Better than expected US housing price data from Case Shiller, along with a slightly better than expected Consumer Confidence number helped keep US equities in the black for today’s trading session. The S&p 500 was basically unchanged closing at 1049.
The euro-zone unemployment rate remained at 10% for a fifth straight month in July, indicating that despite strong economic growth in the second quarter, the recovery has yet to result in the creation of a significant number of new jobs. The European Union official statistics agency Eurostat said Tuesday t hat 15.833 million people were without jobs across the 16 nations that use the euro. That is more than the combined populations of Greece and Ireland, two of the euro zone’s most troubled members. Eurostat said the number of unemployed fell by 8,000 from June, but was up by 668,000 compared with July 2009. The unemployment rate was in line with economists’ forecasts.
The Federal Reserve has taken steps to avoid a passive tightening of policy by preventing a contraction in its balance sheet. Judging from Bernanke’s speech at Jackson Hole last week, the Federal Reserve has adopted what traditionally would be called an “easing bias” and although the precise trigger may be being debated, many expect that continued poor US economic data will prompt the Fed to take additional measures. Japanese officials are providing additional monetary and fiscal support. The BOJ yesterday expanded a special lending facility by JPY10 trillion (~$117 bln) and the government indicated it will draw down its budget reserves by almost JPY1 trillion to boost jobs and investment.
Economic reports today have included somewhat better than expected Japanese industrial output (0.3% vs consensus of -0.2%) and retail sales (0.7% vs consensus 0.5%). However, the strength is not expected to last. The manufacturing PMI fell to 50.1 in August from 52.8 in July, which is the third consecutive monthly decline. There a numerous media reports discussing how the strength of the yen is going to force manufacturers to re-locate abroad. MOF data suggests that since the late 1990s, the foreign sales by affiliates of Japanese companies have exceeded exports from Japan. Also note that Japan’s auto purchase scheme expires next month and is not expected to be renewed. However, the year-end expiry of the appliance purchase scheme may be extended, according to local press reports. Australia also reported stronger than expected data (though it is not aiding the Australian dollar today). Retail sales rose 0.7% in July, nearly twice the consensus and building approvals rose 2.3% rather than decline by 0.7% as the consensus forecast. And the current account deficit narrowed sharply in Q2 from A$16.45 bln to A$5.64 bln. The c/a figure warns that Q2 GDP, due out tomorrow, may be stronger than the 0.9% expected. The net-export function added 0.4% to GDP, the government’s stats bureau estimated today. The trade balance swung into surplus of $A6.5 bln in Q2 from a $A3.2 bln deficit in Q1.
