Asia FX By Cornelius Luca - Thu 09 Aug 2012 17:07:34 CT (Source:CME/www.lucafxta.com)
The appetite for risk was mixed on Thursday. The European currencies and yen ended lower and the commodity currencies higher on Thursday after closing divergently on Wednesday. The US stock markets ended mixed, but gold, oil and silver edged up. The market needs new information. The short-term outlook for the foreign currencies is sideways. The medium-term outlook for most of the foreign currencies is sideways. The LGR short-term model is short only the yen. Good luck!
Overnight
US: The initial jobless claims fell to 361,000 from the previous week's revised figure of 367,000.
US: The trade balance showed a deficit of $42.9 billion in June, a 10.7% drop from the revised May level of $48 billion.
Canada: The international merchandise trade showed a deficit of C$1.81 billion in June from -C$0.95 billion in May.
Canada: The new housing price index slowed to 0.2% in July from 0.3% in June.
Today's economic calendar
China: Trade Balance for July
Australia: The RBA monetary policy statement
Japan: Industrial production for June
Most Asian Stocks Drop on Concern About China Slowdown (Source: Bloomberg)
Asian stocks swung between gains and losses, with the regional benchmark index headed for its biggest weekly gain this year, ahead of a report expected to show China’s export growth slowed for a third month. Trend Micro Inc. (4704) slumped 9.9 percent in Tokyo after earnings fell at the maker of anti-virus software. Olympus Corp. dropped 1.9 percent after the camera maker last year embroiled in an accounting scandal violated terms on 320 billion yen ($4 billion) in loans. LG Electronics Inc. rose 1.6 percent on speculation sales in its biggest market will rise after U.S. jobless claims unexpectedly fell. The MSCI Asia Pacific Index (MXAP) fell less than 0.1 percent to 120.89 as of 10:00 a.m. in Tokyo, with more than six stocks dropping for each that rose. The gauge is heading for a 3.3 percent advance this week amid speculation China will add stimulus to support growth and after Germany backed a European Central Bank bond-buying plan.
“Markets have resumed an uptrend but it won’t be without volatility,” said Nader Naeimi, Sydney-based head of dynamic asset allocation at AMP Capital Investors Ltd., which manages a most $100 billion. “While disaster has been avoided in Europe on the back of the ECB’s actions, earnings will remain weak reflecting a soft patch in the global economy.”
Japanese Stocks Decline Amid Economic Growth Concern (Source: Bloomberg)
Japanese stocks fell for the first time in five days, paring the biggest weekly gain since February, as currency gains hit exporters ahead of a report next week expected to show the country’s economy slowed. Canon Inc. (7751), a camera maker that depends on Europe for almost a third of its sales, fell 0.8 percent after the shared currency weakened. Trend Micro Inc. sank 10 percent after earnings fell at the security software maker. Sony Corp gained 5.1 percent after the consumer-electronics company offered to buy out online shopping site So-net Entertainment Corp. “The euro’s weakness is likely to get priced into stocks today,” said Kenichi Hirano, general manager and strategist at Tachibana Securities Co. in Tokyo. “Investors won’t become bullish until the currency market settles down.”
The Nikkei 225 Stock Average (NKY) fell 0.4 percent to 8,940.41 as of 9:34 a.m. in Tokyo, trimming a weekly gain to 4.5 percent. Trading volume was almost 20 percent above the 30-day average as traders settled the price of August options on the gauge at 8.914.81. The broader Topix lost 0.1 percent to 750.78, with about four shares dropping for every three that gained.
Hong Kong Stocks Advance as China CPI Slows Fourth Month (Source: Bloomberg)
Hong Kong stocks rose, with the benchmark index closing at the highest level since May, as slowing gains in China’s inflation and industrial production boosted bets for added stimulus to support economic growth. Agricultural Bank of China Ltd. (1288) added 0.9 percent. Shimao Property Holdings Ltd. paced gains among mainland developers after Poly Real Estate Group Co. reported July contracted sales jumped. SJM Holdings Ltd., the Macau casino operator founded by billionaire Stanley Ho, gained 2.3 percent after reporting a 28 percent increase in first-half profit. The Hang Seng Index added 1 percent to close at 20,269.47, the highest since May 9. All but eight stocks gained on the 49- member gauge. The Hang Seng China Enterprises Index (HSCEI) of mainland companies rose 1 percent to 9,962.17.
