The International Monetary Fund and Mexico’s government raised their forecasts for economic growth in the past week. Gross domestic product will grow 4.6 percent this year after expanding 5.5 percent in 2010, the fastest in a decade, the IMF said yesterday. It previously predicted the economy would grow 4.2 percent.

Exports

Finance Minister Ernesto Cordero said Mexico may expand as much as 5 percent this year, up from a previous estimate of 4 percent, on U.S. demand for automobiles and other exports. The rebound in the U.S. last year helped drive Mexican exports to a record $298 billion. 

The central bank declined to comment because of its policy meeting this week, according to an official in the bank’s press office. 

Banco de Mexico will likely keep the lending rate unchanged at its meeting on April 15, according to the median estimate of 14 economists in a Bloomberg survey. 

Yields on the interbank rate futures contract maturing in July fell 4 basis points to 4.96 percent last week, indicating traders no longer expect a rate increase that month. The yield on the August contract fell 4 to 5 percent. They were both unchanged yesterday. In the past five years, the gap between the 28-day TIIE and the overnight rate has averaged 36 basis points.

Yield Spread

The extra yield investors demand to own Mexican dollar bonds instead of U.S. Treasuries was unchanged at 128 basis points at 8:44 a.m. New York time, according to JPMorgan Chase & Co. 

The cost to protect Mexican debt against non-payment for five years rose 1 basis point to 98, according to CMA. Credit- default swaps pay the buyer face value in exchange for the underlying securities or cash equivalent if the issuer fails to comply with debt agreements. 

The peso dropped 0.1 percent to 11.7658 per dollar. 

Inflation will quicken to 4.1 percent by August, increasing pressure on Carstens to raise borrowing costs, according to Alonso Cervera, chief Latin America economist at Credit Suisse Group AG. 

“If that materializes, there may be pressure on the central bank to react to that,” Cervera said in a telephone interview from Mexico City. “The central bank may be forced to do something as early as August.”

Breakeven Rates

The yield gap between debt tied to inflation and fixed-rate bonds, a gauge of investor expectations for annual price increases over the next five years, was 3.89 percent, according to data compiled by Bloomberg. The central bank has a target range of 2 percent to 4 percent. 

In Brazil, the so-called breakeven rate over the next two years was 6.81 percent. The government targets inflation of 4.5 percent, plus or minus 2 percentage points. 

“The mistake is to simply place Mexico in the same category as the rest of the region,” Morgan Stanley’s Newman said. “Mexico is the country whose performance looks most like a developed market, and it happens to be sitting in an emerging- markets region called Latin America.” 

Source: Bloomberg

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