Weekly Review and Outlook Commodity Currencies Dumped, Dollar Rebound to Face GDP & NFP Test

Market Overview | Written by ActionForex.com | Jul 26 08 22:00 GMT |

Top 5 Current Last Change (Pips) Change (%) NZDUSD 0.7417 0.7609 -192 -2.59% NZDJPY 80.01 81.37 -136 -1.70% AUDUSD 0.9559 0.9699 -140 -1.46% USDCAD 1.0196 1.0054 +142 +1.39% USDCHF 1.0364 1.0223 +141 +1.36% Dollar EURUSD 1.5701 1.5848 -147 -0.94% USDJPY 107.89 106.96 +93 +0.86% GBPUSD 1.9912 1.9990 -78 -0.39% USDCHF 1.0364 1.0223 +141 +1.36% USDCAD 1.0196 1.0054 +142 +1.39% Euro EURUSD 1.5701 1.5848 -147 -0.94% EURGBP 0.7884 0.7926 -42 -0.53% EURCHF 1.6276 1.6204 +72 +0.44% EURJPY 169.40 169.46 -6 -0.04% EURCAD 1.6009 1.5936 +73 +0.46% Yen USDJPY 107.89 106.96 +93 +0.86% EURJPY 169.40 169.46 -6 -0.04% GBPJPY 214.84 213.82 +102 +0.47% AUDJPY 103.13 103.74 -61 -0.59% NZDJPY 80.01 81.37 -136 -1.70% Sterling GBPUSD 1.9912 1.9990 -78 -0.39% EURGBP 0.7884 0.7926 -42 -0.53% GBPCHF 2.0643 2.0438 +205 +0.99% GBPJPY 214.84 213.82 +102 +0.47% GBPCAD 2.0304 2.0104 +200 +0.99% A coupled of themes further developed in the forex markets last week. Dollar rebounded broadly on revived speculations on a near term rate hike from Fed. Markets are now pricing in around 50% chance that Fed will hike in Sep or Oct after Fed Plosser's hawkish comments. Yen had another extremely volatile week as investors' risk appetite flip-flopped and settled sharply lower against dollar and sterling. Euro, on the other hand, was soft after a string of disappointing sentiments indicators. Sterling was boosted by more hawkish than expected vote split revealed in BoE minutes. However, the most notable theme was indeed the lost of interest in commodity currencies. Among them, New Zealand dollar suffered most after RBNZ's surprised rate cut during the week. Canadian dollar was dumped further after crude oil dropped another 1.5% to $123.42 a barrel, over 16% off it's record high above $147 made on Jul 11. Aussie was dragged down by the kiwi as well as sharp fall in gold prices. AUD/JPY, NZD/JPY and CAD/JPY closed lower even though the yen was under tremendous pressure elsewhere. Technically speaking, the outlook in major pairs and crosses are mixed. On the one hand, dollar is still holding below near term resistance level against Euro, Sterling and even the Aussie, and thus there is not confirmation of a reversal yet. Though, outlook is USD/JPY, USD/CHF and USD/CAD are both suggesting more upside in the greenback should be seen. Euro is attempting an upside breakout against Swissy and at the same time a downside breakout against Sterling. Yen crosses remained generally very volatile. Also, considering that US Q2 GDP and Non-farm payroll will be featured this week, along with the development in equity and commodity markets, the forex markets will likely remain mixed and volatile this week. Currency Heat Map Weekly View USD EUR JPY GBP CHF CAD AUD USD EUR JPY GBP Dollar was talked up by Fed Plosser's hawkish comments early last week. Plosser argued that monetary policy makers will have to "back up their words with actions" to keep inflation expectations anchored. Fed will need to "reverse course" and Plosser anticipate the reversal to be started "sooner rather than later". Fed's Beige Book noted that all of the 12 districts said that prices were "elevated" or "increasing, supporting recent hawkish rhetoric of Plosser. Though, five districts reported a "softening in their overall economies". On the data front, Jun durable goods orders came in much stronger than expected. Headline orders rose for the second consecutive months by 0.8% versus expectation of -0.3% fall. Ex-transport orders is even more impressive, rising strongly by 2.0%, largest monthly increase since last Dec, versus expectation of -0.2% fall. U of Michigan sentiments revised sharply higher to 61.2. New home sales dropped -0.6% to 530k, above exp 504k. Though, existing home sales dropped more than expected by -2.6% mom to 4.86m annualized rate in Jun. Jobless claims surged back to above 400k to 406k. Leading indicators dropped -0.1% in Jun, inline with expectation. House price index dropped -0.3% mom in May, better than expectation of -0.8%. Sentiments in Eurozone businesses continued to deteriorate. German Ifo business climate fell much more than expected from 101.2 to 97.5 in Jul, hitting the lowest level since mid 2005. Current situation component also dropped further from 108.3 to 105.7. Expectation component dropped from 94.6 to 90.0. The indices of trade & industry, construction, wholesaling and retailing were all in negative territory with manufacturing index being positive only. In addition, PMI manufacturing and services both fell more than expected to 47.5 and 48.3 respectively in Jul, remaining in contraction region below 50. The data argues that growth in the Eurozone, including in Germany, will continue to slow throughout the rest of the year and into 2009. Other data from Eurozone saw current account deficit much wider than expected at -21.4b in May. Industrial orders dropped more than expected by -3.5% mom, -4.4% yoy in May. M3 monthly supply growth slowed sharply to 9.5% yoy, below expectation of 10.3%. Sterling was boosted by the BoE minutes which surprisingly showed a three way split in voting to keep rates unchanged at 5.00% earlier this month. Markets expected a 8-1 vote but the results showed a 1-7-1 split, with Besley voted for a hike and Blanchflower voted for a cut, with seven other members voted for no change. Besley called for the hike to anchor inflation as well as ensuring BoE's credibility. Q2 GDP came in as expected by 0.2% qoq, 1.6% yoy. Though, retail sales dropped more than expected by -3.9% mom in Jun, biggest fall since at least 1986. Yoy rate also dropped down from 7.9% to 2.2%. Rightmove house prices index showed deeper drop by -1.8% mom, -2.0% yoy in Jul. Swiss combined PPI climbed 0.6% mom, 4.5% yoy in Jun, up from prior 1.2% mom and 3.9% yoy and beat expectation of 0.4% mom, 4.3% yoy. Trade surplus jumped to 2.41B in Jun. Japan national CPI beat expectation and climbed 2.0% yoy in Jun. Corporate Service Price Index rose 1.2%, much stronger than expectation of 0.6%. All industry index climbed 0.4% in May, inline with expectation. Trade surplus released overnight shrank to 138.6b on strong growth in imports by 16.2% and a -1.7% drop in imports. Canadian Headline CPI in Canada surged sharply from 2.2% yoy to 3.1% yoy in Jun, beating expectation of 2.9%. Core CPI, though, was unchanged at 1.5% yoy, below consensus of 1.6%. May retail sales report missed expectation. Headline sales grew 0.4% versus consensus of 0.6% while ex-auto sales grew 0.4% versus expectation of 0.8%. Australian CPI jumped from 1.3% to 1.5% qoq in Q2, with yoy rate pushed up from 4.2% to 4.5%, above expectation of 1.3% qoq, 4.3% yoy. The core CPI, RBA trimmed mean jumped to 1.2% qoq, 4.3% yoy, hitting a 17 year high. Q2 PPI softened from 1.9% qoq to 1.0% qoq and from 4.8% yoy to 4.7% yoy. Markets expected a 5.3% yoy jump in PPI. RBNZ's surprised the markets by 25bps cut in OCR and issued a rather dovish statement. In the accompanying statement, RBNZ noted that "economic activity is likely to remain weak over the remainder of 2008," and "provided that the outlook for inflation continues to improve and there is no excessive exchange-rate depreciation, we would expect to lower the OCR further."

The Week Ahead

Developments in the equity markets and commodity markets will continue to be major driving forces in the forex markets, in particular, triggering volatility in Yen and Aussie. Meanwhile, note that while EUR/USD and AUD/USD are still both holding above key near term support, the bullish outlook is looking shaky. Much focus will be on this week's Q2 GDP, Non-farm payroll as well as ISM manufacturing index on whether the greenback can extend the board based rebound.

Other focus of the week include US consumer confidence, Chicago PMI, Eurozone HICP flash, unemployment rate & PMIs. Germany Gfk consumer confidence, UK Manufacturing PMI and Gfk survey. Japanese unemployment and retail sales, Swiss KOF leading indicator and CPI, Canadian May GDP, Australia retail sales and trade balance, New Zealand Trade Balance.

USD/CAD Weekly Outlook

USD/CAD's rebound 0.9974 extended further to as high as 1.0206 last week. As discussed before, with correction from 1.0322 should have completed with three waves down to 0.9974, above mentioned key near term support at 0.9557. Initial bias remains on the upside this week and break of 1.0230 resistance will confirm this case. In other words, further rally should then be seen to 1.0378 medium term resistance first. On the downside, below 1.0126 will turn intraday outlook neutral first.

In the bigger picture, corrective nature of the price actions inside medium term range of 0.9709 and 1.0378 argues that it's merely consolidation to the whole rebound from 0.9056. Recent price actions argues that a break out is around the corner and above 1.0378 will confirm that rise from 0.9056 has resumed for 61.8% projection of 0.9056 to 1.0378 from 0.9709 at 1.0526 and above. On the downside, below 0.9974 will indicate that consolidation from 1.0378 is going to extend further with another test of 0.9709 support before completion.

In the longer term picture, a medium term bottom is in place at 0.9056 after USD/CAD just missed double projection target of 161.8% projection of 1.4006 to 1.1716 from 1.2737 at 0.9032 and 161.8% projection of 1.2737 to 1.0930 from 1.1874 at 0.8950. But with key medium term resistance zone of 1.0930, 38.2% retracement of 1.4006 to 0.9056 at 1.0947 and 50% retracement of 1.2737 to 0.9056 at 1.0897 remains intact, the long term down trend from 1.6196 is still in force. Though, break of 0.9709 support is needed to indicate rebound from 0.9056 has completed first before considering resumption of the long term down trend.

