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Kiron Sarkar
September 08, 2011
Hi there,
Greek provisional unadjusted Q2 GDP came in at -7.3% YoY, worse than
the -6.9% preliminary estimate;
The Italians, shocked by the recent widening of bond yields, are to
introduce the principle of a balanced budget amendment in their
constitution, according to the Ministry of economy. The "principle" -
not sure what that means in reality. The Spanish have agreed to
introduce a similar principle and the French are proposing it, as well
;
The OECD has reduced 3rd Q German GDP to +2.6% and to DECLINE to -1.4%
in the 4th Q (previously +3.0%). The German Economics Minister
predicted 2011 German GDP growth at +2.6% - the Finance Minister
believes it will be even higher - at +3.0%;
The ECB kept rates on hold as Trichet stated that risks to economic
growth are on the downside. They cut Euro Zone GDP forecasts for both
2011/12. Inflation risks are "broadly balanced" apparently, from his
view last time that inflation risks were on the upside - he added that
the ECB was monitoring inflation "very closely", suggesting no cut in
interest rates next month. Clearly a number of us believe he should
have cut rates. The ECB still believe that their monetary policy is
accomodative, but accepted that financing conditions had tightened
!!!!!. He reminded Greece to meet its commitments.
Basically, the same old rubbish from the ECB. They do not want to
admit that they were wrong in raising interest rates previously, so
Europe will have to wait for a few months before rates are reduced,
unless there is some coordinated action by the G7 meeting of Finance
ministers and central bakers over the weekend. The less hawkish
Trichet has resulted in a weaker Euro;
The OECD has cut US 3rd Q to just +1.1% and just +0.4% in the 4th;
The BoE has left interest rates and the size of the QE programme
unchanged - as expected. Sterling appreciated, as no additional QE was
announced - wait for next month;
Charles Evans, a FED member, suggests that the FED should consider
adding "very significant amounts of policy accommodation". In
addition, he suggested that a 2.0% inflation rate was too tight.
According to Mr Evans interest rates should be kept low until
unemployment reduces to 7.5%.
US weekly jobless claims rose by 2k to 414k in the week ended 3rd
Sept, higher than forecasts of 405k. The less volatile 4 week moving
average rose to 414.75k, from 411 previously.
The US trade gap narrowed by 13.1% in July, the most since February
2009, to US$44.8bn, from a revised US$51.6bn in June. Exports rose by
+3.6%, whilst imports declined by -0.2%. Crude Oil imports declined.
Markets on Bernanke watch again today - he is to speak in Minnesota
today. Cant see what he can say ahead of the 2 day FED meeting later
this month;
The Brazilian Central bank hinted that they may cut rates further, in
the face of a slowing global economy, according to minutes released
today;
Summary
European markets are up around 0.5%, following the US higher. Euro is
weaker, following Trichet's less hawkish comments. Gold has recovered
to US$1854 and Brent to US$116. US and German bond yields are lower,
UK sightly higher.
Best
Kiron
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