“The market is expecting some type of policy support from the Chinese government to accelerate the economy because momentum is slowing at this point,” said Tim Leung, a portfolio manager who helps manage about $1.5 billion at IG Investment Ltd. in Hong Kong. The Hang Seng Index fell 6.5 percent from this year’s high on Feb. 29 amid concern global policy measures may fail to revive growth as Europe’s debt crisis spreads. Shares on the gauge trade for 10.7 times estimated earnings on average, compared with 13.6 for the Standard & Poor’s 500 Index and 11.6 for Stoxx Europe 600 Index.
S&P 500 Caps Longest Rally Since March on Economic Data (Source: Bloomberg)
Most U.S. stocks rose, giving the Standard & Poor’s 500 Index its longest rally since March, as data showing an unexpected decline in jobless claims last week tempered concern about a worsening of Europe’s economy. A measure of homebuilders in S&P indexes advanced 2.3 percent as JPMorgan Chase & Co. (JPM) said it saw higher demand in the industry and data showed prices for single-family homes rose in most U.S. cities last quarter. E*Trade Financial Corp. (ETFC) increased 6.9 percent as Chief Executive Officer Steven J. Freiberg was ousted from the brokerage. Monster Beverage Corp. declined 9.7 percent after profit and sales trailed estimates. Five stocks rose for every four falling on U.S. exchanges at 4 p.m. New York time. The S&P 500 (SPX) added less than 0.1 percent to 1,402.80, rallying 2.8 percent in five days. The Dow Jones Industrial Average lost 10.45 points, or 0.1 percent, to 13,165.19. Volume for exchange-listed stocks in the U.S. was 5.5 billion shares, 18 percent below the three-month average.
“We acknowledge the positive news,” Wayne Lin, a money manager at Baltimore-based Legg Mason Inc., said in a telephone interview. His firm oversees $631.8 billion. “We’ve had some positive surprises on the jobs front and it seems that housing has found some footing. Yet people are aware of the risks. The risk in Europe is still out there.”
Emerging Stocks Reach Three-Month High as China Inflation Slows (Source: Bloomberg)
Emerging-market stocks rose to a three-month high after U.S. jobless claims unexpectedly fell and as China’s inflation cooled in July, providing policy makers more room to stimulate the world’s second-largest economy. The MSCI Emerging Markets Index (VXEEM) climbed 0.9 percent to 979.28, gaining for a fifth day to the highest since May 10. South Korea’s Kospi (KOSPI) index jumped 2 percent and Warsaw’s WIG20 gauge advanced 2.2 percent. Brazil’s Bovespa stock index fell with clothing retailer Lojas Renner SA and steelmaker Usinas Siderurgicas de Minas Gerais SA among the biggest losers. Circuit-board maker Zhen Ding Technology Holding Ltd. (4958) rallied 7 percent in Taipei.
China’s consumer prices increased 1.8 percent last month, compared with a 2.2 percent gain in June. The Bank of Korea said growth momentum is “slackening,” fueling optimism the central bank will cut borrowing costs later this year after keeping its interest rate unchanged today. Fewer Americans filed applications for unemployment benefits last week, with jobless claims unexpectedly dropping by 6,000 to 361,000 in the week ended Aug. 4, Labor Department figures showed today in Washington. “As news gets worse in China, it provides more of an excuse for any kind of Chinese stimulus,” Michael Gayed, chief investment strategist at Pension Partners LLC overseeing about $160 million in assets, said by phone from New York. “Any kind of improving data from the U.S. has helped undo the bearish sentiment and it reflects in rising stocks globally. This has been a year purely of psychology.”
European Stocks Rise for Fifth Day; Nestle Gains (Source: Bloomberg)
European stocks climbed for a fifth day as Nestle SA (NESN) posted sales growth that beat estimates and a report showed China’s inflation cooled, increasing speculation that policy makers will do more to stimulate the economy. Nestle, which accounts for more than 3 percent of the Stoxx Europe 600 Index (SXXP), advanced 2.4 percent as higher prices helped to increase revenue. Novo Nordisk (NOVOB) A/S gained 1.3 percent after the company raised its full-year sales and profit forecasts. Deutsche Telekom AG (DTE) slid 2 percent after saying it has lost more customers in the U.S. than analysts had forecast. The Stoxx 600 increased 0.4 percent to 270.26 at the close, its highest level since March 19. The equity benchmark has rallied 16 percent since its 2012 low on June 4, with nine straight weeks of gains, as policy makers eased repayment terms for Spanish lenders and optimism grew that central banks will add more stimulus.
