Asia FX By Cornelius Luca - Thu 16 Aug 2012 16:44:39 CT (Source:CME/www.lucafxta.com)
The appetite for risk improved on Wednesday after German Chancellor Merkel supported ECB President Draghi's comments about defending the euro. This always makes for a nice catalyst in the short term, but talk remains cheap. The European and commodity currencies advanced, while the yen remains under pressure. The US stock markets advanced. Gold, oil and silver gained as well. The short-term outlook for most of the European and commodity 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: Housing starts fell 1.1% to an annual rate of 746,000 in July from the revised June estimate of 754,000. However, new building permits surged 6.8% to a seasonally adjusted annual rate of 812,000, the highest level since August of 2008, from 755,000.
US: The initial jobless rose to 366,000 from the previous week's revised figure of 364,000 (from the 361,000 originally reported for the previous week).
US: the Philadelphia Fed manufacturing improved to −7.1 in August from −12.9 in July.
Canada: Foreign portfolio investment in Canadian securities contracted $7.89 billion in June from +$26.11 billion in May.
Canada: Manufacturing shipments fell 0.4% in June from in 0.0% May.
Most Asian Stocks Climb After U.S. Housing Permits Rise (Source: Bloomberg)
Most Asian stocks rose, with the region’s benchmark index trading near a three-month high, as U.S. housing permits reaching a four-year high helped temper concerns about the strength of a global recovery. Santos Ltd. (STO), an Australia’s oil and gas producer that reported earnings today, climbed 3.6 percent as oil traded above $95 a barrel on the improving U.S. economic outlook. Mitsubishi UFJ Financial Group Inc., Japan’s largest publicly traded lender, rose 1.1 percent as German Chancellor Angela Merkel backed the European Central Bank’s conditions for assisting indebted countries. Samsung Electronics Co. (005930), South Korea’s largest exporter, fell 2.8 percent as it rested its case in one of its patent-infringement cases against Apple Inc. The MSCI Asia Pacific Index (MXAP) rose 0.2 percent to 120.74 as of 9:16 a.m. in Tokyo, with more than three stocks climbing for every two that declined. Markets in Hong Kong and China are yet to open. The measure closed at 120.93 on Aug. 9, the highest since May 8.
“The U.S. economic deterioration is being curtailed,” said Juichi Wako, a senior strategist at Tokyo-based Nomura Holdings Inc. “Euro-region officials are going along with the ECB, reducing uncertainty.” The Asia-Pacific gauge fell 6.6 percent from this year’s high on Feb. 29 through yesterday on concern Europe’s debt crisis and slower growth in China and the U.S. are hurting earnings.
Japanese Stocks Gain on U.S. Building Permits, Merkel Remarks (Source: Bloomberg)
Japanese stocks rose for a second day, with the Nikkei 225 (NKY) Stock Average heading for the highest week since May 4, after U.S. building permits reached a four- year high and German Chancellor Angela Merkel reiterated her commitment to working with the European Central Bank. Uniden Corp., an electronic equipment maker that counts North America as its biggest market, rose 1.7 percent. Nippon Sheet Glass Co. (5202), a glassmaker that generates about 40 percent of its sales in Europe, gained 1.8 percent. Yamaha Motor Co., Japan’s second-largest maker of motorcycles, jumped 5.1 percent after its investment rating was boosted by Credit Suisse Group. “The U.S. economic deterioration is being curtailed,” said Juichi Wako, a senior strategist at Tokyo-based Nomura Holdings Inc. “Euro-region officials are going along with the ECB, reducing uncertainty. There’s less anxiety out there so we should investors continuing to buy.”
The Nikkei 225 rose 0.3 percent to 9,119.54 as of 9:30 a.m. in Tokyo, heading for a weekly gain of 2.6 percent gain. Volume on the gauge was 7.6 percent above the 30-day average even with many investors taking the week off for O-bon holidays. The broader Topix gained 0.3 percent to 761.30, with about seven shares advancing for every six that fell.
