Archive forJune, 2013

Modest improvement in UK consumer confidence for June

The GfK consumer confidence index for the UK inched up to -21 in June from -22 in May, reaching the highest level since May 2011. The reading matched economists’ expectations.

EU finance ministers agree on bank rescue rules

Today morning, the European Union (EU) finance ministers reached a draft deal about future bank bailouts and who is liable to pay for them. As per the new rules, shareholders, bondholders and depositors with more than €100,000 should share the burden of saving a bank. Bailouts by taxpayers would be allowed in exceptional cases alone. The meeting was chaired by the Minister for Finance, Michael Noonan.

Dutch economy contracts 0.4% in first quarter

The GDP in Netherlands contracted at a much faster pace of 0.4% in the first quarter of this year compared to the 0.1% decline estimated previously. GDP fell 1.8% on an annual basis compared to a 1.7% drop estimated previously. The European Commission expects the Dutch economy to contract 0.8% this year and then grow 0.9% in 2014.

China’s credit crunch lingers for second week

China’s stock markets continued to slide for the fifth day, slumping to their lowest since early 2009, after the People’s Bank of China (PBOC) stated it will not be injecting funds into the markets to address the credit crunch among Chinese banks. The spike in inter-bank borrowing costs has raised concerns that tighter financial conditions could have a broader impact on the country’s already slowing economic growth. Separately, Goldman Sachs cut its estimate for China’s economic growth this year to 7.4% from 7.8% earlier. China’s overnight interbank rates reached a record-high of 13.44% last week.

China’s central bank says liquidity ‘Reasonable’

The People’s Bank of China (PBOC) said in a report published today that there were reasonable levels of liquidity in the financial markets and urged banks to manage risks from credit expansion. The central bank said that changing dynamics in financial markets and mid-year stage led to higher liquidity management requirements for commercial banks.

France’s economy set to contract in 2013

France’s economy is estimated to contract 0.1% in 2013 as against President Francois Hollande’s previous forecast of a 0.1% expansion, the statistical office Insee said yesterday. GDP is expected to grow 0.2% in Q2 2013 after shrinking 0.2% in the previous quarter.

China’s manufacturing activity declines to nine-month low

The preliminary estimate China’s manufacturing HSBC Purchasing Manager’s Index (PMI) dropped to a nine-month low of 48.3 in June, below the final reading of 49.2 in May. New orders and new export orders contracted at a quicker pace during the month.

Japanese exports surge in May

Japanese exports surged 10.1% y-o-y in May, beating economists’ forecast of 6.5% and at the fastest pace since December 2010, the finance ministry said today. Imports grew 10% y-o-y on increased purchases of liquefied natural gas. The trade balance showed a deficit of ¥993.9bn vis-à-vis economists’ forecast of ¥1.2trln and a downwardly revised ¥881.9bn in April.

China’s home prices surge in May; FDIs see modest increase

New home prices in China rose 6% y-o-y in May, its fastest pace this year after increasing 4.9% in April, calculations based on data from the National Bureau of Statistics indicated today. On m-o-m basis, prices were up 0.9% in May, following April’s 1% gain. Separately, FDI rose 0.3% y-o-y to US$9.3bn in May from US$8.4bn in April, the Ministry of Commerce said today. FDI was up 1% y-o-y in the first five months of the year.

PBOC raises reference rate; interbank rates also increase

The People’s Bank of China (PBOC) raised its reference rate to an all-time high of 6.1598 this morning. As a result, the domestic currency gained about 0.07% against the dollar. The spot rate is allowed to diverge from the daily fixing by a maximum 1%. Separately, interbank market rates in China have started moving up on tighter liquidity conditions. The same was reflective in poor interest in the bonds auction last week

China displays first signs of a cash crunch in 23 months

China’s Finance Ministry managed to sell just ¥9.53 bn (US$1.55 bn) of treasury bills, about 35% less than the targeted sale of ¥15 bn. The poor interest in the auction for bonds depicts a cash crunch in the country. The cash shortage comes at a time when China’s economic outlook is deteriorating. Few days back, the World Bank slashed its economic growth projections for China to 7.7% in 2013 from 8.4%.

