Asia FX By Cornelius Luca - Wed 17 Oct 2012 15:37:48 CT (CME/www.lucafxta.com)
The appetite for risk surged early on Wednesday after Moody's kept Spanish rating at Baa3, but then petered out. The appetite for risk had been improving recently due to good US data and earnings, and hopes the European Union's leaders will be able to alleviate with Spain and Greece's debilitating debt problems later this week. All the European and commodity currencies advanced, and but the yen resumed losses. The US stock markets closed marginally higher. Gold and oil and silver finished little changed. 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 slightly bullish. The LGR short-term model is short on yen, sterling and Canadian dollar, and long euro, franc and Australian dollar. Good luck!
Overnight
US: Housing starts jumped 15% to an annual rate of 872,000 in September from a revised August estimate of 758,000. Building permits surged 11.6% to 894,000 from 801,000.
Today's economic calendar
China: Gross Domestic Product for the third quarter
China: Industrial production for September
China: Retail sales for September
Japan: Foreign investment in Japanese stocks for October
Australia: National Australia Bank's business confidence for the third quarter
Asian Stocks Rise on U.S. Housing, Wen China GDP Comments (Bloomberg)
Asian stocks rose, with the regional benchmark index headed for its highest close in a month, as U.S. housing starts jumped and Premier Wen Jiabao said China’s economy was “relatively good” ahead of today’s report on gross domestic product. Machinery maker Hitachi Construction Machinery Co (6305), which gets about 17 percent of its sales in China, added 2.3 percent in Tokyo. James Hardie Industries SE (JHX), a building-materials supplier that gets 67 percent of sales from the U.S. rose 4 percent in Sydney. Woodside Petroleum Ltd. (WPL), Australia’s second- biggest oil producer, advanced 3.9 percent in Sydney after boosting its output forecast. The MSCI Asia Pacific Index gained 0.5 percent to 123.51 as of 10:04 a.m. in Tokyo, rising for a third day, before markets in Hong Kong and China opened. Almost four stocks advanced for each that fell on the measure.
“I don’t see much of a downside risk for stocks because we don’t see the U.S. situation deteriorating,” said Masahiko Ejiri, a Tokyo-based senior fund manager at Mizuho Asset Management Co., which oversees about 3.6 trillion yen ($45 billion) in assets. “The market consensus is that China’s GDP will continue to be weaker, and the government has been deploying new measures. They will do a bit more to shore up growth once the leadership transition is over.” China’s Communist Party will nominate new leaders at a congress starting Nov. 8 in a once-a-decade leadership change.
Japanese Stocks Rise on U.S. Housing Starts, Weaker Yen (Bloomberg)
Japanese shares rose, with the Nikkei 225 (NKY) Stock Average headed for its longest winning streak in two months, after U.S. housing starts jumped to a four-year high and the yen weakened. Honda Motor Co. (7267), a carmaker that gets 44 percent of its sales in North America, jumped 2.7 percent. Komatsu Ltd. (6301), a construction-machinery company that relies on China for 14 percent of its revenue, gained 3.7 percent after Chinese Premier Wen Jiabao said the economy was “relatively good” ahead of today’s gross domestic product report. Bridgestone Co. gained 1.5 percent on a report the tiremaker will raise capacity in emerging markets.
The Nikkei 225 gained 1.1 percent to 8,907.08 as of 10:01 a.m. in Tokyo, heading for a four-day advance. Trading volume was almost 30 percent higher than the 30-day average. The broader Topix Index climbed 1.1 percent to 747.65, with almost four times as many shares advancing as declining. The economy minister yesterday called for stronger stimulus from the Bank of Japan, which is holding a policy meeting at the end of the month. “U.S. homes and car sales are rebounding from the plunge after the Lehman shock, and recovery momentum will be maintained,” said Mitsushige Akino, an executive officer at Ichiyoshi Investment Management Co., which oversees about 40 billion yen ($505 million). “There are rising expectations the government will put strong pressure on the Bank of Japan for further easing to overcome deflation.”
