Friday, July 31, 2009 0

Chicago PMI Indicates Slower Pace Of Contraction

While the Institute for Supply Management - Chicago released a report on Friday showing a continued contraction in manufacturing activity in the month of July, the pace of contraction slowed by a little more than economists had been expecting.

The ISM - Chicago said its index of activity in the manufacturing sector rose to 43.4 in July from 39.9 in June, with a reading below 50 indicating a contraction in the sector. Economists had been expecting the index to come in at 43.0.

A slower pace of contraction in new orders contributed to the improvement in the sector, with the new orders index rising to 48.0 in July from 41.6 in June.

Employment also contracted at a slower pace compared to the previous month, as the employment index rose to 35.3 from 28.9.

At the same time, the report showed an acceleration in the pace of contraction in order backlog, with the order backlog index slipping to 32.1 in July from 37.6 in the previous month.

On the inflation front, the prices index fell to 35.0 in July from 36.3 in June, indicating a faster pace of contraction in prices.

Peter Boockvar, equity strategist at Miller Tabak said, "Bottom line, the data confirms the backdrop for an improvement in GDP."

"The degree and sustainability of the recovery will however remain in the hands of end demand, aka, predominantly the U.S. consumer," he added.

Second Quarter GDP Contracts At Slower Than Expected Pace

The U.S. economy continued to shrink in the second quarter, according to new government statistics released Friday, although the pace of contraction slowed by more than economists had been expecting.

The U.S. Commerce Department revealed that Gross Domestic Product, a closely watched measure of broad economic performance, fell at a pace of 1 percent for the second quarter. Economists had expected GDP to fall at a 1.5 percent rate.

This marks the fourth consecutive quarter of contraction, but the pace slowed considerably from the 6.4 percent decline that was seen in the first 3 months of the year.

While the moderated pace of decline is a step toward economic stability, experts are uncertain about the second-quarter report, noting that components of the report were mixed.

"We are set up for an improvement in inventories and trade, but consumer spending still remains in question," Peter Boockvar, equity strategist for Miller Tabak, said in a note to clients.

Personal consumption was down 1.2 percent in the second-quarter report, significantly more than economists had been expecting. This followed a 0.6 percent increase in the first quarter.

Consumer spending makes up about two-thirds of the U.S. economy, and rising unemployment and tight credit conditions have made it difficult for average Americans to pick up their spending.

"The drop in consumption in Q2 was a disappointment, because it is the one important piece which does not fit the bottoming-out narrative," noted Chris Low, chief economist at FTN Financial.

Low added, "As long as consumption is flat or falling, there will be doubts about the sustainability of any economic recovery."

Boockvar pointed out that government spending added 1.1 percent to the GDP figure, meaning that the better-than-expected reading came largely thanks to the massive stimulus authorities have used to prop up the economy.

There are a series of economic reports due to be released next week, culminating in the monthly employment report on Friday.

With jobs seen as the key to consumer spending, and the consumer the main stumbling block to a possible recovery, next week's employment numbers for July will be even more closely watched than normal.

The U.S. economy continued to shrink in the second quarter, according to new government statistics released Friday, although the pace of contraction slowed by more than economists had been expecting. The U.S. Commerce Department revealed that Gross Domestic Product, a closely watched measure of broad economic performance, fell at a pace of 1 percent for the second quarter. Economists had expected GDP to fall at a 1.5 percent rate. (Market News Provided by RTTNews)

Eurozone July Consumer Prices Log Biggest Fall, June Unemployment At 10-Year High

Eurozone consumer price inflation stayed negative for the second month in July with the latest decline being the biggest on record, extending support to a low interest rate regime. Unemployment reached the highest level since June 1999 as more employers cut headcount in June.

A flash estimate from the European Union statistics office, Eurostat, revealed a 0.6% annual fall in consumer prices in July compared to a 0.1% drop in June. The decline in July was the biggest on record. Prices also dropped more than the expected 0.4%.

Inflation turned negative for the first time in June. The European Central Bank aims at inflation rates below, but close to 2% over the medium term.

The statistical office is set to release the final report on August 14.

Simon Junker, analyst at Commerzbank, expects inflation to stay negative for the coming few months, but expects a reversal in the autumn. The core rate could still ease until the end of the next year, but without crossing zero, the analyst said.

The reason behind the annual fall continue to be energy prices, which have fallen around 14% since last July. This special effect would gradually drop and inflation would then pick up again. The analyst sees inflation rate of 1.6% for 2010 compared to 0.5% this year.

Junker holds the view that the medium term inflation trend is in line with the ECB target. Besides, easing core inflation is another argument for low interest rates. The ECB should therefore retain its expansionary course of monetary policy for time to come, he said.

Elsewhere, a preliminary estimate from the Italian statistical office showed that inflation decreased to a fifty-year low of 0% in July from 0.5% in June, indicating that the rate turn negative in the coming months. Meanwhile, the EU harmonized index fell 0.1% in July from a year earlier.

Consumer prices in the largest Eurozone economy recorded the first annual decrease since March 1987. The German CPI was down 0.6% annually in July, following a 0.1% rise in June. The harmonized index of consumer prices also dipped 0.6% from the last year.

Earlier in the day, Marek Belka, director of the International Monetary Fund's European department said deflation is not imminent in Eurozone. But it should not completely rule out the possibility.

Another report from the Luxembourg-based Eurostat said the jobless rate rose to 9.4% in June from 9.3% in the previous month. This was the highest since June 1999. Economists had expected the rate to be 9.7%. The unemployment rate for May was revised from 9.5% reported on July 2.

In June, the number of unemployed persons increased 158,000 from the previous month to 14.89 million. Compared to the previous year, unemployment rose 3.2 million. In the meantime, the unemployment rate in the EU27 stood at 8.9% in June, which was the highest since June 2005. The rate in May was 8.8%. Among the member states, the lowest unemployment rates were recorded in the Netherlands and Austria. On the other hand, the highest rates were reported in Spain, Latvia and Estonia.

Dollar Back On The Defensive Versus Most Majors

The dollar weakened versus most other major currencies Friday morning as US stock futures rose on increasing optimism that the economy is in recovery mode.

Increased risk appetite and concerns about US government spending have hurt the dollar versus higher-yielding counterpart such as the euro.

A modest comeback earlier in the week pared some of the buck's recent losses, but it appears that renewed confidence in the global economic recovery may continue to weigh on the safe haven dollar.

Traders await the advance estimate of second quarter GDP, which is likely to confirm that slump in the economy slowed down in the Apr-June period.

Friday morning, the dollar slipped to 1.4150 versus the euro, moving away from a 2-week high near 1.4000 and back toward its 2009 low of 1.4338, last tested on Monday.

Meanwhile, the dollar extended its losses from the previous session versus the sterling, dropping to a weekly low of 1.6574 before finding support. With the loss, the dollar moved to the lower end of a 2-month trading range.

The dollar also came under pressure versus its red-hot rival from north of the border, slipping to C$1.0780. Following a brief recovery attempt mid-week, the dollar appears poised to test a 10-month low of $1.0749, set on Monday.

On the flip side, the dollar rose versus the slumping yen, climbing to 95.77 and challenging yesterday's nearly 4-week high of 95.87.

Friday, Eurostat said in a report that Eurozone jobless rate stood at 9.4% in June, up from 9.3% in the previous month, which was revised from 9.5% reported initially. This was the highest jobless rate since June 1999.

Also, a flash estimate from the Eurostat showed that consumer prices in the euro area dropped 0.6% in July from the previous year compared to a 0.1% drop in June. Annual inflation had turned negative for the first time on record in June.

(Market News Provided by RTTNews)

U.S., U.K. To Have Higher Budget Deficits In 2009 Among G 20 Nations: IMF

The U.S. and the U.K. would have the highest budget deficits in 2009 among the world's top 20 advanced and emerging economies, a report from the International Monetary Fund showed Thursday.

According to the IMF staff report on the state of public finances, the budget deficit in the U.S. would be 13.5% of the gross domestic product or GDP. That compares to a deficit of 2.9% of GDP in 2007, the pre-crisis year. However, the deficit is expected to decrease to 9.7% of GDP in 2010.

In the U.K., the IMF forecasts a deficit of 11.6% of GDP, significantly larger than a deficit of 2.6% of GDP in 2007. The fiscal shortfall is expected to rise to 13.3% of GDP in 2010.

The third nation to record the biggest budget deficit is Japan, with a deficit of 10.3% GDP and it is anticipated to remain at this level in the next year.

"The outlook for the public debt is more worrying in many countries," the IMF said. However, it urged advanced economies to continue fiscal policies to support economic activity until economic recovery takes hold.

Debt levels of advanced economies are expected to rise to close to 120% of GDP by 2014, up from about 80% GDP before the crisis.

The U.S. and the U.K. would have the highest budget deficits in 2009 among the world's top 20 advanced and emerging economies, a report from the International Monetary Fund showed Thursday. (Market News Provided by RTTNews)

U.K. Treasury Committee Report: Banking Regulation Reform Largely Cosmetic

Friday, UK government's Treasury Committee assessed that the reforms to the institutional structure of the Tripartite Committee announced in the Treasury's recent White Paper was largely cosmetic. Merely re-branding the Tripartite Standing Committee would do little in itself, the committee said in its latest report titled Banking Crisis: Regulation and Supervision.

