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A dark and dismal Europe

A swathe of dismal economic news cast a long shadow across Europe yesterday, beating the single currency lower by nearly 1%. The manufacturing PMIs in the periphery for April were uniformly dreadful, Spain down to 43.6 and Italy to 43.8 (from 47.9 in March). For the latter, the new order balance saw the biggest monthly decline for three years, from 45.7 to 39.2, suggesting that there’s not much on the horizon to turn around the fortunes of the manufacturing sector anytime soon. Read more

03/05/2012 @ 07:36 GMT

Cautious optimism from the Fed

The Fed decision last night was not expected to rock the boat, but the subtleties cannot be ignored given the reliance of many asset markets upon the Fed’s continued easy money stance. There was a subtle upgrading of the Fed’s growth outlook, the statement acknowledging an improvement in the longer-term picture. Although the Fed’s commitment to keep “exceptionally low levels” for rates until late 2014 remains, the charts released with the statement show a notable proportion of the non-voting members are looking to raise rates earlier. Read more

26/04/2012 @ 07:20 GMT

Asian cheer tempers European fear

Bolstered by some reasonably encouraging growth data, the mood in Asia overnight has been constructive, with broad gains in the major bourses of around 1%. Both Australia and South Korea recorded better than expected employment outcomes last month; in the latter, the unemployment rate fell to 3.4% in March from 3.7% previously. In both Malaysia and the Philippines, exports soared by 15% in the most recent month. Read more

12/04/2012 @ 07:19 GMT

A higher hurdle for more Fed easing

Synonymous with just how far the debate concerning Fed policy has moved on is the extent to which various policy-makers have expressed significant reservations about the need for additional monetary stimulus. Just in the past few days, no less than four regional Fed Presidents have expressed this view, all of whom have a vote on the FOMC this year. On Tuesday, the March 13 FOMC Minutes showed that policy officials were more confident of recovery prospects, although they remain committed to retaining the funds’ rate at a very low level until late 2014. Read more

05/04/2012 @ 09:48 GMT

USD benefits as Fed dismisses extra QE talk

Fed officials seem more relaxed about the state of the economy, judging by the contents of the March 13 FOMC Minutes released last night. At the previous meeting held late in January, some policy-makers felt that additional monetary easing may well be required before too long because of the sluggish nature of the recovery. That position has now shifted – additional stimulus will only be forthcoming: ”if the economy lost momentum” or should inflation stay below the 2% target. Read more

04/04/2012 @ 07:35 GMT

Oil prices now the strongest growth headwind

Last week’s warning from the International Energy Agency (IEA) that the surging cost of oil now represented a bigger risk for global growth than the European sovereign debt and banking crisis did not generate the publicity it deserved. Brent crude has jumped by 17% this year to USD 126 a barrel, essentially matching the high achieved a year ago; in mid-2008, Brent soared to a record high of USD 146.

27/03/12 @ 10:57 GMT by Michael Derks, Chief Strategist

Bernanke reaffirms ultra-loose policy stance

Yesterday’s remarks by Fed Chairman Bernanke have put paid to the recent hypothesis that the Fed might be reversing its commitment to an extended period of ultra-loose monetary policy any time soon. His suggestion that wages growth remains subdued because of the weak labour market scuppered speculation that the Fed might need to start raising rates as soon as 2014. Although Bernanke acknowledged the better news on both the labour and housing market fronts, he reaffirmed that the Fed would stay cautious. Read more

27/03/2012 @ 06:45 GMT

Bernanke will stay cautious on recovery

Although two regional Fed presidents have recently warned of the risks of maintaining an ultra-easy monetary policy for too long, it is extremely unlikely that Fed policy officials will alter their commitment to unchanged rates (for the next two years) any time soon. At their last meeting on March 13th, policy-makers at the Fed slightly raised their forecasts for growth this year, although they observed that unemployment remained elevated and that there were still ‘significant downside risks’ to growth. Read more

26/03/2012 @ 11:19 GMT

Well Fed markets

The US Federal Reserve pulled off a difficult balancing act last night, sounding both more upbeat on the economy, but also keeping open the option of further easing measures and maintaining the commitment to keep rates low until the end of 2014. The expectation of growth was altered from “modest” to “moderate”, a seemingly small adjustment but a sign of the Fed’s cautious optimism that the recent run of good data is more than likely to be sustained. Read more

14/03/2012 @ 08:11 GMT

Data justification

Markets started the new year on an optimistic footing, of that there can be little doubt. We’ve seen some double-digit gains in equity markets during January, most notably Germany (up nearly 10%) and several emerging market indices (Russia, Peru and Argentina all double-digit gains). The question now is whether the economic data is going to do its part to offer substance to such gains. Read more

01/02/2012 @ 10:33 GMT

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