U.S. Stocks Rise as Housing Data Overshadow Intel, IBM (Bloomberg)
U.S. stocks rose, sending the Standard & Poor’s 500 Index higher for a third straight day, as a jump in housing starts overshadowed disappointing results from International Business Machines Corp. (IBM) and Intel Corp PulteGroup Inc. (PHM) and D.R. Horton Inc. jumped more than 4.2 percent as homebuilders rallied. Dean Foods Co. (DF) soared 13 percent after its WhiteWave Foods Co. filed to go public. Intel fell 2.5 percent after forecasting a fourth-quarter gross margin that missed estimates. IBM slid 4.9 percent after reporting third-quarter revenue that trailed analysts’ projections. The S&P 500 (SPX) rose 0.4 percent to 1,460.91 at 4 p.m. in New York. The index has gained 2.3 percent this week. The Dow Jones Industrial Average added 5.22 points, or less than 0.1 percent, to 13,557 today. IBM, which accounts for more than 11 percent of the share-price-weighted Dow, took 80 points off the gauge today. About 6.3 billion shares traded hands on U.S. exchanges, 5.1 percent above the three-month average.
“The housing number was amazing,” Randall Warren, who oversees $75 million as chief investment officer of Warren Financial Service in Exton, Pennsylvania, said in a phone interview. “Corporate earnings have been strong in a slow growth environment, so if housing can help improve the economy then we could see a move up in stocks.” U.S. equities rose as Commerce Department figures showed new-house construction jumped 15 percent to an 872,000 annual rate last month, the most since July 2008 and exceeding all forecasts in a Bloomberg survey of economists. The median estimate of 81 economists surveyed by Bloomberg called for 770,000.
Recap Stock Index Market Report(CME)
The December S&P 500 trended higher for the third session in a row and climbed to its highest level since October 5th. Early support in the equity market came on Spain debt ratings that were left unchanged by Moody's and US housing market data that showed more signs of improvement. However, mixed earnings last night from IBM and Intel, along with results from Bank of America and Abbott Labs this morning tempered early gains. Shares of IBM were down more than 5% during the session after revenues fell short of expectations. However, most of the major S&P sectors were in positive territory, with the exception of technology shares. The market will get the latest corporate earnings from American Express and eBay after the close, with Chinese growth data expected later this evening.
U.K. Stocks Rally to One-Month High; Tesco, RBS Climb (Bloomberg)
The U.K.’s FTSE 100 Index climbed to a one-month high after an unexpected drop in the country’s unemployment and a surge in U.S. new-house construction. Tesco (TSCO) Plc increased 2.7 percent after UBS AG recommended investors buy shares of Britain’s largest retailer. Royal Bank of Scotland Group Plc rose more 2.2 percent after the lender agreed to leave the U.K.’s Asset Protection Scheme. Rio Tinto Group led mining shares higher, advancing 4 percent. The FTSE 100 Index rose 40.37 points, or 0.7 percent, to 5,910.91 at the close in London, the highest since Sept. 14. The gauge has rallied 2 percent so far this week bolstered by better-than-forecast U.S. retail and industrial-output data. The FTSE All-Share Index added 0.7 percent today, while Ireland’s ISEQ Index gained 0.2 percent.
“Economic data has helped to limit the downward pressure in the U.S. and Europe,” said Ishaq Siddiqi, market strategist at ETX Capital in London. The U.K. jobs data “is very encouraging and will undoubtedly raise questions about the need for more quantitative easing, but importantly, suggests the U.K. economy is back on track to growth.” The Office for National Statistics showed jobless claims in the U.K. fell 4,000 in September from the previous month to 1.57 million, boosted by the London Olympics. The median economist estimate in a Bloomberg News Survey called for no change in claims. A wider measure of unemployment, measured by International Labor Organization methods, declined to 7.9 percent between June and August. Employment surged 212,000 to 29.6 million, the highest since records began in 1971.