The Treasury Committee said there remains a lack of clarity regarding who is responsible for systemic oversight, and who has executive authority in a crisis.

"Where before no-one had a formal responsibility for financial stability, now many do-the Bank of England, the FSA, the Treasury, the Council for Financial Stability and the Bank's Financial Stability Committee. Where responsibility lies for strategic decisions and executive action was, and remains, a muddle," the report said.

John McFall, Chairman of the Committee said the FSA failed spectacularly in its supervision of the banking sector. But, it has acknowledged this and already started to rectify its mistakes.

Further, the Committee said no new macro prudential responsibilities should be allocated until a decision has been made about the required tools. The report does not advocate substantial change to the tripartite system.

According to McFall, change and coordination are needed to clarify responsibility, but the picture is constantly moving. He said, "When the dust settles though, we cannot afford to have any ambiguity over who is in charge, and who is responsible if something goes wrong."

Dollar Slumps As Economy Hopes Increase Risk Appetite

Friday, the U.S. dollar tumbled against its major counterparts as growing hopes for a global recovery prompted investors to pick up riskier assets such as stocks, pushing up higher-yielding currencies.

The dollar slumped to an 8-day low against the pound, 2-day lows against the euro, franc and the kiwi and 3-day lows against the aussie and the loonie.

Risk appetite increased with the dollar and the yen coming under pressure and stocks and oil rising after Thursday's solid U.S. earnings reports and a drop in the number of Americans collecting long-term unemployment aid.

Asian stocks pushed higher today and were poised to score double-digit gains in July as investors kept pouring in funds on bets the region's growth will lead the global economy out of recession.

South Korea's benchmark KOSPI index hit a one-year high and Japan's Nikkei average hit a 10-month peak as upbeat corporate earnings report around the world have been viewed as more evidence that companies are coping well and poised to benefit from any recovery.

The dollar fell to a 2-day low of 1.4146 against the euro during early deals on Friday. If the dollar weakens further, it may likely target the 1.420 level.

The dollar rose to a 2-week high of 1.4009 against the euro on Wednesday as investors mulled over data showing the first annual decline in German consumer prices since March 1987. The decline in prices was steeper than what analysts' expected for the Euro-zone's largest economy.

But the dollar pared its gains yesterday as the euro was supported by the Euro-zone economic sentiment index, which improved for the fourth consecutive month in July, pointing towards a possibility of positive growth in the economy during the second half of 2009. At yesterday's New York session close, the euro-dollar pair was quoted at 1.4076.

The dollar has dropped 1% against the euro since reaching a 2-week high. The dollar lost 2% against the euro this month, following a 0.6% gain in June.

In early deals on Friday, the dollar slipped to a 2-day low of 1.0840 against the Swiss franc. This may be compared to yesterday's close of 1.0879. On the downside, 1.080 is seen as the next target level for the U.S. currency.

After hitting a 7-week low of 1.0626 against the franc on July 21, the dollar advanced 3% and rose to a 16-day high of 1.0937 yesterday morning in New York. However, the dollar weakened in afternoon deals and extended its slide today. Since then, the dollar-franc pair has declined 1%.

The dollar plunged to an 8-day low against the pound today after GfK NOP said in an e-mailed statement that an index of consumer sentiment in the U.K. was unchanged in July at minus 25, adding to signs Britain is emerging from recession. The reading is up from minus 39 a year earlier.

The Nationwide Building Society said yesterday that house prices rose in U.K. for a third straight month in July.

The Bank of England policy maker Andrew Sentance said last week the bank may pause its plan to stoke growth by buying bonds if forecasts next month point to an improvement.

The dollar that closed yesterday's trading at 1.6501 against the pound plunged to an 8-day low of 1.6574 in early deals on Friday. The next downside target for the dollar is seen around the 1.675 level.

The dollar has slipped 1.4% against the pound since reaching an 8-day high of 1.6342 yesterday.

During early deals on Friday, the dollar weakened against the Japanese yen. At 2:30 am ET, the dollar-yen pair touched 95.23, down from yesterday's close of 95.59. The near term support for the U.S. currency is seen around the 94.9 level.

Japan's core consumer price index sank a record 1.7% year-on-year to 100.3 in June, declining for the fourth straight month, the Ministry of Internal Affairs said today. The core CPI for the Tokyo metropolitan area, considered a bellwether for nationwide price trends, also fell at its fastest pace in July, down 1.7% to 99.7.

According to a release from the Ministry of Internal Affairs, Japan's unemployment rate rose 0.2 percentage points from the previous month to 5.4% in June, marking the fifth straight month of increase. The number of jobless rose for the eight consecutive month to 3.48 million, an increase of 830,000. The number of people who were forced to quit their jobs due to employers' circumstances increased by 62,000, while 40,000 fewer left their jobs on their own.

The dollar jumped to more than a 3-week high of 95.90 against the yen yesterday, up 4% from a 5-month low of 91.76 hit on July 13. Positive economic data, rising stocks and better-than-expected earnings improved risk appetite, thus damping demand for the Japanese currency.

The greenback also fell to multi-day lows against commodity related currencies namely the aussie, kiwi and the loonie on higher oil prices.

Oil extended gains above $67 a barrel today, after a 5.7 percent jump yesterday on U.S. data and earnings which renewed hopes of an economic recovery and drove up equity and commodities markets.

U.S. light crude for September delivery rose 44 cents to $67.38 a barrel in Asian deals, having settled up $3.59, or 5.67 percent at $66.94, its biggest one-day gain since April 9. London Brent crude gained 34 cents to $70.45.

The U.S. dollar, which closed yesterday's trading at 0.8258 against the Aussie declined to a 3-day low of 0.8306 during early deals on Friday. The next downside target level for the greenback is seen at 0.834.

The Aussie was supported after a report by the TD Securities and the Melbourne Institute showed that a gauge of inflation accelerated in July as prices rose for communications, utilities and local government taxes.

The gauge rose 0.9% in July, which is the steepest rise in the seven-year history of the survey. This comes after a 0.4% rise in June.

During early deals on Friday, the U.S. currency slipped to a 2-day low of 0.6582 against the NZ dollar and a 3-day low of 1.0788 against the Canadian dollar. The next downside target level for the greenback is seen at 0.663 against the kiwi and 1.075 against the loonie. The kiwi-greenback pair closed trading at 0.6525 and the greenback-loonie pair at 1.0839 on Thursday.

The Italian June PPI and the Euro-zone July CPI and unemployment report for June are expected in the upcoming hours.

Turning to the U.S., the second quarter GDP report has been slated for release at 8:30 am ET. Analysts expect the U.S. economy probably shrank at a slower pace in the second quarter, a sign the worst recession in half a century is winding down.

Recent reports showed the housing slump, which helped trigger the financial crisis last year, and the decline in manufacturing have eased.

Most of the Fed's 12 regional banks reported a slower pace of economic decline in June and July, the central bank's regional survey of activity showed this week. Fed Chairman Ben Bernanke told Congress last week that there were "tentative signs of stabilization."

Today's report is likely to show that the U.S. economy contracted at a 1.5% rate in the second quarter, after dropping 5.5% in the first quarter.

The Canadian GDP report for May is also scheduled for release at 8:30 am ET.

At 9:45 am ET, the results of the Institute of Supply Management-Chicago's business survey for July are scheduled to be released. Economists expect the business barometer index based on the survey to come in at 43.

(Market News Provided by RTTNews)

Australian Inflation Gauge At 7-Year High In July

A monthly inflation gauge for Australia rose at its fastest pace in seven years in July, a report by the TD Securities and Melbourne Institute showed Friday. This was mainly due to higher costs of communication, utilities and other housing related charges.

The gauge rose 0.9% in July, which is the steepest rise in the seven-year history of the survey. This comes after a 0.4% rise in June.

For the year ended July, the inflation gauge climbed 1.9%, falling just short of the Reserve Bank of Australia's target band of 2% to 3%, and signaling a possible end of interest rate cuts in the near future.

The latest inflation figures released by the statistical office showed that consumer prices climbed 1.5% year-on-year in the second quarter, slower than the 2.5% rise in the first quarter.

Sequentially, consumer prices were up 0.5% in the second quarter, faster than a 0.1% rise in the first quarter.

In its latest monetary policy meeting, the central bank held the interest rate at a 49-year low of 3% for the third consecutive month. The central bank had slashed interest rates by 125 basis points since December last year.

On the basis of the latest data, the TD Securities economist Annette Beacher indicated that the RBA would most certainly leave the rates steady at its next policy meeting on August 4.

Meanwhile, in an address to the Anika Foundation Luncheon in Sydney on July 28, the RBA governor Glenn Stevens indicated that the downturn in Australia may not turn out to be one of the more serious ones of the post-War era, in contrast to the experiences of so many other nations.