S&P 500 Rises to Highest Since April on Housing, Cisco (Source: Bloomberg)
U.S. stocks advanced, sending the Standard & Poor’s 500 Index toward the highest level since April, as building permits jumped in July to a four-year peak. Cisco Systems Inc. rallied 8 percent on better-than- expected earnings while Sears Holdings Corp. climbed 5.6 percent as its loss narrowed. Facebook Inc. dropped 6.6 percent as 271.1 million of its shares will be allowed to trade. Wal-Mart Stores Inc. fell 3.5 percent after posting second-quarter sales that trailed analysts’ estimates. The S&P 500 rose 0.3 percent to 1,409.34 at 10:46 a.m. in New York. The Dow Jones Industrial Average added 34.07 points, or 0.3 percent, to 13,198.85. Trading in S&P 500 companies was almost in line with the 30-day average at this time of day.
“We’re in a situation where the economy is growing, jobs are being created, and the consumer seems to be feeling better about spending,” Jason Benowitz, who helps manage $5 billion at Roosevelt Investment Group Inc. in New York, said in a phone interview. “The fact permitting is improving in the housing market suggests the future is going to be there. On the other hand, you have to counterweight the less likely chance of further monetary easing.” New-home construction in the U.S. fell 1.1 percent to a 746,000 annual rate from June’s 754,000 pace, Commerce Department figures showed today in Washington. The median estimate of 79 economists surveyed by Bloomberg News called for 756,000. Building permits, a proxy for future construction, rose to an 812,000 pace, the most since August 2008.
Jobless Claims
Jobless claims climbed by 2,000 to 366,000 in the week ended Aug. 11, Labor Department figures showed. The median forecast of 45 economists surveyed by Bloomberg News called for an increase to 365,000. The four-week moving average, a less volatile measure, dropped to 363,750, the fewest since the week ended March 31. The Fed Bank of Philadelphia’s general economic index increased to minus 7.1 in August from minus 12.9 the previous month. Economists forecast the gauge would improve to minus 5, according to the median estimate in a Bloomberg survey. A reading of zero is the dividing point between contraction and expansion in the area covering eastern Pennsylvania, southern New Jersey and Delaware. The S&P 500 added 0.1 percent yesterday as investors weighed manufacturing data for clues on whether the Federal Reserve will move to stimulate the economy.
The index has fluctuated around 1,400 for the past seven trading sessions, with intraday price movement averaging 0.6 percent, the smallest fluctuation over a comparable period since January 2011, according to data compiled by Bloomberg.
European Stocks Climb to Highest Since March (Source: Bloomberg)
European stocks advanced to their highest level since March as U.K. retail sales beat forecasts and U.S. building permits jumped to their highest in four years. Novozymes A/S (NZYMB), the world’s biggest maker of industrial enzymes, gained 4.8 percent after reporting second-quarter profit that exceeded analysts’ projections. Mediaset SpA (MS) surged 11 percent amid reports Middle East investors are buying shares in the Italian broadcaster. Telekom Austria AG (TKA) slid 5.6 percent after cutting its profit and sales forecast for 2012. The Stoxx Europe 600 Index (SXXP) climbed 0.3 percent to 271.22 at the close, its highest level since March 19. European stocks have rallied for the last 10 weeks amid optimism that policy makers will do more to stimulate the global economy. The Stoxx 600 has surged 16 percent from its lowest level this year on June 4.
“It seems that investors are comfortable with building a degree of risk in anticipation of stimulus measures from the Federal Reserve and the European Central Bank,” said Ishaq Siddiqi, a market strategist at ETX Capital in London. “The weaker the data, the more likely we are to see a response from the Fed.” The volume of shares changing hands on the Stoxx 600 was 17 percent lower than the average of the last 30 days, according to data compiled by Bloomberg. In the U.K., retail sales rose 0.3 percent in July, the Office for National Statistics said in London. The median forecast of economists surveyed by Bloomberg had called for a 0.1 percent decline. The ONS also revised sales in June to a 0.8 percent gain from a 0.1 percent advance.
