Europe - Economic Data & News 01 (May 08 - Oct 08)

[millionairemind]

GR,

Nice comics... Ben can really talk..

I think there is not enough fear in the market yet for a sustained rally... so far mkt wants to break down, but did not break down enough... it wants to go up.. but is constricted by oil movements.

This calls for an undecided whipsawing market. If market breaks down hard like in January, then we will be able to see a sustained rally maybe toward end of Q3/beginning of Q4.

But I digress cos' I don't attempt to predict the market. Lets see the market is "Bi Simi Bang" (Hokkien for what's up the sleeve?)

Cheers,
mm

[millionairemind]

Britain's lonely monetarists fear Bank of England may trigger severe crunch
By Ambrose Evans-Pritchard, International Business Editor
Last Updated: 11:45pm BST 17/06/2008

Britain's lonely band of monetarists fear that the Bank of England will trigger a severe crunch if it overreacts to the inflation spike and keeps interest rates too high as the downturn gathers pace.

An abstruse and little-understood measure of the money supply - "adjusted M4" - is flashing serious warning signals of distress over coming months, replicating a pattern that led to a vicious slump in the early 1980s.

Tim Congdon watched 'adjusted M4' closely in the early 1980s.

Simon Ward, New Star's chief economist, says the growth rate of M4 holdings of corporations (excluding banks) has plummeted from 16.1pc a year ago to 1pc in April. Past falls of this kind have heralded economic contraction. It is the speed of the decline that matters most, rather than the absolute level.

"This slowdown is contributing to a dangerous liquidity squeeze on companies. We're not in a recession yet, but it is approaching rapidly," he said.

"It would be disastrous if the Monetary Policy Committee tried to over-compensate for their errors in 2006 and 2007 by tightening too hard now," he said.

The M4 money data - which includes a wide range of bank accounts as well as cash - often gives advance warning of major shifts in the economy.

Leading monetarists such as Professor Tim Congdon from the London School of Economics warned three years ago that surging M4 growth would lead to a property bubble and inflation.

This is exactly what occurred, although a surge in global food and oil prices have been a crucial factor.

Mr Congdon say the risk has now inverted as the credit crisis eats into bank lending.

"The money supply is plummeting. This is potentially serious," he said.

The warnings come amid a flurry of gloomy reports from City banks.

Lehman Brothers warned that UK house prices would fall 28pc from peak to trough, the grimmest forecast to date. BNP Paribas said the UK faced a "significant risk" of a deep and protracted recession.

The Bank of England says the overall M4 figure - growing at 11.1pc - is distorted by strains in the interbank markets. Once this effect is stripped out, the M4 growth rate is down 16pc a year ago to 4.5pc in the first quarter.

The money markets have already begun to price in two to three rate rises this year, so some degree of tightening is already happening.

"A rate rise is out of the question. The Bank may soon need to start cutting," said Mr Ward.

The Bank's Governor, Mervyn King, pays close attention to M4 data. This might explain why he has played down the surge in inflation to 3.3pc in May, the highest since the Labour era began.

Mr King's letter to the Chancellor, Alistair Darling, stressed that the commodity spike was "not the same as continuing inflation" and that there was no sign of a broad-based jump in wages.

"In recent months the growth rate of the broad money supply has eased and credit conditions have tightened. This will restrain the growth of money spending in the future," he wrote.

It is less clear whether the MPC fully agrees with him. Economists are deeply split over the balance of risks in the world as the commodity boom and imported inflation from the emerging world collide with an economic downturn in the West.

Hawks fear that Britain is on the cusp of a 1970s wage price spiral: doves fear a deflationary crunch that may lie beyond as the triple effects of the lending squeeze, the housing slump, and the global slowdown all combine to send prices into a sharp fall.

[kennynah]

plenty of stats within...not important...just see the headlines and know that eur/usd dropped slightly on this release..

Eurozone construction output falters in April
6/18/2008 10:23 AM ET

(RTTNews) - Eurozone Construction output in April slipped a working day adjusted 2.4% on an annual basis, in the Euro area, the Eurostat said Wednesday. In March, output had dropped a revised 2.4% from the decline of 1.4% in the initial estimates. Construction output in the EU27 declined 0.3% in April, compared to a fall of 1.2% in the previous month revised from 0.1% in the first estimates.

In April, Construction output rose in ten member states while declining in three states, the Eurostat said. The highest annual increases were in Romania, 30%, Slovenia 23.3%, followed by Poland, 22.8% and Bulgaria, 21%. The biggest fall in construction output was in Spain, 21.8%.

In the euro area, building construction recorded a fall of 1.8% annually in April, while civil engineering output slipped 4.8%. In the EU27, building construction posted a 0.4% growth, while civil engineering output decreased 3.5%.

