Further Rate Cuts in Australia RBA Fading
Chances of Further Rate Cuts in Australia Fading.
The strength of Australia’s labor market in October builds on other evidence that suggests the economy has made some big leaps forward in recent months and therefore diminishes the chances of further rate cuts, at least in the near-term, says Paul Dales, chief economist at Capital Economics. The labor market is currently surpassing even the central bank’s expectations, he notes. This explains the leap in the Australian dollar from US$0.7065 before the data to US$0.7140 after, as the chances of further rate cuts are fading somewhat, he says. “We have to admit that if this strengthening of the labor market is sustained, the chances of rates falling to 1.5% next year, as we have been forecasting, are slimmer,” Dales adds
Aussie Jobs Report Has a Whiff of Truth About It.
It might be tempting to dismiss news of a big fall in Australia’s unemployment rate in October as just more noise in a flawed data set. Government jobs reports in recent years have been marred by flawed data. But this time, the fall in the jobless rate to 5.9% in October, its lowest level since April 2014, at least has some whiff of truth to it. Business surveys, such as NAB’s monthly reading of conditions and confidence also tells a story of resilience in the job market. “We know lots of people don’t believe the labor force survey. They should, in our view, given other indicators are confirming the trend in jobs growth,” said Deutsche Bank chief economist Adam Boyton said. Elsewhere, senior economist at ANZ Bank, Justin Fabo admits that his bank’s forecast of two interest rate cuts in 2016 is starting to look strained. “Perhaps the labor market is even better currently than we thought. If so, achieving a cash rate cut by February looks less likely at this stage,” he said
New Zealand Dollar Up on Broad Greenback Retreat
The New Zealand dollar was higher Wednesday against a backdrop of broad-based U.S. dollar weakness in Asia, with traders ignoring official warnings about financial sector instability.
At 0405 GMT, the New Zealand dollar was at US$0.6576, from US$0.6531 late Tuesday. It touched lows of around US$0.6512 in early trading.
Elias Haddad, currency strategist at Commonwealth Bank, said the rally in the New Zealand dollar may not last long and that the advance is mostly technical.
Data on Chinese industrial production later Wednesday could bring the rally to a sudden halt, he added.
Earlier Wednesday, New Zealand’s central bank warned that risks to the health of the country’s financial sector are growing as the potential for instability globally has lifted.
The central bank continues to do good “despite the drop in the prospect of global financial stability”, said the Reserve Bank of New Zealand gov. Graeme Wheeler.
“Global economic growth has softened during the six months, and the uncertainty about the path of economic and financial adjustment in Beijing have helped depress commodity prices and added to financial market uncertainty,” Mr. Wheeler added
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Jokowi GDP Growth Boost Sentiment in Indonesia
Only the strong GDP growth momentum will boost sentiment in Indonesia
Since the mid-2013, the Bank Indonesia (BI) has been working hard to improve the macro-economic risk profile. In spite of the push to narrow current account (C/A) deficit, the central bank also has managed the growth of the debt. Total external debt growing multi-year low of 3.7% (YoY) in July 2015. More importantly, short-term foreign debt have been kept stable around USD 45bn, less than 50% of the level of foreign exchange reserves.
However, the rupiah is still susceptible, such as external factors continue to overload the market sentiment. In addition to the uncertainty over the Fed’s interest rate increase in the U.S. this year, global growth concerns have also been dominant in the market. For now, only strong capital inflows will help to improve sentiment on the currency. But the risk of a decline in GDP growth means that it is hard for investors to justify putting more money into the economy at the moment. An example is the gross foreign direct investment, which may be slipping around USD 25 billion this year after noting USD 28bn in the last 2 years.
Indonesian Government remained optimistic GDP growth will come in the top 5% to around 4.8% this year, it seems more likely. Acceleration of public investment remained important entry to 2016, but data from third quarter in 2015 showed no indication of a change in the momentum of growth yet.
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Rental Rates Skidded in Brazil Last Month.
Brazil’s poor economic conditions is providing some good news for renters, but not so for properties owners. According to FipeZap, an index compiled by local research foundation Fipe based on rental prices in Brazil’s nine largest cities, rental-contract rates fell 1.8% in the year through August while inflation has been running hot, nearing double digits. Rental prices fell 0.7% last month, the biggest decline since the index began in 2008
Tough Road for Brazil Financial -Transaction Tax — Market Talk.
