ALL FINANCIAL FOREX NEWS on ONE PAGE » Inflation

U.K. Consumer Confidence Falls for Fourth Month on Unemployment, Inflation

Forex-Master — Fri, 21 Oct 2011 07:49:04 +0000

U.K. consumer confidence fell for a fourth month in September as unemployment increases and accelerating inflation squeezes Britons, Nationwide Building Society said.

An index of sentiment slipped 3 points from the previous month to 45, the lowest since April, the Swindon, England-based customer-…
read full news

Published: Fri, 21 Oct 2011 09:49

The Euro Strikes Back – US-FOREX.US

Forex-Publisher — Thu, 13 Aug 2009 18:46:06 +0000

The euro-zone has hit back at the dollar’s recent gains with the out-of-left-field announcement that its economy barely contracted between April and June.On Thursday the 16-member euro zone reported its gross domestic product fell by only 0.1% during the second quarter, a significant improvement from the 2.5% drop it recorded in the first. The news was a shot in the arm to euro-boosters, who were set back after Friday’s U.S. labor report indicated economic improvement in America is free of inflation pressure, despite massive liquidity injections by the Federal Reserve and Treasury. Yet, more than the broader euro zone’s surprisingly strong quarter, the euro reached a one-week high against the greenback, 1.43, because its largest economies, France and Germany, managed to actually grow in the second quarter. The British pound meanwhile exchanged hands at 1.68, in midday trading. PowerShares DB US Dollar Index Bullish
fell 0.6%, or 14 cents, to 23.33, while PowerShares DB US Dollar Index Bearish
rose 0.6%, or 15 cents, to 27.37.The pro-euro argument has been that its central bank’s relative temperance in stimulating its recovery will benefit in the long-term by preventing inflation. The argument stands against Britain and the United States, who have injected massive amounts of stimulus cash into their economies in the hopes it will man-handle their nations’ dark economic forces into submission. The English-speaking measures have raised inflationary concerns throughout the financial world. The U.S. Federal Reserve has rejected these arguments by contending that the economic recovery in the U.S. will be too slow to spark inflation, and that the excess capacity in the States will be able to absorb the growth. In addition to Europe’s good news, the dollar was hampered by disappointing jobs and retail data, both of which indicated continued consumer prudence. “Retail sales were miserable once again in July,” said Mike Feroli, a senior economist at JPMorgan Chase. Total sales only fell 0.1%, but the figure was spurred by the government’s “cash for clunkers” program. When auto sales are excluded, sales decline 0.6%. The data comes one day after the Federal Open Market Committee said economic activity is leveling out, though it promised to keep policy at historic lows, while employing all necessary means to support the recovery process.
The weak economic news lowered the Japanese Yen to 95.27, and dragged the yield on the benchmark 10-year U.S. Treasury note to 3.67%, from 3.71%. Meanwhile, the iShares Barclays 10-20 Year Treasury Bond
exchange-traded fund, which follows long-dated Treasuries, rose 0.4%, or 43 cents, to 107.62, and the iShares Barclays 1-3 Year Treasury Bond
ETF gained 0.1%, or 5 cents, to 83.52.

Euro Losing Friends – US-FOREX.US

Forex-Publisher — Tue, 11 Aug 2009 21:46:25 +0000

The Euro is losing its friends, said Andrew Wilkinson, a senior market analyst at Interactive Brokers Group, and could fall as low as 1.33 by the end of the summer.The argument for the euro has centered on the Eurozone’s tempered measures in stimulating its economy, at least compared Britain and the United States. Many on Wall Street and in other financial capitals have been concerned that the massive sums of liquidity injected into the U.S. economic recovery will eventually lead to inflation. But Friday’s labor report indicated that the economy was recovering, while inflation is far from a threat. Naturally, the Federal Reserve has argued that inflation is not a risk, saying that there is enough excess capacity to absorb the government’s massive injections. Furthermore, a number of Fed officials have also said the economy’s slow recovery blunts inflationary threats. So far that position has proven valid. U.S. interest rate futures dropped last week after Friday’s labor report as market begun wondering when the Fed might start to raise policy. Sensibly, the market has since pulled back, but the move was indicative of the optimism that exists below the surface. On Tuesday the euro was worth 1.42, while the pound went for 1.65. The PowerShares DB U.S. Dollar Index Bullish
rose 2 cents to 23.58.The British pound continues to fall against the greenback on account of economic concerns, while China’s position as the global economy’s engine hasn’t panned out as well as expected. The US Treasury auctioned 37 billion in 3-year Treasury bonds on Tuesday and investors happily bought the short duration debt. Auctions of 7 and 10 years bonds have also gone well recently. An undersubscribed Treasury auction remains the dollar’s biggest threat. So far, the world’s appetite for U.S. debt remains.
Still the long-term risks to the dollar remain, especially as the global economy recovers. Any serious uptick in commodities demand will favor metal, oil and gas exporting countries.