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FACTBOX-Key facts on Fannie Mae and Freddie Mac

Sat Jul 26, 2008 11:56am EDT


July 26 (Reuters) - The U.S. Congress has passed a housing bill aimed at rescuing the ailing housing market and shoring up Fannie Mae and Freddie Mac, enabling to two housing finance titans to support the U.S. home market.

Here are some key facts about the two companies:

FANNIE MAE:

-- Formal name: Federal National Mortgage Association

-- Created in 1938 by Congress as part of a campaign aimed at expanding the secondary U.S. mortgage market and increasing home ownership and rental housing.

-- Annual revenue: $43.71 billion (Dec. 31, 2007)

-- CEO: Daniel H. Mudd

-- Shares touched a 52-week high of $70.57 on Aug. 22, 2007 and fell as low as $6.68 on July 11, but closed at $11.55 on Friday.

FREDDIE MAC:

-- Formal name: Federal Home Loan Mortgage Corp.

-- Created in 1970 by Congress as part of a campaign aimed at expanding the secondary U.S. mortgage market and increasing home ownership and rental housing

-- Annual revenue: $42.91 billion (Dec. 31, 2007)

-- Common stock outstanding: 646.27 million (Jan. 31, 2008)

-- CEO: Richard F. Syron.

-- Shares touched a 52-week high of $66.65 on Aug. 17, 2007 and fell as low as $3.89 on July 11, but closed at $8.27 on Friday.

WHAT DO THE COMPANIES DO?

Fannie Mae and smaller Freddie Mac are shareholder-owned companies charged by Congress with supporting housing by keeping money flowing in the mortgage market. Due to the congressional charter, the two are often referred to as government-sponsored enterprises, or GSEs.

Due largely to an implied government guarantee, they are able to raise funds relatively cheaply by selling debt to investors. The funds they raise are then used to purchase home loans from mortgage originators such as banks, allowing the lenders to make fresh home loans.

While the collapse of the subprime mortgage market, which caters to borrowers with poor credit histories, has contributed significantly to the U.S. housing slump, the vast majority of mortgages purchased by Fannie Mae and Freddie Mac are prime, fixed-rate loans on which borrowers are current.

Fannie Mae and Freddie Mac bundle the loans they purchase into securities which are sold, with a guarantee of payment, to investors worldwide. In addition, the two companies also guarantee mortgages and pay owners of the loans when there is a default.

SIZE OF INVESTMENTS

The two companies hold some of the loans they purchase and securities they bundle in their investment portfolios. Fannie Mae said its portfolio was $736.9 billion in May, the highest since August 2005, while Freddie Mac said its portfolio was a record $791.8 billion in June.

Including investments and guarantees, Fannie Mae's total book of business topped $3 trillion for the first time in May, twice its size at the beginning of 2002.

With Freddie Mac's $2.2 trillion in investments and guarantees, the two have a hand in nearly half of the entire, $12 trillion national mortgage market.

WHY ARE THEY IN TROUBLE?

As the housing market continues to deteriorate, foreclosures have spread beyond subprime loans to higher-quality mortgages. The two companies have been required to write down their loans held for investment and pay out on guaranteed mortgages that default, depleting their capital.

Fannie Mae and Freddie Mac have reported more than $11 billion in losses since the housing market bubble burst.

Contrary to many other financial institutions, Fannie Mae and Freddie Mac have never been required to hold much capital relative to their assets. That leaves them with a smaller cushion for absorbing losses.

A lack of capital also indicates they are unable to buy mortgages from lenders.

THE SOLUTION?

Analysts and investors expect the two companies to raise capital.

Fannie Mae raised $7.4 billion of capital in April and May by selling common and preferred shares. Freddie Mac has announced plans to raise $5.5 billion but its ability to do that by selling shares will be difficult given the sharp drop in its stock price.

WHY DOES IT MATTER IF THEY REMAIN SOLVENT?

The two companies' presence in the struggling housing market is widely considered to be critical. They help keep mortgage rates low for many consumers, but the companies are struggling to balance growth through buying loans against rising delinquencies. The companies' debt instruments, which have a high credit rating, are widely held by banks and institutional investors around the world. A crisis in confidence could not only damage the companies but increase the cost of borrowing for the U.S. government.

IS THERE A PRECEDENT?

In 1979, Fannie Mae became insolvent as the market value of its liabilities exceeded the market value of its assets. This turned around as market factors eventually worked in the company's favor. The U.S. government did not get involved.

WHO OVERSEES THE TWO COMPANIES?

The Office of Federal Housing Enterprise Oversight, created in 1992. The agency is widely considered to lack crucial powers to oversee the companies and would be replaced by a stronger regulator under the just-passed legislation. (Compiled by Carl Bagh from Reuters source material, Editing by Jonathan Oatis)



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US Congress approves housing bill, sends to Bush

Sat Jul 26, 2008 4:11pm EDT


(Adds White House statement)

By Kevin Drawbaugh

WASHINGTON, July 26 (Reuters) - The U.S. Congress approved a massive housing market rescue bill on Saturday, offering emergency financing to mortgage titans Fannie Mae (FNM.N: Quote, Profile, Research, Stock Buzz) and Freddie Mac (FRE.N: Quote, Profile, Research, Stock Buzz), and setting up a $300-billion fund to help hundreds of thousands of troubled homeowners.

Approved by the Senate in a 72-13 vote, the election-year rescue bill was passed by the House of Representatives on Wednesday. President George W. Bush was expected to sign it promptly, amid doubts about how much it would help.

With foreclosures at record levels, home sales sluggish and property values down, America is in its deepest housing slump since the Great Depression.

Fears that Fannie Mae and Freddie Mac, the largest U.S. mortgage companies, might collapse rattled global markets earlier this month and led the Bush administration to call for emergency measures to bolster investor confidence.

They recently lost billions of dollars on bad home loans and the stock market has whipsawed their share prices on uncertainty about whether they have enough capital.

Housing activists and scholars said this election-year bill will ease, but not end, the housing crisis.

"We have a housing market going into cardiac arrest. This bill is like CPR to stabilize the situation," said David Abromowitz, a senior fellow at the Center for American Progress, a think tank in Washington.

The National Community Reinvestment Coalition, an alliance of 600 community investment and development groups, estimated 2.5 million U.S. households will face foreclosure this year.

While Congress' legislation is welcome, the coalition said, it "will likely have little effect on the foreclosure crisis gripping the financial markets and economy."

HELP FOR FANNIE, FREDDIE

As private finance has retreated from the mortgage sector, the importance of Fannie Mae and Freddie Mac has grown, and they own or guarantee almost half the country's $12 trillion in outstanding home mortgage debt.

Under a provision put into the bill late in its development at the administration's urging, Fannie and Freddie could draw on a temporary line of U.S. Treasury credit or the government could buy shares in them, if they ran into trouble.

Texas Republican Sen. Kay Bailey Hutchison said the housing bill had positive aspects. But she added, "I am troubled by the inclusion of an unlimited U.S. Treasury credit line to Fannie Mae and Freddie Mac" and possible government stock purchases.

The bill establishes a $300-billion fund under the Federal Housing Administration to help distressed homeowners get more affordable, government-backed mortgages and get out from under exotic mortgages they cannot afford.

The success of the temporary fund will depend on lenders' willingness to accept losses on original loans to shift overstretched borrowers into new loans. An estimated 400,000 families could be helped by the program.

But it would not take effect until Oct. 1 and housing activists said it might not be in full operation until 2009.

Connecticut Democratic Sen. Christopher Dodd, who steered the bill through the Senate, said the FHA fund should need "four months to get it up and running." He said he would meet with agency officials to urge rapid implementation.

The bill sends about $4 billion in grants to communities to help them buy and repair foreclosed homes; offers tax breaks to spur home-buying; sets up the first national licensing system for mortgage brokers and loan officers; and raises the limit on the size of mortgages that federal agencies can guarantee.

NEW REGULATOR

The bill also creates a new regulator for the shareholder-owned companies with sharper teeth than the existing one, including power over their capital levels and over their executive compensation and internal financial controls, and with Federal Reserve consultation.

Because Fannie Mae and Freddie Mac are chartered by Congress they are often referred to as government-sponsored enterprises, which also gives them an implied government guarantee.

Senate Majority Leader Harry Reid, a Nevada Democrat, told reporters after the vote he expects the bill to be sent to the White House on Monday.

"Because of the Democratic Congress' delays and the need for action now, President Bush will sign this bill when he receives it, despite our concerns with some provisions, including nearly $4 billion to help lenders, not the homeowners this legislation is intended to serve," White House spokesman Tony Fratto said.

Both presidential contenders Barack Obama and John McCain praised the Senate's passage of the housing bill.

Illinois Democratic Sen. Obama said in a statement that the bill was "urgently needed" and represented "an important start to protecting homeowners and restoring stability to our housing market and our economy."

Sen. McCain, an Arizona Republican, "believes that relief for struggling homeowners is overdue, applauds the passage of this legislation and urges the president to sign it quickly," said McCain spokesman Taylor Griffin in a statement. (Reporting by Kevin Drawbaugh and Patrick Rucker, editing by Jackie Frank)



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Apple CEO Jobs' life not in danger: report

Sat Jul 26, 2008 4:05pm EDT

LOS ANGELES (Reuters) - Apple Inc CEO Steve Jobs, who has been dogged by investor concerns about his health, does not have recurrent cancer or a life-threatening health issue, The New York Times reported on Saturday.

"While his health problems amounted to a good deal more than 'a common bug,' they weren't life-threatening and he doesn't have a recurrence of cancer," journalist Joe Nocera wrote in a column.

