By: Ffd Analyst|2009-09-01 09:16:16
On Tuesday, the National Association of Realtors said its pending home sales index, based on contracts signed in July, rose 3.2 percent to 97.6, the highest level since June 2007, from 94.6 in June. Pending home sales contracts have risen for a record six straight months.
Analysts had forecast pending home sales to rise by 2.0 percent.
A nationwide slump in house prices for the first time since the Great Depression of the 1930s contributed to the credit crunch and contraction in economic activity in the past year, but recent housing data suggested home prices may have stopped falling.
Some stabilization in the three-year old housing downturn is seen as essential to any economic recovery.
Last week Standard & Poor's said prices of single-family homes rose for the second consecutive month in June, while the government said sales of newly-build single-family homes rose for a fourth straight month in July and the inventory of unsold new homes fell to the lowest in 16 years.
Earlier this month, the government said existing homes sales rose in July to mark the fastest pace in nearly two years.
Despite some optimism on manufacturing and the housing market on Tuesday, data also showed total U.S. construction spending fell 0.2 percent in July to the lowest rate since February 2004.
Home Sales Signal Potential Recovery
Yen Declines Versus Greenback as U.S. Economy Recovers
The yen fell against the U.S. dollar today as several evidences are suggesting that the American economy may be finally recovering, making traders who opted for the Japanese currency as a refuge from uncertainties to bet once again in dollar-priced assets.
After U.S. President Barack Obama declarations indicating that job losses are slowing down and many economic sectors are already growing again, the U.S. dollar found the support necessary to gain versus the yen and several other currencies, as according to some analysts, it could be also undervalued. The yen also lost versus the British pound earlier, as the real estate market showed signs of stabilization, raising confidence for the pound, even if previous gains were later pared. The U.S. dollar may gain even further versus the Japanese yen, as favorable reports in the North American nation may decrease attractiveness for the relative safety of the Japanese currency, affecting its price.
As long as the economy continues to show resilience, mainly in the U.S., the yen is likely to become less appealing for traders, since, even in a positive scenario, there are other trading options in Asia that can provide higher yieldings, such as in South Korea, that is providing better economic data than Japan, and also has more attractive interest rates.
USD/JPY traded at 91.12 as of 10:19 GMT from a previous rate of 90.69 in the intraday comparison. EUR/JPY traded at 133.16 from 133.08 yesterday.
USD Edges Higher, Eyes Jobs
The dollar climbed higher against the majors on softer US economic reports, pushing the euro to 1.4245 and the Loonie toward 1.1072. Weekly jobless claims were unchanged from the previous week, missing forecasts for a decline to 560k, instead holding steady at 570k. Meanwhile, the August non-manufacturing ISM figure improved by more than forecast, edging up to 48.4 and beating estimates for an increase to 48.0 from 46.4 in the previous month.
The key highlight for this week will be the August labor data, scheduled for release at 8:30 AM on Friday. The market expects the August unemployment rate to creep up to 9.5% from 9.4% in July. The non-farm payrolls are expected to improve further to post a loss of 230k jobs, compared with 247k jobs shed a month prior.
The G-20 Finance Ministers meeting kicks off this weekend in London. US Treasury Secretary Tim Geithner had prefaced the meeting yesterday, saying “this is a stock-taking meeting not a new-initiatives meeting”, adding that “the important thing to do is to try to figure out what cooperative framework or phased differentiated withdrawal of support is going to be appropriate”. The agenda seems to be focused on European government curbs on banking
USD Tumbles to Lowest Levels of 2009
The dollar fell to its lowest level of the year as traders returned from the Labor Day holiday, relinquishing the 1.45-level against the euro and sliding to 1.6586 versus the British pound. Commodities continued to test higher at the start of the week, with spot gold breaching the key resistance level of $1,000 per ounce and crude oil firming above the $70 per barrel mark to $71.20. Meanwhile, the Asian equity bourses climbed higher overnight, with Hong Kong’s Hang Seng index rallying by over 2% and the Shanghai Composite gaining by 1.7%.
The US economic calendar is light for most of this week as the majority of the releases are slated for Friday. Weekly jobless claims, which are due on Thursday, are expected to improve marginally to 560k from 570k a week prior. On Friday, the data to be released consists of July wholesale inventory, wholesale sales, and the University of Michigan consumer confidence survey. The wholesale sales reading is estimated to edge up to 0.6% in July from 0.4% a month prior, while the wholesale inventory figure is seen posting a 1.0% decline, albeit improving from a decline of 1.7% previously. The preliminary reading for the September University of Michigan consumer confidence survey is largely unchanged, seen slipping marginally lower to 65.3 from 65.7 in August and the expectations component is estimated to ease to 64.2 from 65.0.