Sara Lee Sees Meaty Growth – US-FOREX.US

Forex-Publisher — Tue, 11 Aug 2009 18:46:58 +0000

Commodity costs have been a huge boon to packaged food companies, along with favorable dining trends as consumers prepare more meals at home to conserve cash. Sales of cheap, quick and satisfying meal options are heating up in the current environment, leading Sara Lee to focus on packaged meat product lines like Hillshire Farm and Ball Park. At the end of May, packaged food and household products company Sara Lee
announced plans to invest more than 130 million in a Kansas City sliced meat manufacturing plant, which is expected to be up and running by 2011. The company sees value-added meats as a huge long-term growth driver and recently launched a Premium Deli lunch meat line and Miller Beer bratwursts. Speaking at a May conference, CJ Fraleigh, chief executive of the company’s North American retail and food service division, estimated sales of the company’s bacon and sausage line, Jimmy Dean, would hit 676 million this year and said Ball Park hot dogs continue to be swift-sellers.The market is eager to hear whether the Downers Grove, Ill.-based company has reached any conclusion regarding its international household and personal care division since it previously mentioned the possibility of selling it after receiving some interest from unnamed parties. At the time of the March announcement, Sara Lee said the unit was a 2.3 billion business, including brands like Pur, Kiwi shoe care and Sanex deodorant and skin care products. The company has also expressed interest in expanding into developing markets, particularly Russia, India and Brazil.Sara Lee releases fourth-quarter earnings on Wednesday. Analysts polled by Thomson Reuters have been expecting earnings of 24 cents a share on sales of 3.3 billion and a year-end profit of 82 cents a share on sales of 13 billion. Analysts and investors will also be looking at progress made under the company’s cost savings initiative that aims to deliver more than 250 million annually by fiscal 2011. Shares of Sara Lee were trading down by 7 cents, or 0.7%, at 10.70, on Tuesday afternoon, which saw a mixed trading session for packaged food companies. Kraft Foods
lifted its full-year forecast last week after reporting higher-than-expected profits on cost-cutting and stronger pricing on the heels of similar results from General Mills
and Kellogg
. Kraft’s stock was down by 18 cents, or 0.7%, at 28.44, General Mills shares gained 15 cents, or 0.3%, to 58.29; and Kellogg’s stock was up by 11 cents, or 0.2%, at 46.20.
The Associated Press contributed to this article.