Stevens said "we can much more easily imagine upside risks to the outlook, to balance out the downside ones, than was the case six months ago". At the same time, the Governor pointed out that the real challenge in the near term was to ensure ready availability and low cost of housing finance.

Trust In Business Recovering In World Markets: Survey

The public's trust in business has stabilized and is recovering significantly in some of the world's largest markets, results of a survey conducted by Edelman, a leading independent public relations firm, showed Thursday.

Edelman's previous survey, conducted in January, showed a devastating loss in trust in the private sector.

The mid-year survey was conducted among 1,675 informed public in six countries - the U.S., the U.K., France, Germany, India, and China.

The survey found that India and China are the most positive about business. At 75%, India recorded the highest level of trust in business of any of the six countries surveyed. China followed with 60% saying they trust business to do what is right.

"The private sector is perceived as enabling an economic growth that has led to healthier living standards. The survey numbers reflect a high degree of national pride in the accomplishments of business," said Alan VanderMolen, president, Asia Pacific, Edelman.

In the U.S., 48% of informed public trust business to do what is right, up from a low of 36% in January. The figure for France rose to 41% from 30%.

"Trust in business is on the way back, but we're still in the middle of the game," said Richard Edelman, president and CEO, Edelman.

The public's trust in government rose the most in India, an increase of 13 points to 55% followed by the U.S., where the trust barometer rose 12 points to 42%.

European Economics Preview: Eurozone HICP, Unemployment Reports Due

Friday, major statistical reports due for the day are Eurozone HICP and unemployment.

At 3.30am ET, the Statistics Sweden is slated to release the second quarter GDP data. The economy is forecast to contract 0.4% sequentially in the second quarter.

Half an hour later, the Italian PPI and Norwegian C2 credit indicator and unemployment reports are scheduled. Norway's C2 credit indicator growth in June is seen at 7.1%, down from 7.5% in May. Meanwhile, the jobless rate is expected to rise to 3.2% in April to June.

Economists forecast Italian producer prices to drop 7.5% on a yearly basis in June following a 6.7% decrease in May.

At 5.00am ET, the Eurostat is slated to release unemployment data and a flash estimate for HICP. Eurozone HICP inflation is forecast fall 0.4% year-on-year in July compared to a 0.1% drop in June. Meanwhile, the jobless rate is expected to rise to 9.7% in June from 9.5%.

In the meantime, a preliminary report for Italian CPI for the month of July is also due. EU harmonized annual inflation in Italy is seen at 0.4%.

Friday, major statistical reports due for the day are Eurozone HICP and unemployment data. (Market News Provided by RTTNews)

Private Sector Participation Can Ease UK Govt.'s Insurance Burden: Working Group

In its report released on Monday on the medium and long term challenges facing the UK insurance industry, the Insurance Industry Working Group noted that if the private sector were to increase its share in the insurance market by five percentage points, it could help a corresponding savings of GBP 17 billion per year for the public sector.

The working group was set up in October last year and is co-chaired by Chancellor of the Exchequer, Alistair Darling and Andrew Moss, Group Chief Executive of Aviva.

At present, the government is providing about 64% of the insurance coverage for individuals and occupational pensions, besides providing health and long term care and income protection measures, the group said. The total addressable 'risk management' market for these three areas is around GBP 340 billion, the report said.

The working group pointed out that over time, the challenge of funding these costs would rise, due to a decline in the relative size of the working age population and rising costs in areas such as healthcare.

"This raises the question of where the optimal balance between private and state provision should lie in the future and how much emphasis should be placed on personal responsibility", the report added.

(Market News Provided by RTTNews)

Japan Consumer Prices Fall At Record Pace In June; Unemployment Climbs Further

Consumer prices in Japan continued to fall for the fifth consecutive month in June on a year-over-year basis, with the latest decline being the steepest on record, government data showed Friday. At the same, unemployment increased further.

Data released by the Ministry of Internal Affairs and Communication showed that consumer prices dipped 1.8% year-on-year in June, faster than the 1.1% fall in the preceding month.

Core consumer prices, which exclude fresh food prices, also dropped at a record pace, by 1.7% June, following the 1.1% fall in the preceding month. Economists had expected a 1.8% decline.

In June, most of the sub groups showed decline in prices, with the steepest drop of 6.6% being in transport and communication, followed by a 5.2% fall in utility prices. Education was the only group to show a rise in prices, by 0.9%.

Month-on-month, overall consumer prices were down 0.2% in June, and core consumer prices also dropped at the same pace.

For the Tokyo Metropolitan area, consumer prices dropped 1.8% annually in July, while the core consumer prices were down 1.7%. The trend in the Tokyo region is taken as a leader indicator for conditions in the whole of Japan. Compared to the previous month, overall consumer prices fell 0.4% and core consumer prices declined 0.3%.

Meanwhile, jobless rate climbed further to hit a six-year high in June. The seasonally adjusted jobless rate climbed to 5.4% from 5.2% in May. Economists expected the rate to come in at 5.3%. This is the highest rate since June 2003, and was just short of the record 5.5% set in April 2003.

The number of unemployed persons totaled 3.48 million, an increase of 830 thousand or 31.3% from the previous year. At the same time, the number of employed persons decreased by 1.51 million or 2.3% to 63 million.

The ministry also reported that household spending in Japan increased 0.2% in real terms in June compared to one year earlier, while spending by wage earner households was down 0.9%. Economists expected the real household spending to rise 0.5%.

India's RBI Retains Interest Rates, Projects 5% Inflation For FY10

India's apex bank, Reserve Bank Of India in its quarterly monetary policy review, retained the interest rates. It retained the repo rate, reverse repo rate and the Cash Reserve Ratio (CRR) at their current levels.

Due to the existing global trend in commodity prices and domestic demand-supply balance, the bank projects 5% inflation for the next year, higher than its earlier projection of 4% in its Annual policy statement in April 2009. The bank, in the present scenario, estimates GDP to grow at 6% for 2009-10.

The review pointed out positive signs of progressive recovery with increased food stocks, positive industrial production and business confidence while hinting out negative aspects like delayed and shortfall in the monsoon, food price inflation, rebound in global commodity prices and weak external demand with high fiscal deficit.

RBI decided to manage liquidity actively so that the credit demand of the government is met while ensuring the flow of credit to the private sector at viable rates. It will keep a vigil on the trends and signals of inflation, and get prepared to respond swiftly and efficiently through policy adjustments. The bank will maintain a monetary and interest rate regime consistent with price stability supportive of bringing back the economy to high growth path.

(Market News Provided by RTTNews)

Gold Rebounds, Rises Above $930

Gold rallied on Thursday in U.S. trading, boosted by higher crude oil prices. The rise took the precious metal off of a two-week low.

September-stamped gold climbed to $934.90 per ounce, up $7.70. Prices touched as high as $937 in early trading.

Crude oil surged more than 5%, leading an increase across the board for commodities. Light sweet crude added $3.57 to finish at $66.92 per barrel, erasing most of yesterday's sharp slide.

The dollar held most of its recent gains against the euro, limiting the metal's hedge appeal. The greenback fell against the British pound and Canadian dollar, but gained on the yen. Gold usually moves opposite the dollar.

In economic news, a Labor Department report showed that jobless claims rose to 584,000 from the previous week's revised figure of 559,000. Economists had expected jobless claims to rise to 575,000 from the 554,000 originally reported for the previous week.

Traders awaited the release of the gross domestic product data for the second quarter, which will be revealed at 8:30 a.m. ET. A drop of 1.5% is forecast, compared to a drop of 5.5% in the first quarter.

The Chicago purchasing manager's index report for July is due at 9:45 a.m. ET. A reading of 42.0 is projected, compared to a 39.9 in June.

(Market News Provided by RTTNews)

Dollar Rebounds Versus Euro After Testing 2009 Low

The dollar surged higher versus the euro and held its ground versus other majors on Wednesday as US stocks slumped, fueling increased aversion to riskier, higher-yielding assets.

After coming within a hair of its 2009 low versus he euro earlier this week the dollar has shot up to an 11-day high of 1.4006.

Traders reacted to a relatively disappointing report on durable goods orders. Meanwhile, the Federal Reserve's Beige Book said that most districts see recession easing, but that economic activity remains weak.

The dollar came up just shy of hitting a fresh 5-month high versus yen. The buck rose to 95.30, erasing its losses from the previous session while challenging Monday's high mark of 95.37.

The dollar rose versus the sterling, reaching a weekly high of 1.6360. Still, on a longer term basis, the pair has been stuck in the mud, and is little changed over the past two months.

Meanwhile, the dollar saw renewed buying interest versus the scorching-hot loonie, rising to a weekly high of $1.0930 from a 10-month low of $1.0749.

The report showed that durable goods orders fell by 2.5 percent in June following a downwardly revised 1.3 percent increase in May. Economists had expected orders to fall by 0.6 percent compared to the 1.8 percent increase originally reported for the previous month.

(Market News Provided by RTTNews)

U.K. Announces GBP 1 Bln Funding To Create Jobs

Wednesday, the U.K. announced around GBP 1 billion funding to create 150,000 jobs - 100,000 for young people and 50,000 for unemployment hotspots.