It will be tough to reintroduce a tax on all financial transactions in Brazil. A few hours after the government said it would try to do so, an effort aimed at raising BRL32B ($8.4B), chamber of deputies President Eduardo Cunha said the proposal is unlikely to be approved by congress. The Rousseff administration is looking to increase certain taxes and cut spending in the wake of S&P moving Brazil’s credit rating to junk territory.
Korea Finance Minister: Fed Should Make Intentions Clear
Fed Should Make Intentions Clear, Says Korea Finance Minister.
South Korea’s finance minister calls for the U.S. Federal Reserve to make more efforts to reduce uncertainty over pace of its expected interest rate increases. In an interview with The Wall Street Journal, Choi Kyung-hwan says the Fed needs to ensure sufficient communications with markets over more than just when the rate rises will begin. “If uncertainty continues to go on like this, it will be a big burden for the world economy,” he says. Choi also defends the global easing cycle as an unavoidable policy to fight the world’s economic slowdown. “We should have employed this monetary easing policy earlier,” he says
USD May Still Lack Firm Direction After U.S. Jobs Data.
The possibility is high for the US dollar “to continue to lack moving initiative of its own for a while,” even after the closely-watched jobs data for August due out later today, says J.P. Morgan in a morning note. Noting that the Fed’s decision to raise rates later this month largely depends on market trends, oil prices and USD movement. “It’s very unlikely that jobs data alone can lead to a conclusion,” about raising rates, says J.P. Morgan. In addition, August nonfarm payrolls (J.P. Morgan expects +200,000 jobs) tend to fall below market consensus (4 years in row) due to seasonal adjustment process, says J.P. Morgan. Nonfarm payrolls in August last year up 142,000, below market consensus of an addition of 230,000, but later revised upward to 213,000. The USD/JPY is now at 119.87 from 120.09 late Thursday in New York
India Shares Fall, Yen New Resistance
USD/JPY May Face New Resistance at 122.00.
The USD/JPY may face new resistance of 122.00 with its upside already capped, says IG Securities market analyst Junichi Ishikawa, adding that focus now is which side of a 120.00- 121.80 range the pair will breach. The pair already failed to clear 121.82 (a 61.80% Fibonacci retracement line.) Relative strength index momentum gauge is also losing upside momentum. The pair is now drifting lower at 120.78 from 121.22 late Friday in New York, with weak Asian stocks accelerating buying of JPY as a perceived safe haven. After Asia trade, investors will likely shift their attention to U.S. ISM manufacturing index for August. If the U.S. stocks fall anticipating that the Fed is closer to rate increase, the JPY and EUR will likely be bought again, he says
India Shares Fall on Weak Economic Growth Data.
India shares open lower Tuesday as slower economic growth numbers hit investor sentiment. The S&P BSE Sensex is trading down 0.8% at 26,079.59, while the National Stock Exchange’s Nifty index falls 0.8% to 7,909.45. India’s economy expanded 7% year-on-year in the quarter ended June 30, weaker than the 7.4% average forecast by economists polled by The Wall Street Journal. The growth in GDP doesn’t suggest any significant turnaround as yet, says Care Ratings. Among the major losers on the Sensex, HDFC Bank (500180.BY) falls 2%, Bharti Airtel (532454.BY) declines 1.6%, while Vedanta (500295.BY) loses 1.5%.
* Indonesia August core inflation +4.92% On Year versus +4.86% on year in July
An RBA spokesman said: Australia GDP likely to grow at 3% in 2016, and 3.75% rate in 2017.
Malaysia Ringgit Still Weak as Traders Fret Over Politics.
USD/MYR is up slightly Monday as the ringgit remains weak on concerns that political instability in Malaysia could ratchet up toward end-August, when a major political opposition rally is set to take place in the capital as well as other cities. While the likelihood of the government being overthrown is slim, growing public discontent with the administration could devolve into civic strife and further dampen foreign investor confidence. Economists are already bearish on Malaysia’s growth potential as oil prices stay depressed and the global growth engine that is China sputters. Expectations are negative for the ringgit too, not just due to lackluster economic performance but also due to falling foreign-currency reserves that may weaken the country’s credit rating score. USD/MYR is now 4.1100 from its Friday close of 4.0790
India’s Wholesale Inflation May Stay in Negative Zone.
India’s wholesale inflation is likely to remain in negative zone in the coming months on expectation of further correction in fuel prices and weak global commodity prices, says Edelweiss Securities. India’s wholesale price index fell for the ninth-straight month in July. Demand-led inflation has also slipped below zero, for the past couple of months with nearly all the components showing a benign trend, Edelweiss says. However, a key uncertainty is related to the wet season, he added. After the above normal rainfall in June, momentum has slowed down and the monsoon rainfall was 10% below a 50-year average so far this season.
