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Video for November 26th, 2008 (4 min): High Yielders Give Back Some of Recent Gains on Recession Fears
GER Import Price Index Down 3.6% in October
German import prices fell by 3.6% in October, a much bigger decline than was expected. In annual terms prices cooled to 2.9%, a sharp decline compared to the 7.6% rate seen in September.
GER Consumer Prices Ease Substantially in November
German consumer prices fell 0.5% in November preliminary data showed, surprising forecasts on the downside, and the annual rate gained 1.4% - the lowest annual rate since December of 2006. It has become apparent that inflation is retreating as the major economies of the world slide into recession, reducing economic activity and demand for commodities. It also gives the ECB leeway to keep cutting interest rates if it feels its necessary to help spur growth in the economy.
US Durable Goods Orders Plunge 6.2% in October
Durable goods orders fell 6.2% in October, the steepest decline in demand in two years. Durable goods orders show the willingness of companies and firms to make big ticket, long term purchases. A key measure of capital investment fell 4%, as companies restrain their investment spending in the face of weaker economic activity. US Personal Spending Falls A Sharp 1%, Incomes Increase 0.3% Personal spending fell 1% in October, the steepest fall in consumer spending in seven years. October saw the acceleration of stock market losses and the intensification of the global financial crisis. In that environment, and with job losses mounting and housing prices continuing to suffer as well, consumer scaled back purchases in a large way. Incomes increased 0.3%, so there was an increase in saving going. US Core PCE Lower Than Expected The reports inflation figures came in less than expected. The Personal Consumption Expenditures price index decreased 0.6% in October. The core PCE price index, which strips out energy and foods costs, remained unchanged. Falling energy prices have been a major catalyst in falling prices as consumers can fill up their tank for cheaper and face lower heating oil costs. US Jobless Claims Remain Above 500K, Level Consistent with Steep Job Losses The number of Americans filing new claims for unemployment benefits fell last week to 529K coming very close to the forecast by economists. Still the figure remained far above 500K, a very high level consistent with steep job losses. The 4-week moving average increased by 11K to 518K. Nonfarm payrolls have fallen 10-straight months, and the unemployment rate in the US is at a 14-year high of 6.5%. A loosening labor market will add to apprehension to consumers as they worry about their economic security. That will affect spending, which will hurt companies' bottom lines and increase layoffs in what can become a vicious cycle. US Chicago PMI Contracts Sharply, As Does UMich Consumer Sentiment The Chicago PMI deteriorated further, posting a 33.8 reading for November, a 4 point reduction from the 37.8 seen in October. New orders and employment decreased for the month as the economy weakens and consumers and firms purchase less goods. The final version of November's consumer sentiment came in at 55.3, a sharp slide compared to the preliminary reading of 57.9. The difference between the mid-month release and the end of the month saw a deterioration in current conditions, and a drop in future expectations. Weak consumer confidence has translated into weaker spending as was seen by today's personal spending data US New Homes Sales Fall 5.3% Sales on new homes fell 5.3% to an annualized rate of 433K in October, which was below forecasts and is the lowest level since 1991. Americans are reluctant to buy new homes, while builders have scaled back housing starts. The inventories to sales ratio increased, while prices for a new home retreated. EUR/USD - Grim Data Boosts Dollar as Safe Haven Refuge
The Euro-Dollar pair retreated from its recent 3-day rally, after setting an intraday high at 1.3070 to start the global session. It proceeded to fall overnight to the 1.2820 level a change of about 230 pips. The pair found support at the 38.2% retracement of its recent rally. The data from the US including weaker consumer spending, durable-goods orders and new-home sales brought back the harsh realities of what to expect for the rest of the 4th quarter and caused traders to seek refuge in the safe haven status of the greenback. EUR/JPY - Yen Gains on Risk Aversion
The Euro declined against the Yen as well, falling to 121.90 in NY trading, a 400 pip swing from the high set in yesterday's session. European stocks ended a choppy session with mixed results, as a rise by miners partly offset a weak performance by insurers and others. Increased risk aversion as a result of worries over global growth helped boost the Yen. A late rally in US stocks helped buck some of the gains by the Yen. GBP/USD - Pound Gives Back Some of Recent Gains on Recession Fears
The Pound-Dollar also retreated fro its recent rally. The UK released a second version of 3rd quarter GDP which showed investment and consumer spending falling. The attention on recession fears has brought markets back to the sentiments seen last week. The pair hit an intra day low near 1.5175 around noon NY time, a drop of nearly 300 pips from its high near 1.55. The late rally in US stocks helped the Pound to bounce off support. Tonight, Overnight and Tomorrow's Releases Tonight, New Zealand will release data on trade and business confidence and Australia reveals quarterly data on capital spending. Overnight, we get housing prices from UK, employment data from Germany and the end of the month sentiment report from the Euro-zone. Tomorrow the US will be celebrating Thanksgiving. At night, Japan will reveal data on manufacturing, household spending, retail sales, employment, consumer prices and industrial production. |
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