Nocera said he spoke to the Apple CEO about his health.

"Because the conversation was off the record, I cannot disclose what Mr. Jobs told me," Nocera said.

An Apple spokesman was not immediately available for comment.

In 2004, Jobs, 53, announced he had undergone successful surgery to remove a rare type of pancreatic cancer.

Concerns about his health roared back last month, when a thinner-than-usual Jobs introduced the latest iteration of the iPhone at a conference in San Francisco.

Apple, which first attributed the weight loss to a common bug, has said repeatedly Jobs' health is a private matter. The lack of disclosure from the company -- well-known for its secrecy -- caused investors and analysts to fret.

On Wednesday, the Times reported Jobs had told associates he was doing well and was cancer free.

Citing people close to Jobs, the article said Jobs had told associates and Apple directors he was dealing with nutritional problems in the wake of his cancer surgery and that he had had surgery this year to fix a problem contributing to his weight loss.

(Reporting by Lisa Baertlein; editing by Todd Eastham)




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Economic Calendar Summary 7/27 - 8/1

Sunday, Jul 27, 2008

GMT	Ccy	Events	Consensus	Previous
22:45	NZD	Trade Balance (New Zealand dollars) (JUN)	-350.0M	-195.8M
22:45	NZD	Imports (New Zealand dollars) (JUN)	3.70B	3.92B
22:45	NZD	Exports (New Zealand dollars) (JUN)	3.35B	3.73B

Monday, Jul 28, 2008

GMT	Ccy	Events	Consensus	Previous
6:10	EUR	German GfK Consumer Confidence Survey (AUG)	3.5	3.9
22:45	NZD	Building Permits (MoM) (JUN)	--	-42.3%
23:30	JPY	Jobless Rate (JUN)	4.0%	4.0%
23:30	JPY	Job-To-Applicant Ratio (JUN)	0.91	0.92
23:30	JPY	Household Spending (YoY) (JUN)	-2.8%	-3.2%
23:50	JPY	Large Retailers' Sales (JUN)	-3.4%	-2.1%
23:50	JPY	Retail Trade s.a. (MoM) (JUN)	-0.2%	0.2%
23:50	JPY	Retail Trade (YoY) (JUN)	-0.6%	-0.2%

Tuesday, Jul 29, 2008

GMT	Ccy	Events	Consensus	Previous
6:40	EUR	French Consumer Confidence Indicator (JUL)	-47	-46
6:45	EUR	French Producer Prices (MoM) (JUN)	0.8%	1.3%
6:45	EUR	French Producer Prices (YoY) (JUN)	7.3%	6.7%
6:45	EUR	French Housing Starts (3MoY) (JUN)	--	-21.6%
6:45	EUR	French Housing Permits (3MoY) (JUN)	--	-19.9%
8:00	EUR	Italian Hourly Wages (MoM) (JUN)	--	0.6%
8:00	EUR	Italian Hourly Wages (YoY) (JUN)	--	3.3%
8:00	CHF	UBS Consumption Indicator (JUN)	--	1.91
8:30	GBP	M4 Money Supply (MoM) (JUN F)	--	--
8:30	GBP	M4 Money Supply (YoY) (JUN F)	--	11.5%
8:30	GBP	M4 Sterling Lending (British Pound) (JUN F)	--	45.9B
8:30	GBP	Net Consumer Credit (British Pound) (JUN)	1.0B	1.4B
8:30	GBP	Net Lending Sec. on Dwellings (British Pound) (JUN)	3.7B	4.1B
8:30	GBP	Mortgage Approvals (JUN)	37K	42K
13:00	USD	S&P/CaseShiller Home Price Index (MAY)	--	169.9
13:00	USD	S&P/CaseShiller Composite-20 (YoY) (MAY)	-16.0%	-15.3%
14:00	USD	Consumer Confidence (JUL)	50	50.4
21:00	USD	ABC Consumer Confidence (JUL 27)	--	-41
23:50	JPY	Industrial Production (MoM) (JUN P)	-1.6%	2.8%
23:50	JPY	Industrial Production (YoY) (JUN P)	0.6%	1.1%

Wednesday, Jul 30, 2008

GMT	Ccy	Events	Consensus	Previous
--	AUD	HIA New Home Sales (MoM) (JUN)	--	-5.0%
--	EUR	German Retail Sales (MoM) (JUN)	-0.5%	1.3%
--	EUR	German Retail Sales (YoY) (JUN)	-0.7%	0.7%
1:30	AUD	Building Approvals (MoM) (JUN)	1.0%	-6.5%
1:30	AUD	Building Approvals (YoY) (JUN)	-4.1%	0.2%
3:00	NZD	Money Supply M3 (YoY) (JUN)	--	4.9%
4:00	JPY	Vehicle Production (YoY) (JUN)	--	6.8%
8:00	EUR	Italian Producer Price Index (MoM) (JUN)	0.9%	1.5%
8:00	EUR	Italian Producer Price Index (YoY) (JUN)	8.2%	7.5%
8:00	EUR	Bloomberg Italian Retail Purchasing Manager Index (JUL)	--	36.3
8:00	EUR	Bloomberg French Retail Purchasing Manager Index (JUL)	49	48.7
8:00	EUR	Bloomberg German Retail Purchasing Manager Index (JUL)	--	44.9
8:00	EUR	Bloomberg Euro-Zone Retail Purchasing Manager Index (JUL)	--	44.0
9:00	EUR	Euro-Zone Economic Confidence (JUL)	93	94.9
9:00	EUR	Euro-Zone Industrial Confidence (JUL)	-7	-5
9:00	EUR	Euro-Zone Services Confidence (JUL)	8	9
9:00	EUR	Euro-Zone Business Climate Indicator (JUL)	-0.02	0.14
9:00	EUR	Euro-Zone Consumer Confidence (JUL)	-18	-17
9:30	CHF	KOF Swiss Leading Indicator (JUL)	0.95	1.01
11:00	USD	MBA Mortgage Applications (JUL 25)	--	-6.2%
12:15	USD	ADP Employment Change (JUL)	-53K	-79K
12:30	CAD	Industrial Product Price (MoM) (JUN)	1.0%	0.6%
12:30	CAD	Raw Materials Price Index (MoM) (JUN)	3.0%	3.1%
23:01	GBP	GfK Consumer Confidence Survey (JUL)	-37	-34
23:50	JPY	Foreign Buying Japan Stocks (Yen) (JUL 25)	--	333.5B
23:50	JPY	Foreign Buying Japan Bonds (Yen) (JUL 25)	--	-297.2B
23:50	JPY	Japan Buying Foreign Stocks (Yen) (JUL 25)	--	71.1B
23:50	JPY	Japan Buying Foreign Bonds (Yen) (JUL 25)	--	172.3B
1:30	JPY	Labor Cash Earnings (YoY) (JUN)	0.6%	0.2%
1:30	AUD	Private Sector Credit (MoM) (JUN)	0.6%	0.6%
1:30	AUD	Private Sector Credit (YoY) (JUN)	12.1%	13.4%
1:30	AUD	Trade Balance (Australian dollars) (JUN)	-100M	-965M
1:30	AUD	Exports (Australian dollars) (MoM) (JUN)	--	--
1:30	AUD	Imports (Australian dollars) (MoM) (JUN)	--	--
1:30	AUD	Retail Sales (JUN)	0.0%	0.7%
1:30	AUD	Retail Sales Ex Inflation (QoQ) (2Q)	-0.1%	-0.1%
3:00	NZD	NBNZ Business Confidence (JUL)		-38.7

Thursday, Jul 31, 2008

GMT	Ccy	Events	Consensus	Previous
5:00	JPY	Housing Starts (YoY) (JUN)	-17.8%	-6.5%
5:00	JPY	Annualized Housing Starts (JUN)	1.110M	1.072M
5:00	JPY	Construction Orders (YoY) (JUN)	--	-25.2%
5:45	CHF	Consumer Price Index (MoM) (JUL)	-0.4%	0.2%
5:45	CHF	Consumer Price Index (YoY) (JUL)	3.0%	2.9%
7:55	EUR	German ILO Unemployment Change (JUL)	-20K	-38K
6:00	EUR	German ILO Unemployment Rate (JUN)	7.4%	7.4%
8:00	EUR	Italian Large Company Employment n.s.a. (YoY) (MAY)	--	0.0%
9:00	EUR	Italian Consumer Price Index (NIC incl. tobacco) (MoM) (JUL P)	0.4%	0.4%
9:00	EUR	Italian Consumer Price Index (NIC incl. tobacco) (YoY) (JUL P)	4.0%	3.8%
9:00	EUR	Italian Consumer Price Index - EU Harmonized (MoM) (JUL P)	-0.3%	0.5%
9:00	EUR	Italian Consumer Price Index - EU Harmonized (YoY) (JUL P)	4.2%	4.0%
9:00	EUR	Euro-Zone Consumer Price Index Estimate (YoY) (JUL)	4.1%	4.0%
9:00	EUR	Euro-Zone Unemployment Rate (JUN)	7.2%	7.2%
12:30	CAD	Gross Domestic Product (MoM) (MAY)	0.2%	0.4%
12:30	USD	Gross Domestic Product (QoQ) (Annualized) (2Q A)	2.0%	1.0%
12:30	USD	Gross Domestic Product Price Index (2Q A)	2.7%	2.7%
12:30	USD	Personal Consumption (2Q A)	1.4%	1.1%
12:30	USD	Core Personal Consumption Expenditure (QoQ) (2Q A)	2.0%	2.3%
12:30	USD	Employment Cost Index (2Q)	0.7%	0.7%
12:30	USD	Initial Jobless Claims (JUL 26)	390K	406K
12:30	USD	Continuing Claims (JUL 19)	--	3107K
13:45	USD	Chicago Purchasing Manager (JUL)	49.0	49.6
14:00	USD	NAPM-Milwaukee (JUL)	45	39
23:30	AUD	AiG Performance of Manufacturing Index (JUL)	--	47
23:50	JPY	Loans & Discounts Corp (YoY) (JUN)	--	1.0%

