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

To: zonder who wrote (15912)	11/16/2004 9:58:51 AM
From: mishedlo	Respond to of 116555

Retail chains report softer weekly same-store sales Tuesday, November 16, 2004 1:18:33 PM afxpress.com WASHINGTON (AFX) -- U.S. retail chains' same-store sales fell 0.4 percent in the week ended Nov. 13 compared to the prior week, according to the latest survey conducted by the International Council of Shopping Centers and UBS. "The good news is that the overall sales pace gained momentum and increased on a year-over-year basis," noted Mike Niemira, ICSC's chief economist. Last week's sales were 3.4 percent higher than in the comparable week in 2003. "As we move closer to the beginning of the traditional start of the holiday season -- Black Friday -- we should start to see retail sales rebound," Niemira said, adding that ICSC sees chains' sales for November as a whole rising by about 3.0 percent to 4.0 percent

To: zonder who wrote (15912)	11/16/2004 9:59:44 AM
From: mishedlo	Respond to of 116555

Dollar's Decline Is 2004's Defining Market Move: Mark Gilbert Nov. 16 (Bloomberg) -- It's time to dust off a remark John Connally made about the dollar when he was Richard Nixon's U.S. Treasury secretary. ``It's our currency, but it's your problem.'' Three decades later, the problem is back. The dollar's dive against the euro and the yen is turning out to be the defining market move of 2004. After years of ignoring U.S. deficits, the currency market is using the trade and current-account figures as a reason (excuse?) to whack the dollar to a record low against the euro and a seven-month low versus the yen. The biggest worry for European and Japanese officials isn't just the extent of the dollar's slide. It's the conspiracy theory doing the rounds that says the U.S. would like nothing more than to see a sustained slide in its currency. Yesterday, Treasury Secretary John Snow trotted out the standard party line that ``a strong dollar is in America's interest.'' Currency traders ignored him -- same as they ignored the surge in U.S. employment reported Nov. 5, when figures showed the economy created twice as many jobs as economists had forecast, and the Nov. 10 Commerce Department release showing the U.S. trade gap unexpectedly narrowed in September. Indeed, a couple of minutes after the last set of trade figures, traders drove the dollar to $1.30 against the euro for the first time ever. It's currently hovering at about $1.2970. Against the yen, the U.S. currency is at 105.31. Twin Deficits The most important part of Snow's comments wasn't the robotic incantation of ``strong dollar.'' It was his accompanying assertion that ``currency values are best set in open and competitive exchange markets.'' With the U.S. trade gap at a record $496.5 billion last year, and the current account deficit reaching $166.2 billion in the second quarter, currency forecasters reckon the market is setting a value for the dollar that will take it toward $1.40 per euro and through 105 yen. Are the conspiracy theorists correct? Is a unilateral policy of benign dollar neglect by the U.S. administration set to inflict shock and awe on the financial markets? A look at the motivations of the four most interested groups should help determine how willing the U.S. might be to let the dollar extend its slide. 1. The U.S. While the U.S. Treasury is responsible for currency policy, the central bank still has a lot of sway. In the past few months, Fed officials ranging from Chairman Alan Greenspan to Governor Susan Bies to St. Louis Fed President William Poole have lined up to disparage their government's spending habits, and warn that the twin deficits risk undermining the dollar and driving government borrowing costs higher. You might almost think the Fed was waving a sign in front of currency traders saying ``sell the dollar.'' You might be right. A weaker dollar helps the Fed out, giving it room to push its target rate for overnight borrowing higher without facing accusations of killing off the economic recovery. Four rate increases this year have