Yuan Devaluation Will Ultimately Boost Aussie & NZ Economy
*China’s Central Bank Sticks to Its Pledge With Yuan Fix.
*U.S. Strains Mount After China Devalues Yuan.
China’s Currency Devaluation Won’t Affect Fed, a Wealth Manager Says.
China’s devaluation of its currency shows that it’s running out of alternatives, but the move isn’t likely to affect Federal Reserve policy, says Michael Yoshikami, chief executive of Destination Wealth Management, a Walnut Creek, Calif., advisory firm managing $1.5 billion. “This is the most drastic alternative they [China] could take, and it’s taking a page out of the U.S. and Europe,” he says. “Currency adjustments are the easiest way to stimulate economies.” But the Fed will remain focused on the overall state of the global economy, Mr. Yoshikami says
Some Economists Looking Ahead to August Payrolls.
Whether it hits or misses, Friday’s employment report is expected to continue to reflect decent progress in the US labor market. To some analysts, it’s the August print–out the Friday before Labor Day–we should worry about. Coming less than two weeks ahead of the Fed’s next meeting (which many expect will deliver the first rate hike), Deutsche Bank notes August’s report has missed expectations each of the last 4 years by an average 55K jobs–and the initial readings were all below 200K. Analysis by Wrightson ICAP last month showed August’s initial payrolls result being the most understated of any month, seeing the biggest upward revisions
Neurology book: Prophylactic Neuro-protection
In animals, most neuroprotector drugs are effective only when they are initiated before stroke onset. Therefore, in patients at high risk for stroke, prophylactic neuroprotectors also should be considered to reduce the size of a potential infarct. The aim of prophylactic neuroprotection is not to actually prevent stroke but to minimize its consequences. A potentially prophylactic neuroprotective agent should be suitable for routine oral administration and is safe and inexpensive. Calcium channel blockers, N-methyl-D-aspartate antagonist, antioxidants, and B-blockers are drugs that may be appropriate. Short term prophylactic neuroprotection can be applied to patients undergoing risky procedures, such as coronary bypass surgery, carotid endarterectomy, and endovascular treatment, it might be initiated just before the procedure and continued for several days. Long-term prophylactic neuroprotection, continued for years, should be considered in patients who are at high risk for stroke, that is, 5% to 10% annual incidence because of multiple risk factors, such as arterial hypertension, diabetes mellitus, hyperlipidemia, CHD, history of stroke or TIA, AF, and asymptomatic carotid stenosis. These potential therapeutic approaches should be evaluated in well-designed clinical trials.
Sources: Fisher M Jones S, Sacco RL: Prophylactic Neuroprotection for cerebral ischemia. Stroke. Neurology books.
Nikkei Stocks Down Greece Jitters Yen Weigh
Japan Stock Index Down 0.6% as Fast Retailing, Greece Jitters Weigh.
The Nikkei is down 0.6% at 19738.17 in early trading as investors take profits following the market’s dramatic rise to a positive finish Thursday, as stocks reversed a big early plunge. A selloff in shares of heavily-weighted Fast Retailing (9983.TO) is also weighing, despite the firm’s report of a record nine-month profit after the prior-day market close. Fast Retailing is down 6.0% at Y54,000. “China’s volatility, Greece’s fate in the euro zone, and U.S. corporate outlooks are all factoring into jitters for investors, and this affects stock market participation,” says Yoshihiro Okumura general manager at Chibagin Asset Management. “Longer-term investors may be waiting longer to buy in, thinking things could get worse, while short-term traders are looking for oversold shares to ride to a profit. Japan corporate fundamentals remain good, but there is too much ambient risk out there to simply buy and forget.”
USD/JPY Near 120 Provides Good Buying Opportunity.
Even assuming a prolonged China stock slump but no serious debilitating effect on the macro-economy there, the USD/JPY near 120 is a good chance to buy, says Taisuke Tanaka chief FX strategist at Deutsche Securities in Tokyo. “As long as we continue to believe the U.S. decision to raise rates, a deeper dip provides a better chance to buy,” says Tanaka. China stocks are not fully open to foreigners meaning there is less chance of contagion to the global economy. And a fallback from the short-lived stocks market boom (10 months) is spreading contagion to the macro economy there. But if China and the eurozone (due to Greece) roil the market to push back U.S. rate increase, the JPY weakness trajectory curve may become more moderate. It may take some time for the JPY to accelerate its weakness, so that better to hedge risk by limiting dip buying at Y120-level to only a portion of portfolio, he says