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Kiron Sarkar
September 20, 2011
Hi there,
The IMF has reduced 2011 Australian GDP forecast to just +1.8%, from +3.0% previously. Wow;
Japanese exports rose by less than expected in August - they rose by +2.8% MoM, much lower than the +8.0% expected. However, the Yen continues to strengthen. Intervention by the Japanese authorities soon? - certainly my view. The August trade deficit was Yen775.3bn, as compared with a Yen218bn forecast;
The IMF has reduced Chinese GDP growth modestly - to +9.5% this year, from the previous +9.6% and to +9.0%, from +9.5% previously. I must say, a number of us would not mind being cut to these levels. The IMF has suggested that China should raise domestic consumption - however, domestic consumption has declined to approx 35% of GDP, from 45% of GDP over the last 10 years;;
The Conference Board (a forecast for conditions some 6 months ahead) reported that its leading indicator for China rose by +0.6% in July. Chinese markets responded positively (up 2.5%+), though the Chinese markets are still down over 10% YTD;
India is to resume rice exports - should help reduce EM inflation, particularly given the importance of rice and food's weighting in inflation indicies;
Scares of problems between Greece and the Troika in respect of the next tranche of the bail out funds seem overblown. The Troika is to head for Athens on Monday, rather than in October as was rumoured late yesterday. EU officials advise that talks are progressing "well";
The Italian authorities are seeking to introduce measures to stimulate their economy. Major structural reforms will be needed - not easy given the vested interests. The IMF has reduced Italian GDP forecasts to +0.6% this year (+1.0% previously) and 0.3% for 2012 (+1.3% previously). However, the IMF did project that the Italian budget deficit would decline to 4.0% of GDP this year and 2.4% next and declining further to just 1.1% in 2013. The debt to GDP is forecast to rise to 121.1% this year, 121.4 next, before declining to 118.4% in 2013
The Italian Government GDP forecasts are +1.1% this year and +1.3% next - oh yeah;
Market speculation around that the SNB will re peg at E1.25 rather than the E1.20. Who knows, but seems unlikely to me. Having said that, I was surprised by their move last time around. Shorting the Yen seems to be a better trade in my humble opinion;
Summary
Asian markets are up today (India is flat). Euro is flat. Gold is up a bit - currently spot is trading around US$1810. Brent (Oct) is US$110.60. European futures indicate a lower open, though I would expect a better outcome. Safe Government bond yields are flat. Everyone on FED watch.
Last nights late US sell off was really due to speculation that talks between the Troika and Greece were problematic - denied. As you know, I believe that Greece will get the next tranche of aid, after that, well, only if Greece really delivers, which seems unlikely.
Best
Kiron
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