Friday, Aug 1, 2008

GMT	Ccy	Events	Consensus	Previous
0:30	AUD	TD Securities Inflation (MoM) (JUL)	--	0.5%
0:30	AUD	TD Securities Inflation (YoY) (JUL)	--	4.8%
4:00	USD	Domestic Vehicle Sales (JUL)	--	--
4:00	USD	Total Vehicle Sales (JUL)	--	--
5:00	JPY	Vehicle Sales (YoY) (JUL)	--	-3.6%
6:30	AUD	RBA Commodity Index SDR (YoY) (JUL)	--	38.2%
7:45	EUR	Italian Purchasing Manager Index Manufacturing (JUL)	46	46.9
7:50	EUR	French Purchasing Manager Index Manufacturing (JUL F)	47.3	47.3
7:55	EUR	German Purchasing Manager Index Manufacturing (JUL F)	50.9	50.9
8:00	EUR	Euro-Zone Purchasing Manager Index Manufacturing (JUL F)	47.5	47.5
8:30	GBP	Purchasing Manager Index Manufacturing (JUL)	45.5	45.8
12:30	USD	Change in Nonfarm Payrolls (JUL)	-75k	-62k
12:30	USD	Unemployment Rate (JUL)	5.6%	5.5%
12:30	USD	Change in Manufacturing Payrolls (JUL)	-40K	-33K
12:30	USD	Average Hourly Earnings (MoM) (JUL)	0.3%	0.3%
12:30	USD	Average Hourly Earnings (YoY) (JUL)	3.3%	3.4%
12:30	USD	Average Weekly Hours (JUL)	33.7	33.7
13:00	USD	RPX Composite 28-Day Index (MAY)	--	234.41
13:00	USD	RPX Composite 28-Day (YoY) (MAY)	--	-14.67%
14:00	USD	ISM Manufacturing (JUL)	49.2	50.2
14:00	USD	ISM Prices Paid (JUL)	88.0	91.5
14:00	USD	Construction Spending (MoM) (JUN)	-0.3%	-0.4%
16:00	EUR	Italian New Car Registrations (YoY) (JUL)	--	-19.5%
17:00	EUR	Italian Budget Balance (JUL)	--	15.8B
17:00	EUR	Italian Budget Balance (YTD) (JUL)	--	-23.5B

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UBS suspends U.S. fixed income head amid probes: report

Sat Jul 26, 2008 3:29pm EDT

CHICAGO (Reuters) - Swiss bank UBS AG has suspended David Shulman, head of its U.S. fixed income unit, amid state and federal probes of sales of auction-rate securities, the Wall Street Journal reported on Saturday, citing people familiar with the matter.

A spokesman for Shulman, who was also UBS's global head of municipal securities, said he was cooperating fully with UBS as it works through the matter, the newspaper reported.

On Thursday, New York State Attorney General Andrew Cuomo sued UBS, accusing it of committing a "multi-billion dollar fraud" by steering clients into auction-rate securities that became impossible to sell once the credit market tightened.

The long-term securities are issued by municipalities, student-loan companies and mutual funds, with interest rates set through weekly or monthly auctions.

The lawsuit said at least seven UBS executives dumped $21 million in auction-rate securities that they held in personal accounts as the credit market began showing signs of trouble, and that the bank continued to sell those securities.

UBS said it conducted an internal probe of alleged sales of personal holdings of auction-rate debt by its executives and found no wrongdoing.

"While UBS does not believe that there was illegal conduct by any employee, we have found cases of poor judgment by certain individuals and are evaluating appropriate disciplinary measures," the bank said last week.

Last week, UBS announced a plan to buy back as much as $3.5 billion in auction-rate securities from customers. Cuomo dismissed that offer as insufficient.

(Editing by John O'Callaghan)



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Dollar Mostly Higher on Better-Than-Expected US Data

Daily Forex Fundamentals | Written by CMS Forex | Jul 26 08 06:05 GMT |

The dollar was mostly higher Friday following better-than-expected US economic data. US June durable-goods orders unexpectedly rose and a decline in June new-home sales was smaller than forecast, easing concern that the US economic slowdown will worsen. An unexpectedly rise in the Reuters/University of Michigan consumer sentiment index also supported the greenback. The Canadian and Australian dollars fell for a fourth day. The USD/JPY was higher, close to important resistance, as US equity prices advanced. The EUR/JPY was also higher, at important resistance, on increased risk appetite. The European currencies gained. The EUR/USD pared earlier gains on the better-than-expected US economic reports. The pair touched 1.60 in April and July but failed to penetrate this resistance. This could be a double top, indicating lower prices. Fundamentally the US economic weakness is spreading to Europe. Supports at 1.54 and 1.56 are significant. If these are broken, the pair will drop. Financial and Economic News and Comments US & Canada US durable-goods orders unexpectedly rose 0.8% m/m in June to a seasonally adjusted $215.43 billion, the Commerce Department said. Excluding transportation, orders unexpectedly gained 2.0% m/m. Durable-goods orders fell 1.1% y/y, but up 6.2% y/y excluding transportation. A barometer of business equipment spending -- orders for non-defense capital goods excluding aircraft -- increased 1.4% m/m in June following May's 0.1% m/m decline. The barometer increased 3.8% y/y, indicating capital spending has not collapsed despite tight credit conditions. US new-home sales fell 0.6% m/m to an annual rate of 530,000 in June from May's upwardly revised 533,000, the Commerce Department said. The decline, the fifth in six months, was smaller than expected. Sales dropped 33.2% y/y. Sales increased in the Northeast and Midwest but declined in the South and West. At the current sales pace, the supply of unsold new homes fell to 10.0 months in June. Three months ago, the months' supply was at 11.2, the highest since 1981. The inventory of new homes fell to 426,000, down 25.4% from the peak in mid-2006. The median price of new homes sold was $230,900 in June, down 2.0% y/y. The average price of new homes sold was $298,600, down 2.6% y/y. The Reuters/University of Michigan final index of consumer sentiment unexpectedly rose to 61.2 in July, up from a preliminary reading of 56.6 in early July and from 56.4 in June. The measure averaged 85.6 in 2007. The consumer expectations index increased to 53.5 in July from 49.2 in June. The current conditions index rose to 73.1 from 67.6. The figures showed slight improvement in US consumer confidence. Europe The UK economy grew 0.2% q/q in Q2 2008, the slowest pace since 2001, as the UK is headed for a recession. The Q2 GDP grew 1.6% y/y, the least since 2005, preliminary data from the Office for National Statistics showed. Asia-Pacific Japan's core consumer-price index, which excludes volatile fresh food prices but includes oil prices, rose 1.9% y/y in June, in line with expectation. Excluding both food and energy, prices increased 0.1% y/y in June. The Tokyo-area core CPI, available a month before nationwide data, rose 1.6% y/y in July, the biggest increase since 1998. FX Strategy Update EUR/USD USD/JPY GBP/USD USD/CHF USD/CAD AUD/USD EUR/JPY Primary Trend Positive Negative Negative Negative Negative Positive Positive Secondary Trend Neutral Neutral Neutral Neutral Neutral Neutral Positive Outlook Neutral Neutral Neutral Neutral Neutral Neutral Neutral Action None Sell None None None None None Current 1.5697 107.88 1.9903 1.0368 1.0196 0.9558 169.36 Start Position N/A 107.95 N/A N/A N/A N/A N/A Objective N/A N/A N/A N/A N/A N/A N/A Stop N/A 108.50 N/A N/A N/A 0.9570 N/A Support 1.5600 105.00 1.9800 1.0200 1.0000 0.9500 166.00 1.5400 103.00 1.9600 0.9980 0.9800 0.9300 162.00 Resistance 1.5800 108.20 2.0100 1.0400 1.0300 0.9800 170.00 1.6020 110.00 2.0300 1.0600 1.0400 1.0000 172.00 Hans Nilsson Capital Market Services, L.L.C. www.cmsfx.com ©C2004-2005 Globicus International, Inc. and Capital Market Services, L.L.C. Any information in this report is based on data obtained from sources considered to be reliable, but no representations or guarantees are made by Capital Market Services, L.L.C. with regard to the accuracy of the data. The opinions and estimates contained herein constitute our best judgment at this date and time, and are subject to change without notice. Capital Market Services, L.L.C. accepts no responsibility or liability whatsoever for any expense, loss or damages arising out of, or in any way connected with, the use of all or any part of this report. No part of this report may be reproduced or distributed in any manner without the permission of Capital Market Services, L.L.C.