Beige Book Shows Signs Of Hope – US-FOREX.US

Forex-Publisher — Thu, 30 Jul 2009 23:45:09 +0000

The view from the Federal Reserve’s art deco columns has brightened, if only a little, as the week brought a more self-assured attitude from its officials and a less-dour tone from its Beige Book.The week began with news that Fed chairman Ben Bernanke will speak before a general audience in a “town-hall” style discussion over three nights, broadcast on public television. Discussing the economy and defending the central bank’s actions helped raise public awareness, and also served to heighten the profile of the Fed during a key period on Washington.The Fed Beige Book, which was released Wednesday, found that lending is still weak, and manufacturing and consumer spending is still sluggish. The major takeaway though from the central bank’s report, which is an anecdotal survey of its 12 regions from June through July 20, is that the recession isn’t as severe, even if the economy hasn’t turned a corner yet. The Beige Book’s most pessimistic passages covered commercial real estate, which it said is being hit by-surprise, surprise-rising vacancy rates and weak rentals, while sales were low or even nonexistent on account of tight credit and limp demand. Numerous central bank officials have commented on the struggling industry and its potential effects on the economy. The most recent remark came Wednesday from New York Fed President William Dudley, who said commercial real estate will be under pressure for a while. The primary interest in Dudley’s speech though was inflation, or why the massive swelling of the Fed’s balance sheet is highly unlikely to be inflationary. Mike Feroli, senior economist at JPMorgan Chase, noted that Fed officials have been saying as much. Dudley instead offered a detailed account, which argued that the economic recovery will be so slow that an inflation threat is still remote, and that the Fed’s new ability to pay interest on excess reserves will keep banks like Citigroup
, JPMorgan
and Wells Fargo
from lending on those reserves. He added the Fed can also conduct reverse repo transactions, sell securities and use other means to control inflation.Speaking on the economy, Dudley also said that the contraction is waning, and he expects moderate growth in the second half of the year. The recovery, as Dudley sees it, is driven by fiscal stimulus, an inventory swing and a rebound in housing and auto sales. Yet, it’s slower, at least by historical standards, due to lack of support from personal income and lower household wealth, plus other factors.
Dudley said he’s concerned Fed’s exit-strategy will be premature, a sentiment held by Janet Yellen, his counterpart in San Francisco. Despite keeping rates low for the foreseeable future, Yellen, who spoke Tuesday, insisted the Fed will not repeat the mistakes it made in the 1960s and 1970s, when it lost control of inflation.Her comments on the economy took a more upbeat tone than in the past, saying she doesn’t anticipate a so-called “double dip recession” and that consumer spending will likely start to improve soon. Yellen also said she wasn’t surprised the banks didn’t increase lending in light of the Fed’s actions, and that she expects to see continuing demand for U.S. Treasuries. Lastly, she noted the current account deficit is on an unsustainable trend.

Exxon Chevron Next Up – US-FOREX.US

Forex-Publisher — Wed, 29 Jul 2009 21:45:59 +0000

Steep second-quarter profit declines aren’t over yet for the oil sector as Exxon Mobil reports second-quarter results on Thursday and Chevron releases its second-quarter report on Friday. By now the market is well-versed in the difficult year-over-year comparisons plaguing oil companies so far. During 2008′s second quarter crude oil traded at 125 a barrel, about twice this year’s prices. Refining margins have been hampered by high gasoline inventory levels and weak fuel prices. On Wednesday, integrated oil company Hess
posted an 89% second-quarter profit pitfall and ConocoPhillips
reported a 76% drop in second-quarter earnings on the heels of the 53% earnings slump posted on Tuesday by BP
. Despite deteriorated profits, results have largely met analysts’ lowered expectations for the sector.Analysts polled by Thomson Reuters expect Exxon Mobil
to report a second-quarter profit of 1.02 a share on sales of 71.3 billion on Thursday and Chevron
is projected to post earnings of 95 cents a share on sales of 33.4 billion. Ahead of the releases, both companies assured investors that dividends would remain intact with Chevron boosting its quarterly payout by 4.6% to 68 cents a share. Exxon retained its 42-cent quarterly dividend.Investors will be looking to see how the companies are using capital during the period of weak commodity prices.Shares across the oil sector closed Wednesday’s trading session lower as the U.S. energy department reported an unexpected increase in crude stocks, which rose 5.2 million barrels to 347.8 million barrels in the week ended July 24. Crude oil lost 3.88, or 5.8%, to settle Wednesday’s session at 63.35 a barrel. The Energy Select Sector
exchange-traded fund shed 1.17, or 2.3%, to close at 49.44. Exxon’s stock finished down by 1.54, or 2.1%, at 70.35 and Chevron closed Wednesday’s trading session 1.76 lower, or 2.6%, at 66.58.
Thomson Reuters contributed to this article.