Recap Stock Index Market Report (Source: CME)
The September S&P 500 rallied throughout the US trading session and registered a new contract high. Early support for stocks came on favorable earnings from Cisco Systems and news that they were increasing their dividend. Meanwhile, those gains might have been tempered following earnings from Wal-Mart, which lowered their forward outlook. US economic data this morning was mostly in line with expectations, except for a Philadelphia Fed survey that showed another month of contracting business activity in August. Well-received comments from German Chancellor Angela Merkel in support of efforts taken by the ECB to halt the crisis fueled a mid day rally. Traders said that the market continued to rally during the afternoon hours on light volume. The market receives earnings after the close from Gap Inc.
Most Emerging Stocks Rise as U.S. Building Permits Climb (Source: Bloomberg)
Emerging-market stocks advanced as U.S. building permits jumped in July to a four-year peak, offsetting concern of declining foreign direct investment in China, the world’s second-biggest economy. The MSCI Emerging Markets Index (MXEF) climbed 0.2 percent to 975.82. Brazil’s Bovespa stock index rose to a three-month high as a surprise increase in retail sales buoyed gains for homebuilder PDG Realty SA Empreendimentos & Participacoes. (PDGR3) China Mobile, the biggest phone company by subscribers, fell the most in 12 months as profit growth slowed to the weakest pace in at least 13 years. Building permits, a proxy for future construction, rose to an 812,000 pace last month, the most since August 2008, the Commerce Department said. Retail sales in Brazil jumped more than economists expected in June. Investment in China declined 8.7 percent in July to the lowest level in two years, signaling reduced confidence that economic growth will accelerate.
Premier Wen Jiabao said downward pressure on economy remained relatively large. “Every significant data point gives you a state of play on the world’s largest economy and that obviously plays through to emerging market assets,” David Semple, who helps oversee about $33 billion as director of international equity at Van Eck Global, said by phone from New York. “People had set themselves up for even worse news from China. There are some glimmers of hope.”
Morgan Stanley Cuts Emerging Stocks Target, Raises Cash (Source: Bloomberg)
Morgan Stanley (MS) cut its 2012 forecast for emerging-market stocks amid concern the global economy will grow less than estimated and after the benchmark gauge rallied as much as 11 percent from this year’s low in June. Morgan Stanley reduced its year-end estimate for the MSCI Emerging Markets Index by 7 percent to 1,130, compared with 1,210 previously. The target still implies a gain of about 16 percent from the current level. The brokerage also cut its targets for the MSCI Asia Pacific excluding Japan Index by 6 percent to 500, and the Hang Seng China Enterprises Index by 9 percent to 12,200. The MSCI Emerging Markets Index rose to a three-month high of 979.28 on Aug. 9, an increase of about 11 percent from the gauge’s June 4 low, amid optimism that central banks will introduce new stimulus measures. The gauge fell 0.1 percent to 973.08 as of 1:50 p.m. in Hong Kong today.
“We take some profits after the recent rally and scale back our fully invested overweight equities position, raising cash from zero to 4 percent,” Morgan Stanley analysts led by Jonathan Garner wrote in a report today. The brokerage recently cut its 2012 and 2013 growth estimates for China and South Korea along with major advanced and emerging economies. The MSCI Emerging Markets Index has advanced 6.2 percent this year, compared with an 8.1 percent gain by the MSCI World Index (MXWO) of developed countries. The emerging-markets gauge trades at 10.8 times estimated earnings, compared with 13 for the developed-nations measure, data compiled by Bloomberg show. Morgan Stanley this week cut its 2012 growth forecast for China to 8 percent from 8.5 percent previously, and 2013 estimate to 8.6 percent from 9.0 percent, citing stronger “headwinds” from external demand. It also lowered its 2012 growth estimate for South Korea to 2.8 percent from 3.2 percent.