driven the key rate to 2 percent, which the Fed says ``remains accommodative.'' The futures market tells us the central bank will take another step higher in December. We don't know what the Fed regards as a neutral level for interest rates; we do know that it's north of 2 percent, and dollar weakness helps ease the path to higher interest rates. ``Our work is not done,'' Fed Governor Mark Olson said in a speech in Toronto yesterday. Greenspan, coming up to his last year at the helm with retirement looming in January 2006, is likely to embrace the dollar's decline as a useful balm for a faltering 2005 economy. President George W. Bush's administration is likely to do the same, letting the weaker dollar reduce the trade deficit by boosting exports. 2. Europe ``Brutal'' was how ECB President Jean-Claude Trichet described the dollar's recent movement last week. ``Unwelcome,'' was Dutch Finance Minister Gerrit Zalm's verdict yesterday. ``Fatal'' might be more apt, given how European growth is leaning on the crutch of exports to make even minimal headway. After third- quarter growth for the 12 euro-using nations came in at 0.3 percent, the European Commission chopped its fourth-quarter forecast to 0.4 percent from 0.5 percent. With one-fifth of the economy coming from exports, that might start to look wildly optimistic should the euro break to record highs against the U.S. currency. When Brent crude-oil futures were trading above $50 a barrel, a strong euro looked like a godsend helping to cushion the European economy from surging energy costs. Now that oil is close to $40, the dollar's decline is a hindrance rather than a help. There's little Europe can do to halt the euro's rise, though. Italian Finance Minister Domenico Siniscalco's Nov. 10 claim that the Group of Seven industrialized countries might be poised for coordinated dollar buying drew a collective giggle from participants in the foreign-exchange market. Trichet, wisely, is sticking closely to a limited script, keeping what verbal ammunition he has in reserve. There are analysts who argue that it's easier for a central bank to halt a currency's rise than it is to prop up a declining currency. I'm not convinced. Without U.S. backing, the ECB would struggle to hold back the tide of dollar sales once $1.30 is breached. 3. Asia Japan's 0.3 percent third-quarter growth rate was hardly the stuff of a rebounding economy. The median forecast of 28 economists surveyed by Bloomberg News was for 2.1 percent growth. The word anemic springs to mind. You can argue whether Japan's efforts to prevent the yen from rising in recent years have succeeded, or whether the yen might have averaged about 113 yen in the past two years even without billions of dollars of currency market manipulation. Whichever is true, currency traders look poised to test Japan's resolve in preventing a spring to 100 yen per dollar. The wildcard is China. Merrill Lynch & Co.'s currency strategy team, led by Alex Patelis, is sticking to its forecast that China will revalue its currency by year-end, and start pegging it to a basket of currencies rather than maintaining the rate of 8.3 to the dollar that's prevailed since 1995. Suppose Merrill is right. Suppose China starts rebalancing its $500 billion or so of foreign exchange reserves. Maybe it doesn't need to hold as many dollar assets once the yuan is tied to a basket of currencies rather than just the dollar. Suddenly, there's an 800-pound gorilla in the market. Selling dollars. 4. Hedge Funds The $900 billion of funds that the hedge funds have to throw around makes them the most important players in any market you care to mention. It's been a tough year, with just 3.8 percent to show for their 2004 efforts, down from 15 percent last year, according to an index of returns compiled by Credit Suisse Group and Tremont Capital Management. Faced with the prospect of investors withdrawing their capital in January, there must be a strong temptation to try and boost returns by driving the dollar down even further by year-end. As the saying goes, ``the trend is your friend.'' quote.bloomberg.com

