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Strategies & Market Trends : Mish's Global Economic Trend Analysis -- Ignore unavailable to you. Want to Upgrade?

To: Knighty Tin who wrote (10407)	8/9/2004 12:23:43 PM
From: Haim R. Branisteanu	Respond to of 116555

how true

To: Knighty Tin who wrote (10407)	8/9/2004 12:37:11 PM
From: mishedlo	Respond to of 116555

European govt bonds softer but still underpinned by weak US labour data Monday, August 9, 2004 4:26:45 PM LONDON (AFX) - European government bonds were modestly lower after their late surge last week amid a lack of fresh trading incentives The unexpectedly small rise in US job creation, evidenced by dismal non-farm payroll numbers on Friday drove bond prices higher on both sides of the Atlantic as markets scaled back rate hike expectations Since then prices have remain well supported and in part today's Italian second quarter GDP data helped bond prices stay at highs Italian GDP rose a preliminary 0.3 pct in the second quarter from the first quarter, compared with market expectations for a 0.4 pct increase, suggesting that the country will continue to lag behind its euro zone partners The data also strengthened market belief that the European Central Bank is still far away from delivering a rate hike Unsurprisingly, shorter dated maturities performed better In contrast, UK issues were dealt another blow from stronger than expected economic data. The morning brought more news of strength in the property sector and perhaps more worryingly a surprise pick-up in upstream inflationary pressures Analysts said the surge in the core factory gate prices in July confirms the pressure on medium-term inflation, and leaves the door open for a further rate hike, possibly as soon as September. According to official figures released this morning, producers' raw material costs rose just 0.6 pct in July from June, well below expectations, but the core measure of output prices, which excludes food, beverages, tobacco and petroleum, rose to an eight-year high The core number rose by 1.6 pct in July from a year earlier, the highest level since June 1996 and well ahead of expectations for a rise of 1.3 pct Compared with a month ago, core output prices rose 0.3 pct - the highest level since September 1995. "The rise in core inflation suggests that the Bank of England is right to be concerned about medium-term inflationary pressures," said David Page of Investec Jonathan Loynes, chief UK economist at Capital Economics described the number as a "moderately hawkish development", which could cause the market to alter its dovish interpretation of the Bank of England's accompanying statement to Thursday's interest rate hike Elsewhere, evidence that UK housing market activity remains robust also put a drag on gilt prices Figures released by the Office of the Deputy Prime Minister showed UK house prices rose by 13.9 pct in June from a year earlier, above the 12.2 pct rise seen in May fxstreet.com

To: Knighty Tin who wrote (10407)	8/9/2004 5:40:37 PM
From: mishedlo	Read Replies (2) \| Respond to of 116555

Some economists buck trend and see FOMC holding steady Monday, August 9, 2004 8:39:38 PM WASHINGTON (AFX) - Although they are still badly outnumbered, some economists are beginning to question the perceived market wisdom that the Federal Open Market Committee will raise rates Tuesday Evidence that the economy may be faltering, especially the weak July jobs report, may give central bank policymakers pause, they argue The most prominent member of the 'hold' camp is Lynn Reaser, chief economist at Bank of America Capital Management She said the poor employment data "will likely cause the Fed to keep the target fed funds rate at 1.25 percent, pending assurance that the recent pause in economic growth is only temporary." Reaser doesn't think the Fed will be on hold for long. She still expects the federal funds rate to reach 2.0 percent by the end of the year But for an FOMC that has promised to be gradual, Reaser said that now is the time for patience The majority opinion The conventional wisdom on Wall Street is that the Fed will go ahead and raise its target for overnight loans by a quarter percentage point to 1.5 percent. These analysts expect the FOMC to signal in its statement that it may be prepared to hold rates steady until after the Presidential election - skipping a rate hike at the Sept. 21 meeting This thinking is reflected in the fed funds futures contract "Despite the awkward timing, the Fed's clear confidence in the outlook and belief that policy is overly accommodative warrants a 25 basis point move in August," said Richard Berner and the economic team at Morgan Stanley Equity Research After all, Federal Reserve board chairman Alan Greenspan told Congress only three weeks ago that the economy had hit a "soft-patch" in June that should prove "short-lived." Many economists still believe that inflation is a bigger threat to the recovery than slow growth "We would hope that the Fed would still raise rates gradually, even if employment growth is soft in August, since we agree that monetary accommodation threatens higher inflation down the road," said John Ryding and the economic team at Bear Stearns Jobs and energy considerations But Reaser isn't alone in her forecast. Lou Crandall, chief economist for Wrightson ICAP, said the July jobs report "was jarring enough" to affect the outcome of Tuesday's FOMC meeting "We think there is less than a 50-50 chance that the Fed will tighten on Tuesday," Crandall said. Robert Brusca, chief economist at FAO Economics, said the Fed has the built-in excuse of higher oil prices to change its mind "That is why I think the Fed will not hike rates on Tuesday as it had previously planned. I don't care what the Fed funds contract says. I think the Fed has to teach those trading that contract to pay attention to world events whenever they happen, even on the threshold of a Fed meeting," Brusca said A delicate balance Michael Panzner, equity trader at Rabo Securities and the author of 'The New Laws of the Stock Market Jungle,' said the Fed is "now stuck between a rock and a hard place." "On the one hand, if the central bank moves to slow down the pace of - or even puts a halt to - future rate hikes, it risks creating the unsettling impression that conditions are much worse than what they have been acknowledging," Panzner said "On the other hand, if Greenspan and company choose to go ahead as originally planned, there is a good possibility that they may end up exacerbating the extent of any downdraft that might now be unfolding," he said Complicating the outlook a bit was a Wall Street Journal story on Friday quoting unidentified Fed officials saying that the Fed would stay on a patch of steady rate hikes no matter what the July jobs report showed Some economists believe that Greenspan likes to signal his intended monetary policy at upcoming FOMC meetings to a small group of favorite reporters, including the Journal fxstreet.com

To: Knighty Tin who wrote (10407)	8/9/2004 8:14:21 PM
From: mishedlo	Respond to of 116555

UK July retail sales spending slows for second month in a row - BRC Monday, August 9, 2004 11:16:25 PM LONDON (AFX) - Retail spending growth in the UK slowed for the second month running in July, as consumers started to feel the pinch from the series of rate hikes delivered by the Bank of England, figures from the British Retail Consortium showed today The BRC said like-for-like sales, which exclude the impact of new stores or additional retail space, rose just 1.8 pct in July from a year ago, down from 2.4 pct in June and 3.7 pct in May Sales were last lower in March this year Meanwhile, total sales, which includes new stores and space, rose by the smallest margin all year, up just 4.3 pct in July compared with 5.0 pct in June and 6.5 pct in May On a three-month basis, sales slowed to 2.6 pct in July from 2.7 pct in June for like-for-like sales and to 5.3 pct from 5.4 pct for total sales Kevin Hawkins, the BRC's newly-appointed director-general, said the dampening effect of the rate rises is beginning to become clear "Demand is sluggish and most growth is being driven by promotion, which is why the impact of unseasonable weather was amplified," he said He asserted that the central bank has chosen to "target house prices" despite the "unnecessary and unwanted consequences" on high street spending Hawkins called on the BoE to "refrain from any further rises unless it wants to further test fragility of the consumer economy" The central bank has hiked rates five times since November and is widely expected to deliver at least one more quarter point hike before the year is out. Despite the apparent decline in retail spending in July, the BRC's numbers still show that consumers remain far more buoyant than in the last quarter of 2003. fxstreet.com