FOREX-Dollar at 1-month high vs yen on rising U.S. yields
LONDON, Aug 16 (Reuters) - The dollar rose to a one-month high against the yen , extending gains after recent upbeat U.S. data pushed Treasury yields higher and cooled expectations of further monetary easing by the Federal Reserve.
"We are seeing an underlying trend for dollar outperformance, partly on the back of euro zone debt problems, which sees reserve managers prefer the U.S. currency, and more generally due to some decent U.S. data," said Geoff Kendrick, currency analyst at Nomura.
Recap Interest Rate Market Report (Source:CME)
The Treasury market waffled around both sides of unchanged today, but in general the charts appeared to favor the bear camp. While headline readings from initial claims and housing starts should have provided support to Treasury prices, ongoing claims and housing permits might have displayed enough positive news to leave the bear camp with an edge from the data front. With equities higher and the Euro rebounding it also seemed as if there was a risk on environment in place and that can channel money away from Treasuries.
Building Permits in U.S. Increase to Four-Year High: Economy (Source: Bloomberg)
American builders took out more residential construction permits in July than at any time in the past four years, a sign the market will continue to improve. Applications, a proxy for future work, rose to an 812,000 annual rate, exceeding the highest estimate of economists surveyed by Bloomberg and the most since August 2008, Commerce Department figures showed today in Washington. Housing starts fell 1.1 percent to a 746,000 rate from June’s 754,000, which was the strongest pace in more than three years. Less costly properties combined with record-low mortgage rates are reviving demand, helping companies like PulteGroup Inc. (PHM) boost profits. Another report showed Americans this month were the most pessimistic on the economic outlook since late last year as fuel costs climb, a hurdle that may prevent the economy from strengthening in the second half of the year.
“Housing is one of the bright spots in the economy,” said Ryan Sweet, a senior economist at Moody’s Analytics Inc. in West Chester, Pennsylvania. “The recovery’s resilience will be tested over the next couple months because of Europe, the weakening in China, and also given that the consumer and business moods are rather gloomy right now.” Stocks rose, sending the Standard & Poor’s 500 Index to its highest level since April, as the increase in building permits brightened the outlook for housing. The 500 Index climbed 0.7 percent to 1,415.51 at the 4 p.m. close in New York. The S&P Supercomposite Homebuilding Index advanced 4.4 percent.
Jobless Claims in U.S. Little Changed as Market Stable (Source: Bloomberg)
The number of Americans filing applications for unemployment benefits was little changed last week, bringing the average over the past month to the lowest level since late March, a sign the labor market has stabilized after employment picked up in July. Jobless claims climbed by 2,000 to 366,000 in the week ended Aug. 11, Labor Department figures showed today in Washington. The median forecast of 45 economists surveyed by Bloomberg News called for an increase to 365,000. The four-week moving average, a less volatile measure, dropped to 363,750, the fewest since the week ended March 31. Employers may be limiting firings as the pace of sales warrants keeping current staff levels, which will probably underpin consumer spending. A pickup in demand and an agreement to forestall the fiscal cliff of tax increases and government spending cuts following the presidential election will probably be needed to induce an increase in hiring.
“It’s certainly further evidence the labor market doesn’t look like it’s in danger of falling off a cliff,” said Jeremy Lawson, senior U.S. economist at BNP Paribas in New York. “At the same time, the hiring rate is still fairly soft.”