To: zonder who wrote (15912)	11/16/2004 10:04:42 AM
From: mishedlo	Respond to of 116555

ECOFIN EU to mull whether to restart French, German deficit action [What are they going to do, Force Germany to raise taxes? Cut spending? that will sure do wonders for the economy wont it - probably cause the Euro to rise too - Mish] Tuesday, November 16, 2004 1:29:07 PM afxpress.com BRUSSELS (AFX) - The European Commission will decide "in the coming weeks" whether to restart disciplinary action against France and Germany over their high deficits, EU economic and monetary affairs commissioner Joaquin Almunia said Almunia said he would ask the new commission to assess the question, and that the decision would be based on whether the two countries were meeting their growth and deficit targets A year ago, EU finance ministers overturned a commission proposal to take action against the euro zone's two biggest economies for repeatedly breaching the stability and growth pact's deficit limit of 3 pct of GDP

To: zonder who wrote (15912)	11/16/2004 10:08:39 AM
From: mishedlo	Respond to of 116555

Pounds recovers as data shows UK inflation edged higher in Oct Tuesday, November 16, 2004 1:18:03 PM afxpress.com LONDON (AFX) - The pound recovered from early falls after news that inflation in the UK edged higher in October steadied market nerves The UK currency had been on the backfoot all morning and throughout the Asian trading session following a survey from the Royal Institute of Chartered Surveyors showing signs of significant cooling in the housing market "After the disappointing RICS survey, the market was nervous UK inflation may show a downside risk and drag sterling further down. As CPI inflation rose as expected, so sterling recovered ground," said Clyde Wardle at HSBC Bank USA The pound rose back above 1.85 usd after the news while the euro retreated below 0.70 stg. The Office of National Statistics said the Consumer Price Index in October rose by 1.2 pct from a year ago, in line with expectations and above the 1.1 pct recorded in September The rise ended three straight months of falls On a month-on-month basis, the CPI was 0.3 pct higher than September - once again in line with predictions. Despite the rise, inflation in the UK remains benign and there is yet very little to suggest that the Bank of England will be forced to hike interest rate to ward off price pressures. At present, the market is not pricing in any chance in UK interest rates through December 2005. Against this backdrop, sterling's fortunes will be closely linked to upcoming UK data. Weak numbers may lead the market to believe that the next move in UK rates may be down and in turn weigh on the pound, said Wardle Earlier, the monthly survey from the Royal Institution of Chartered Surveyors, which found house prices falling at their fastest pace since December 1992, led to a bout of selling on the pound John Butler, UK economist at HSBC, said the key to interest rates is whether the housing market slowdown is the start of a sharp correction, or due to a build up of negative sentiment which may soon end "It is hard to know whether this is the beginning of the end but either way, while the threat lingers the MPC is likely to stay on hold, concerned that they have finally burst the bubble that they were instrumental in building," said Butler The MPC has raised the cost of borrowing a quarter point on five occasions in the last year in an attempt to curb inflationary pressures stemming from rampant consumer demand and above-trend economic growth Elsewhere, the dollar weakened ahead of this afternoon's US Treasury International Capital flow data, a key indicator of how the gaping US current account deficit is being funded Market participants are also likely to be cautious ahead of today's meeting of EU finance ministers, which ends this evening, and will be watching for any further comments from European officials about the recent sharp rise in the euro The yen meanwhile, continued to remain strong against the dollar, edging ever closer towards the 105 mark despite the speculation that Japan may start selling its own currency

To: zonder who wrote (15912)	11/16/2004 10:14:07 AM
From: mishedlo	Respond to of 116555

France´s Sarkozy calls for EU ´partnership´ with Turkey, not membership Tuesday, November 16, 2004 12:55:27 PM afxpress.com France's Sarkozy calls for EU 'partnership' with Turkey, not membership BRUSSELS (AFX) - French finance minister and future ruling party chief Nicolas Sarkozy has repeated his opposition to Turkish membership of the EU, saying a decision next month from heads of government should focus instead on "partnership." Sarkozy, who steps down as minister later this month to head French president Jacques Chirac's Union for a Popular Movement (UMP), said he opposes Turkish entry, "not because it is a Muslim country, but because Europe must concentrate on the enlargement which has already taken place." He told French journalists in Brussels: "On December 17 the perspective of partnership must feature in the decision of the council of ministers" Sarkozy's opposition to Turkish EU membership has put him at odds with Chirac, who has said the country's eventual accession is inevitable

To: zonder who wrote (15912)	11/16/2004 10:16:34 AM
From: mishedlo	Read Replies (1) \| Respond to of 116555

Fed´s Moskow: More ground to cover to get to neutral Tuesday, November 16, 2004 2:16:31 PM afxpress.com Fed's Moskow: More ground to cover to get to neutral CHICAGO (AFX) -- The Federal Reserve will continue to raise U.S. interest rates to return to "neutral" monetary stimulus. But because inflation remains moderate, the Fed can continue to do so at a measured pace, said Michael Moskow, president of the Chicago Federal Reserve in a speech Tuesday. "There is certainly more ground to cover," he said. "But given the low level of inflation, well-contained inflationary expectations, and the remaining slack in the economy, we believe we can remove the remaining policy accommodation at a pace that is likely to be measured." The biggest unknowns facing the Fed are sporadic job growth and high energy prices, he said. But while expensive oil has cut into spending, its lasting impact has been limited. Energy prices also have not translated into higher inflation expectations, Moskow said