European Stocks Climb on Spain Debt Rating, U.S. Housing (Bloomberg)
European stocks rose for a third day, the longest winning streak in five weeks, as Moody’s Investors Service kept its investment-grade debt rating on Spain and U.S. new-home construction surged to a four-year high. Bankia led a rally in Spanish banks, jumping 19 percent. Waertsilae Oyj soared 8.1 percent as the world’s largest maker of ship engines and power plants raised its forecasts. PSA Peugeot Citroen advanced 4.1 percent as Le Figaro said the French government and banks may bail out the automaker’s credit unit. Danone SA sank the most in two months as the food company reported revenue growth that missed analysts’ estimates. The Stoxx Europe 600 Index (SXXP) rose 0.5 percent to 275.66 at the close of trading, the highest level in three weeks. The gauge has rallied 18 percent from its 2012 low on June 4 as European Central Bank policy makers agreed on an unlimited bond- buying program and the Federal Reserve unveiled a third round of quantitative easing.
“There appears to be positive news regarding Spain,” said Jakup Petur Baerentsen, a chief equity adviser at Nordea Private Bank in Copenhagen. “The market has consolidated and we think that it will continue upwards.” National benchmark indexes rose in 16 of the 18 western European markets. The U.K.’s FTSE 100 (UKX) gained 0.7 percent, Germany’s DAX increased 0.3 percent and France’s CAC 40 climbed 0.8 percent. Spain’s IBEX 35 surged 2.4 percent.
Emerging Stocks Rise to One-Month High on China Outlook (Bloomberg)
Emerging-market stocks rose, sending the benchmark index to its highest level in a month, on speculation China’s economy is stabilizing and as Moody’s Investors Service retained Spain’s investment-grade rating. Cosco Pacific Ltd. (1199), which gets about 35 percent of its revenue from Europe, climbed to the highest since March in Hong Kong. Chinese banks including Industrial & Commercial Bank of China Ltd. rose after upgrades by Credit Suisse Group AG. Brazil’s Bovespa index advanced for a fourth day as OGX Petroleo & Gas Participacoes SA (OGXP3) rose. OAO Gazprom, Russia’s largest natural-gas producer, gained and Poland’s Telekomunikacja Polska SA (TPS) tumbled 15 percent after cutting its dividend and earnings forecast.
The MSCI Emerging Markets Index rose 0.7 percent to 1,010.85 at the close of trading in New York, the highest level since Sept. 17. Credit Suisse said the Chinese economy is probably bottoming and Premier Wen Jiabao said the country’s economic situation last quarter was “relatively good.” The European Central Bank’s willingness to buy Spain’s debt lowered the risk of losing access to credit markets, Moody’s said yesterday. A U.S. report today showed new-home construction rose to a four-year high in September. “Emerging markets are getting buoyed by a confluence of favorable factors that are neutralizing the outlook of a global slowdown,” said Jonathan Ravelas, chief market strategist at Manila-based BDO Unibank Inc. “A bottoming China and rising U.S. industrial output will boost global demand while an investment grade raises the chances of a bailout for Spain.”
Euro Near Month High on EU Summit Crisis Progress Outlook (Bloomberg)
The euro was 0.2 percent from its highest level in a month on prospects European Union leaders meeting today will take steps toward resolving the currency bloc’s debt crisis. The 17-nation euro matched its strongest level in a month versus the yen on speculation Spain will seek financial assistance, which would help contain turmoil within the euro area. The yen fell against all major peers as expectations increased the Bank of Japan (8301) will boost stimulus measures at a meeting this month. Australia’s dollar traded near a two-week high as Asian stocks rose and investors awaited data that may show China grew at the slowest pace in more than three years. “The situation in Spain is the main focus as we head into the EU summit,” said Kikuko Takeda, senior currency economist in London at Bank of Tokyo-Mitsubishi UFJ Ltd. “There seems to be a common belief within Europe that Spain would be too big to fail. The euro should test new highs should Spain request aid.”
The euro was at $1.3112 as of 9:25 a.m. in Tokyo from $1.3119 yesterday, when it reached $1.3140, the strongest since Sept. 17. It rose 0.1 percent to 103.69 yen after earlier touching 103.75, matching yesterday’s high that was the most since Sept. 17. Japan’s currency was at 79.14 per dollar earlier, the weakest since Sept. 19, before trading at 79.09, 0.2 percent below the close in New York. The MSCI Asia Pacific Index of shares climbed 0.5 percent.