Americans’ Views on Economy Are Most Pessimistic Since November (Source: Bloomberg)
Americans this month were the most pessimistic on the economic outlook since late last year as fuel prices rose and unemployment remained elevated. The share of households viewing the economy as heading in the wrong direction rose to 45 percent in August, the highest since November, from 36 percent the prior month. The Bloomberg monthly expectations gauge dropped to minus 22 from minus 11. The weekly Bloomberg Consumer Comfort Index fell to minus 44.4 in the period ended Aug. 12, lowest since January, from minus 41.9 “The American public appears to have tired of running harder to stand still, expressing their displeasure with the current state of economic affairs in the country and their own personal finances,” said Joseph Brusuelas, a senior economist at Bloomberg LP in New York.
The report raises the risk that a pickup in retail sales last month will not be sustained after gasoline prices climbed by 38 cents a gallon in less than two months. A jobless rate that’s exceeded 8 percent for a post-World War II record 42 months is probably also contributing to concern that the world’s largest economy is failing to make enough progress. Another report today showed the number of Americans filing applications for unemployment benefits was little changed last week, bringing the average over the past month to the lowest level since late March, a sign the labor market has stabilized after employment picked up in July.
Malaysia’s 1MDB Said to Prepare $2 Billion IPO of Power Assets (Source: Bloomberg)
1Malaysia Development Bhd., the state investment company known as 1MDB, plans to raise as much as $2 billion in an initial public offering of its power assets, said a person with knowledge of the matter. The IPO may take place in the first quarter of next year, said the person, who asked not to be identified as the process is private. 1MDB has spent about 10.8 billion ringgit ($3.5 billion) purchasing the electricity generation plants. 1MDB joins Malaysian companies including Malakoff Bhd. in planning IPOs after sales by Felda Global Ventures Holdings Bhd. and IHH Healthcare Bhd. rewarded investors with stock-market gains. Malaysia, whose economy unexpectedly accelerated in the most recent quarter, accounts for two of the world’s three largest IPOs this year, data compiled by Bloomberg show. Proceeds will be used to repay debt, the person said. 1MDB, which is developing an $8 billion financial district in Kuala Lumpur, has total debt of 20.7 billion ringgit, according to data compiled by Bloomberg.
Malakoff, Malaysia’s largest independent power producer, is planning a share sale that may raise about $1 billion, people with knowledge of the matter said in June. Palm-oil planter Felda Global and IHH Healthcare, Asia’s largest hospital operator, have both advanced 11 percent from their offer prices. 1MDB agreed in March to buy billionaire T. Ananda Krishnan’s power assets for 8.5 billion ringgit. This week, 1MDB agreed to purchase Genting Bhd. (GENT)’s domestic power generation business for 2.3 billion ringgit. Goldman Sachs Group Inc. (GS), which advised 1MDB on both deals, is also likely to be hired for the IPO, the person said. Shahrol Halmi, 1MDB’s chief executive officer, didn’t immediately respond to a phone call seeking comment. Energy is one of the group’s core areas of focus, he said in a statement on March 7, when it announced the acquisition of Ananda Krishnan’s power plants.
China’s Yuan Decades From Challenging Dollar: Cutting Research (Source: Bloomberg)
To see the status of China’s yuan as a major reserve currency in two decades, one need only look at the yen. The internationalization of Japan’s currency in the 1970s and 1980s boosted its use in trade settlements, fostered global samurai bonds and made it a mainstay of foreign-exchange markets, said Alistair Thornton, an economist at IHS Global Insight in Beijing. Then its star faded, a victim of government reluctance to fully open financial markets to foreign participants and focus on developing financial products, Thornton wrote in an Aug. 14 report on the website of the Sydney-based Lowy Institute. The global proportion of yen reserve holdings peaked at 9 percent in 1991, before falling to about 3 percent, he said. That same fate may befall China. After accelerating the internationalization of the yuan, fundamental changes in China’s economic model including an open capital account, a floating currency and financial-market liberalization are needed to move toward achieving reserve status, Thornton said.
