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Weekly Economic and Financial Commentary : 06/06/2011
Have We Hit a Soft Patch or Something a Bit Worse?
Most of this week's economic reports came in on the soft side, including Friday's employment report, which showed payrolls rising just 54,000 in May and the unemployment rate rising to 9.1 percent.
The ISM manufacturing survey also weakened much more than expected. The headline index fell 6.9 points to 53.5, with new orders plunging 10.7 points.
Consumer confidence fell in May as consumers expressed more concern about both current and future economic conditions.
Just a Temporary Glitch or Wishful Thinking?
It has been nearly two years since the economic recovery began. But rather than celebration, this milestone has been marked by renewed doubts about the sustainability of the recovery. Virtually all the early data for May ...
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Risk Comes Off and the USD Still Suffers
The Week Ahead
Highlights
Risk comes off and the USD still suffers
Greece passes its test - is the euro on its way to 1.5000?
Is the BOE getting more dovish?
Steady RBA cash rate…for now
RBNZ likely to remain on hold for an extended period
Key data and events to watch next week
Risk comes off and the USD still suffers
Last week we suggested that the strength of the global recovery remained very much in doubt despite the G8's optimistic pronouncement and that risk assets (stocks and commodities) were set to weaken further, and that this would support the USD. Stocks and many key commodities did decline on the week (S&P 500 closed below the daily Ichimoku cloud bottom at 1305/1306; CRB commodity index potentially forming an 'Abandoned Baby Top" bearish reversal ...
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The yen temporarily weakened
USD
The yen temporarily weakened during the Asia session amid newspaper speculation that a political crisis could be imminent in Japan. Prime Minister Kan is due to face a vote of no-confidence in parliament today but we doubt he will lose his post. EURUSD traded 1.4308-1.4401, USDJPY 80.84-81.33. Asian equities are weaker at the time of writing after the S&P 500 closed down -2.3% on the day. The yield on the 10y US Treasury bond slipped below 3.0% for the first time in six months in response to yesterday’s weaker US data. The ISM manufacturing report reflected recent weakness in regional indexes but the more worrisome print was the ADP employment change of +38k versus consensus +175k. The correlation with the ADP print and the Bureau of Labor Statistic’s (BLS) payrolls data is volatile ...
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Moody's places Japan on possible downgrade, but better manufacturing data gets the focus
Morning Briefing: Moody's places Japan on possible downgrade, but better manufacturing data gets the focus
News:
Japan: Moody’s places Japan on review for possible downgrade
Japan: Stronger Manufacturing and Industrial data get the limelight
JPY: Weakens, but could bode well for Japanese exports
Euro Zone: Germany shows willingness to reach an accord for Greek second round of aid.
FOREX: Euro lifted to 1.4406 on German comments for Greece
New Zealand: Improving business confidence gives support for the Kiwi
BoC: Interest rate decision today CAD garners support ahead of the event
Rates in Asia and Indices:
EUR/USD: 1.4406 - 1.4279.
USD/CHF: 0.8540 – 0.8466.
GBP/USD: 1.6546 - 1.6472.
EUR/JPY: 117.27 – 115.57.
USD/JPY: 81.51 – 80.71
Dow Jones: 12’441.58
NASDAQ: 2'796.86
S & P 500: 1' ...
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Fears of US Slowdown Overdone
Economic Data Analysis
Fears of US Slowdown Overdone
The ISM and nonfarm payroll reports for May will provide an important steer for markets this week. We expect above-consensus outturns to help redress some of the recent concerns about the US growth outlook.
Euro area peripheral tensions remain acute, but we believe are overdone. With Germany opposed to a debt 'reprofiling' in Greece, an easing in tensions may soon clear the path for a recovery in risk sentiment.
Forward looking indicators dominate the UK calendar with the latest PMIs and Lloyds Business Barometer watched for their implications for Q2/Q3 GDP.
US non-farm payrolls (May): The recent patch of soft US activity data has raised the significance of Friday's report, as payroll employment is an important coincident ...
Title:
G8 Optimism on Global Growth Seems Wishful Thinking
The Week Ahead
Highlights
G8 optimism on global growth seems wishful thinking
June's event risks are make-or-break for the Eurozone
There's more than meets the eye to the Swissie
The Loonie's flight path facing some turbulence
Key data and events to watch next week
G8 optimism on global growth seems wishful thinking
The past week ended on an upbeat note for risk assets (stocks and commodities) and a weaker USD ostensibly on the pronouncement from the G8 that the global recovery is “gaining strength and is becoming more self-sustained.” However, incoming economic data suggest the opposite, namely that growth in major developed economies is showing signs of slippage. Just in the past week, key Eurozone PMI's and business confidence indexes posted larger than expected ...
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Analysis: Don't rule out early use of emerging FX in reserves
(Reuters) - China's yuan and its emerging economy peers could become reserve currencies sooner than many investors think, as some experts reckon the hurdles of convertibility and policymaker inertia are easily negotiated.
China and other countries from the BRICS nations -- Brazil, Russia, India and South Africa -- would like their currencies to make up part of the International Monetary Fund's special drawing right (SDR), which is used as a reserve asset.
Chinese officials have asserted that widening the SDR basket would heighten the yuan's profile as a potential reserve currency, with some experts seeing the SDR growing into a partial substitute for the dollar.
The SDR, now composed of just U.S. dollars, euros, British pounds and Japanese yen, broadly reflects the composition of the $9 ...
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Dollar advancing against the Euro
USD
Risk appetite took a turn for the worse during the Asia session, allowing the dollar to advance against the euro, the AUD, and the NZD in particular. EURUSD traded 1.4025-1.4127 and USDJPY 81.82-82.17. Asian equities were modestly weaker after US stocks closed virtually flat. BoJ Governor Shirakawa appeared to rule out an acceleration in the pace of the BoJ’s monthly JGB purchases. St Louis Fed President Bullard said the debt crisis is a threat to US economic growth. According to Reuters, he went on to say that “if all goes well, Fed could start to tighten in second half of the year.” Durable goods orders are expected to come in softer for April, which could keep dollar worries in place. But our economists note that ISM new orders continue to signal a solid trend in growth and ...
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Markets Consolidate Before the End of the World
The Week Ahead
Highlights
Markets consolidate before The End of the World
Greek problems get worse before they get better?
The euro hinges on Spain
Japan's economy still in a 'very severe' state
The Loonie may see weakness ahead
Key data and events to watch next week
Markets consolidate before The End of the World
This past week saw most major asset markets and currencies essentially consolidate around recent lows following the sell-off in the first half of May. Incoming data, however, continues to suggest increasing sluggishness in the major economies. In the US, housing data weakened further, both the Philadelphia and Empire manufacturing indexes declined, industrial production flattened, and the index of leading indicators dropped for the first time in 10 ...
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