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Strong US Durable Goods Orders Gives Dollar Bulls Further Ammunition this Week, Risk Appetite Returns

Daily Forex Fundamentals | Written by CMS Forex | Jul 26 08 06:01 GMT |

JPN National Consumer Inflation Continues to Rise on Energy, Toyko CPI Undershoots Forecasts Japan's national consumer price index for June rose 2% compared to last year. It was the fastest pace in 10 years. Inflation excluding food was up 1.9%. Looking at inflation minus both food and energy, prices were up 0.1%. It's easy to see that consumers are paying more for gas and electricity. In a measure of consumer inflation around the Tokyo area, which leads the national survey by one month prices were up 1.6%, lower than expected. CPI excluding food and energy was also lower than forecast. JPN Corporate Service Price Index Rises 1.2% Year over Year in June The prices that Japanese corporations pay for services rose 1.2% in June compared to last year. May's figure was revised up as well. Transportation led the increase, climbing 6.2% even as other services like communications and advertising were down for the year. UK 2nd Quarter GDP Slows to 0.2%, Worst in 7 Years In the UK, GDP growth in the second quarter met expectations of a 0.2% quarterly increase and a 1.6% increase on a year-over-year basis. The quarterly change is the slowest pace in 7 years. The troubles that started with the financial turmoil and a housing correction have now seeped into the banking, construction and manufacturing sectors. GBP/JPY - Pound Pares Yesterday's Looses vs Yen The Pound-Yen pair fell sharply during yesterday's session and continued falling to start today's global session on the back of weaker global stocks. Risk appetite returned prior to the NY open and the pair surged almost 270 pips from its intra-day low. This put the pair back above the level at which it started the week. Positive results from the US helped spur a rally in US stocks in today's session. US Durable Goods Orders Increase 0.8%, Beating Expectations Orders for durable goods surprised on the upside, increasing 0.8%, a positive piece of news that shows US manufacturers doing better than expected. Orders excluding transportation were up 2%, the highest this year. US New Home Sales Better Than Expected Last 2 Months Sales of new homes were down 0.6% this month, but only because the figures for the month of May were revised up modestly. For June, the annual pace of new home sales was 530K, better than expectations. US UMich Consumer Sentiment Improves to 61.2, Surprises Forecasts The UMich consumer confidence index surprised forecasts and improved to 61.2 for July's revised version. It was at 56.6 in the preliminary release. Both current and future expectations saw an increase though the gains may be a temporary bounce as consumers may have at first overestimated how poor conditions were. EUR/USD - Strong Durable Goods Orders Boosts Dollar in Today's Trading The Euro-Dollar pair gained overnight on hawkish comments from a member of the ECB Council who said that the bank still had room to raise rates this year. The Euro tested 1.5750, but reversed course after the US orders data. The pair fell to trade near 1.57 by mid afternoon. The week has seen a strong swing in favor of the Dollar. European fundamental data was quite poor, oil prices kept falling and the crisis surrounding Fannie Mae and Freddie Mac seemed to be alleviated by a government bailout. USD/JPY - US Stocks Show Positive Signs, and Risk Appetite Returns After a very brutal Thursday session on Wall Street, today's positive US fundamental releases helped spur a rally. The Dollar-Yen pair pared its overnight losses and was back at the 108 level which has acted as resistance recently. USD/CAD - Loonie Sinks This Week on Retail Sales, Falling Oil The US Dollar-Canadian Dollar broke above another level of resistance at 1.0150 today, climbing to test the area near 1.02. That's a 200 pip swing since the pair tested parity on Tuesday. Falling oil prices and a weaker than expected retail sales report on Tuesday have been the main catalysts for the weakness in the Canadian Dollar. USD/ZAR - Return to Carry Trade Boosts Rand in Friday Trading The US Dollar-South African Rand pair had a topsy-turvy week. The Dollar gained in the middle of the week on an increase in risk aversion, but with today's increase in risk appetite the Rand pared its losses and was trading back near the 7.59 area. South Africa's interest rate is at 12% currently, making it a key destination for carry trade. Next Week's Releases Important releases next week include GDP and non-farm payroll data from the US, a slew of releases from Australia including retail sales and trade balance, and data on consumer inflation from the Euro-zone. Capital Market Services, L.L.C. www.cmsfx.com ©C2004-2005 Globicus International, Inc. and Capital Market Services, L.L.C. Any information in this report is based on data obtained from sources considered to be reliable, but no representations or guarantees are made by Capital Market Services, L.L.C. with regard to the accuracy of the data. The opinions and estimates contained herein constitute our best judgment at this date and time, and are subject to change without notice. Capital Market Services, L.L.C. accepts no responsibility or liability whatsoever for any expense, loss or damages arising out of, or in any way connected with, the use of all or any part of this report. No part of this report may be reproduced or distributed in any manner without the permission of Capital Market Services, L.L.C.

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Japanese Five-Year Bonds Complete Weekly Decline on Stock Rally

By Theresa Barraclough

July 26 (Bloomberg) -- Japan's five-year government notes completed a weekly decline for the first time since July 4 as stock indexes rallied, reducing demand for the security of debt.

Five-year yields this week reached the highest since July 9 after the Nikkei 225 Stock Average completed its biggest weekly advance in five months as crude oil prices declined. Bonds also fell after U.S. lawmakers approved a rescue plan for the nation's two largest mortgage-finance companies, easing concerns that financial-market losses will widen.

``In the first half of this week, the financial uncertainty of the financial system peaked out'' weighing on bonds, said Koji Shimamoto, chief strategist at BNP Paribas Securities Japan Ltd. in Tokyo and the top-rated debt analyst in Japan according to Nikkei Veritas. The bond ``market corresponds to the other market and in this case it's the equity market.''

The yield on the 1.3 percent note due June 2013 rose 2.5 basis points this week to 1.14 percent in Tokyo at Japan Bond Trading Co., the nation's largest interdealer debt broker. The price fell 0.119 yen to 100.741 yen. The yield reached as high as 1.22 percent on July 24. Ten-year yields were unchanged at 1.57 percent on the week. A basis point is 0.01 percentage point.

The Nikkei 225 advanced 4.2 percent this week, the biggest weekly rally since Feb. 15. Crude oil futures fell by about 2 percent this week to $125.84 a barrel.

Japan's bonds often move in the opposite direction to stocks. Benchmark 10-year yields had a correlation of 0.78 with the Nikkei 225 in the past three weeks, according to data compiled by Bloomberg. A value of 1 would mean the two moved in lockstep.

Fannie, Freddie

Ten-year bonds fell for three straight days this week after U.S. lawmakers approved a bill that gives Treasury Secretary Henry Paulson authority to bail out Fannie Mae and Freddie Mac, and provides for a federal agency to insure up to $300 billion of refinanced home loans for struggling owners.

The demand for bonds was limited this week on speculation the Bank of Japan will keep interest rates on hold amid signs the global economy is slowing. Five-year yields lost 7.5 basis points to 1.14 percent yesterday.

``There is a possibility that Japan's economy will slip into a light recession,'' Bank of Japan board member Atsushi Mizuno said on July 24 at a news conference.

Japan's exports fell for the first time in more than four years as demand for cars and electronics cooled, the Finance Ministry said on July 24.

The Ifo institute's German business confidence index slipped by the most since the Sept. 11 terrorist attacks, a report showed on July 24. The National Association of Realtors said U.S. home resales dropped to a decade low.

Growth Priority

The BOJ's ``priority is given to growth,'' said Alessio Caldarera, a fixed-income strategist at BNP Paribas Securities Japan Ltd. in Tokyo. ``As corporate profits are still being squeezed, there isn't going to be a chance for the BOJ to hike in reaction to the higher CPI.''

There is an 18 percent chance the central bank will raise its target rate to 0.75 percent from 0.5 percent by Dec. 31, according to calculations by JPMorgan Chase & Co. using overnight interest-rate swaps. The odds were as high as 92 percent on June 11.

The drop in bonds was also driven by concern accelerating inflation will erode the value of the fixed interest debt pays.

Accelerating Inflation

Consumer prices that exclude fresh food rose 1.9 percent in June from a year earlier after climbing 1.5 percent in May, the statistics bureau said yesterday in Tokyo.

The inflation rate exceeded the benchmark 10-year yield for the first time since 1998. Ten-year yields are 33 basis points lower than the index, compared with last year's average of 170 basis points above, Bloomberg data show.

``This could be a turning point for investors and they will think that higher prices are bad for economic growth,'' said Takashi Nishimura, an analyst in Tokyo at Mitsubishi UFJ Securities Co., a unit of the nation's largest bank by market value. ``This is the same thing as what happened in 1998, when the government introduced higher consumption tax, but this time its simply that Japanese consumer are losing purchasing power to the overseas.''

To contact the reporter on this story: Theresa Barraclough in Tokyo at tbarraclough@bloomberg.net.



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Asia Stocks Rise Most in Two Months; Bank Losses Cap Gains

By Richard Frost and Shani Raja

July 26 (Bloomberg) -- Asian stocks climbed the most in two months this week as commodities prices fell. Gains were capped after National Australia Bank Ltd. said credit losses may surge and Samsung Electronic Ltd.'s profit missed estimates.

Cathay Pacific Airways Ltd. rose as oil dropped for a second week. Bridgestone Corp., the world's largest tiremaker by sales, surged the most since March after rubber traded near a seven-week low. National Australia, the country's biggest bank, and Australian & New Zealand Banking Group Ltd. plunged yesterday by the most since the October 1987 stock market crash. Samsung, Asia's largest maker of flat screens, tumbled in Seoul.

``Volatility is high; one day investors feel good and the next day you get a writedown,'' said Nader Naeimi, a Sydney- based senior investment strategist at AMP Capital investors, which manages about $108 billion. ``There's a lack of trust.''

The MSCI Asia Pacific Index rose 3.0 percent to 132.98, the biggest weekly advance since the five days to May 16. Nine of the index's 10 industry groups climbed this week, except for energy shares.

Japan's Nikkei 225 Stock Average added 4.2 percent, snapping a six-week losing streak. Japan was shut on July 21 for a holiday. All other Asian benchmark indexes rose.

MSCI's Asian index rallied 5.9 percent in the first four days of the week, after closing the previous week at its lowest level since October 2006, as concerns eased that bank losses will expand and oil tumbled from a record. The gauge fell 2.5 percent yesterday, the most in six weeks, on renewed speculation losses tied to U.S. mortgages will widen after a report showed sales of previously owned homes slipped to the lowest level in a decade.

Bear Market

The benchmark index is down 15 percent this year, part of a rout that has erased more than $13 trillion from equities worldwide since October as accelerating inflation and $468 billion in writedowns and credit-related losses threaten to push the U.S. into recession.

Except for Canada, all of the 23 developed markets in the MSCI World index experienced bear market plunges of at least 20 percent this year.

Cathay Pacific, Hong Kong's biggest airline, gained 2.4 percent to HK$15.50, capping a three-week, 11 percent advance. China Southern Airlines Co., the nation's largest carrier, jumped 13 percent to HK$3.60, its biggest advance since the five days to April 25.