To: zonder who wrote (15912)	11/16/2004 10:21:45 AM
From: mishedlo	Read Replies (1) \| Respond to of 116555

russell on gold 321gold.com Today it isn't a question of how much paper money there is in the world or how much gold is being mined. The question is how much distrust there is in the dollar and in paper money in general -- the real question is how willing are knowledgeable investors and US creditors to hold dollars? Call it "escape from the dollar," call it "diversification," call it anything you want, but money is starting to flow into gold. I'm going to revise my thinking on the phase gold is in. I've stated that gold is still in its first psychological phase. I've revised my thinking on that. Often the first and second phase of a bull market is divided by a severe correction. I believe that the July 2004 correction was the correction that ended the first psychological phase of gold, and that we are now in the second psychological phase. The second phase of a bull market is usually the longest (in duration) phase. It's in the second phase that the public begins to be interested in an item. And it's in the second phase that the funds start to take their initial positions in an item. I believe we're at the start of the second phase in gold. The sharp July correction followed by a second correction in August -- these two corrections, served, I believe, to knock out late-comers and "in-and-out traders" and solidify the technical position in gold. Only the "believers" held on, and in many cases bought more. All of which takes us to the second psychological phase of gold. Let the second phase begin.

To: zonder who wrote (15912)	11/16/2004 10:24:47 AM
From: yard_man	Respond to of 116555

He ain't heavy, ... <g>

To: zonder who wrote (15912)	11/16/2004 10:33:54 AM
From: mishedlo	Read Replies (3) \| Respond to of 116555

If Treasuries do not believe the PPI was that high or that significant, why should I? $TNX at 4.21 basically yawned at the PPI number Mish

To: zonder who wrote (15912)	11/16/2004 10:45:13 AM
From: mishedlo	Respond to of 116555

U.S. PPI jumps by 1.7% in October on food, energy - Tuesday, November 16, 2004 3:08:44 PM afxpress.com WASHINGTON (AFX) -- U.S. producer prices increased 1.7 percent in October, the fastest rate in 14 years, the Labor Department estimated Tuesday Most of the inflation in finished goods prices came from volatile food and energy categories. October's core PPI rate, which excludes food and energy, rose a more moderate 0.3 percent for the second straight month The headline figure stunned Wall Street economists, who were expecting a much milder 0.6 percent gain in the PPI and a 0.2 percent rise in the core rate, according to a survey conducted by CBS MarketWatch. U.S. stocks opened lower, while bond prices also fell. The dollar was slightly firmer after the report. The PPI, which advanced just 0.1 percent in September, is now up 4.4 percent in the past 12 months, while the core rate is 1.8 percent higher measured over the same interval "Fed policymakers will not overreact to the surge in overall producer prices, especially with energy prices having eased in recent weeks," said Steve Stanley, chief economist for RBS Greenwich Capital. "Above all, the Fed will be focused on consumer prices, which so far have remained in the middle of the Fed's perceived target range." Finished energy prices jumped 6.8 percent in October, including a 17.3 percent rise in wholesale gasoline prices. Similarly, home heating oil prices rose 17.9 percent, while electric power rose 2.3 percent -- the biggest gain in nearly 14 years Meanwhile, finished food prices increased 1.6 percent, as wholesale vegetable prices skyrocketed 34.2 percent, likely due to the September hurricanes The increase in food prices raises the risks of a worse-than-expected consumer price index, which will be released on Wednesday, said Ian Shepherdson, chief U.S. economist for High Frequency Economics. Much of the damage in the core rate was due to finished capital goods prices, which increased 0.4 percent for the second month in a row. Prices increased 2.7 percent for light motor trucks and 2.7 percent for construction machinery and equipment prices, a 24-year high Prices of power transformers also surged, likely an impact of the hurricanes. Finished consumer goods prices excluding food and energy increased 0.2 percent in October. Passenger car prices fell 1.3 percent as the government implemented quality adjustments for the 2005 model year By comparison, price pressures were tamer further back in the production cycle Intermediate goods prices rose 0.9 percent in October, yielding a 12-month increase of 9 percent. Intermediate energy goods prices rose 4.3 percent during October, with core intermediate goods prices gaining by 0.3 percent. However, intermediate food prices fell for the fifth straight month At the crude level, prices increased 4.3 percent in October, including a 7.9 percent gain in crude energy prices. Prices for basic industrial materials climbed 5.4 percent, including a 15.4 percent increase in iron and steel scrap