((truncated))

[kennynah]

19 Jun 2008 08:30 GMT
BULLET: UK DATA: May retail sales +3.5% m/m; +8.1% y/y

UK DATA: May retail sales +3.5% m/m; +8.1% y/y; median -0.2% m/m;+4% y/y

--National Statistics says no statistical quirks affecting data but note it was warmest May on record

--May retail sales boosted by clothing and footwear

------------------------------------------------------------------------

Retail sales rocketed in May at the fastest monthly pace on record boosted by a massive increase in sales of clothing and footwear. Given the current economic climate this is an incredible set of data and will leave pundits even more confused over the outlook for interest rates.

NS said there were no statistical quirks in the data and that it had been checked as usual, but did note it was the warmest May on record. Sales rose across the board but clothing and footwear put in a huge 9.2% m/m rise.

Expect the focus to shift to a possible near-term hike in rates and prepare for another hit on interest rate markets.

[millionairemind]

Looks like UK is starting to get the chills only this year..

House prices to fall more than 25pc as BBA warns on mortgages
By Edmund Conway, Economics Editor
Last Updated: 11:43am BST 24/06/2008

House prices are set to lose a quarter or more of their value, experts have warned after a "shocking" fall in property market activity.

The number of mortgages approved by Britain's biggest banks fell last month to the lowest level since records began 11 years ago.

Approvals dropped to just under 28,000 in May - a 20 per cent fall in the past month, and a 56.1 per cent fall since May last year, according to figures from the British Bankers' Association.

It is the latest disappointing news from the housing market, where prices are already almost 5 per cent lower than last year, and underlines fears that property will fall even more sharply in the coming months.

Michael Saunders, chief UK economist at Citigroup, said: "This is by far the lowest since data began in 1997 and yet another sign that the UK housing market is in freefall. Our base case - base case, not worst case - is for house prices to fall 20 per cent over this year and 2009 combined."

Howard Archer of Global Insight said: "We forecast house prices falling 24 per cent in nominal terms from their August 2007 peak of £199,600 to stand at £152,683 at the end of 2009."

The economists said the figures were particularly ominous since a fall in approvals is usually followed by a similar plunge in prices themselves.

David Dooks of the BBA said the fall in approvals was largely due to the sharp rise in mortgage rates hitting customers in the wake of the credit crunch in financial markets.

"Only remortgaging business is holding up, where people need or want to take advantage of deals with other lenders," he said.

Mr Archer said: "[This is] more very worrying news that heightens concern that we are in for an extended, deep correction in the housing market.

"The BBA data graphically highlight that housing market activity is currently being throttled by stretched affordability and tight lending conditions.

"Obviously the more that house prices fall, the more people will be trapped with negative equity, although it must be borne in mind that average house prices rose by 190 per cent over the decade to August 2007 on the Halifax measure. Nevertheless, those people who took out 100 per cent or even 100 per cent-plus mortgages within the last two years are particularly vulnerable to falling into the negative equity trap."

[millionairemind]

Investors Call ECB's Bluff, Bet on Rate Increases (Update3)
By Gabi Thesing

June 25 (Bloomberg) -- The European Central Bank insists it has signaled only one interest-rate increase; investors are calling its bluff.

They're betting the ECB will raise rates twice this year and most predict a third step by March, even as policy makers admonish markets for jumping the gun. ``We're not talking about a series of rate increases,'' Executive Board member Juergen Stark said. One move ``should be enough,'' said board member Lorenzo Bini Smaghi.

``There will be at least two rate hikes,'' said Franz Wenzel, Paris-based deputy director for investment strategy at AXA Investment Managers, which oversees $831 billion. ``Whether you call that a series or not is semantic.''

Central banks from India to South America are raising borrowing costs as climbing prices replace the global credit crunch as their biggest concern. The risk for the ECB is that higher rates spur the euro and exacerbate Europe's economic slowdown.

ECB President Jean-Claude Trichet said June 5 the bank may raise its benchmark rate by a quarter-point to 4.25 percent in July to curb the fastest inflation in 16 years.

Investors responded by pricing in two increases to 4.5 percent by December, Eonia forward contracts show. While some of the bank's 21 council members have left open the option of further moves, Trichet said others are against raising rates at all.

`Disagreement'

``There is disagreement among ECB policy makers about the future course of monetary policy, but one increase will simply not be enough,'' said Jacques Cailloux, chief euro-area economist at Royal Bank of Scotland Plc in London. ``At the end of the day, inflation concerns will rule.''

The ECB's primary mandate is to achieve price stability, which it defines as inflation just below 2 percent. Inflation in the 15-nation euro area accelerated to 3.7 percent last month and, according to ECB forecasts, will average 3.4 percent this year and 2.4 percent next.

``It would not be credible for the ECB to hike just the once and then expect inflation to fall back,'' said Robert Robis, a fixed-income portfolio manager at OppenheimerFunds Inc. in New York, which manages $260 billion. ``It has its hand forced by its own mandate.''