At the launching of the Future Jobs Fund, Work and Pensions Secretary Yvette Cooper, Business Secretary Lord Mandelson, Children, Schools and Families Secretary Ed Balls and Communities Secretary Secretary John Denham announced the first 47,000 youth jobs supported by the fund for young people who are unable to find work or training within a year.

Cooper said, "We are determined not to lose a generation of talent as has happened in the past because of the global recession. This is why we are announcing 47,000 new jobs for young people today."

"And - with business and charities - we are launching a national call to action to our fellow employers to join us in Backing Young Britain - to give every young person a job, training place, skills or work experience."

Mandelson said, "Our national campaign to help every young person to find a job, training or work skills and experience is not just a response to the recession but an investment in our future as we build a stronger Britain."

Leaders announced that 117 bidders have been given the green light to create up to 47,000 innovative jobs for young people through the government's Future Jobs Fund. Jobs will include sports coaches, education assistants, and roles in the green and social care sectors.

Wednesday, the U.K. announced around GBP 1 billion funding to create 150,000 jobs - 100,000 for young people and 50,000 for unemployment hotspots. (Market News Provided by RTTNews)

European Economics Preview: Eurozone Economic Sentiment Forecast To Improve

Thursday, Eurozone economic confidence and Germany's unemployment reports are expected to dominate the newsflow.

At 3.00am ET, the Spanish statistical office is set to release the flash HICP estimate. The index is forecast to drop 1.4% on a yearly basis in July compared to 1% decline recorded in June. In the meantime, a final external trade balance report for the month of May is due from the Hungarian Central Statistical Office.

Thereafter, the National Institute of Economic Research is set to issue Swedish consumer confidence survey at 3.15am ET. The consumer confidence index is seen at minus 7 in July versus June's minus 9. Meanwhile, manufacturing confidence is expected to rise to minus 29 from minus 31 in June.

At 3.30am ET, the Statistics Denmark is scheduled to release the unemployment data for June.

Afterwards, the German Federal Labor Agency is set to report July unemployment details at 3.55am ET. The number of unemployed persons in July is forecast to rise to 43,000 in July.

At 4.00am ET, the Italian statistical office ISTAT is expected to issue hourly wages. Economists forecast an annual 2.8% growth in hourly wages.

At 5.00am ET, a monthly economic sentiment survey results are due from the European Commission. Eurozone economic sentiment is predicted to rise to 75 in July from 73.3 in June. Meanwhile, consumer sentiment is seen at minus 24, up from minus 25 last month. Economists forecast business confidence to climb to minus 2.83 in July from minus 2.97 in the prior month.

(Market News Provided by RTTNews)

Japan CPI, Unemployment On Tap For Friday

Japan is scheduled to release June numbers for consumer price index on Friday, headlining a busy day for Asian economic news. Also due are figures for unemployment, household spending, construction orders and housing starts.

National inflation is expected to fall 1.8 percent on year in June after the 1.1 percent annual decline in May. The July projection for Tokyo inflation is forecast lower by 1.7 percent on year after the 1.3 percent annual contraction in June. The unemployment rate is forecast to creep up to 5.3 percent from the current 5.2 percent. Household spending is called higher by 0.5 percent on year after the 0.3 percent annual increase in the previous month. Construction orders were down 41.9 percent on year in the previous month, while housing starts were down 30.8 percent at 758,000 yen.

South Korea will provide June data for industrial output, service industry output and its leading index. Industrial output is forecast to fall 5.8 percent on year after the 9 percent annual contraction in May. Service industry output came in at 0.2 percent in May, while the leading index saw an increase of 2.6 percent on year in the previous month.

Singapore will announce seasonally adjusted unemployment numbers for the second quarter. Analysts are expecting the rate to climb to 3.7 percent from the current 3.2 percent.

Thailand is set to announce June numbers for imports, exports, trade balance, current account and manufacturing production, as well as foreign reserves figures for the week ending July 24. Imports are forecast lower by 29.6 percent on year, with exports called lower by an annual 26.4 percent for a trade balance of $1.438 billion. The current account is projected at $1.061 billion, while manufacturing production is expected to contract 9.5 percent on year and foreign reserves are seen higher by 122.5 percent on year.

(Market News Provided by RTTNews)

Gold Tumbles Back Below $930 As Dollar Rebounds

Gold prices moved notably lower as the dollar gained more ground on the euro. The drop added to gold's losses from the previous session when it fell away from a six-week high.

August-dated gold fell to $927.20, down $11.90 per ounce. Prices touched as low as $925.20 after touching as high as $960 earlier this week.

The dollar rose to a 10-day high near 1.4000 against the euro after testing an eight-month low around 1.4300 earlier in the week. The buck also gained on the yen and was little-changed against the pound. Gold usually moves opposite the dollar because of its hedge appeal.

In economic news on Wednesday, a Commerce Department report showed that durable goods orders fell by 2.5 percent in June following a downwardly revised 1.3 percent increase in May. Economists had expected orders to fall by 0.6 percent compared to the 1.8 percent increase originally reported for the previous month.

In the afternoon, the Federal Reserve's Beige Book report said that economic activity continued to be weak going into the summer, but noted that most of the 12 Fed districts indicated that the pace of decline has moderated or that activity has begun to stabilize.

Initial jobless claims data headlines a light economic calendar on Thursday. First-time unemployment claims rose to 585,000, compared to 554,000 a week earlier. The report is due at 8:30 a.m. ET.

August gold fell $14.40 for the session at its lowest closing level since July 17. Prices hit as low as $935.00 after touching $960 in on Monday.

(Market News Provided by RTTNews)

Crude Stockpiles Rise More Than 5 Million Barrels

Crude oil inventories rose sharply in the recent week, according to data released Wednesday morning by the Energy Information Administration. The build was larger than the expectation of analysts and bigger than the one shown by an industry survey yesterday.

U.S. commercial crude oil inventories increased by 5.1 million barrels during the week ended July 24. Experts were looking for a build of about 1.1 million barrels. At 347.8 million barrels, U.S. crude oil inventories are above the upper boundary of the average range for this time of year.

Crude oil prices plunged on the NYMEX following the report. Light sweet crude for September fell to $63.94, down $3.29 on the session. Prices touched as low as $63.90 after challenging $69 earlier this week.

Total motor gasoline inventories decreased by 2.3 million barrels last week. Economists were looking for a drop of about 1.1 million barrels. Both finished gasoline inventories and gasoline blending components decreased last week.

Distillate fuel inventories increased by 2.1 million barrels, and are above the upper boundary of the average range for this time of year. Experts were forecasting an increase of about 1 million barrels.

Propane/propylene inventories increased by 2.0 million barrels last week. Total commercial petroleum inventories increased by 5.5 million barrels last week.

Late Tuesday afternoon, the American Petroleum Institute reported crude oil inventories increased by about 4.1 million barrels to 352.4 million in the week ended July 24. The API report is not as closely watched as the EIA data because participation in the API survey is voluntary.

(Market News Provided by RTTNews)

Dollar Jumps Versus Yen, Levels Off Versus Other Majors

The dollar was mixed versus other majors on Thursday as US stocks snapped back from losses in the previous session. The buck leveled off versus the the euro and sterling, but spiked higher against the yen.

Relatively encouraging economic reports and some decent corporate earnings news from around the globe fueled renewed risk appetite and helped global equities rally.

The buck jumped to a nearly 4-week high of 95.82 versus yen, moving well away from a 5-month low of 91.87 set earlier in July.

The dollar held its ground near 1.4050 versus the higher yielding euro despite increased risk appetite. Earlier in the week, the dollar tested its 2009 lows near 1.4340, but has since found support.

The buck once again failed to sustain a move to the upside versus the sterling, slipping to 1.6500. The pair has been stick in a stubborn range near that mark for most of the past two months.

Against the red-hot loonie, the dollar slipped back to C$1.0820, edging closer to a 10-month low of C$1.0749, set earlier this week.

The report showed that jobless claims rose to 584,000 from the previous week's revised figure of 559,000. Economists had expected jobless claims to rise to 575,000 from the 554,000 originally reported for the previous week.

Elsewhere, Japanese manufacturers saw industrial production gain 2.4% in June after a 5.7% May advance.

Eurozone economic sentiment improved for the fourth consecutive month in July pointing towards a possibility of positive growth in the economy during the second half of 2009, a monthly survey published by the European Commission showed Thursday.

Canadian industrial product and raw materials prices rose more than forecast in June, according to data released Thursday by Statistics Canada.

In June, the Industrial Product Index (IPPI) rose 0.7% compared with May, while the Raw Materials Price Index (RMPI) increased 6.2%. Both gains were due to a strong increase in petroleum prices.

(Market News Provided by RTTNews)

Euro Stabilizes Versus Dollar, Gains On Yen As Stocks Improve

The euro found its footing against its lower-yielding currencies on Thursday in New York as global stocks improved, adding to risk appetite. Meanwhile, the common currency fell against the pound.

On the economic front, German unemployment unexpectedly fell in July, the first decline since October, thanks to government measures.