Aussie Is Near 2-Week High on Stock Gains; Bonds Decline (Bloomberg)
The Australian dollar traded 0.2 percent from its highest level in two weeks and government bonds fell for a third day as gains in stocks worldwide boosted demand for riskier assets. The so-called Aussie held above $1.03 for a second day as investors awaited Chinese data that may show the world’s second- largest economy grew at the slowest pace in more than three years in the third quarter. New Zealand’s currency was near a one-week high before European Union leaders begin a two-day summit in Brussels today to discuss ways to contain the region’s debt crisis. “The Aussie is being bought because there is a risk-on tone across markets,” said Daisaku Ueno, a senior foreign- exchange and fixed-income strategist in Tokyo at Mitsubishi UFJ Morgan Stanley. “China will be the biggest focus of attention today.”
The Australian dollar was little changed at $1.0373 as of 10:20 a.m. in Sydney from the close in New York yesterday, when it touched $1.0389, the strongest since Oct. 1. It added 0.1 percent to 82.04 yen. New Zealand’s currency, nicknamed the kiwi, fetched 82.11 U.S. cents from 82.19, after yesterday reaching 82.27, the highest since Oct. 9. It currency bought 64.94 yen, 0.1 percent higher than yesterday’s close. Stocks rose globally yesterday after data showed U.S. new home construction surged to a four-year high, adding to signs that the world’s largest economy is gaining momentum. The Standard & Poor’s 500 Index (SPX) of U.S. stocks added 0.4 percent after gaining 1.8 percent over the previous two sessions, while the Stoxx Europe 600 Index advanced 0.5 percent.
Treasuries Snap Three-Day Loss Before Jobless Claims (Bloomberg)
Treasuries snapped a three-day loss before government data economists said will show initial claims for jobless insurance rose last week. The U.S. is scheduled to sell $7 billion of 30-year Treasury Inflation Protected Securities today. The difference between yields on 10-year notes and same-maturity TIPS, a gauge of trader expectations for consumer prices over the life of the debt, was 2.51 percentage points. The average over the past decade is 2.17 percentage points. “Yields will stay pretty low,” said Kim Youngsung, the head of fixed income in Seoul at Samsung Asset Management Co., South Korea’s largest private bond investor with the equivalent of $102.2 billion. “Treasuries are still a safe haven. We’re not sure about the economic recovery.” U.S. 10-year rates were little changed at 1.81 percent as of 9:47 a.m. in Tokyo, according to Bloomberg Bond Trader data. The price of the 1.625 percent security due in August 2022 was 98 11/32.
Jobless claims probably rose to 365,000 last week from 339,000 in the previous period, according to the median forecast among 49 economists surveyed by Bloomberg News before the Labor Department report at 8:30 a.m. New York time today. Treasuries fell yesterday as a surge in new-home construction to the highest level in four years reduced demand for the safety of U.S. government debt. Housing starts jumped 15 percent to an 872,000 annual rate last month, the most since July 2008 and exceeding all forecasts in a Bloomberg survey of economists, Commerce Department figures showed.
U.S. to Get Downgraded Amid Fiscal ‘Theater,’ Pimco Says (Bloomberg)
The U.S.’s sovereign credit rating will be cut as “fiscal theater” plays out in the world’s biggest economy, according to Pacific Investment Management Co., which runs the world’s biggest bond fund. “The U.S. will get downgraded, it’s a question of when,” Scott Mather, Pimco’s head of global portfolio management, said at a briefing in Wellington. “It depends on what the end of the year looks like, but it could be fairly soon after that.” The Congressional Budget Office has warned the U.S. economy will fall into recession if $600 billion of government spending cuts and tax increases occur at the start of 2013. Financial markets are complacent about whether the White House and Congress will reach agreement on deferring the so-called fiscal drag on the economy until later next year, Mather said. In a “base case” of Barack Obama being re-elected and Congress becoming more Republican, there is a high likelihood an agreement “doesn’t happen in a nice way, and we have disruption in the marketplace,” he said.
