Yen Gains on CIT Risk

* The dollar fell against most major currencies on Thursday on mixed economic news. Risk aversion increased after commercial lender CIT Group said bailout talks with the US government failed. The Philadelphia Fed manufacturing index fell more than expected in July. Meanwhile, US initial and continuing jobless claims dropped more than anticipated and July builder confidence climbed to the highest level since September 2008. Stocks gained after Nouriel Roubini, one of the most bearish forecasters, said the worst of the financial crisis is over and predicted a weak economic expansion later this year. The S&P 500 gained 8.06 points to 940.74. The euro and sterling rose on higher stocks. The Canadian dollar fell after three days of strong gains. The Australian dollar was supported by China’s strong economic growth. The Reserve Bank of Australia disclosed it sold Australian dollars in June.

* The USD/JPY fell on news that CIT will not receive a second bailout from the US government or access to the FDIC’s debt-guarantee program. A downgrade of New Zealand’s bond rating by Fitch also pressured the pair. The Bank of Japan’s upgrade on the Japanese economic outlook as well as mixed Japanese economic data had little impact on the yen. There are resistance in the 94-95 area and support around the 92 handle. We believe the downside is limited and may buy the pair when it is closer to the support.

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Financial and Economic News and Comments

US & Canada

* US initial jobless claims in the week ending July 11 posted steep declines for a second consecutive week, falling a more-than-expected 47,000 to 522,000 from the previous week’s upwardly revised 569,000, figures from the Labor Department showed. The 4-week average of new jobless claims declined 22,500 to 584,500, the lowest level since January 31. Continuing jobless claims in the week ending July 4 plunged a record 642,000 to 6,273,000, the lowest since April 11, from the preceding week’s upwardly revised 6,915,000. The 4- week average of those continuing claims dropped 110,250 to 6,666,750. The steep drops in both the initial and continuing claims reflected seasonal issues surrounding auto plant shutdowns. The insured unemployment rate for the week ending July 4 decline to 4.7% from the prior week’s upwardly revised 5.2%.

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* The Philadelphia Fed manufacturing index, having been negative for 19 of the past 20 months, declined more than expected to -7.5 in July from a 9-month high of -2.2 in June, indicating manufacturing in the Philadelphia region contracted at a faster pace, according to the Federal Reserve Bank of Philadelphia’s July 2009 business outlook survey. The shipments index fell to -9.5 in July from 2.1 in June. The employment index declined to -25.3 from June’s -21.8, indicating labor market conditions remain weak. However, the new orders index rose to -2.2 in July, its highest reading in 10 months, from -4.8 in June. “Most of the survey’s broad indicators of future activity declined slightly this month, but they continue to suggest that the region’s manufacturing executives expect a recovery in business over the next six months,” the Philadelphia Fed said.

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* The NAHB/Wells Fargo US housing market index increased more than expected to 17 in July from 15 in June, indicating US builder confidence rose this month to the highest since September 2008, according to data from the National Association of Home Builders/Wells Fargo. The current single-family home sales index improved to 17, the highest since September, from June’s 14. The buyer traffic index was up to 14, also the highest since September, after holding at 13 for three months. The sales expectations index held at 26 for a second month.

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* Net foreign purchases of long-term securities were -$19.8 billion in May and monthly net TIC flows were -$66.6 billion, the Treasury said.

Europe

* Switzerland’s economic expectations declined in July after continuous rises in H1 2009, according to the July economic survey by Credit Suisse in cooperation with the Centre for European Economic Research. The Credit Suisse ZEW economic expectations indicator fell to zero in July from 9.7 in June. The current economic situation indicator slid to -70.2 from June’s -67.7.

Asia-Pacific

* China became the first of the major economies to recover from the global recession. The Chinese GDP expanded a slightly more-than-expected 7.9% y/y in Q2 2009 after a 6.1% y/y gain in Q1, data from the Statistics Bureau showed. Urban fixed-asset investment jumped 35.3% y/y in June. Industrial production rose 10.7% y/y in June, the biggest rise in nine months, while retail sales gained 15.0% y/y. Consumer prices were down 1.7% y/y in June, a fifth month of decline.

* Japan’s service demand unexpectedly fell in May. The tertiary index declined 0.1% m/m after April’s 2.2% m/m increase, according to the Ministry of Economy, Trade and Industry.

* The Bank of Japan upgraded its economic assessment for a third month. “Japan’s economic conditions have stopped worsening,” the BOJ said in its July monthly report, asserting that the “economic conditions are likely to turn upward over time.”

Источник: Hans Nilsson

16.07.2009