On an upbeat note, Eurozone economic sentiment improved for the fourth consecutive month in July pointing towards a possibility of positive growth in the economy during the second half of 2009.

The euro stabilized against the dollar after reaching a 2 1/2-week low on Wednesday. The pair moved at 1.4070 in early afternoon trading, compared to yesterday's low crossing of 1.4006.

In the U.S., initial jobless claims saw a increase in the week ended July 18th, with the increase coming roughly in line with economist estimates. The report showed that jobless claims rose to 554,000 from the previous week's revised figure of 524,000.

The euro touched a two-month low of 0.8502 against the British pound, extending a downward move that began yesterday morning. The pair had been range-bound for about a week before the slide.

House prices in the UK rose 1.3% month-on-month in July after climbing a revised 1% in June, data released by the Nationwide building society showed Thursday.

The euro climbed to a 3 1/2-week high against the Japanese yen, reaching 95.875. The rise took the European currency above a near-term resistance level.

In economic news, the seasonally adjusted number of unemployed Germans dropped 6,000 in July, data released by the Federal Labor Agency showed Thursday. Economists had forecast the number to rise 43,000. The jobless rate stood at 8.3%, unchanged from June, while it was expected to rise to 8.4%.

The consumer sentiment index stood at 76 in July, up from a revised reading of 73.2 logged in the prior month,a monthly survey published by the European Commission showed. Economists expected the indicator to climb to 75. However, the level is still far below the long-term average.

(Market News Provided by RTTNews)

BoE To Start Buying Asset-backed Commercial Paper

The Bank of England on Thursday said that it is planning to buy asset-backed commercial paper to help improve the function of the private market.

Through its Secured Commercial Paper Facility, the bank will purchase commercial paper securities directly from firms and also from other investors during a defined period each business day.

The BoE said it will purchase, at a minimum spread over risk-free rates, newly issued securities in the primary market via dealers and, after issuance, from other eligible counterparties in the secondary market.

The new measure is part of the central bank's Asset Purchase Programmme that allows the bank to buy bonds up to GBP 150 billion to support the economy. But, the BoE implemented only GBP 125 billion plan so far. A majority of the bonds the central bank bought was government bonds or gilts.

The facility will be available from August 3, although transactions will not take place until this programme is approved as eligible, the central bank said.

The bank said it intends to operate the facility for as long as the highly abnormal conditions in corporate credit markets persist. Moreover, the BoE said it will give a notice period of twelve months if it decides to withdraw the scheme, but there will not be any such notice during an initial period of three months after the facility's launch date. Purchases under the facility may be financed by advances to the bank from the Debt Management Office or, with authorization by the Monetary Policy Committee, by the issuance of central bank reserves.

The Bank of England on Thursday said that it is planning to buy asset-backed commercial paper to help improve the function of the private market. (Market News Provided by RTTNews)

Unexpected Fall In German Unemployment

German unemployment unexpectedly fell in July, the first decline since October 2008, thanks to government measures.

The seasonally adjusted number of unemployed dropped 6,000 in July, data released by the Federal Labor Agency showed Thursday. Economists had forecast the number to rise 43,000. The jobless rate stood at 8.3%, unchanged from June, while it was expected to rise to 8.4%.

At the same time, the labor agency revised June's jobless increase to 27,000 from 31,000 reported initially.

In May, the labor office made some changes in the method of calculating unemployment figures. The new rule instructs the labor agency to exclude people attending training in a company as unemployed. Without this change, the number would have risen by 30,000 in July, the agency said.

Commerzbank analyst Eckart Tuchtfeld said the decline was surprising. He warned that companies, which have maintained production capacities through large-scale use of short-term work, will shortly establish that capacities are too high for the lower demand and may react with dismissals.

German unemployment was on the rise since November 2008 and in March 2009, it grew the most, by 66,000. The government expects unemployment to increase to 3.7 million this year and to 4.6 million in 2010.

Short-term work is helping the country to address the situation to some degree. But, most economists expect a sudden sharp rise in joblessness once firms pull out of this programme

On an unadjusted basis, unemployment increased 52,000, taking the total to 3.4 million and the jobless rate rose to 8.2% from June's 8.1%.

Earlier in the day, Germany's Federal Statistical Office announced that the ILO jobless rate stood at 7.7% in June, unchanged from the previous month. The number of unemployed amounted to a seasonally adjusted 3.35 million in June, compared to 3.32 million in May.

As a result of Chancellor Angela Merkel's spending plan, consumer confidence and business climate in the economy showed improvements in recent months. Merkel is seeking a second-term in office in September elections.

German unemployment unexpectedly fell in July, the first decline since October 2008, thanks to government measures. (Market News Provided by RTTNews)

Thursday, July 30, 2009 0

Dollar Rally Fizzles As Stocks Look To Rebound Thursday

The dollar leveled off versus other majors Thursday morning after a strong performance in the previous session as US stocks appeared poised to snap back, fueling renewed risk appetite.

While weakening versus sterling, the dollar was able to hold onto most of its big gains versus the euro and sat practically still against the yen.

Traders will be eying the customary weekly jobless claims report for the week ended July 25th, which is due at 8:30 AM ET.

First-time claims for unemployment benefits showed a moderate increase in the week ended July 18th, with the increase coming roughly in line with economist estimates. The report showed that jobless claims rose to 554,000 from the previous week's revised figure of 524,000.

The dollar eased to 1.4066 versus the euro, moving slightly from yesterday's 2-week high of 1.4006. Earlier in the week, the dollar came within a whisker of setting a new 2009 low, slipping near June's low mark of 1.4338.

Eurozone economic sentiment improved for the fourth consecutive month in July, a monthly survey from the European Commission showed Thursday. The index stood at 76, up from a revised reading of 73.2 recorded in the prior month. Economists were expecting the indicator to climb to 75.

Versus the sterling the dollar continued its run of choppy trading, slipping to 1.6500 from a weekly high of 1.6337. On a longer term basis, the dollar is little changed over the past two months.

House prices in the U.K. rose for the third straight month in July, with the pace exceeding economists' expectations, suggesting that prices would be much better by the end of this year compared with the beginning.

House prices rose 1.3% month-on-month in July after climbing a revised 1% in June, data released by the Nationwide building society showed Thursday.

The buck held its ground versus the yen, moving near 95 in quiet dealing. The pair seems to have found a solid range since the dollar improved from a 5-month low of 91.87 set earlier this month.

The dollar was slightly weaker versus the loonie Thursday morning, easing a cent to C$1.0840. In the process, the dollar moved back toward a 10-month low of C$1.0749, set earlier this week.

Canadian industrial product price data is due at 8:30 a.m. ET. Analysts predict prices fell 1.1% in the month of June, compared to a 0.1% jump in May. At the same time, raw materials price index rose 3% in June, compared to 2.2% in May.

(Market News Provided by RTTNews)

Jobless Claims Increase But 4-Week Moving Average Falls To 6-Month Low

Peter Boockvar, equity strategist at Miller Tabak noted, "This should be the first clean number in weeks where its not influenced by the seasonal distortions that was brought by the differing time schedules of auto plant shutdowns."

Without the seasonal issues in the auto sector skewing the data artificially lower, there was some concern that jobless claims could have spiked last week.

"The insured unemployment rate was unchanged at 4.7% and there is a sigh of relief in the market that it didn't spike higher now that the claims data is not artificially suppressed due to seasonal distortions," Boockvar said.

The Labor Department noted that the less volatile four-week moving average fell to 559,000 from the previous week's revised average of 567,250.

With the decrease, the moving average fell for the fifth straight week, dropping to its lowest level since coming in at 547,00 in the week ended January 24th.

Additionally, the report showed that continuing claims in the week ended July 18th fell to 6.197 million from the preceding week's revised level of 6.251 million.

Next Friday, the Labor Department will release its closely watched monthly employment report for the month of July. The report is expected to show a slowdown in the pace of job losses compared to the previous month.

Economists expect the report to show that non-farm payroll employment fell by 333,000 jobs in July following a decrease of 467,000 jobs in June. At the same time, the unemployment rate is expected to edge up to a twenty-six year high of 9.6 percent from 9.5 percent.

Yesterday, the Federal Reserve's Beige Book report said that all twelve Fed districts indicated that the labor markets remain slack, with most sectors either reducing jobs or holding steady.

However, the report showed that the Boston, Cleveland, Richmond, Atlanta, Chicago, St. Louis, and Minneapolis districts saw selective hiring, including attempts by some firms to take advantage of layoffs elsewhere to pick up experienced talent.

While the Labor Department released a report on Thursday showing that first-time claims for unemployment benefits in the week ended July 25th came in above the average analyst estimate, there were some concerns that jobless claims could have come in substantially higher. The report showed that jobless claims rose to 584,000 from the previous week's revised figure of 559,000. Economists had expected jobless claims to rise to 575,000 from the 554,000 originally reported for the previous week. (Market News Provided by RTTNews)

Eurozone Economic Confidence Continues To Recover

The index stood at 76 in July, up from a revised reading of 73.2 logged in the prior month. Economists expected the indicator to climb to 75. However, the level is still far below the long-term average.