“It requires facing down tough political opposition and powerful vested interests, a willingness to expose the economy to new and unknown stresses and external volatilities, and a recognition that China needs to implement one of the largest sets of economic and financial reforms in recent history,” he said. “Against a backdrop of a weak and uncertain outlook in the global economy, it would be unsurprising if leaders in China receded into policy conservatism.” The yuan is involved in less than 1 percent of average daily turnover in global currency markets, somewhere between the Russian ruble and the Turkish new lira, Thornton said, citing data from the Bank for International Settlements. That compares with 85 percent for the U.S. dollar and about 40 percent for the euro.
“Whilst some measure of internationalization is indeed underway, movement towards a reserve currency status commensurate with China’s global economic status will be tortuously slow, relegating the prospect to irrelevance,” he said. “The very best Beijing can hope for within the next couple of decades is a renminbi similar in position to that of the Japanese yen -- an internationalized, but modestly used, reserve currency. Even that will prove a stretch.”
Korea Corporate Bond Sales Stall for Second Week on Low Premiums (Source: Bloomberg)
Sales of won-denominated corporate bonds in South Korea stalled for a second week as investors balked at the lower yields relative to sovereign notes. Woori Finance Holdings Co. was the only issuer this week, with 250 billion won ($221 million) of five-year notes, after last week’s offerings fell to a three-month low of 200 billion won, according to data compiled by Bloomberg. The extra yield investors demand to hold corporate notes over similar-maturity government bonds rose to 59 basis points this week, two basis points from the lowest premium this year in June, data from the Korea Financial Investment Association show. “The market is slowing due to the low bond yields,” Kim Min-Jeong, a credit analyst at KDB Daewoo Securities Co., said by telephone from Seoul on Aug. 14. “This may be good news for issuers, but for investors it’s unattractive.”
Sales also faltered this month because companies that needed financing took advantage of the Bank of Korea’s decision to cut rates in July, Kim said. Governor Kim Choong Soo surprised economists by lowering the key rate by a quarter percentage point to 3 percent on July 12, spurring a tripling in corporate bond issuance as yields fell to all-time lows. Woori Finance, the biggest bank holding company by assets, sold the five-year notes to yield 2 basis points more than five- year AAA rated Korea composite financial debentures, according to Bloomberg data. The sale is to refinance 250 billion won of debt maturing this month, Ahn Chul Woo, a general manager with the company’s financial planning department, said last week.
Singapore July Exports Rise More Than Estimated on Electronics (Source: Bloomberg)
Singapore’s exports rose more than economists estimated in July as companies shipped more electronics and petrochemicals and sold more goods to China. Non-oil domestic exports climbed 5.8 percent from a year earlier, after a revised 6.6 percent increase in June, the trade promotion agency said in a statement today. The median of 14 estimates in a Bloomberg News survey was for a 5 percent gain. Demand from Asian neighbors is supporting sales of Singapore’s goods even as Europe’s sovereign debt crisis and an uneven U.S. recovery crimps demand for products made in the island’s factories. Singapore expects exports to rise at least 4 percent this year, the trade promotion agency said last week, raising its projection from 3 percent previously. Exports will pick up “once we see China growth first and U.S. maybe later on towards the end of the year picking up and rebounding,” Vincent Conti, a Singapore-based economist at Australia & New Zealand Banking Group Ltd., said before the report.
Singapore’s electronics shipments by companies such as Venture Corp. rose 2 percent in July from a year earlier, after climbing 1.6 percent the previous month. Non-electronics shipments, which include petrochemicals and pharmaceuticals, increased 7.9 percent. Petrochemicals exports gained 11.6 percent, while pharmaceutical shipments advanced 1.3 percent after jumping 24 percent in June. Singapore’s non-oil exports slid a seasonally adjusted 3.6 percent last month from June, when they rose 6.7 percent, today’s report showed.