DIARY - Belgium to November 30, 2009
Reuters publishes a Western European company diary covering earnings, shareholder meetings, news conferences and analyst meetings. Double-click on or type in the code and hit F9.
For daily West-European IPO diary, double-click on .
This diary is updated daily.
Please note:
- All events/times provisional and in local time unless otherwise indicated.
- The inclusion of an event does not necessarily mean that Reuters will file a story based on it.
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ECONOMIC INDICATORS
DATE GMT/LOCAL INDICATOR PERIOD F/CAST PRIOR
09SEP 1300/1500 GDP final Q2
18SEP 1300/1500 Consumer confidence Sep -11
23SEP 1300/1500 Leading indicator Sep -18.2
29SEP 0930/1130 CPI y/y Sep +0.3
29SEP 0930/1130 CPI m/m Sep -0.78
20OCT 1300/1500 Consumer confidence Oct
22OCT 1300/1500 Leading indicator Oct
28OCT 1400/1500 GDP flash Q3
29OCT 1030/1130 CPI y/y Oct
29OCT 1030/1130 CPI m/m Oct
20NOV 1400/1500 Consumer confidence Oct
24NOV 1400/1500 Leading indicator Oct
27NOV 1030/1130 CPI y/y Nov
27NOV 1030/1130 CPI m/m Nov
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CORPORATE/TREASURY/POLITICAL EVENTS
THURSDAY, SEPTEMBER 10
BRUSSELS - CMB first-half report published
MONDAY, SEPTEMBER 14
LUXEMBOURG - ArcelorMittal pays quarterly dividend
TUESDAY, SEPTEMBER 15
BRUSSELS - Treasury certificate auction (three, 12 months)
BRUSSELS - RHJ International AGM
WEDNESDAY, SEPTEMBER 16
ArcelorMittal holds investor relations day with group management board
FRIDAY, SEPTEMBER 18
UTRECHT - Fortis extraordinary shareholder meeting to appoint Chief Executive Bart De Smet on the board
MONDAY, SEPTEMBER 28
BRUSSELS - OLO bond auction
TUESDAY, SEPTEMBER 29
BRUSSELS - Treasury certificate auction (three, six months)
TUESDAY, OCTOBER 13
BRUSSELS - Treasury certificate auction (three, 12 months)
BRUSSELS - Arseus third-quarter update
THURSDAY, OCTOBER 15
BRUSSELS - Deceuninck third-quarter update
BRUSSELS - Omega Pharma third-quarter update
TUESDAY, OCTOBER 20
BRUSSELS - Euronav third-quarter results
WEDNESDAY, OCTOBER 21
BARCO third-quarter results
THURSDAY, OCTOBER 22
BRUSSELS - CMB third-quarter results
BRUSSELS - UCB third-quarter update
BRUSSELS - Melexis third-quarter results
FRIDAY, OCTOBER 23
BRUSSELS - Mobistar nine-months results
LUXEMBOURG - SES nine-month results
TUESDAY, OCTOBER 27
BRUSSELS - Exmar third-quarter update
WEDNESDAY, OCTOBER 28
LUXEMBOURG - ArcelorMittal Q3 2009 results
THURSDAY, OCTOBER 29
BRUSSELS - Solvay third-quarter results
BRUSSELS - Option third-quarter results
FRIDAY, OCTOBER 30
MORTSEL - Agfa Gevaert third-quarter results
BRUSSELS - Belgacom third-quarter results
MONDAY, NOVEMBER 2
MECHELEN - Telenet third-quarter results
TUESDAY, NOVEMBER 3
BRUSSELS - Treasury certificate auction (three, six months)
WEDNESDAY, NOVEMBER 4
BRUSSELS - Thrombogenics H2 business update
THURSDAY, NOVEMBER 5
BRUSSELS - Delhaize third-quarter results
BRUSSELS - Tessenderlo third-quarter results
FRIDAY, NOVEMBER 6
HIGHLIGHTS-BOJ's Suda: need for abnormal policies lessening
NAGASAKI, Japan, Sept 9 (Reuters) - Bank of Japan board member Miyako Suda said on Wednesday the role of the bank's unconventional steps aimed at easing credit strains is lessening as corporate financing conditions improve.
Suda, a former economics professor seen as holding hawkish views on monetary policy, made the remark in a speech to business leaders in Nagasaki in southern Japan.
Following are key quotes from her speech:
CORPORATE FINANCE STEPS
'We should not underestimate the drawbacks of the unconventional measures. It is true that these steps have put a cap on rates on commercial paper and corporate bonds and term interest rates, and prompted issuance of corporate bonds mainly from names with high credit ratings. They have made a big contribution to improving market sentiment.