Deutsche Bank Loves Bonds – US-FOREX.US

Forex-Publisher — Wed, 15 Jul 2009 17:46:16 +0000

Because of fear or prudence Americans are stashing more of their money away, spurring fears that the new habit will drag on economic growth and make it harder to emerge from the recession. Philip Condon, head of municipal bonds at Deutsche Bank’s DWS Investments, looks at the trend differently. “Where’s it all going to go?” Condon asked at a press briefing on Tuesday. “The money has to go somewhere.”The cash Americans put aside could give bonds a lift, he said. Compared to other investments, bonds look appealing. Retail investors will likely remain wary of stocks and real estate, the investments that burned them in 2008. Those holding tax-free municipal bonds have little to fear from higher capital gains taxes. Outside of some Treasury securities, bonds offer more yield than cash sitting in a savings account. Condon and other members of DWS Investments, which manages 112.5 billion in retail and retirement assets, gave a cautiously optimistic overview of the fixed-income market. Would California miss a bond payment? Very doubtful, Condon said. Would a rising default rate punish the corporate high yield market? Don’t count on it, said Gary Sullivan, head of high yield bond portfolio management. The rate will rise, he said, but not as high as 14%, what Standard & Poor’s expects by March of next year .
Should investors fear inflation? “I’m not sure,” said William Chepolis, head of retail mortgage backed securities. High unemployment and a pullback in lending would restrain rising prices, he said. The Treasury market currently implies annual inflation of 1.79%, an ideal rate for many economists. Then again, market predictions are almost always wrong, said Matthew MacDonald, senior portfolio manager for retail mortgage-backed securities.
Inflation could be a problem, Condon said. “Or it could be perceived as a problem.”
Sullivan said he still sees high-yield corporate bonds to buy, even after the market has climbed 29.5% this year. He holds bonds in hospital chain HCA and likes the outlook for health-care cable and telecom debt. He favors bonds rated B and BB, near the top of the junk range, which still offer strong yields. Lower-rated credits, especially CCCs, are the most likely to default. But he’s still willing to pick through the CCC pile.Meanwhile, investors are waiting to see if CIT Group
will be saved from default by a government rescue. Investors who believe the Deutsche bank’s strong bond thesis but still want the liquidity of stocks might look to the potential underwriters of all this new debt. Meredith Whitney says that Goldman Sachs
will get the lionshare . JPMorgan Chase
has also been climbing the league tables, followed by Morgan Stanley
. .
Information from Reuters is included in this report.

Europe Starts Deflating – US-FOREX.US

Forex-Publisher — Wed, 15 Jul 2009 17:46:12 +0000

While inflation in the United States and Britain is slipping, it’s seriously sliding in Europe, to the point where economists can add the “negative” sign to the region’s latest inflation numbers and label the situation as “deflationary.” Eurostat confirmed on Wednesday that consumer prices in the euro zone had moved into deflation territory in June, at -0.1% year-on-year. Prices were pushed down by lower food costs and the ongoing impact of sharply lower energy prices. Another, less-direct reason: Banks in Europe are still wary of lending, or at least that’s the impression consumers are getting. Data from the Germany’s ZEW economic thinktank on Tuesday showed the country’s economic sentiment gauge unexpectedly fell for the first time since October, due to concerns among Germans about tighter credit conditions. The German export association BGA has warned of a “massive credit squeeze” by late summer while Business Europe, the region’s main business lobby, told the European Central Bank that bank lending desperately needs to be improved. The slide in deflation is meanwhile bad news for retail companies struggling to keep pace with consumer’s collective expectations of a deflationary environment by rigorously cutting prices. One example is Hennes & Mauritz
, the cheap fashion retailer which on Wednesday posted a drop in sales in the last quarter at a time when its value-for-money goods should be flying off the shelves. French supermarket chain Carrefour
has also been focusing more than ever on cutting prices under a new chief executive, but analysts polled by Reuters still expect it to post a second-quarter sales declines of around 2%. Europe’s slide toward deflation is not helped by its weak economic environment: The euro zone jobless rate rose to 9.5% in May, from 9.3% in April, hardly evidence of green shoots. The situation is clearly worse than in the U.S., where consumer prices for June rose to 0.7% year on year, while in the U.K. they were at 1.8% in the same month.
So what is the European Central Bank doing about this? So far it’s being quiet, but cautious. The ECB didn’t even mention the word “deflation” in its 214-page monthly bulletin for July, nor did its president, Jean-Claude Trichet, in his keynote address to the University of Munich on Monday. He only said that the ECB expected prices to “remain dampened over the medium term.”
“I think they should be more worried,” says Jacques Cailloux, euro area economist with the Royal Bank of Scotland. “The population sees it differently and when you have embedded expectations of deflation, it’s difficult to get out of that.”The ECB’s wake-up call is likely to come when its statistics department discovers that credit growth in the euro area has contracted for the first time since the formation of the European Monetary Union, says Cailloux. Expect that to happen in the fourth quarter of this year. The ECB will then try to stop Europe from spiraling into even lower prices by cutting euro area interest rates from their current level of 1%, or by buying corporate bonds to help increase the money supply. But the divergent situations among the Euro area’s members will always make this a delicate maneuver. While Ireland is the country with the steepest rate of price declines, with inflation at -2.2% year-on-year in June, Finland’s rate is at 1.6% and new euro member Malta’s is at 2.8%. That gives some credence to the ECB’s quiet caution.