Yudhoyono Plans Indonesian Spending Boost to Spur Economy (Source: Bloomberg)
Indonesia plans to increase government capital spending by 15 percent next year as President Susilo Bambang Yudhoyono pledges to boost infrastructure that he says is needed to ensure sustainable growth. Capital spending will rise to 193.8 trillion rupiah ($20 billion) in 2013, Yudhoyono said in his annual budget address in Jakarta today. The budget deficit may narrow to 1.6 percent of gross domestic product from 2.23 percent, as economic growth is forecast to accelerate to 6.8 percent from an estimated 6.3 percent to 6.5 percent this year, he said. “We’ll raise capital spending to boost infrastructure in order to support domestic connectivity, energy and food and to support the economy,” the president said, pledging to maintain the fiscal deficit at a “safe level” and reduce debt.
Yudhoyono, who also said he will give civil servants a raise next year, is increasing spending on roads, seaports and airports as he woos investment to spur Southeast Asia’s largest economy. More than a decade after the Asian financial crisis that forced the nation to seek an International Monetary Fund bailout, Fitch Ratings and Moody’s Investors Services have raised Indonesia to investment grade and the country’s growth is among the fastest in the Group of 20 nations. The rupiah climbed 0.2 percent to 9,494 a dollar today. Yudhoyono said in a speech to lawmakers earlier today that Indonesia should review its subsidy bill and use the savings to boost the country’s infrastructure, calling for fiscal prudence.
Mexico Economy Weakened Less Than Forecast in Second Quarter (Source: Bloomberg)
Mexico’s economic growth slowed less than analysts forecast in the second quarter as auto exports climbed to a record, helping offset a downturn in shipments of some manufactured goods and oil. Gross domestic product expanded 0.9 percent from the first quarter, an annualized rate of 3.5 percent and down from a revised 1.2 percent in the first three months, the statistics agency said today on its website. That beat the 0.7 percent median estimate of seven economists surveyed by Bloomberg. Economic growth in the U.S., the buyer of 80 percent of Mexico’s exports, slowed to a 1.5 percent annual rate in the second quarter amid unemployment that has held above 8 percent for more than three years. While Mexico’s expansion slowed from the fastest annual pace since 2010 on the weaker U.S. expansion, growth has topped Brazil’s for the past year. The central bank said last month that monetary policy is adequate with the economy on a positive trajectory.
“We see less growth in the manufacturing sector due to lower growth in the U.S. economy, but we believe this is a good figure overall,” Rafael Camarena, an economist at Banco Santander SA (SAN), said by phone from Mexico City. “If the U.S. economy grows at least two percent this year and a similar figure for 2013, the Mexican economy could see a good performance probably close to four percent this year.” Mexico’s annual growth will slow to 2.9 percent in the third quarter before rising to 3.1 percent in the final three months of the year, according to the median estimates in a Bloomberg survey.
Thai Growth May Quicken as Yingluck Spending Counters Europe (Source: Bloomberg)
Thailand’s growth probably accelerated last quarter as Prime Minister Yingluck Shinawatra boosted government stimulus, spurring domestic demand as the weakening global economy clouded the outlook for exports. Gross domestic product rose 3.1 percent in the three months through June from a year earlier, which would be the fastest pace of expansion since last year’s floods, according to a Bloomberg News survey of 16 economists. The economy grew 2 percent from the previous quarter, a separate survey showed. The data is scheduled to be released on Aug. 20. Southeast Asian nations from Indonesia to Malaysia have cut interest rates or increased public spending to shore up local demand as Europe’s debt crisis and a faltering U.S. recovery curb exports. Yingluck, who marked her first year in office this month, has shelved politically contentious legislation to focus more on the economy as Thailand confronts overseas risks after recovering from the worst floods in almost 70 years in 2011.
“The government’s fiscal measures have boosted growth, which in turn feeds into domestic demand -- consumption and private investment,” said Leslie Tang, an economist in Singapore at OSK-DMG. “The biggest risks ahead are external headwinds and a slow disbursement of the fiscal measures that could slow the recovery and rebuilding of the Thai economy.” The baht has lost more than 5 percent against the dollar over the past 12 months, while the benchmark Stock Exchange of Thailand index has gained about 14 percent.