'But there are also side-effects such as a reversal of commercial paper rates between government and companies.
'If this continues it could sap investors' appetite for investment and hinder the function of markets.
'The efficiency and fairness of markets could be compromised by central banks' involvement in resource allocation on the microeconomic level.
'If we keep abnormal steps longer than needed even after corporate finance conditions have improved enough, their side-effect could outweigh any advantages. We should be careful not to let that happen ...
'At present, the bank has no predetermined idea about its next move.
'For the time being, the BOJ needs to maintain a fully accommodative financial environment in order to ensure sustained growth of the Japanese economy under stable price moves, irrespective of whether the BOJ unwinds or extends unconventional policies ...
'As the environment surrounding corporate finance recovers, the role of unconventional policies is becoming less significant.
'But I also understand concerns that unwinding the measures may rekindle worries among companies. Still, the corporate financing climate seems to have improved in such a way as to allow the BOJ to replace unconventional measures with ordinary fund-supply operations.'
PRICES AND MONETARY POLICY
'It is important to consider price stability in the mid- to long-term perspective.
'Monetary policy should not be swayed by short-term falls in prices as long as people's inflation expectations do not fall and there is a high probability that the fall in consumer prices will gradually shrink.
'In the near term, prices are facing downside risks from a deterioration in the demand-supply balance. But what could cause a bigger swing in the economy and prices are expansionary macroeconomic policies that cause excessive investments and market positions.
'In January 2004, more than a year after the economy had hit a bottom, Mr. Bernanke, a Federal Reserve governor at the time, said downside risks to prices were still largely the reason why the bank kept interest rates at 1 percent, a record low at the time.
'It's been said later that such a policy at the time had side-effects ... such as the view that low interest rates at the time were a factor behind the housing bubbles later on.'
'Considering these discussions, it is difficult to aggressively take preventative measures against tail risks.'
ECONOMY
'Japan's economy has stopped worsening and is steadily heading towards a pickup ...
'Looking at economic indicators up until now, the economy is moving largely in line with the bank's standard scenario that it will be recovering moderately from the latter half of the current fiscal year. Downside risks have lowered to a considerable degree in the near term.
'However, uncertainty over the outlook remains strong, such as how long the effects of economic measures will last and how the financial system will develop in the long run. So the situation remains the same, that we need to continue to pay heed to downside risks ...
'Underlying production levels have fallen below the break-even point. I'm not saying production levels need to return to the high level seen in the first half of 2008 to go beyond the break-even point, given that many firms are trying to reduce fixed costs. But it will take time for production to reach the break-even level.
'The situation surrounding capital spending will remain severe for the time being as machinery orders are expected to keep falling in the July-September quarter.'
'Near-term negative risks to the economy appear to have receded substantially, but in the long run, the important point is whether the economy's current pickup supported by stimulus measures will smoothly shift into a sustainable recovery. In this regard, uncertainty is still strong ...
'Downside risks exist for the medium- to long-term growth outlook for companies ... There are possibilities that falls in corporate capital spending will become more prolonged than expected and that personal consumption will fall steeply as a result of job market adjustments ...
'As for prices, we need to be aware of the risk of prices falling more than expected. But in the long run, we also have to remain alert to the risk of inflation, as funds may again flow back into commodities products on the back of easy monetary policies taken globally.'
Pound Climbs on U.K. Manufacturing
The pound climbed today versus most of the 6 main traded currencies as the situation starts to become more positive for the British economy, pushing stocks up in London and consequently attracting international inflows of capitals to the United Kingdom.
After U.K. manufacturing output had the highest climb in 18 months today in a report published by the Office for National Statistics, the pound rose sharply, gaining virtually against all 16 main traded currencies worldwide, rebounding from a rather weak performance last week, when a wave of pessimism still affected pound-priced assets attractiveness. Stocks in the U.K. rose to the highest level since October last year, when the credit crunch plunged the British Isles into a intense sequence of losses in multiple bearish market weeks. U.K. manufacturing went much beyond forecasts, which suggested a 0.3 percent increase for the past month, but the actual report indicated an amazing 0.9 jump, being this surprising figures the main vector to push the pound up today in foreign-exchange markets.
According to many analysts, the pound remains undervalued, still suffering the consequences of the credit crunch that caused the biggest crisis in the country since the Second World War, but if favorable news still follow, the pound may find support for a big uptrend in the following months.
GBP/USD traded at 1.6554 as of 12:41 GMT from a previous rate of 1.6382 yesterday. EUR/GBP traded at 0.8744 after being traded at 0.8777 before the report was published.
If you want to comment on the Great Britain pound’s recent action or have any questions regarding this currency, please, feel free to reply below.
