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OECD savages 4th Q German GDP forecasts - now forecasting a DECLINE of -1.4%
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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