“If the figures show mild inflation and economic growth slows down as they have recently, there’s a strong chance that China will add stimulus,” said Pierre Mouton, a fund manager who helps oversee $6.5 billion at Notz Stucki & Cie. in Geneva. “On earnings, Nestle’s reported a very good set of results. It helps the sector as a whole.” The volume of shares changing hands on the Stoxx 600 was 23 percent lower than the average of the last 30 days, according to data compiled by Bloomberg. The volume of securities trading on Germany’s DAX Index was 12 percent higher than the average.
Euro Poised for Weekly Drop Before GDP Report; Dollar Holds Gain (Source: Bloomberg)
The euro was set for the first five- day drop in three weeks before data forecast to show the economy of the region that shares the currency shrank. The 17-nation euro remained lower against the yen following a two-day slide after economists in a European Central Bank survey cut their 2013 growth estimate for the currency bloc. The dollar maintained a gain versus the yen from yesterday as Treasury yields rose before a report projected to show U.S. retail sales advanced for the first time in four months. “The markets will have to assume euro weakness,” said Gavin Stacey, chief rate strategist in Sydney at Barclays Plc. “The euro situation is continuing to deteriorate on the economic front and obviously does warrant more aggressive measures from the ECB.”
The euro traded at $1.2298 and 96.66 yen as of 8:26 a.m. in Tokyo, little changed from the close in New York yesterday. It has lost 0.7 percent this week against the greenback and 0.6 percent versus the Japanese currency. The dollar fetched 78.59 yen after advancing 0.2 percent yesterday to 78.57. It has risen 0.2 percent since Aug. 3. Gross domestic product in the euro area probably contracted 0.2 percent in the three months through June after being unchanged in the first quarter, according to the median forecast of economists in a Bloomberg News survey. The European Union’s statistics office will report the figure on Aug. 14. The economists polled by the ECB reduced their 2013 growth projection to 0.6 percent from 1 percent. The region’s economy is likely to shrink 0.3 percent this year, they said in the ECB’s monthly bulletin yesterday.
FOREX-Euro ekes out gain, Aussie lifted by jobs, China data
TOKYO, Aug 9 (Reuters) - The euro got a slight lift against major counterparts and the Australian dollar crested at a 4-1/2 month peak after Chinese inflation data suggested scope for further easing and Australia's employment picture brightened.
"Today's data releases can be said to be better than expected, though overall, market moves were small, with recent ranges holding for now," said Kimihiko Tomita, head of foreign exchange for State Street Global Markets in Tokyo.
Jobless Claims Fall in Sign U.S. Job Market Mending: Economy (Source: Bloomberg)
Fewer Americans filed applications for unemployment benefits last week, a sign the labor market may keep improving after hiring picked up in July. Jobless claims unexpectedly dropped by 6,000 to 361,000 in the week ended Aug. 4, Labor Department figures showed today in Washington. The median forecast of 43 economists surveyed by Bloomberg News called for an increase to 370,000. Other reports showed consumer confidence dropped to a two-month low and home prices climbed by the most since 2006. The decrease in firings indicates the job market continues to mend after payrolls rose last month by the most since February. The world’s largest economy needs bigger gains in employment to prevent the lingering European debt crisis and approaching U.S. fiscal cliff from derailing the economic expansion.
“There’s a gradual improvement on the layoffs side,” said Peter Newland, an economist in New York for Barclays Plc, who projected claims would drop to 360,000. There will be “a bit of a rebound in the second half. It’s not going to be spectacular, but it should be better than the first half.” Most stocks rose, giving the Standard & Poor’s 500 Index its longest rally since March. The S&P 500 advanced less than 0.1 percent to 1,402.8 at the close in New York.
Home Prices Rise in 75% of U.S. Cities in Second Quarter (Source: Bloomberg)
Prices for single-family homes climbed in three-quarters of U.S. cities and values nationally jumped the most since 2006 as real estate markets stabilized. The median sales price increased in the second quarter from a year earlier in 110 of 147 metropolitan areas measured, the National Association of Realtors said in a report today. In the first quarter, 74 areas had gains. U.S. housing prices are beginning to lift off the bottom after the worst housing slump since the 1930s as buyers compete for a tight supply of available properties. At the end of June, 2.39 million previously owned homes were available for sale, 24 percent fewer than a year earlier, the Realtors said. “The turnaround in home prices feels pretty broad,” Celia Chen, a housing economist at Moody’s Analytics in West Chester, Pennsylvania, said yesterday. “There are still risks that home prices will dip a little more before they start appreciating with any consistency,”
One threat to home values is the so-called shadow inventory of delinquent properties that have yet to enter the market. U.S. foreclosure starts rose 6 percent last month from July 2011, Irvine, California-based data provider RealtyTrac Inc. said today.