Oil prices declined 4.4 percent this week, after dropping as much as 16 percent below its July 11 record of $147.27, on signs of falling demand in the U.S.

Oil Producers

Woodside Petroleum Ltd., Australia's second-largest oil and gas producer, fell 5.9 percent to A$52.21, capping a 22 percent, four-week slump. The stock is still up 3.6 percent for the year, compared with a 22 percent decline on Australia's benchmark S&P/ASX 200 Index.

Inpex Holdings Inc., the biggest Japanese oil explorer, dropped 6.6 percent to 1.056 million yen.

A measure of energy stocks has lost 9.2 percent this month, the most among the 10 industry groups, as the stronger U.S. dollar limited the appeal of commodities as a hedge against inflation and high prices cut fuel consumption.

Bridgestone gained 6 percent to 1,809 yen, the biggest advance in four months, while Yokohama Rubber Co., Japan's second-largest tiremaker, added 9.2 percent to 519 yen, the most since April 2004, after natural rubber futures in Tokyo dropped to the lowest in seven weeks on July 24. JSR Corp., a maker of synthetic rubber, gained 4.6 percent to 1,922 yen, after saying profit increased on higher product prices.

Credit Losses

National Australia dropped 1.7 percent to A$26.56, after slumping 13 percent yesterday. The Melbourne-based company said it has set aside funds amounting to 90 percent of the value of its A$1.2 billion ($1.1 billion) of collateralized debt obligations. National Australia took a A$181 million provision in March.

Australia & New Zealand Banking, which increased bad-debt provisions by 71 percent in April, lost 2.5 percent to A$17.75, after plunging 8.7 percent yesterday.

Concern that banks may report wider credit-market losses led to a 4 percent decline in Asian financial shares yesterday. Bank stocks advanced 9 percent in the previous four days after Citigroup Inc. and JPMorgan Chase & Co. reported results that topped analyst estimates and Deutsche Bank AG said financial companies are overcoming credit losses.

Samsung lost 1 percent to 576,000 won. The stock tumbled 6.2 percent yesterday, the most since June 2004, after net income in the second quarter climbed 51 percent to 2.14 trillion won ($2.1 billion), missing the 2.36 trillion won median estimate in a Bloomberg analyst survey. Profit from chips unexpectedly fell and losses at the consumer electronics division more than doubled.

To contact the reporters for this story: Richard Frost in Hong Kong at rfrost4@bloomberg.net; Shani Raja in Sydney at sraja4@bloomberg.net.



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Malaysia Bucks Asian Trend of Raising Rates; Focuses on Growth

By Stephanie Phang

July 26 (Bloomberg) -- Malaysia's central bank broke with its Asian neighbors by keeping interest rates unchanged, putting economic growth ahead of fighting the fastest inflation in a quarter century.

Bank Negara Malaysia kept its overnight policy rate unchanged at 3.5 percent for an 18th straight meeting yesterday. The move had been predicted by seven of the 20 economists surveyed by Bloomberg News.

The decision spurred traders to bet the ringgit will weaken over the next 12 months. Malaysia has avoided following Thailand, Indonesia, India, Vietnam and the Philippines in raising borrowing costs this year as the government tries to regain public support after its worst electoral performance in March elections.

``It's a highly risky decision, a decision which could well undermine the credibility of the central bank,'' said Robert Prior-Wandesforde, an economist at HSBC Holdings Plc in Singapore. ``I think the ringgit will sell off, I think bonds will sell off. They've lost credibility in not moving. That will be reflected in the markets.''

Malaysia's currency dropped to its lowest level in more than two weeks yesterday, losing 0.2 percent for the week to 3.2490 per dollar, Bloomberg data showed.

Ringgit to Weaken

Traders abandoned expectations for an appreciation in the ringgit, non-deliverable forwards contracts showed after yesterday's decision. They bet the ringgit will drop to 3.2515 per dollar in a year, versus a bet for an advance to 3.2310 before the policy decision, according to prices by Tullett Prebon Plc. The contracts are agreements in which assets are bought and sold at current prices for future delivery.

``While both the risks to higher inflation and the risks to slower growth have increased, the immediate concern is to avoid a fundamental economic slowdown,'' the central bank said in a statement in Kuala Lumpur. ``The appropriate monetary policy response will be taken'' should price increases spread beyond food and fuel.

Bank Negara yesterday raised its inflation forecast for 2008 for a second time this year, to a range of 5.5 percent to 6 percent from a June estimate of 4.2 percent and a March prediction of as much as 3 percent. The rate decision was two hours late.

It didn't say if it had revised its March forecast for a 5 percent to 6 percent expansion in the $151 billion economy. Growth was 6.3 percent in 2007. Governor Zeti Akhtar Aziz had said earlier the central bank would review the economic growth target yesterday.

`Behind the Curve'

Malaysia's delay in raising borrowing costs risks fueling inflation further, says Lye Thim Loong, who helps oversee about $500 million at Avenue Invest Bhd. in Kuala Lumpur.

``They will really be behind the curve,'' he said. ``At the end of this year they will have wage pressure, and the impact on the economy is far-reaching. They have to do something to cool it off a bit.''

Concerns that inflation will hurt growth and erode investors' returns have added to a slump in Southeast Asia's stocks and bonds. Philippine and Indonesian bonds have lost the most this year among 10 Asian markets tracked by an HSBC Holdings Plc index. Vietnam's key stock index is the world's worst performer in 2008.

Asian central banks need ``decisive tightening'' of monetary policies to combat inflation, and many are too slow to raise borrowing costs, the Asian Development Bank said this week. The Philippine central bank said it is considering further rate increases after successive moves in June and July.

U.S. Slowdown

Still, higher interest rates may cool domestic demand, which the government is relying on for growth as a U.S. slowdown hurts overseas sales.

Malaysia has tried to ease inflation through other measures, including increasing spending on agriculture to boost food supply and loosening import restrictions on steel. Oil has declined 14 percent since reaching a record $147.27 a barrel on July 11.

Inflation accelerated to 7.7 percent last month after Prime Minister Abdullah Ahmad Badawi announced a 41 percent increase in retail gasoline prices in a bid to trim government subsidies that keep pump costs artificially low. Diesel went up 63 percent, and electricity rates rose in July.

``Much of the jump in inflation of late has been due to rising food and energy costs,'' said Azrul Azwar Ahmad Tajudin, an economist at Bank Islam Malaysia Bhd. in Kuala Lumpur. ``If the current runaway inflation is expected to be a transient phenomenon without causing a generalized rise in prices, then raising rates doesn't appear to be an appropriate answer.''

The central bank's overnight policy rate is at the highest since its introduction in April 2004, and, together with Hong Kong's and Thailand's, is the second lowest in Asia according to Bloomberg data.

To contact the reporter on this story: Stephanie Phang in Singapore at sphang@bloomberg.net



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Asian Currencies: Indian Rupee, Peso Lead Weekly Gain on Oil

By Lilian Karunungan and Anoop Agrawal

July 26 (Bloomberg) -- The Indian rupee and the Philippine peso led a weekly advance among Asian currencies on speculation oil prices near the lowest in seven weeks will reduce demand for dollars from importers.

The rupee posted its best week in four months as exporters may have converted overseas earnings to guard against further currency gains. A stronger rupee erodes revenue from overseas shipments in local-currency terms. Crude oil in New York declined for a third week, helping lower India's import costs.

``The oil slump has been instrumental in subduing dollar demand,'' said P.V. Rao, a currency trader at IndusInd Bank Ltd. in Mumbai. ``Sentiment for the rupee is strengthening and gauging that, exporters are also probably reducing their dollar receivables.''

The rupee gained 1.2 percent this week to 42.265 per dollar in Mumbai, according to data compiled by Bloomberg. It may strengthen to 42.10 next week, Rao said. The Philippine peso rose 0.9 percent from last week to 44.07 in Manila, according to Tullett Prebon Plc.

The Indian currency rallied 1.5 percent on July 23, the biggest gain in more than a decade, on speculation the government will allow more overseas investment in the financial industry after Prime Minister Manmohan Singh survived a confidence vote in parliament the previous day.

Crude oil futures touched $123.50 a barrel on July 24, a seven-week low, down 16 percent from their all-time high of $147.27, Bloomberg data show.

Monthly Gain

The peso was poised for its first monthly gain since February, buoyed by cheaper oil and speculation the central bank will raise interest rates to keep inflation in check.

The currency jumped 1.3 percent on July 23, the most in almost seven years, after Bangko Sentral ng Pilipinas Governor Amando Tetangco said higher borrowing costs ``cannot be ruled out.'' The bank last week raised its benchmark interest rate by a half-percentage point, sparking the peso's first weekly gain in three months.

``The Bangko Sentral has been a little bit aggressive in hiking rates, surprising the market,'' said Ed Garcia, a currency trader at East West Banking Corp. in Manila. ``This week, they've been in the news, saying more aggressive rate hikes are on the table.''

Oil's Decline

Crude oil's decline also helped the peso gain, according to Garcia and Lito Biacora, vice president for treasury at Bank of the Philippine Islands in Manila.

``The easing pressure on inflation in relation to lower crude prices seems to provide reason for funds to shift to higher-yielding assets,'' Biacora said.

South Korea's won advanced this week on speculation the government bought the currency to help contain inflation.

The won has gained 3.8 percent this month, the best performance among the 16 most-active major currencies as Vice Finance Minister Kim Dong Soo said July 24 that the government will monitor for ``herd behavior'' in the foreign-exchange market. A central bank report yesterday showed the economy maintained its growth in the second quarter as export gains made up for shrinking consumer spending.

``Market players are worried about strong interventions,'' said Jeff Kim, a currency dealer at Korea Exchange Bank in Seoul. ``The government is keen to keep the won stable.''