Merkel Says Germany Backs Draghi’s ECB Aid Conditionality (Source: Bloomberg)
Chancellor Angela Merkel backed the European Central Bank’s insistence on conditions for helping reduce borrowing costs in indebted countries, saying Germany is “in line” with the ECB’s approach to defending the euro. “Obviously time is pressing” on stamping out the debt crisis, though “on many of these issues we feel we’re on the right track,” Merkel told reporters in Ottawa yesterday at a joint press conference with Canadian Prime Minister Stephen Harper. Euro-area policy makers “feel committed to do everything we can to maintain the common currency.” Asked about ECB chief Mario Draghi’s announcement that the central bank may return to sovereign bond-buying, Merkel said recent ECB decisions “have made it clear that the European Central Bank is counting on political action in the form of conditionality as the precondition for a positive development of the euro.”
Merkel, facing European pressure to ease bailout terms and allow shared debt as well as calls by global partners to stop contagion, returned to the crisis fight after her summer vacation, using the trip to Canada to make her first public comments on the turmoil in a month. She hailed Canada’s budget and debt discipline as a model for the 17-nation euro area.
Spain Said to Speed EU Bank Bailout on Collateral Limits (Source: Bloomberg)
Spain is about to receive an emergency disbursement from the 100 billion-euro ($123 billion) bailout of its financial system because of restrictions the European Central Bank imposed on bank borrowing, according to a person familiar with the matter. The ECB last month applied limits on how much it will lend banks against government-guaranteed bonds. The rule change meant Spain had to ditch a plan for nationalized lender Bankia group to get a loan from the Frankfurt-based central bank, said the person, who asked not to be named because the matter is private. Bankia group, formed in 2010 from the merger of Spain’s troubled savings banks, will get the first portion of the country’s European Union cash imminently, the person said. The rescue program always included a 30 billion-euro tranche to be paid out first and “mobilized in any contingency,” according to the agreement document dated July 16.
“Spain needs the money for Bankia as soon as possible because the uncertainty just makes it expensive for the government to raise money in the bond markets,” said Arturo Bris, a professor of finance at the IMD business school in Lausanne, Switzerland.
U.K. Retail Sales Unexpectedly Rise on Fuel Discounting: Economy (Source: Bloomberg)
U.K. retail sales unexpectedly rose in July as promotions helped to boost gasoline sales and food sales increased. Sales including auto fuel gained 0.3 percent from June, the Office for National Statistics said today in London. The median forecast of 22 economists in a Bloomberg News survey was for a 0.1 percent decline. Sales in June were revised to a 0.8 percent gain from 0.1 percent, which means second-quarter sales fell 0.3 percent, less than initially estimated. The ONS said the change would have a negligible impact on gross domestic product. The report follows factory and construction data suggesting GDP may have fallen less than the 0.7 percent estimated in the second quarter. Jobless claims dropped in July and the Bank of England says cooling inflation may help to bolster demand. Still, with the euro-area crisis showing little sign of abating and the U.K. government cutting spending, any recovery is likely to be only gradual.
“Together with yesterday’s firm looking jobs numbers, we continue to have doubts about the message from the GDP report, suggesting the U.K. is in a deepening recession,” said James Knightley, an economist at ING Bank NV in London. “That said, the uncertainty over the U.K. data, coupled with worries about Europe and the U.S. fiscal cliff will keep the BOE wary.” The pound advanced against the euro and the dollar. It was 0.1 percent stronger at $1.5694 as of 11:42 a.m. London time and advanced 0.2 percent to 78.21 pence per euro.
Euro zone July inflation stable as economy slows (Reuters)
Falling communications prices helped keep euro zone consumer inflation stable in July, giving the European Central Bank space to cut interest rates amid a worsening economic climate.
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