U.S. Consumer Comfort Drops to Two-Month Low on Economy Concern (Source: Bloomberg)
Consumer confidence in the U.S. fell this week to the lowest level in two months as Americans became more discouraged about the economy. The Bloomberg Consumer Comfort Index dropped to minus 41.9 in the period ended Aug. 5 from minus 39.7. The gauge hasn’t climbed since the end of June. Americans’ view of the economy fell to the lowest level since February. Greater discontent about the economy was accompanied by dimmer views of personal finances and the buying climate, a sign consumer spending will be slow to pick up. A recent increase in gasoline prices and scant improvement in the labor market are also restraining confidence among lower-income households. “The American public is downright sour on their own economic prospects and those of the nation as a whole due to the growing labor slack in the economy,” said Joseph Brusuelas, a senior economist at Bloomberg LP in New York. The share of respondents in the Bloomberg survey who rated the economy as “poor” climbed this week to a seventh-month high.
Another report today showed fewer Americans filed applications for unemployment benefits last week, a sign the labor market may keep improving after job growth picked up in July. Jobless claims fell by 6,000 to 361,000 in the week ended Aug. 4, the Labor Department said. The median forecast in a Bloomberg survey called for an increase to 370,000. Stocks fell as concern about Europe’s economy. The Standard & Poor’s 500 Index dropped 0.1 percent to 1,400.97 at 9:37 a.m. in New York.
Trade Deficit in the U.S. Shrank More Than Forecast in June (Source: Bloomberg)
The U.S. trade deficit narrowed more than forecast in June as the biggest drop in crude oil prices in more than three years helped cut the nation’s import bill. The gap shrank 11 percent to $42.9 billion, the smallest since December 2010, from $48 billion in May, Commerce Department figures showed today in Washington. The median forecast in a Bloomberg News survey of 69 economists called for the deficit to shrink to $47.5 billion. Exports climbed to a record on demand for autos and industrial engines. The better-than-projected reading may help boost second- quarter growth figures when the government revises the data later this month. The recent rebound in oil prices and slowing economies in Europe and Asia mean the deficit will probably not keep contracting, making it more difficult for trade to aid the economic expansion.
"For all the talk about the troubles in Europe and China slowing, what’s going on around the world is not make or break for the U.S. recovery,” said Stephen Stanley, chief economist at Pierpont Securities LLC in Stamford, Connecticut. “This report is a positive in the sense that growth in the first half of the year was a little better than reported.”
What’s Fed to Do as 15 of 18 Banks Fixing Libor Aren’t American (Source: Bloomberg)
Mark Calabria at the Cato Institute usually isn’t shy about criticizing Timothy F. Geithner. Yet he says it was ultimately up to the British to deal with the manipulation of Libor, as only three of the 18 banks that set the London interbank offered rate are based in the U.S. Geithner was president of the Federal Reserve Bank of New York in 2008 when he learned about banks under-reporting Libor, the global benchmark for $500 trillion of securities. He sent a memo in June of that year to Bank of England Governor Mervyn King raising concerns and recommending changes in how the rate is calculated. Little has been done to address the issue since, and King said last month that he only just learned of wrongdoing and Geithner didn’t highlight malpractice. “Geithner is not the primary person in the world responsible for Libor,” said Calabria, Cato’s director of financial-regulation studies in Washington and a former Senate Banking Committee aide.
“There were items on that memo that were absolutely first and last the responsibility of the British Bankers’ Association and by extension the Bank of England.” Four years after Geithner sent his recommendations, Barclays Plc (BARC) was fined a record 290 million pounds ($453 million) for rigging borrowing costs, and regulators in both countries have defended their reaction to the manipulation. The failure to work together across jurisdictions highlights the need for better collaboration among policy makers and regulators worldwide, said Kevin Hassett, a director of economic policy studies at the American Enterprise Institute in Washington.