Improvement in the economic sentiment came from a general increase in morale in all sectors, except construction. Recovery of the industrial confidence indicator continued, backed by a further improvement in production expectations and normalization in the level of stocks. Industrial confidence improved two points to minus 30 in July. The reading came in line with economists' expectations.

Consumer confidence as well as services confidence also climbed two points each to minus 23 and minus 18, respectively. Both consumer and services sentiments stood above the expected level. Expected reading for consumer sentiment was minus 24 and that for services confidence was minus 19. Confidence amongst retailers moved up by four points to minus 13. At the same time, the gauge for construction remained at the June level of minus 33.

Economic confidence in EU also improved for the fourth month in a row. The index now stands at 75 compared to 71.1 in June. The majority of the member states registered an improvement. Among the largest member states, the UK, Spain, Italy and Germany recorded significant increases in sentiment, while the rise was marginal in France, the Netherlands and Poland.

Separately, the business confidence survey showed that business sentiment for the euro area increased to minus 2.71 in July from a revised minus 2.92. But, the level is still very low, even when compared to the previous historical lows of 1993. This indicates that annual growth in industrial output would have been negative in June and would remain subdued in July.

Among the sub indices of the business climate indicator, both order books and export order books revealed signs of improvement, while managers' production expectations and their perception of the production trend observed in recent months picked up for the fourth consecutive month. Their opinion regarding stocks of finished goods also improved in July.

Commenting on the data, Simon Junker analyst at Commerzbank said euro area should show positive growth rates in the second half of the year, which would possibly be weaker than suggested by the increase in sentiment. Economic sentiment is expected to rise in the months ahead and further signal positive growth rates in the region. Although with the chance of marked sequential growth rates in the short term having increased lately, economic growth is likely to remain muted well into next year.

Further, the European Central Bank would possibly hold its key interest rate at its current low level for a prolonged period.

India's Inflation Negative For Seventh Straight Week

India's inflation rate continued to be negative since last month, with the rate for the week ended July 18 standing at 1.54%, compared to the previous week's negative figure of 1.17%.

The annual rate of inflation was 12.54% for the corresponding week of the preceding year, say data released Thursday by the Ministry of Commerce and Industry.

Going by the provisional figures, the wholesale price index or WPI for all-commodities rose by 0.04% to 236.8 from 236.7 for the preceding week.

Inflation, based on the wholesale price index dropped, though food items like grams, fruits and vegetables became expensive.

The final estimate of inflation for the week ended May 23 was enhanced to 1.34% from the earlier provisional figure of 0.48%.

The increase in the prices of vermiculite, manganese ore, logs and timber, mutton, arhar, grams, fruits and vegetables, masur as also urad, kept the rate of the main index for primary articles to grow by 0.3% from the previous week's level. However, those of iron ore, felspar, condiments and spices, as also sunflower, declined.

The index representing fuel, power, light and lubricants declined by 0.1% due to the lower prices of aviation turbine fuel.

The index of Manufactured Products fell by 0.1%, due to lower prices of oilcakes, hessian and sacking bags, cottonseed, steel ingots, as also lead ingots, while those of imported edible oil, rice bran oil, sugar, butter, ghee, gur, all varieties of soft drinks, all types of acid, foundry pig iron, as also basic pig iron, moved up.

Reserve Bank of India (RBI) Governor D. Subba Rao, while reviewing the monetary policy for the first-quarter of this fiscal, projected the inflation rate of around 5% for this fiscal, higher than the earlier estimate of 4% made in the Annual Policy Statement of April 2009. He added that the comfortable levels of foodgrain stocks should help minimize the risks in the event of price pressures from the supply side. RBI would also monitor the level of liquidity so as to contain inflationary expectations, if supply side price pressures rose.

The country's annual rate of inflation turned negative last month due to the statistical base effect and not because of any contraction in demand. However, the sharp decline in WPI inflation was not commensurately matched by a similar decline in inflation expectations. Within WPI, the inflation of primary articles, particularly food articles, remained significantly positive. Moreover, consumer price indices (CPIs) remained high and even hardened in recent months. Global commodity prices rebounded ahead of global recovery and the uncertain monsoon outlook could further accentuate food price inflation, he said.

The RBI Governor also projected GDP for this fiscal at 6%, and possibly more. His higher growth projection thus marks a slight improvement over the growth expectation of around 6% indicated in the Annual Policy Statement. The overall macroeconomic scenario continued to be uncertain, although it was expected that the fiscal and monetary stimuli measures will supplement domestic demand in 2009-10. On balance, an uptrend in the growth momentum was unlikely before the middle of 2009-10, he added.

Mridul Sagar, chief economist at Kotak Securities, said the fall in inflation was slightly higher than expected. But he was expecting the inflation to come back strongly in the second half of the year.

(Market News Provided by RTTNews)

Pound Soars To 1-month High Against Swiss Franc Amid Strong U.K. House Price Report

During early European deals on Thursday, the British pound rose to a 1-month high against the Swiss franc as U.K. house prices enjoyed their strongest run of gains over the past three months, lifting hopes that the market may have found a bottom. The pound also jumped to a 4-week high against the European currency and a 2-day high versus the US dollar and the Japanese yen. House prices in the U.K. rose 1.3% month-on-month in July after rising a revised 1% in the previous month, the latest report from the Nationwide Building Society showed today. Economists had forecast an increase of just 0.2%. House prices increased for the third straight month in July.

Compared to the previous year, prices fell 6.2% in July, slower than a 9.3% fall in June. But, economists had forecast a decline of 7.6%.

"House prices have been remarkably resilient so far this year, despite a recessionary economic background with sharply rising unemployment," said Martin Gahbauer, chief economist at the Nationwide.

Gahbauer noted that even if prices were to remain unchanged for the rest of 2009, the year-on-year rate would continue to improve since prices were falling very sharply in the second half of last year.

The report adds to signs that the U.K. housing market may be starting to recover as the economy emerges from the worst recession in at least three decades. The Bank of England will decide next week whether to continue its program of buying bonds with newly created money.

Indicating that activity in the British housing market is likely to increase in the coming months, the number of mortgage approvals for house purchase rose to their highest level in more than a year in June, data released by the Bank of England showed yesterday.

The number of loans approved for house purchase totaled 47,584 in June, the highest since April 2008, larger than May's 44,169 and 47,000 expected by economists. Meanwhile, the number of loans approved for other purposes stood at 29,509, which was also higher than in May.

To kick-start activities in the housing sector, U.K.'s Housing Minister John Healey announced on Monday GBP 925 million funding for 270 stalled development projects across the country.

The British currency was also boosted by a rise in U.K. stock prices. Britain's top share index gained 0.5 percent in early deals on Thursday fueled by strength in miners and energy issues after results from Royal Dutch Shell, with investors digesting a slew of blue chip numbers.

By 4:54 am ET, the FTSE 100 .FTSE was 29.01 points firmer at 4,576.54 having closed 18.69 points or 0.4 percent higher on Wednesday, resuming its advance after snapping a two-week winning streak on Tuesday.

The index has gained over 31 percent since hitting a six-year low in March, but is still down 2.6 percent this year.

Against the European currency, the British pound edged higher to 0.8521 during early deals on Thursday. This set the highest point for the pound since July 3, 2009. The next upside target level for the British currency is seen around 0.848. The euro-pound pair closed Wednesday's North American session at 0.8580.

The British pound that touched a 5-day low of 0.8687 against the European currency on July 27 strengthened thereafter and has gained around 2% thus far.

In economic news from Europe, Germany's Federal Statistical Office announced that the ILO jobless rate stood at 7.7% in June, marking the same pace as in the previous month. A year earlier, the jobless rate was 7.3%.

The British currency climbed to a 2-day high of 1.6516 against the US dollar during today's early deals. The pound-dollar pair is currently trading at 1.6475 with 1.660 seen as the next target level. The pair closed yesterday's deals at 1.6382.

The pound has appreciated around 3% after hitting a 1-month low of 1.5986 against the dollar on July 8.

Against the Swiss franc, the sterling advanced to a 1-month high of 1.7959 during Thursday's early deals. On the upside, 1.804 is seen as the next target level for the British currency. The pound-franc pair closed Wednesday's New York deals at 1.7812.

The pound-franc pair that traded near a 5-week low of 1.7398 on July 13 has gained around 2.9% since then.

U.K.'s sterling traded higher against the Japanese yen during early deals on Thursday At 5:00 am ET, the pound-yen pair rose to a 2-day high of 156.94, compared to 155.62 hit late New York Wednesday. If the pair gains further, 157.6 is seen as the next target level.

Data released by the Ministry of Economy, Trade and Industry showed that Japan's industrial output rose a seasonally adjusted 2.4% month-on-month in June, after rising a revised 5.7% in the preceding month. Most economists expected a 2.5% rise in production.

Year-on-year, industrial output slipped an unadjusted 23.4%, slower than the 29.5% drop in May and also slower than the 23.6% fall expected by economists.

From the U.S., the weekly jobless claims report for the week ended July 25th has been scheduled for release in the upcoming North American session.