Deflation Vs. Disinflation – US-FOREX.US

Forex-Publisher — Tue, 14 Jul 2009 14:46:21 +0000

A big slide in the rate of British inflation might have looked worrisome on Tuesday if signs of deflation are what’s spooking you-but there may be little need to fret. U.K. consumer prices fell to 1.8% in June, below the Bank of England’s target rate of 2% for the first time in nearly two years. But that doesn’t mean the British economy is on the road to deflation, according to Howard Archer, U.K. economist for think tank IHS Global Insight.
Though there has been plenty of price cutting by British retailers in an effort to lure shoppers, that’s more a sign of disinflation than deflation. “We’ll see consumer prices dipping below 1% in September, but they’ll edge up a bit after that,” he said.
When Wal-Mart cuts prices, and even takes a hit to its margins in order to lure shoppers out of their homes or away from a rival like Target, that’s disinflation. It’s temporary, as prices are bound to head back up once shoppers start hitting the aisles again or once a competitor is knocked out of the space. Deflation would be a more permanent, spiraling phenomenon, marked by broadly falling prices for raw materials, falling wages and sharply declining prices for consumer goods.Deflation has been a buzzword for many British economists for the last few months as prices have fallen in the wake of the recession. But falling prices in the U.K. are only given a veneer of deflation, says Archer, thanks to sharply lower mortgage interest payments from a year ago. He calls that “artificial deflation.”Prices should also come to be supported later in January when the British government increases the national rate of value-added tax to 17.5% from 15%, after having lowered it to stimulate consumer spending.
The inflation data reinforces the notion that the Bank of England can afford to keep interest rates at 0.5% until next year, although it has the option to fight deflation and stimulate growth with its asset-purchase program, a form of quantitative easing.
Assuming oil prices don’t drastically fall and the British economy improves, worries about deflation in the U.K. should become a thing of the past.

Bonds Aim For The Middle- US-FOREX.US

Forex-Publisher — Tue, 07 Jul 2009 21:46:08 +0000

With the Federal Reserve keeping interest rates at record lows, inflation is bound to be a problem, says Paul Lefurgey, Madison Investment Advisor’s lead fixed-income manager. But it’s not an immediate one: Bond markets currently project prices to rise 1.5%.Taking a nuanced view leads Lefurgey to walk a middle ground. Madison manages 8 billion for institutions and retail investors, including the Mosaic mutual funds. He’s not keen on longer-dated Treasury bonds, which seem sure to drop as inflation expectations grow, or short-term Treasury bills that pay next to nothing. He thinks the yield curve, the difference between short- and long-term interest rates, will grow steeper. As a result, most of Madison’s bonds mature in three to seven years. “When the yield curve is steep, it’s better to be intermediate than long or short,” Lefurgey says. A flood of Treasury paper to finance deficits, weakening demand from foreign buyers and inflation worries will continue to push 10-year Treasury bonds higher, he says. Eventually, when businesses begin spending again and inflation starts to creep into the economy, the Fed will be hesitant to raise short-term rates and stifle a recovery. A steep yield curve, after all, is a boon to banks that borrow short and lend long. Janet Yellen, president of the Federal Reserve Bank of San Francisco, recently said the federal funds rate could remain around 0% for years. In a speech before the Commonwealth Club of California, she said falling prices, not inflation, remains a threat to the economy; Yellen has a say on the federal funds rate as a member of the Fed’s Open Market Committee. Over the next six months, Lefurgey sees the yield on the 10-year Treasury hovering between 3.25% to 4.25%. On Tuesday, the benchmark bond traded at 3.46%. Lefurgey calls a 10-year yield of 5.5% “fair value.”Earlier this year, Lefurgey began selling off some Treasury holdings in favor of investment-grade corporate bonds. “The easy money has been made there,” he says. But one move he still finds attractive is buying banks’ senior-ranked debt. “The Treasury and Fed have already showed us that some banks are too big too fail,” he says. Troubled Citigroup
and Bank of America
can probably rely on the government to back them up. If the government actually lets a bank fail, then Lefurgey thinks lower-ranked subordinated debt holders would suffer before senior-level creditors.