Policy makers probably will agree on cutbacks that would lower economic growth by about 1.5 percentage points next year, Mather said. They may roil markets by discussing scenarios that would lead to a 4.5 percentage-point fiscal drag, he said. Standard & Poor’s cut the U.S. credit rating to AA+ from AAA on Aug. 5, 2011. Since that time, benchmark Treasury yields have dropped to records.
Housing Starts Jump 15% to Four-Year U.S. High: Economy (Bloomberg)
Housing starts in the U.S. surged 15 percent in September to the highest level in four years, adding to signs of a revival in the industry at the heart of the financial crisis. Beginning home construction jumped last month to an 872,000 annual rate, the fastest since July 2008 and exceeding all forecasts in a Bloomberg survey of economists, Commerce Department figures showed today in Washington. An increase in building permits may mean the gains will be sustained. “It’s no longer a question of whether the industry is rebounding,” Larry Sorsby, chief financial officer of Red Bank, New Jersey-based Hovnanian Enterprises Inc. (HOV), the best-performing homebuilding stock this year, said in a telephone interview today. “There is clear evidence that we have bounced off the bottom and are in the midst of a recovery.”
A pickup in sales stoked by record-low mortgage rates and population growth combined with dwindling supply indicates construction can continue strengthening, contributing more to economic growth. Improving demand may also help revive a part of the job market that’s seen construction employment fall by almost 2 million since the end of 2007. “This is good news for the labor market,” said Anika Khan, a Charlotte, North Carolina-based senior economist at Wells Fargo & Co., the biggest mortgage lender in the U.S. If single-family starts “continue to show this positive momentum, and we expect they will, we’ll likely start to see some construction jobs come back.”
FOMC Straying on Price Target, Former Fed Officials Say (Bloomberg)
The Federal Reserve appears to be backing away from its commitment to keep inflation at 2 percent with its plan to buy mortgage-backed securities until employment improves, two former Fed officials said.
“The message that I took” from the central bank’s Sept. 13 announcement of a third round of bond buying is “we want the inflation rate to go higher,” said Dino Kos, managing director at Hamiltonian Associates Ltd. in New York and a former New York Fed executive vice president. “It’s a historical shift from where they had been to where they seem be to going.” The Fed committed in January to a 2 percent inflation goal.
The policy-setting Federal Open Market Committee said it will buy $40 billion of mortgage bonds per month and possibly purchase even more assets until the labor market improves “substantially.” The central bank in a statement didn’t specify its commitment to act “in a context of price stability,” even though in January it unveiled for the first time an inflation target, according to Marvin Goodfriend, a former research director at the Richmond Fed.
“You have to look hard to find any mention of inflation” in the FOMC’s Sept. 13 statement, Goodfriend, a professor at Carnegie Mellon University in Pittsburgh, said. Both Goodfriend and Kos were interviewed on Bloomberg Radio’s “The Hays Advantage” with Kathleen Hays and Vonnie Quinn. “There ought to be a follow-through on the explicit 2 percent inflation objective” in the Fed’s next statement after its Oct. 23-24 meeting.
Intel Slumps With IBM on Weak Businesses-Consumer Demand (Bloomberg)
The global economic slowdown is prompting companies to curtail technology spending and pushing consumers to favor mobile devices like Apple Inc.’s iPhone over personal computers, eroding profitability at Intel Corp. (INL) and trimming sales for International Business Machines Corp (IBM). Intel, the largest chipmaker, forecast fourth-quarter gross margins that missed analysts’ estimates, while IBM, the biggest computer-services provider, reported third-quarter revenue that fell short of projections. Shares of both companies declined in late trading yesterday and German trading today.
IBM customers, hurt by anemic demand in home markets, put off software purchases and computer-maintenance contracts. Budget-strapped consumers are shunning PCs to buy cheaper handheld devices such as the iPhone, while businesses are shying away from servers that run networks, sapping demand for Intel chips. The reports bode ill for Microsoft Corp. (MSFT), the No. 1 software maker, which releases results tomorrow.