(Market News Provided by RTTNews)

New Zealand Interest Rates On Hold

New Zealand's official interest rate will remain unchanged at 2.50 percent.

The Reserve Bank of NZ announced Thursday that the Official Cash Rate (OCR) would hold steady at its record low level for a second straight month.

The move was widely anticipated by economic experts.

In a statement accompanying the rate decision, RBNZ Governor Alan Bollard said that despite signs of a leveling off in economic activity, the economy remains weak.

"We continue to expect to see a patchy recovery get underway toward the end of the year, but it will be some time before growth returns to healthy levels," Bollard said.

The Bank also hinted that interest rates could go even lower, if policy makers felt the economy needed further stimulus.

"We consider it appropriate to continue to provide substantial monetary policy stimulus to the economy," the statement said. "The OCR could still move modestly lower over the coming quarters. We continue to expect to keep the OCR at or below the current level through until the latter part of 2010."

Bollard said that inflation was currently well within its target bands and this was not expected to change in the medium term.

The RBNZ has slashed the OCR by 5.75 percent since July of 2008.

Recent government data shows New Zealand's unemployment rate at a five-year high of 5.0 percent for the first three months of 2009. In June, the RBNZ predicted the jobless rate could rise as high as 7.2 percent by the middle of 2010.

New Zealand's economy has been in contraction since Q1 of 2008, with last month's statement forecasting the recession to continue at least through the current quarter.

(Market News Provided by RTTNews)

Chinese Central Bank To Stick To Moderately Loose Monetary Policy

The Chinese central bank said it will maintain a moderately loose monetary policy. In a report released on Wednesday, by the People's Bank of China pledged to adopt market tools to guide the appropriate growth in credit growth.

The central bank released the statement late Wednesday after the Chinese stock market recorded its largest one day decline in nearly eight months on concerns that government may require banks to limit lending.

Deputy Governor of the central bank, Su Ning said the PBoC will unswervingly continue to implement appropriately loose monetary policy and consolidate the momentum of economic recovery. He added, "We should focus on market oriented tools rather than quantitative style measures, flexibly using various monetary policy tools to promote appropriate monetary and credit growth."

The central bank added that a proactive fiscal policy and moderately loose monetary policy are required to sustain growth.

In June, renminbi loans surged CNY 1.53 trillion, an acceleration of CNY 1.2 trillion from the previous year. At end-June, outstanding renminbi loans increased 34.44% annually to CNY 37.74 trillion.

Earlier in July, Assistant Governor, Li Dongrong said domestic and international economic and financial conditions are posing new challenges. Li added that the central bank will continue to improve financial support for the economy.

According to PBoC, Chinese inflation could bottom out at the end of the third quarter before rebounding. Chinese regulators warned that fresh asset bubbles are forming in the economy and ordered banks to ensure unprecedented volumes of new loans are channeled into the real economy and not diverted into equity or real estate markets, reports said on July 28.

In response to recent decreases in global crude prices, Chinese government reduced gasoline and diesel prices by 220 yuan per tonne from July 29. This follows two big increases in June, which took prices to a record high. After the cut, retail prices of gasoline will drop by about 0.16 yuan per liter. Diesel prices would be lower by about 0.19 yuan per liter.

After concluding its Article IV consultation with the People's Republic of China, the Executive Board of the International Monetary Fund said rapid and vigorous policy response helped the country to mitigate the economic downturn and facilitate an economic recovery during the course of this year and into 2010. However, IMF officials urged China to take more reforms as demand continued to remain sluggish.

The Chinese central bank said it will maintain a moderately loose monetary policy. (Market News Provided by RTTNews)

U.K. House Prices Rise For Third Month In July Suggesting Further Increases

House prices rose 1.3% month-on-month in July after climbing a revised 1% in June, data released by the Nationwide building society showed Thursday. Economists had forecast an increase of just 0.2%. Compared to the previous year, prices were down 6.2% after a 9.3% decline in June. Prices have been falling since April 2008 on an annual basis.

"House prices have been remarkably resilient so far this year, despite a recessionary economic background with sharply rising unemployment," said Martin Gahbauer, chief economist at the Nationwide.

The three-month on three-month rate of change, which is considered as a smoother indicator of the near term trend, rose to 2.6% in July from 1% in June. The current level is the highest since February 2007. Average house price in July was GBP 158,871, up from GBP 156,442 in June.

A cumulative increase of 1.3% in the first seven months of 2009 suggests that there is now a reasonable chance that prices could end the year slightly higher than where they started, the Nationwide said. "Only a few months ago, such an outcome would have appeared unthinkable," it said.

The Nationwide chief economist noted that there was a fairly large pool of prospective purchasers who were ready and able to buy in the course of 2008, but the credit crisis and economic uncertainty refrained them from house purchase.

According to him, some of these purchasers have re-entered the market when government interventions stabilized the banking system, with the added assistance of very low interest rates.

But, he warned that if prices continue to increase at the rate seen in May, June and July, they would soon rise to levels that would be noticeably out of line with earnings, rents and other fundamental determinants of housing valuations.

Given the expected rise in unemployment, it is unlikely that price increases can be sustained for long at the very strong rate observed over the last few months.

In the short run, the supply of homes on the market is mainly determined by factors such as potential sellers' confidence in market conditions, labor market turnover or financial pressures to sell among existing homeowners, Gahbauer said. Shortage of properties available for sale would be one of the factors helping prices to stabilize in 2009, he added.

To kick-start activities in the housing sector, the Housing Ministry on Monday announced a GBP 925 million scheme to fund 270 stalled projects across the country.

Japanese Industrial Output Continues To Rise In June

Industrial production in Japan grew for the fourth consecutive month in June, although at a much slower pace compared to May, an official report showed Thursday.

Data released by the Ministry of Economy, Trade and Industry showed that industrial output rose a seasonally adjusted 2.4% month-on-month in June, after rising a revised 5.7% in the preceding month. Most economists expected a 2.5% rise in production.

Manufacturing output, with the maximum weight in the index, grew 2.5% in June, after a 5.5% rise in the preceding month. Mining output was up 0.4%, following a 3.5% drop in the preceding month.

The industries that contributed to the increase in industrial output were electronic parts and devices, steel and iron, as also chemicals, excluding drugs.

Shipments increased 3.5% in June, slower than the revised 4.8% rise in May, while inventories dropped 1% after a revised 0.7% fall in the previous month. The inventories ratio decreased 9.8%, the first in two months.

Year-on-year, industrial output slipped an unadjusted 23.4%, slower than the 29.5% drop in May and also slower than the 23.6% fall expected by economists.

The ministry said that based on the survey of production forecast for manufacturing, output is expected to increase 1.6% in July and 3.3% in August.

Meanwhile, in a report released on July 29, Japan's Ministry of Finance upgraded its economic assessment for the regional economy. This is the first time the ministry has raised its view since April 2004.

In June, both the Bank of Japan and the Cabinet Office raised their economic forecast for the second consecutive month. The central bank said conditions have begun to stop worsening after deteriorating significantly. Meanwhile, the Cabinet Office said the economy had bottomed out as exports and factory output recovered from sharp declines.

Industrial production in Japan grew for the fourth consecutive month in June, although at a much slower pace compared to May, an official report showed Thursday. (Market News Provided by RTTNews)

New Zealand Dollar Plunges As Central Bank Signals Rate Cut

Thursday in Asia, the New Zealand dollar plummeted against its major counterparts after the Reserve Bank of New Zealand kept its benchmark interest rate unchanged for a second month and said it may cut borrowing costs further.

Amid the announcement, the kiwi tumbled to a fresh 3-week low against the aussie, 10-day low against the greenback and a 2-day low against the euro.

As widely expected, the Reserve Bank of New Zealand held its interest rate steady at a record low of 2.5% for a second straight month.

In a statement accompanying the rate decision, RBNZ Governor Alan Bollard said that despite signs of a leveling off in economic activity, the economy remains weak.

"We expect to see a patchy recovery get underway toward the end of the year, but it will be some time before growth returns to healthy levels," Bollard said.

The Bank also hinted that interest rates could go even lower, if policymakers felt the economy needed further stimulus.

The RBNZ slashed borrowing costs by 5.75 percentage points between July 2008 and April 2009 to buoy an economy that began contracting in the first quarter of last year.

New Zealand's policy rate compared with 0.1 percent in Japan and as low as zero in the U.S.

Wholesale interest rates and the currency are higher than the central bank assumed, which "is not helping the sustainability of future growth and brings with it additional risks," Bollard said.

Finance Minister Bill English said this month the currency was "higher than fundamentals warrant" and may hamper his desire for the nation's recovery to be based around exports and investment rather than consumption led by borrowing.

The Reserve Bank's ongoing focus on the currency made it clear that Dr. Bollard would be particularly sensitive to any signs of faltering recovery with the NZ dollar at current levels.

In early Asian deals on Thursday, the New Zealand dollar slumped below the 0.65 level against the U.S. currency for the first time in 10-days, falling as low as 0.6481. On the downside, 0.640 is seen as the next target level for the NZ dollar. At yesterday's close, the kiwi-greenback pair was quoted at 0.6520.