Trichet told the European Parliament in Brussels today he ``didn't say that we could envisage a series'' of rate increases. ``That being said, we never pre-commit,'' he added.

Previous Series

When the bank last started tightening policy, Trichet also said it wasn't embarking on a series of increases. It raised rates eight times between December 2005 and June 2007, doubling the benchmark to 4 percent.

Policy makers shelved a ninth increase in September to assess the economic fallout of the U.S. housing slump, which sparked a global financial-market rout.

The ECB forecasts economic expansion will slow to 1.8 percent this year and 1.5 percent in 2009. The euro's 16 percent gain against the dollar in 12 months has eroded export competitiveness.

Euro-region manufacturing and service industries contracted in June. Higher credit costs are also depressing housing markets from Spain to Ireland.

``The market believes that the ECB is willing to drive the euro-zone economy into recession to cool headline inflation,'' said Stuart Thomson, a money manager at Resolution Investment Management Ltd. in Glasgow, Scotland, which oversees $46 billion. He doesn't expect the bank to raise rates more than once.

Council Split

Bank of Spain Governor Miguel Angel Fernandez Ordonez has expressed concern about ``contractionary trends'' in his economy, which grew at the slowest pace in 13 years in the first quarter. France's Christian Noyer said today he's ``optimistic'' inflation will fall back toward 2 percent at the start of next year.

By contrast, Axel Weber of Germany, whose economy expanded at the fastest pace in 12 years in the first quarter, has highlighted ``considerable'' inflation risks.

Oil prices have doubled in 12 months to more than $130 a barrel and food prices are at records, increasing the risk of bigger wage gains to compensate for higher costs.

Inflation will ``rise to 4.1 percent in August, which would be like a red rag to a bull for the hawks,'' said Dominic Bryant, an economist at BNP Paribas in London. ``However, growth in the second quarter is likely to be close to zero, making it more difficult to get a majority for a hike in September.''

Weber, one of the so-called ``hawks,'' is credited by some economists with driving the ECB's switch to a tightening bias this month. With Germany accounting for about a third of the euro- region economy, his view may hold sway.

Option Left Open

While appearing to rule out a series, Stark left open the possibility of more than one rate increase. The ECB will ``do everything that is necessary to anchor inflation expectations,'' he said in an interview.

Those expectations, measured by the breakeven on five-year French inflation-indexed bonds, rose to 2.52 percent today from 2.12 percent in March.

``Inflation is out of control globally,'' said Marc Ostwald, a London-based fixed-income strategist at Anglo-Dutch bank Insinger de Beaufort SA. ``If the ECB wants to do what it says it will do, which is control inflation, it'll go more than once.''

To contact the reporter on this story: Gabi Thesing in Frankfurt at [email protected]

[millionairemind]

Looks like the credit default swaps premiums are rising in Europe too..

Corporate Bond Risk Rises in Europe, Credit-Default Swaps Show

By Michael Shanahan

June 26 (Bloomberg) -- The cost of protecting European corporate bonds from default rose, according to traders of credit-default swaps.

Contracts on the Markit iTraxx Crossover Index of 50 companies with mostly high-risk, high-yield credit ratings increased 15 basis points to 523 today, according to JPMorgan Chase & Co. The index is a benchmark for the cost of protecting bonds against default and a rise indicates deterioration in the perception of credit quality; a decline, the opposite.

The Markit iTraxx Europe index of 125 companies with investment-grade ratings rose 4.75 basis points to 100, JPMorgan prices show.

A basis point on a credit-default swap contract protecting 10 million euros ($15.7 million) of debt from default for five years is equivalent to 1,000 euros a year.

In Tokyo, the Markit iTraxx Japan jumped 8 basis points to 103, according to Morgan Stanley.

Credit-default swaps, contracts conceived to protect bondholders against default, pay the buyer face value in exchange for the underlying securities or the cash equivalent should a company fail to adhere to its debt agreements.

The CDX North America Investment Grade Index closed 2.75 basis points higher at 134 in New York, according to Lehman Brothers Holdings Inc.

To contact the reporter on this story: Michael Shanahan in London at [email protected]

Last Updated: June 26, 2008 04:49 EDT

[millionairemind]

Barclays warns of a financial storm as Federal Reserve's credibility crumbles

Last Updated: 12:30am BST 27/06/2008

US central bank accused of unleashing an inflation shock that will rock financial markets, reports Ambrose Evans-Pritchard

Barclays Capital has advised clients to batten down the hatches for a worldwide financial storm, warning that the US Federal Reserve has allowed the inflation genie out of the bottle and let its credibility fall "below zero".

"We're in a nasty environment," said Tim Bond, the bank's chief equity strategist. "There is an inflation shock underway. This is going to be very negative for financial assets. We are going into tortoise mood and are retreating into our shell. Investors will do well if they can preserve their wealth."