The won climbed 0.5 percent this week to 1,009.20 in Seoul, from 1,013.80 last week, according to Seoul Money Brokerage Services Ltd. It dropped 0.2 percent yesterday.

Immediate Concern

Malaysia's ringgit snapped a two-week advance as the central bank unexpectedly refrained from increasing interest rates yesterday. ``The immediate concern is to avoid a fundamental economic slowdown,'' Bank Negara Malaysia said in a statement.

Policy makers have kept the benchmark rate on hold at 3.5 percent since April 2006. The currency traded near the lowest level in two weeks after a U.S. report showed home sales fell to the least in 10 years.

The ringgit dropped 0.3 percent this week to 3.25, Bloomberg data showed.

``If you don't hike rates, the ringgit could hit 3.28 or beyond,'' Suresh Kumar Ramanathan, a currency strategist at CIMB Investment Bank Bhd. in Kuala Lumpur, said before the decision.

Elsewhere, the Singapore dollar fell 0.4 percent this week to S$1.3588 against the U.S. currency. The Taiwan dollar dropped 0.2 percent to NT$30.407 and the Thai baht declined 0.3 percent to 33.42 per dollar. Vietnam's dong was unchanged at 16,795 versus a week ago.

To contact the reporters on this story: Lilian Karunungan in Singapore at lkarunungan@bloomberg.net; Anoop Agrawal in Mumbai at aagrawal8@bloomberg.net.



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Dollar Rallies on Strong Data, but Watch Out for a Big Week

Daily Forex Fundamentals | Written by DailyFX | Jul 25 08 20:45 GMT |

The ECB Has Room to Raise Interest Rates?! Is the UK Headed for a Recession? Dollar Rallies on Strong Data, but Watch Out for a Big Week Stronger economic data has driven the US dollar higher against many of the major currencies. New home sales, consumer confidence and durable goods were all better than the market expected, a sign that the mood of US consumers and businesses may be changing. The number of new homes sold in the month of June was more than the market expected, but the big surprise was the 50,000 unit revision to the past 3 months of data and the reduction in inventory. The numbers indicate that there is still decent activity in the housing market and even though house prices are down on an annualized basis, the median price of a home sold has increased from the prior month. The final University of Michigan consumer confidence numbers also rebounded to a 3 month high after falling to a 28 year low in June while durable goods increased 0.8 percent compared to the market's -0.3 percent forecast. Today's economic releases were almost too good to be true and for that reason, we are cautiously bullish. With that said, it is quite impressive that the US dollar has shaken off risk aversion. The divergence between the price action of the US dollar, the stock market, gold and oil prices indicate that risk aversion yesterday was limited despite the 280 point drop in the Dow. If you recall, the dollar dropped only against the Japanese Yen, and rallied against all of the other G10 currencies. Looking ahead, consumer confidence and house prices are due for release on Tuesday. Given this week's upside surprises, both reports could be dollar bullish. However second quarter GDP, non-farm payrolls and manufacturing ISM which are due at the end of the week could turn things around for the dollar. There have been no end to the layoff announcements and not only do we believe that non-farm payrolls will drop for the seventh straight month, but the job losses could be far worse than the market's -75k forecast. The ECB Has Room to Raise Interest Rates?! The Euro strengthened against the US dollar but the rally has been marginal. Unsurprisingly, inflation last month was hot with import prices rising 1.5 percent in Germany. Despite the recent deterioration in Eurozone economic data, European Central Bank officials have been revving up their degree of hawkishness which leads many people to wonder whether the ECB is digging themselves into a hole. ECB member Liebscher said this morning that the central bank has room to raise interest rates and that it is absolutely necessary to prevent any possibilities of so-called second-round effects. Unlike the Federal Reserve who needs to worry about growth as much as inflation, targeting inflation is the ECB's primary focus. In order to get their attention, we may need to start seeing negative quarterly GDP growth. The central bank only worries about growth when it has fallen below potential. Recent economic data clearly indicates that the region is slowing and if oil prices remain at $125 a barrel, the ECB's concerns about inflation will start to ease, allowing them to become more sensitive to growth. In the week ahead, retail PMI and German unemployment are the big Eurozone releases. We expect this data to continue to be Euro bearish. Meanwhile Switzerland will be releasing the UBS Consumption Index and the KoF report of leading indicators. Is the UK Headed for a Recession? GDP growth slowed in the second quarter, but the British pound managed to rally. The pace of growth has fallen from an annualized rate of 2.3 to 1.6 percent, the lowest level since the first quarter of 2002 and equaling the 15 year low. Weak consumer spending has been the primary drag on the UK economy and given the recent trend of growth, the country could be headed for a recession which is defined by 2 quarters of negative GDP growth. The pace of deterioration in the UK economy has picked up towards the end of the second quarter which implies that unless there is a serious turnaround in the UK economy, the country could be headed for a contraction in the third quarter. We are bearish British pounds and expect the currency to underperform many of the major currencies. Aside from manufacturing PMI and some housing market data, the UK economic calendar is relatively light next week. Oil Prices Continue to Fall, Taking the Canadian Dollar Lower There was no economic data released from the 3 commodity producing countries today, leaving the price action of the currencies dependent upon oil prices. Crude continues to trend lower and ended the day at $123.39 a barrel. This has weighed heavily on the Canadian, Australian and New Zealand dollars. Although oil and gold prices will continue to play a big role in the price action of the commodity currencies, there are a few pieces of key data worth watching next week. New Zealand and Australia both have trade data due for release, Australia also has retail sales while Canada will be releasing their GDP report for the month of May. Yen Crosses Rebound as Risk Appetite Stabilizes The Japanese Yen crosses rebounded today as the stock market and risk appetite stabilizes. Like the rest of the world, Japan has also been hit by inflationary pressures. The latest inflation data shows that core inflation has hit a 10 year high due to rising food and gasoline prices. This has been a huge drag on the Japanese economy and part of the reason why the trade surplus fell for the first time in 5 years last month. The deterioration in trade was significant with the surplus falling a whopping 89 percent in June. Japan is having a particularly tough time with slowing export demand and surging import prices, which is why the BoJ has turned bearish on the economy. There are a lot of Japanese economic data due next week including the jobless rate, retail sales and industrial production. DailyFX Disclaimer Investment in the currency exchange is highly speculative and should only be done with risk capital. Prices rise and fall and past performance is no assurance of future performance. This website is an information site only. Accordingly we make no warranties or guarantees in respect of the content. The publications herein do not take into account the investment objectives, financial situation or particular needs of any particular person. Investors should obtain individual financial advice based on their own particular circumstances before making an investment decision on the basis of the recommendations in this website. While we try to ensure that all of the information provided on this website is kept up-to-date and accurate we accept no responsibility for any use made of the information provided. All intellectual property rights are the property of Daily FX. Daily FX and its affiliates, will not be held responsible for the reliability or accuracy of the information available on this site. The content herein is provided in good faith and believed to be accurate, however, there are no explicit or implicit warranties of accuracy or timeliness made by Daily FX or its affiliates. The reader agrees not to hold Daily FX or any of its affiliates liable for decisions that are based on information from this website. Daily FX highly recommends that before making a decision, the reader collects several opinions related to the decision and verifies facts from at least several independent sources.

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Closing Market Recap: Treasuries Sell Off; Loonie Declines and TSX Rallies

Market Updates | Written by CEP News | Jul 25 08 21:13 GMT |
(CEP News) - A trio of better-than-expected U.S. economic data points on Friday boosted confidence and helped reverse Thursday's downtrodden sentiment. Treasuries sold off while U.S. equities are struggling to make gains. In Canada, the loonie fell nearly a half cent but resource stocks led the TSX higher.

U.S. two-year yields were up 9.7 bps to 2.70%, with five-year yields up 11.4 bps to 3.43%, 10-year yields up 9.8 bps to 4.09% and 30-year yields up 8.3 bps to 4.68%.

"The key drivers for the sell-off in North American bond markets earlier today were the surprisingly strong U.S. durable goods orders report and the better than expected print on U.S. new homes sales for June, though the surge in U.S. home foreclosures in Q2 rained somewhat on the parade," wrote Millan Mulraine, economics strategist at TD Securities

The biggest surprise in the U.S. came from the June report on orders for durable goods. Orders for big ticket items were expected to decline 0.3% but climbed 0.8% instead. Excluding the volatile automotive component, orders were up 2.0% against the -0.2% consensus estimate.

Also in June, new home sales were better than forecast, rising from a 17-year low. Sentiment also climbed, as the Reuters/University of Michigan survey for July was revised nearly 5 points higher to 61.2.

There was also a downside surprise as U.S. home foreclosures increased 14% in the second quarter, according to a report issued by RealtyTrac.

According to TradeWeb, U.S. Treasury volume was only about 60% of normal.

In Canada, the federal government announced a $500 million deficit for April and May. Yet Canada's fixed income market still outperformed, despite the possibility of increased debt issuance.

Yields on two-year Canadian government bonds were up 1.4 bps to 3.15%, with five-year yields up 3.7 bps to 3.42%, 10-year yields up 4.6 bps to 3.84% and 30-year yields up 2.8 bps to 4.16%. The Canadian 10-year note is yielding 25.5 bps less than the U.S. 10-year note.

At the Montreal Exchange, 3-month bankers' acceptance futures saw better-than-normal volume as 34,283 contract changed hands. The most active contract was for December where the yield moved up 3 basis points to 3.20%. Futures on the 10-year Government of Canada note traded at average volume with prices falling to 0.41 to 117.31.

While fixed income markets seemed to be surveying the broader economy, equities were reflecting the housing market, according to Larry Levin, president of Secrets of Traders.com.

"The housing woes are indeed the main problem of the equity markets. Because housing prices are going down, banks and investment banks are stuck with hundreds of billions of dollars worth of bad loans. Because the housing prices are dropping, non-stop spending Americans have run out of what they thought was free money," Levin said.