Investors bought the US dollar as a safe-haven currency after the US Commerce Department said yesterday that orders for durable goods fell percent 2.5 percent in June from a downwardly revised 1.3 percent increase in May.

The kiwi-greenback pair soared to a 9 1/2 -month high of 0.6638 on July 28, up 12% this year on better risk appetite and higher oil prices.

But the kiwi pared its gains thereafter after a report showed that New Zealand's trade deficit grew faster than expected in June. Statistics New Zealand reported on Tuesday that the country logged a June trade deficit of NZ$417.0 million.

Thus far, the kiwi has lost more than 2% against the greenback from a 9 1/2 -month high.

The New Zealand dollar fell to 1.2613 against the Aussie during early Asian deals on Thursday. This set the lowest point for the kiwi since July 06. If the kiwi weakens further, it may likely target the 1.270 level.

The NZ dollar surged up to a 3-month high of 1.2353 on July 15. But the kiwi weakened on July 16 after credit rating agency, Fitch downgraded New Zealand's long-term sovereign credit rating outlook to negative from stable, citing concerns regarding the medium-term growth outlook for the country.

The rating agency affirmed New Zealand's Long-term foreign currency Issuer Default Rating at 'AA+', Long-term local currency IDR at 'AAA', Short-term foreign currency rating at 'F1+' and the Country Ceiling at 'AAA'.

The kiwi extended its slide against the aussie in the subsequent days and dropped 2% thus far. The Australian dollar was supported this week by comments from the Reserve Bank of Australia Governor Glenn Stevens, who said the nation's downturn may not be "one of the more serious" of the post-World War II era.

The New Zealand dollar that jumped to an 8 1/2 -month high of 2.1350 against the euro in late New York trading on Wednesday, lost ground in early Asian deals on Thursday. At 9:50 pm ET, the kiwi hit a 2-day low of 2.1677 against the euro. The next downside target level for the NZ dollar is seen around 2.176.

During early Asian deals on Thursday, the New Zealand dollar slipped against the yen as the latter was supported by an industrial production report.

Year-on-year, industrial output slipped an unadjusted 23.4%, slower than the 29.5% drop in May and also slower than the 23.6% fall expected by economists.

At 9:40 pm ET, the kiwi-yen pair touched 61.55, down from Wednesday's close of 61.95. The near term support for the NZ currency is seen around the 60.9 level.

Traders now look forward to the European session, in which the German July unemployment rate and the Euro-zone economic confidence reports for July are expected.

Across the Atlantic, the U.S. weekly jobless claims report for the week ended July 25th has been scheduled for release.

(Market News Provided by RTTNews)

MBA: Mortgage Applications Drop Last Week

Mortgage applications in the U.S. fell for the first time in a month, decreasing due to mortgage rates climbing for the second straight week.

The Mortgage Bankers Association released data Wednesday that showed that its seasonally adjusted index of mortgage applications--including both purchase and refinance loans--fell 6.3 percent to 495.4 in the week ending July 24. The index for the previous week was 528.9.

The Association also said that average rates for 30 year mortgages moved up 0.05 percentage points to 5.36 percent. In the previous week, the rates moved from 5.05 percent to 5.31 percent. The rates previously hit an all time low in the week ending March 27 when they fell to 4.61 percent.

It was the ninth straight week that rates remained above 5.0 percent, a factor that many experts say caused the decline in applications among potential home buyers. The interest rates, however, are still below the level of 6.46 percent it was last year at this time.

Other data released by the MBA showed that the refinance index decreased 10.9 percent from the previous week-2089.7 to 1862.1-and that the seasonally adjusted Purchase Index remained flat at 262.0.

The four week moving average for the seasonally adjusted market average was reported to be up 2.6 percent, and the four week moving average for the seasonally adjusted purchase index is down 0.5 percent.

The U.S. housing market has been showing recent signs of stabilization after being hit particularly hard in the recent financial crisis. Some experts have said, however that interest rates and inflation might rise, which would be beneficial to the housing market.

Mortgage applications in the U.S. fell for the first time in a month, decreasing due to mortgage rates climbing for the second straight week. (Market News Provided by RTTNews)

Crude Oil Plunges After Inventory Report

Crude oil dropped sharply on Wednesday after Energy Information Administration data revealed a sharp rise in weekly inventories. Oil closed at a 12-day low after reaching a three-week high earlier in the week.

Light sweet crude for September delivery dropped to $62.85 per barrel, down $4.38 on the session. Prices dipped as low as $62.70 earlier in the session after coming within a penny of $69 on Tuesday.

U.S. commercial crude oil inventories increased by 5.1 million barrels during the week ended July 24. Experts were looking for a build of about 1.1 million barrels. At 347.8 million barrels,

Total motor gasoline inventories decreased by 2.3 million barrels last week. Economists were looking for a drop of about 1.1 million barrels. Distillate fuel inventories increased by 2.1 million barrels. Experts were forecasting an increase of about 1 million barrels.

The dollar saw strength versus the rival euro on Wednesday, further reducing oil's value as a hedge investment. The greenback climbed to a 10-day high against the European currency and challenged the 1.4000 mark after testing an eight-month low near 1.4300 earlier in the week.

(Market News Provided by RTTNews)

Durable Goods Orders Fall Amid Steep Drop In Transportation Equipment Orders

A steep drop in orders for transportation equipment contributed to the bigger than expected decline, with transportation equipment orders falling by 12.8 percent in June following a 2.7 percent increase in the previous month.

The pullback by transportation equipment orders reflected a 38.5 percent decrease in orders for non-defense aircraft and parts as well as 1.0 percent drop in orders for motor vehicles and parts, which more than offset a 30.1 percent increase in orders for defense aircraft and parts.

Excluding the drop in orders for transportation equipment, orders for durable goods actually rose 1.1 percent in June compared to a 0.8 percent increase in May. The increase surprised economists, who had expected ex-transportation orders to come in unchanged.

The growth in ex-transportation orders came was partly due to notable increases in orders for primary metals and machinery, which rose by 8.9 percent and 4.4 percent, respectively.

Meanwhile, the Commerce Department said that shipments of durable goods edged down 0.2 percent in June following a revised 2.6 percent decrease in May.

With the continued decrease, shipments of durable goods fell for the eleventh consecutive month, marking the longest streak of consecutive monthly decreases since the series was first published on a NAICS basis in 1992.

Inventories of durable goods fell for the sixth consecutive month, falling by 0.9 percent in June following a 1.1 percent decrease in May.

Meanwhile, the report showed that orders for non-defense capital goods, excluding aircraft, which is seen as an indicator of business spending, rose 1.4 percent in June after jumping 4.3 percent in the previous month.

Next Wednesday, the Commerce Department is due to release its report on factory orders in the month of June, which includes orders for both durable and non-durable goods.

With orders for transportation equipment showing a substantial decline, the Commerce Department released a report on Wednesday showing that orders for manufactured durable goods fell by much more than expected in the month of June. The report showed that durable goods orders fell by 2.5 percent in June following a downwardly revised 1.3 percent increase in May. Economists had expected orders to fall by 0.6 percent compared to the 1.8 percent increase originally reported for the previous month. (Market News Provided by RTTNews)

Fed's Beige Book Indicates Stabilization In Economic Activity

The Beige Book report released Wednesday is a compilation of anecdotal evidence on economic conditions from each of the twelve Federal Reserve districts. The report is typically released about two weeks before the Fed's monetary policy meeting is held.

Economic activity was described as "slow," "subdued," or "weak" by five of the districts, while the Chicago and St. Louis districts reported that the pace of decline appeared to be moderating.

While the reports from the New York, Cleveland, Kansas City, and San Francisco districts also pointed to signs of stabilization, the Minneapolis district said the economy had contracted since the last report.

The Fed said that most districts reported sluggish retail activity, with consumer spending in the early summer below year-ago levels. With households continuing to be price conscious, several districts noted that consumers focused on purchasing less expensive necessities.

Auto sales were mixed across the country, although the Philadelphia, Cleveland, Atlanta, Kansas City, and San Francisco districts said that sales of used vehicles continued to be strong or were strengthening.

While the reports on the manufacturing sector remained subdued, the Fed said that they were slightly more positive than in the previous Beige Book report.

The Fed said, "Many Districts characterized manufacturing activity as remaining depressed but with selected signs of modest improvement."

Similarly, the district reports regarding non-financial services industries were largely negative, although they included a few bright spots.

With regard to employment, the Fed said that all twelve districts indicated that the labor markets remain slack, with most sectors either reducing jobs or holding them steady.

The Fed added that districts reported generally modest price changes across sectors and products, with competitive pressures holding prices down.

While the Federal Reserve's Beige Book report said that economic activity continued to be weak going into the summer, it noted that most of the twelve Fed districts indicated that the pace of decline has moderated or that activity has begun to stabilize. The Beige Book report released Wednesday is a compilation of anecdotal evidence on economic conditions from each of the twelve Federal Reserve districts. The report is typically released about two weeks before the Fed's monetary policy meeting. (Market News Provided by RTTNews)

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