“It’s not looking good out there,” said Alex Gauna, an analyst at JMP Securities.
IBM fell 4.9 percent to $200.63 at the close in New York, the biggest decline since October 2009. Intel dropped 2.5 percent to $21.79.
Wen Says China’s Economy ‘Relatively Good’ Ahead of GDP (Bloomberg)
Chinese Premier Wen Jiabao said the country’s economic situation last quarter was “relatively good,” a signal today’s report on gross domestic product may show the country’s slowdown ebbing. “China’s economic growth has started to stabilize,” the official Xinhua News Agency said yesterday, citing Wen’s comments in meetings he held with industry leaders, company executives and some local government officials on Oct. 12-15. The government is confident of achieving annual targets and the economy will continue to show “positive changes,” Wen said, according to Xinhua. Exports exceeded forecasts in September and money supply grew at the fastest pace in 15 months. Even so, economists forecast today’s data will show growth in the world’s second- biggest economy decelerated for a seventh quarter, putting pressure on the ruling Communist Party to add stimulus ahead of a once-a-decade leadership transition.
“Wen’s comments suggest that there may be signs of stabilization in the quarter-on-quarter numbers, which give a better sign of current momentum in the economy,” said Mark Williams, Asia economist at Capital Economics Ltd. in London. “GDP growth in the third quarter almost certainly slowed in year-on-year terms. Policy makers at this point want to focus on more forward-looking indicators, which indicate the economy may now be turning the corner.” The MSCI Asia Pacific Index of stocks rose for a third day, gaining 0.5 percent at 9:44 a.m. in Tokyo.
Japan Stimulus Limited as Diet Standoff Blocks Extra Budget (Bloomberg)
Japan’s government plans to tap discretionary budget funds to counter an economic slowdown as a legislative stalemate threatens to leave the Noda administration without cash as soon as next month. Prime Minister Yoshihiko Noda yesterday ordered his Cabinet to draw up economic stimulus measures by November, Chief Cabinet Secretary Osamu Fujimura said. With Finance Minister Koriki Jojima telling reporters that the idea of a supplementary budget would be considered later, the government can use around 1.3 trillion yen ($17 billion) in reserves from this year’s budget. Noda’s room for fiscal maneuver is limited by the political opposition’s refusal to give the government authority to borrow to pay for this year’s deficit. Politicians instead may focus on applying pressure on the Bank of Japan, and banks including JPMorgan and UBS AG are among those predicting the BOJ will boost asset purchases this month.
“The next economic stimulus should come from the BOJ,” said Hiromichi Shirakawa, chief Japan economist at Credit Suisse AG and a former BOJ official. The government “does not want to do a big package because monetary stimulus is in sight.”
Russian Investment Unexpectedly Fell First Time in 18 Months (Bloomberg)
Russian investment unexpectedly slid last month for the first time since March 2011 as uncertainty over the economy prompted businesses to reduce spending. Fixed-capital investment fell 1.3 percent in September compared with a year earlier, the Federal Statistics Service in Moscow said in an e-mailed statement today. Economists predicted an increase of 2.1 percent, according to the median of 15 forecasts in a Bloomberg survey. A slowdown in China, Russia’s largest trading parter, and Europe’s sovereign debt crisis are discouraging capital spending, with companies including OAO Novolipetsk Steel (NLMK) and OAO GMK Norilsk Nickel (MNOD) announcing plans in the past month to scale back investment. President Vladimir Putin ordered the government in May to boost investment to 25 percent of gross domestic product by 2015 from 21 percent last year.
“We’re seeing a slowdown in investment from natural- resources companies, which is not so much because of the investment climate as concerns about demand domestically and from abroad,” Vladimir Tikhomirov, chief economist at Otkritie Capital in Moscow, said by telephone. Weaker construction spending and state investment also played a role, he said. The Micex Index (INDEXCF) of 30 stocks maintained gains after the announcement and was 1.4 percent higher at 1,475.83 as of 4:48 p.m. in Moscow. A close at that level would be the highest since Oct. 5.