U.S. equities hit session highs shortly after the report on home sales but the optimism was washed away when Standard & Poor's placed Fannie Mae and Freddie Mac subordinated debt and preferred shares on creditwatch for a possible downgrade.

"Both firms face weak earnings due to rising credit expenses. The creditwatch listing on the subordinated debt, preferred stock, and risk-to-the-government ratings underscores the expected higher stress on capital and earnings these firms face during the next several quarters," said S&P credit analysts in a report.

The Dow Jones industrial average closed up 21 points to 11,371, the S&P 500 up 5 points to 1,258 and the Nasdaq up 30 points to 2,311.

Sentiment was much better in Canada where resource stocks rebounded even as crude oil fell to a seven-week low. The oil price decline came after the Organization of Petroleum Exporting Countries increased output by 200,000 barrels a day in July, according to estimates from PetroLogistics Ltd.

Toronto's S&P/TSX composite index closed up 173 points to 13,379. WTI crude oil closed down $2.23 to $123.26.

Although crude prices fell, technical analysts said the ability of the market to hold above $122 per barrel could pave the way for a rebound.

"But just how much can we draw from a drop in crude that still leaves it higher than at any point in history prior to May? Not much," wrote CIBC economist Avery Shenfeld in a note to clients.

In currency markets, the Canadian dollar spent much of the session unchanged but sold off following the deficit announcement from the federal government.

The loonie was down 0.0041 to 0.9813 against the U.S. dollar (1.0189 USD/CAD) and up 0.09 to 105.85 against the yen. On the week, the Canadian dollar fell 0.0127, or 1.3% USD.

The U.S. dollar was up 0.53 to 107.86 against the yen but the Dollar Index was down 0.077 to 72.856.

The euro was up 0.0026 to 1.5703 against the U.S. dollar, up 0.0090 to 1.6000 against the Canadian dollar, down 0.0006 to 0.7886 against the pound sterling and was higher by 1.09 to 169.37 against the yen.

The pound sterling finished the week up 0.0044 to 1.9913 against the U.S. dollar and up 0.0129 to 2.0292 against the Canadian dollar.

The front month gold contract at the Chicago Board of Trade is up $7.90 to $929.70 per ounce.

Overseas, European stock markets closed in negative territory with the Eurostoxx down 3 points to 2,857, the UK FTSE 100 down 10 points to 5353 and the German DAX down 4 points to 6,437.

In Germany, returns on two-year German bonds are down 0.9 bps to 4.42%, with five-year yields up 1.9 bps to 4.53%, 10-year yields up 3.7 bps to 4.60% and 30-year yields up 4.5 bps to 4.87%.

Yields on UK two-year bonds are up 1.5 bps to 4.98%, with five-year yields up 0.9 bps to 4.95%, 10-year yields up 1.7 bps to 4.99% and 30-year yields up 1.7 bps to 4.62%.

In the week ahead, the focus will be on the United States. Advance GDP figures for the second quarter will be released Thursday and are expected to show the economy grew by a healthy rate of 2%. But economist warn that figure has been inflated by government rebate cheques. Afterwards the focus will turn to employment figures on Friday that are expected to show the U.S. unemployment rate rising to 5.6% from 5.5%.

All data taken at 4:39 p.m. EDT.

By Adam Button, abutton@economicnews.caThis email address is being protected from spam bots, you need Javascript enabled to view it , edited by Cristina Markham, cmarkham@economicnews.caThis email address is being protected from spam bots, you need Javascript enabled to view it

CEP Newswires - CEP News © 2008. All Rights Reserved. www.economicnews.ca

The Copying, Broadcast, Republication or Redistribution of CEP News Content is Expressly Prohibited Without the Prior Written Consent of CEP News.

A copy of CEP News disclaimer can be found at http://www.economicnews.ca/cepnews/wire/disclaimer.



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Friday's News Recap: Optimism Returns Following U.S. Housing, Durable Goods Data

News Recap | Written by CEP News | Jul 25 08 20:52 GMT |
(CEP News) - In contrast to Thursday's downbeat releases, markets received largely positive U.S. economic data on Friday in the form of higher-than-expected home sales in June, an upside revision in the final July consumer sentiment survey from Reuters and University of Michigan and a higher-than-expected increase in durable goods sales.

New home sales came in higher than expected at 530k in June against forecasts for a 503k reading, though due to revisions in the previous month the figure represents a slight decline of 3k, or 0.6%. May sales were revised up to 533k from an initially-reported 512k, the U.S. Census Bureau reported. April's new home sales were also revised up to 542k from a previously reported 525k. The median sale price of new houses sold in June was $230,900, up from May's revised median of $227,700.

Sal Guatieri, senior economist at BMO Capital Markets, said the report "paints a brighter picture (than previously portrayed), in the new housing market anyway." Yet he cautioned against being too optimistic, as things are still getting worse but only at a slower decline than in the past two years. He said sales in both existing and new home sales appear to be stabilizing, but there's no sign yet of an actual pick-up or recovery.

U.S. durable goods excluding transportation soared by 2.0% in June in the U.S. durable goods report released Friday by the Department of Commerce. Economists, who were expecting a 0.2% monthly decline following May's upwardly revised 0.5% decline, say the unexpected jump suggests the business sector remains stable despite the broader financial turmoil, thanks in part to foreign demand from a weak U.S. dollar.

Senior rates and economics strategist Eric Lascelles from TD Securities said the release was a "real surprise to the upside," but that the U.S. business sector is not where to look to note the economic slowdown.

The final consumer sentiment survey from Reuters and the University of Michigan received a large upward revision from preliminary estimates in July, with the headline indicator coming in at 61.2 compared to the preliminary 56.6 level.

Economists had expected a small revision to 56.4. The last time the survey reached 61.2 was in May 2008. Consumer expectations were revised to 53.5 from the preliminary 48.3 level, while the current conditions index bumped up to 73.1 from the initial estimate of 69.5 for July.

On the down side, however, U.S. home foreclosures soared by 121% in second-quarter year-over-year results, according to a report issued by RealtyTrac. There were 739,714 foreclosure filings in the second quarter of 2008, a 14% quarterly increase. According to RealtyTrac, 48 of 50 states and 95 of 100 of the largest metropolitan areas experienced year-over-year increases in foreclosure activity in the second quarter.

The Canadian government reported a $500 million deficit in the first two months of the 2008-09 fiscal year, due to shrinking revenues and rising expenses. The budget shortfall was smaller than the March deficit of $1.2 billion, but a reversal from April and May of 2007, when the government reported a $2.8 billion budgetary surplus for the two months.

The federal fiscal monitor released Friday by the Department of Finance showed that the government eked out a $300 million surplus in May, but that wasn't enough to offset April's $900 million shortfall.

Speaking to reporters in Toronto, Canadian Finance Minister Jim Flaherty said the Canadian economy and budget were "on track" in anticipation of the finance ministry's fiscal update in October. The finance minister added that he agreed with the Bank of Canada's assessment that the risks to the economy were balanced.

Air Canada must form a joint committee with its workers to look at ways to minimize the impact of planned layoffs, Canada's Federal Labour Minister Jean-Pierre Blackburn said Friday. Blackburn refused to grant the airline a waiver from the group termination provisions of the Canada Labour Code. In June, Air Canada announced its plans to cut 2,000 jobs in a bid to save money in the face of rising fuel costs. The group termination provisions under the labour code require that an employer that intends to dismiss 50 or more employees in any single industrial establishment within a four-week period give notice to the Minister of Labour, union representatives and non-unionized employees at least 16 weeks before the termination date.

In overnight news, according to advance estimates from the Office for National Statistics (ONS), the UK economy grew 1.6% year-over-year as expected in the second quarter of 2008, down from the 2.3% growth rate seen in the previous quarter. In quarterly terms, UK GDP increased 0.2%, also in line with expectations, after rising 0.3% in Q1.

German import prices rose 8.9% year-over-year in June, the strongest rate since November 2000, according to data released by the Federal Statistics Office (Destatis). Economists had expected an increase of 8.4%, up from May's 7.9% rise. Month-over-month, German import price inflation cooled somewhat to 1.5%, down from the 2.4% rate observed in the previous month.

In an interview from his office in Vienna, Austria on July 24, European Central Bank Governing Council member Klaus Liebscher said that he was not surprised by the recent data pointing to deteriorating activity levels in the euro zone and stressed that the ECB still has room to maneuver regarding interest rates. "We expected a weaker second and maybe third quarter," he said.

According to data released by the Japanese Ministry of Internal Affairs and Communications on Friday, inflation in Japan rose slightly faster than expected in June, but nevertheless sharply from the previous month, with headline CPI rising 2.0% year-over-year in June, just higher than estimates for a 1.9% increase and above May's 1.3% gain.

By Stephen Huebl, shuebl@economicnews.caThis email address is being protected from spam bots, you need Javascript enabled to view it , with contributions from Patrick McGee, pmcgee@economicnews.caThis email address is being protected from spam bots, you need Javascript enabled to view it , Steve Stecyk, sstecyk@economicnews.caThis email address is being protected from spam bots, you need Javascript enabled to view it , Geoff Matthews, gmatthews@economicnews.caThis email address is being protected from spam bots, you need Javascript enabled to view it , Erik Kevin Franco, efranco@economicnews.caThis email address is being protected from spam bots, you need Javascript enabled to view it and Todd Wailoo, twailoo@economicnews.caThis email address is being protected from spam bots, you need Javascript enabled to view it , edited by Cristina Markham, cmarkham@economicnews.caThis email address is being protected from spam bots, you need Javascript enabled to view it

CEP Newswires - CEP News © 2008. All Rights Reserved. www.economicnews.ca

The Copying, Broadcast, Republication or Redistribution of CEP News Content is Expressly Prohibited Without the Prior Written Consent of CEP News.

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