Asian Morning Update 23rd April 2008
There is no such thing as impossible…
European releases overnight:
March Prior Revised
March Italian Trade Bal Non-EU EUR -1.31bn -1.33bn
Overnight saw the usual barrage of comments from ECB officials on inflation. Noyer said he found it hard to believe that inflation will continue at current levels and said the ECB will hike rates if needed.
Nice comments but two points are raised from that. This time last year it would have been impossible to believe that the U.S. would be in recession and that oil prices would be above $115pb. Very clearly the market’s focus on “innovation” (aka bonuses) has led to excessive risks.
There is no such thing as impossible. Improbable is a better word to use.
Secondly, who would have believed a year ago that the Bundesbank would assume control of the property lender Duesseldorfer Hypothekenbank… Well, it seems they are the 5th lender to get emergency aid over the past 8 months. It has a balance sheet of EUR 26.7bn.
There is no such thing as impossible.
Who would have thought a year ago that the U.K.’s second largest bank would need to go cap in hand to its shareholders with a rights issue of GBP12bn? It still says that its outlook is “inevitably clouded” by current market conditions.
There is no such thing as impossible.
States releases overnight:
March Forecast Actual
U.S. Existing Home Sales (MoM) - 1.6% - 2.0%
U.S. Existing Home Sales 4.92mn 4.93mn
April
U.S. Richmond Fed Mfg Index 2.00 0.00
The States couldn’t raise enough ante to take advantage of the poor news from Europe – but faced with existing homes sales and the Richmond Fed’s Manufacturing index which had curiously sharp upturn in March but consequently collapsed this.
The only redeeming points for the existing home sales numbers were that somehow the annualized figure was on target and prices actually pushed higher by 2.6% in April.
And finally a voice of reason from the Fed’s Fisher who was talking about the string of interest rate cuts. He stated, “It’s really a question of, are we getting the bang for the buck? And clearly we’re not.”
He later added, “The question is: what is the efficacy of further rate cuts? Do they have their impact? … We know that there is a time lag - six months to 18 months. But the secondary consideration for me is, having eased, the pipes start working. They get unclogged, and the system starts actually getting to what I call the lawn of non-inflationary sustainable growth. And then we might start from a higher inflation level.”
“Will the U.S. slowing down really damp the price of oil, or the price of food, rice, or flour, cornmeal, the price of steel? … It’s not clear to me that a mild slowdown will put a dent in price pressures domestically.”
His comments ring true. Plosser said more-or-less the same yesterday when he observed that you cannot ask monetary policy to more than it can actually do. Japan’s zero rate policy only looked to have pulled Japan out of a slump but quite clearly it was the growth in trade brought about by globalization which finally provided growth.
Really, what is the difference between businesses securing funding at 0.5% or 2%? Frankly nothing if consumers aren’t buying their products.
And that is what this current turmoil is coming down to. With fuel and food prices rising and taking up a larger chare of the household budget real economy products are seeing waning demand.
The Dollar still lost out but this appears to be more out of habit rather than any real new information. It still looks as if it has a little further to go against the Euro but against the Swissie and Yen?
Well, since the 1.5901 high in the Euro the Dollar has failed to make new lows against the Swissie and Yen. It does display the fact that the market’s Dollar bearish sentiment is waning and it seems likely this will happen to the Euro too before long…
Did the Titanic sink? Did Bear Stearn’s value collapse from $140bn to almost zero in the space of a few months?
Remember, nothing is impossible…
More later once the daily analysis has been done…
The following releases are due from Asia due today:
Australia
Q1 CPI (QoQ) +1.1%
Q1 CPI (YoY) +4.0%
Q1 RBA Trimmed Mean (QoQ) +0.9%
Q1 RBA Trimmed Mean (YoY) +3.8%
Q1 RBA Weighted Median (QoQ) +0.9%
Q1 RBA Weighted Median (YoY) +4.0%
April DEWR Skilled Vacancies (MoM)
Japan - March
Merchandise Trade Balance Total JPY 1405bn
Adjusted Merchandise Trade Balance JPY 890bn
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