Barclays Capital said in its closely-watched Global Outlook that US headline inflation would hit 5.5pc by August and the Fed will have to raise interest rates six times by the end of next year to prevent a wage-spiral. If it hesitates, the bond markets will take matters into their own hands. "This is the first test for central banks in 30 years and they have fluffed it. They have zero credibility, and the Fed is negative if that's possible. It has lost all credibility," said Mr Bond.

The grim verdict on Ben Bernanke's Fed was underscored by the markets yesterday as the dollar fell against the euro following the bank's dovish policy statement on Wednesday. Traders said the Fed seemed to be rowing back from rate rises. The effect was to propel oil to $138 a barrel, confirming its role as a sort of "anti-dollar" and as a market reproach to Washington's easy-money policies.

The Fed's stimulus is being transmitted to the 45-odd countries linked to the dollar around world. The result is surging commodity prices. Global inflation has jumped from 3.2pc to 5pc over the last year. Mr Bond said the emerging world is now on the cusp of a serious crisis. "Inflation is out of control in Asia. Vietnam has already blown up. The policy response is to shoot the messenger, like the developed central banks in the late 1960s and 1970s," he said.

"They will have to slam on the brakes. There is going to be a deep global recession over the next three years as policy-makers try to get inflation back in the box."

Barclays Capital recommends outright "short" positions on Asian bonds, warning that yields could jump 200 to 300 basis points. The currencies of trade-deficit states like India should be sold. The US yield curve is likely to "steepen" with a vengeance, causing a bloodbath for bond holders.

David Woo, the bank's currency chief, said the Fed's policy of benign neglect towards the dollar had been stymied by oil, which is now eating deep into the country's standard of living. "The world has changed all of a sudden. The market is going to push the Fed into a tightening stance," he said.

The bank said the full damage from the global banking crisis would take another year to unfold. Rob McAdie, Barclays' credit strategist, said: "The core issues have not been addressed. We're still in a very large deleveraging cycle and we're seeing losses continue to mount. We think smaller banks will struggle to raise capital. We're very bearish - in the long-term - on high-yield debt. The default rate will reach 8pc to 9pc next year."

He said investors had taken their eye off the slow-motion disaster engulfing the US bond insurers or "monolines". Together these firms guarantee $170bn of structured credit and $1,000bn of US municipal bonds.

The two leaders - MBIA and Ambac - have already been downgraded as the rating agencies belatedly turn stringent. The risk is further downgrades could set off a fresh wave of bank troubles. "The creditworthiness of many US financial institutions will decline in coming months," he said.

The bank warned that engineering and auto firms we're likely to face a crunch as steel and oil costs surge. "Their business models will have to be substantially altered if they are going to survive," said Mr McAdie.

A small chorus of City bankers dissent from the view that inflation is the chief danger in the US and other rich OECD countries. The teams at Société Générale, Dresdner Kleinwort, and Banque AIG all warn that deflation may loom as housing markets crumble under record levels of household debt.

Bernard Connolly, global startegist at Banque AIG, said inflation targeting by central banks had become a "totemism that threatens to crush the world economy".

He said it would be madness to throw millions out of work by deflating part of the economy to offset a rise in imported fuel and food prices. Real wages are being squeezed by oil, come what may. It may be healthier for society to let it happen gently.

[kennynah]

eh bro...i tot u somewhere else ? got wifi connection there ah ?

[kennynah]

no material impact on eur/usd....currently spot @ 1.576

27 Jun 2008 09:15 GMT
Euro zone June economic sentiment indicator 94.9 vs 97.6 in May
BRUSSELS (Thomson Financial) - The European Commission said its euro zone economic sentiment indicator fell to 94.9 in June from 97.6 in May.

Economists polled by Thomson Financial News had forecast a more modest fall in the indicator to 96.1.

The May sentiment indicator was revised up from a provisional reading of 97.1.

The revision means that the indicator rise of 0.5 points in May came after a run of 11 consecutive declines.

But it resumed its downward trend this month with most euro zone countries reporting a deterioration in sentiment, the commission said.

The industrial confidence indicator fell to -5 from -2, while the consumer confidence indicator declined to -17 from -15.

Economists had forecast a figure of -3 for the industrial confidence indicator and -16 for the consumer confidence indicator.

The only component of the sentiment survey to record an increase was the services confidence indicator, which rose to +9 from +8.

The retail confidence indicator dropped to -4 from -1, while the construction sector indicator declined to -11 from -9.

Meanwhile, the commission's separate euro zone business climate indicator declined to +0.14 in June from +0.58 in May.

"The current level of the indicator suggests that industrial production growth weakened in the second quarter of this year, although it still points to a production growth rate which is above its historical average," the commission said.