Hong Kong Economic Growth Forecast Slowest Since 2009 (Source: Bloomberg)
Hong Kong’s economy probably grew at close to the slowest pace since the financial crisis, as record unemployment in the euro area hurt exports and Chinese tourists spent less on luxury goods. Second-quarter gross domestic product rose 1.2 percent from a year earlier, according to the median forecast in a Bloomberg News survey of 15 economists ahead of data due today. Expansion was 0.4 percent in the first quarter, down from 3 percent in the previous three months and 4.4 percent in the third quarter. The stalling economy adds to the challenges facing Chief Executive Leung Chun-ying, who took office on July 1 vowing to build a more equitable society as the territory’s wealth gap widened to a record. Thousands of residents have taken to the streets to demand higher minimum wages, direct leadership elections by 2017 and a halt to plans for “patriotic” education in primary schools.
“It’s likely that economic growth will still be as weak as, or even worse than, last quarter,” said Kevin Lai, a Hong Kong- based economist at Daiwa Capital Markets Ltd., whose forecast for 0.5 percent expansion is the second lowest. “One, and perhaps the only, way to bolster the economy is investment in infrastructure but I haven’t seen any increase coming there. What we need to hope for is a rebound in the global economy.”
Japan Growth Seen Slowing to Half Previous Pace as Exports Wane (Source: Bloomberg)
Japan’s economy probably grew last quarter at half the pace of the previous three months, a slowdown analysts predict is deepening as Europe’s debt crisis and the yen’s gains erode exports. Gross domestic product expanded an annualized 2.3 percent in the three months through June, compared with 4.7 percent in the first quarter, according to the median estimate of 24 economists surveyed by Bloomberg News. The Cabinet Office will release the report on Aug. 13. The slump may deepen this quarter, with exporters from Sony Corp. (6758) to Canon Inc. (7751) in the past month cutting profit projections because of waning overseas growth. As Prime Minister Yoshihiko Noda prepares to push a sales-tax increase through the Diet, pressure may rise on policy makers to consider a supplementary budget and monetary stimulus to shore up domestic demand.
“We need to be alert to the downside risks to the economy, especially in the third quarter,” as the global slump spills over to Japan, said Kohei Okazaki, an economist at Nomura Securities Co. in Tokyo, a unit of Japan’s largest brokerage. “There’s a possibility monetary and fiscal stimulus will be implemented by the end of the year.”
Housewives With Frying Pans Protest Japan Tax Hike as Debt Soars (Source: Bloomberg)
About 200 housewives marched down a shopping street in central Tokyo, beating pans with ladles and shouting slogans criticizing a government plan to double Japan’s 5 percent consumption tax. “Ordinary people like us have a limited amount of money we can spend each month,” said Natsuyo Makabe, a protester who took part in three demonstrations in June against the tax as well as nuclear energy and a free-trade pact. “Ninety-nine percent of the public will have to cut back on what they buy.” The apron protesters, as they are known, argue that a tax increase would crimp household budgets just when the economy can’t withstand a drop in consumption, Bloomberg Businessweek reports in its Aug. 13 issue. They say it’s a bad time for Prime Minister Yoshihiko Noda to rein in public debt that will be over 230 percent of national output this year, the biggest anywhere. The tax plan has already cleared the lower house of Japan’s Parliament, and Noda this week brokered a deal to bring the bill to the upper house today.
Japan’s debt is ballooning as its population is aging and shrinking, meaning there are only 2.4 working-age Japanese to support one senior citizen now, compared with 9.1 in 1965. If he gets this tax issue wrong, Noda could throttle consumption, reduce tax revenue, and still leave Japan deep in debt. If the tax increase is defeated, the debt problem remains unsolved.
Singapore GDP Falls Less Than Earlier Estimated on Manufacturing (Source: Bloomberg)
Singapore’s economy shrank less than initially estimated last quarter as pharmaceutical output countered declining electronics manufacturing, even as Europe’s sovereign-debt crisis led the government to cut growth forecasts. Gross domestic product fell an annualized 0.7 percent in the second quarter from the previous three months, when it expanded a revised 9.5 percent, the Trade Ministry said in a statement today. That compares with a July preliminary estimate of a 1.1 percent contraction and the median prediction of a 0.5 percent gain in a Bloomberg News survey of 11 economists.