Surprise Thai Rate Cut Shows Worsening Outlook: Southeast Asia (Bloomberg)
Thailand’s central bank voted to cut interest rates four days after Governor Prasarn Trairatvorakul said no easing was needed, adding to evidence Asia’s outlook has worsened and supporting a government push to shore up growth. The Bank of Thailand lowered its one-day bond repurchase rate by a quarter of a percentage point to 2.75 percent, it said in Bangkok yesterday. The decision was predicted by three of 23 economists in a Bloomberg News survey, while the rest expected no change. The monetary policy committee voted 5-2 in favor of a cut, it said in a statement, without disclosing names.
Thailand’s exports have slumped as a growth slowdown in China and austerity measures in Europe hurt demand for Asian goods, prompting South Korea to lower borrowing costs while the Philippines said it won’t rule out further easing. The Thai central bank said there was no political interference in yesterday’s decision, seeking to distance its action from Finance Minister Kittiratt Na-Ranong’s call for lower rates and a weaker baht to help exporters. ”While the overall economy is still a picture of health, the rate cut came amid deeper concerns of a negative spillover from the worsening external environment to domestic demand,” said Julia Goh, an economist at CIMB Investment Bank Bhd. in Kuala Lumpur, who correctly predicted the decision. “The objective of maintaining growth stability and shoring up the post-flood growth momentum was the trigger for the rate cut.”
The monetary authority yesterday maintained its forecast for growth in 2012 at 5.7 percent, and said it would announce a lower estimate for 2013 next week.
U.K. Unemployment Declines as Payrolls Surge to Record (Bloomberg)
U.K. jobless claims unexpectedly fell and payrolls rose to a record high as the London Olympics helped boost hiring. Jobless-benefit claims fell 4,000 to 1.57 million in September, the Office for National Statistics said today in London. The number of people in work surged 212,000 to 29.6 million in the quarter through August, the highest since records began in 1971. Separately, minutes of the Bank of England’s policy meeting this month showed that officials are divided on the need for more stimulus for the economy. The labor-market strength provides a boost for Prime Minister David Cameron and deepens what the Bank of England describes as a “productivity puzzle” as the economy continues to create jobs despite Britain’s return to recession at the end of last year. That may deepen divisions among Bank of England policy makers assessing the outlook for inflation and growth.
“Yet another strong set of labor-market figures, which on one hand is encouraging, but on the other makes the so-called productivity puzzle even more baffling,” said Nida Ali, an economist at the Ernst & Young ITEM Club in London. “It’s likely that there will be some form of payback in the months ahead.” Economists had forecast no change to September jobless claims, according to the median of 27 estimates in a Bloomberg News survey. The decline in claims was the third consecutive drop and it left the claimant-count rate at 4.8 percent. The June-August jobless rate measured by International Labor Organization methods declined to 7.9 percent, the lowest in more than a year, from 8.1 percent.
Samaras Faces Coalition Revolt Over Lenders’ Demands (Bloomberg)
Greek Prime Minister Antonis Samaras faces a growing revolt from his coalition partners as representatives of the country’s lenders press for more changes to the country’s labor market as a condition for releasing further bailout funds. Evangelos Venizelos of Pasok and the Democratic Left’s Fotis Kouvelis, whose parliamentary seats give Samaras the majority in Parliament he needs to govern, both said they wouldn’t accept further changes to labor rules after a three- hour meeting with the prime minister in Athens yesterday. “Further interventions on labor issues don’t help productivity, competitiveness or employment,” Venizelos told state-run NET TV. “We must look elsewhere now and the insistence on this is wrong,” he said, adding some European Union members were “playing with fire.”
The hitch comes as Samaras prepares to argue for a two-year extension to meet the country’s bailout targets at his first EU summit on Oct. 18. A deal with the EU, the International Monetary Fund and the European Central Bank, the so-called troika, is needed to unlock a 31 billion-euro ($40.7 billion) aid installment. The government needs the funds to recapitalize its banks and pay debts. Samaras didn’t comment after yesterday’s meeting.