World Bank cuts global growth forecast

In its latest report, the World Bank has slashed its global growth forecast for 2013 to 2.2% from 2.4% earlier on concerns that central banks may pare monetary stimulus. Larger-than-expected deceleration of growth in emerging markets (such as China, Brazil and India) coupled with slumping investor confidence and budgetary cuts in Europe supported the decision. The World Bank has, however, raised growth forecasts for the US and Japan to 2% and 1.4% from 1.9% and 0.8%, respectively.

UK economy rises 0.6% in three months to May: NIESR

The UK economy expanded 0.6% in the three months ended May, led by production and private services sectors, the National Institute of Economic and Social Research (NIESR) said yesterday. The economy grew an upwardly revised 1% in the three months to April. NIESR expects annual growth of 0.9% in 2013 and 1.5% in 2014.

BOJ upgrades economic outlook

The Bank of Japan (BOJ) revised its outlook for the economy, citing growth is now picking up vis-à-vis last month when it was starting to pick up. The index measuring the sentiment among big Japanese firms rose to 5.9 in April-June from 1.0 in January-March. The manufacturers’ sentiment index edged up to 5 in the second quarter from -4.6 in the first. The non-manufacturing firms’ confidence index jumped to 6.4 from 4.

Japan revises Q1 GDP growth upwards

Japan revised its annualised GDP growth for Q1 2013 to 4.1% from a preliminary reading of 3.5%, the Cabinet Office said yesterday. GDP growth for Q1 was also revised upwards to 1% q-o-q versus the flash reading of 0.9%. Separately, current account surplus jumped to ¥750bn in April, up 100.8% y-o-y and well ahead of the market estimate of ¥320bn.

Investment Strategy Update 07/06/13

Bond and equity markets have become particularly twitchy in recent weeks as investors try to adjust to the prospect of reduced Quantitative Easing (‘tapering’) by the U.S. Federal Reserve Bank. The non-farm payroll number for May due to be released later today is widely expected to show a rise over April of around 163,000.

ECB’s Mario Draghi sees subdued economic recovery

ECB President Mario Draghi said the Eurozone economy would see gradual recovery later this year, with some signs of improvement already evident. However, the economic outlook faces downside risks including the possibility of weak domestic and global demand and slow or inadequate implementation of structural reforms. The ECB projects the Eurozone to contract 0.6% in 2013 vis-à-vis its estimate of 0.5% in March. In 2014, the economy is expected to grow 1.1% versus the estimate of 1% earlier. Inflation is forecasted to ease to 1.4% in 2013 from 1.6% last year and would remain unchanged at 1.3% in 2014. The ECB also said it is technically ready to cut deposit rates to below zero, but would keep this option on hold for now.

US Fed’s Beige Book displays moderate economic growth

The US economy grew at a moderate rate, with the government’s budget cuts hampering stronger recovery, the Fed revealed in its latest Beige Book. The Dallas Federal Reserve district was the only one of 12 districts to have grown robustly. Manufacturing grew in most districts since the previous Beige Book; residential real estate and construction activity rose at a modest to strong pace across the US.

IMF cuts France’s growth outlook, urges economic reforms

The IMF trimmed France’s GDP forecast to a decline of 0.2% in 2013 vis-à-vis the previous forecast of 0.1% contraction. The agency projected growth of 0.8% in 2014 compared to the earlier estimate of 0.9%. The IMF also warned weak household and business confidence as a key downside risk and urged France to lower labour costs, open up regulated professions, and end tax hikes to boost competitiveness.

Beijing caps home prices to stem rising demand

China is taking additional steps to bring down surging home prices in Beijing. The decision is a result of the 3.1% m-o-m rise in prices of new homes in Beijing during April, even after the government raised the minimum down payment on mortgages of second homes to a record 70% and banned single-person households from buying more than one residence.

China’s manufacturing activity slows in May

China’s final purchasing managers’ index (PMI) reading came in at 49.2 in May, the lowest since October 2012 and worse than the preliminary 49.6 announced on May 23. China’s factory activity shrank due to softening of domestic and external demand.