The contraction prompted the Singapore government this week to trim its prediction for 2012 growth to 1.5 percent to 2.5 percent, from an earlier forecast for an expansion of as much as 3 percent. Policy makers across the world are girding for a deeper slowdown from Europe’s turmoil, with Asian central banks from China to South Korea and the Philippines cutting interest rates last month, and adding pressure on Singapore to ease monetary policy. “The second half will be choppy for Singapore as the U.S. faces fiscal headwinds, Europe’s recession deepens, and China slows down,” Chua Hak Bin, an economist in Singapore at Bank of America’s Merrill Lynch division, said before the report. “Domestic demand is sufficient to keep the economy afloat and Singapore will avoid going into a recession but given the growth risks, we think the central bank could normalize and ease” its monetary policy stance, he said.
India Industrial Output Slides in Sign Economy Is Faltering (Source: Bloomberg)
Indian industrial production slid in June for the third time in four months, with output of capital goods plunging the most on record, adding to signs of faltering growth in Asia’s third-largest economy. Production at factories, utilities and mines declined 1.8 percent from a year earlier, after a revised 2.5 percent rise in May, the Central Statistical Office said in New Delhi today. The median of 27 estimates in a Bloomberg News survey was for a 0.4 percent climb. Capital goods output, an indication of investment in plants and machinery, slid 27.9 percent. Indian manufacturing has been subdued in recent months as inflation above 7 percent saps domestic demand and Europe’s debt crisis crimps exports. Price pressures from a drop in the rupee and the impact of a weak monsoon on crops forced the central bank to leave interest rates unchanged in July, breaking with a wave of cuts in borrowing costs from China to Brazil to Europe.
“The negative trend coming in between a looming drought- like situation is very, very worrying,” said Brinda Jagirdar, an economist at State Bank of India in Mumbai. “Our problems are compounding. We need quick and decisive policy actions to revive growth, otherwise we’ll see a severe collapse.” The rupee, which has slumped about 18 percent against the dollar in the past 12 months, strengthened 0.2 percent to 55.295 per dollar at the 5 p.m. close in Mumbai. The BSE India Sensitive Index of stocks pared earlier gains and fell 0.2 percent. The yield on the 8.15 percent government bond due in June 2022 was little changed at 8.14 percent.
London Boom Pushes U.K. House Prices to Four-Year High (Source: Bloomberg)
U.K. house prices increased to a four-year high in July as London’s booming property market widened its divergence with the rest of the country, Acadametrics Ltd. said. The average cost of a home in England and Wales rose 0.2 percent from June to 225,769 pounds ($353,000), the most since June 2008, Acadametrics and LSL Property Services Plc said in a report published in London today. Prices climbed 3.2 percent from a year earlier. “This month we report stunning growth in some London boroughs,” Peter Williams, chairman of Acadametrics, said in a statement. “The Greater London housing market is another country compared with the remainder of the U.K.” and “is likely to continue to move further out of line with all or most of the market in the rest of England and Wales.”
The figures highlight how the British capital is skewing the national picture at a time when mortgage rationing and job losses are curbing demand for homes elsewhere in Britain. The Bank of England said this week that overall house prices have remained “broadly unchanged” in the past two years and that, adjusted for inflation, they have actually declined. London prices rose 11.8 percent in June from a year earlier, driven by gains of 38 percent in Kensington and Chelsea, 21 percent in Camden and 20 percent in Westminster, Acadametrics said. Such increases dwarfed gains of 3.6 percent for England and Wales as a whole and masked price drops recorded in the north of England, the West Midlands and the northwest.
U.K. Goods-Trade Gap Widens to Record as Exports Fall: Economy (Source: Bloomberg)
Britain’s trade deficit widened to a record in the second quarter as the impact of the euro-area debt crisis and cooling global growth sapped demand for exports. The goods-trade gap increased to 28.3 billion pounds ($44.3 billion pounds) from 25 billion pounds in the previous quarter, the Office for National Statistics said today in London. Exports fell 4.9 percent, while imports slipped 0.5 percent. In June, the deficit widened more than economists forecast to 10.1 billion pounds, partly due to the impact of public holidays. The report follows comments from the Bank of England yesterday that the pound’s appreciation over the past year may hamper exports at a time when slowing global expansion is undercutting demand. The U.K. economy shrank 0.7 percent in the second quarter, and the central bank cut its growth forecasts, citing the turmoil in the euro area, Britain’s biggest trading partner, and the government’s fiscal squeeze.
“We’ve seen signs of slower growth more generally across the world, not just in the euro zone, and that seems to be affecting the U.K.,” said Vicky Redwood, an economist at Capital Economics Ltd. in London and a former central bank official. “The main risk to the U.K. export market is still from Europe. The economy will recover in the third quarter, but there’s still a risk of a triple-dip recession.”
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