Month: August 2011

The European Central Bank (ECB) held the Main refinancing operations rate unchanged at 1.50%, the Marginal lending facility at 2.25% and Deposit facility at 0.75%.  The Bank said: “The information that has become available since then confirms our assessment that an adjustment of the accommodative monetary policy stance was warranted in the light of upside risks to price stability.  While the monetary analysis indicates that the underlying pace of monetary expansion is still moderate, monetary liquidity remains ample and may facilitate the accommodation of price pressures.  As expected, recent economic data indicate a deceleration in the pace of economic growth in the past few months, following the strong growth rate in the first quarter.  Continued moderate expansion is expected in the period ahead.  However, uncertainty is particularly high”.

The ECB increased the interest rates by 25 basis points at its July meeting; pausing in May and June, after raising the rate by 25 basis points to 1.25% in April this year.  The Euro Area reported annual HICP inflation of 2.7% in June (same as May), compared to 2.8% in April, and 2.7% in March, and above the Bank’s inflation target of maintaining inflation below, but close to, 2% over the medium term.  The Euro Area reported quarterly GDP growth in the March quarter of 0.8%, following a 0.3% increase in the December quarter of 2010.

Kraft Foods (KFT) said today it has decided to split itself into two separate, publicly traded companies. The company also reported better-than-expected quarterly earnings, and raised its outlook

Aug. 4 (Bloomberg) — Tohru Sasaki, the Tokyo-based head of Japan rates and foreign-exchange research at JPMorgan Chase & Co., talks about the yen. The currency weakened against all its major peers after Japan intervened in the foreign-exchange market for the first time since March to stem gains in the yen that threaten the nation’s economic recovery. Sasaki speaks with Rishaad Salamat on Bloomberg Television’s “On the Move Asia.” (Source: Bloomberg)

Aug. 4 (Bloomberg) — Turkey’s central bank reduced the benchmark interest rate to a record low of 5.75 percent to shield the economy from the impact of the European debt crisis and slowing growth in the U.S. The bank also raised the overnight borrowing rate to 5 percent. Maryam Nemazee and Linda Yueh report on Bloomberg Television’s “The Pulse.” (Source: Bloomberg)

Aug. 4 (Bloomberg) — Thomas Harr, head of Asian foreign-exchange strategy at Standard Chartered Bank, discusses Japan’s intervention today to weaken its currency. He speaks from Singapore with Linzie Janis on Bloomberg Television’s “Countdown.”

European debt woes have flared up once more this week, with Italy coming strongly into view as a result of its burgeoning debt and sluggish growth. Defying pressure for his resignation amid the talk, Italian Prime Minister Silvio Berlusconi vowed Wednesday to remain in office until his mandate comes to a close in 2013 and promised to work tirelessly towards shoring up Italy’s finances.

Italy’s debt, a staggering $2.2T, is viewed all the more ominously when lined up with the country’s economic output. As a portion of GDP, Italy’s debt poses a far greater challenge than that of even the United States, as debated these past few weeks by Congress. Being the seventh largest economy worldwide, Italy’s default would likely ripple through financial markets, dragging the euro zone down with it. The question is whether Italy, and the broader region, will respond, or is capable of responding, to this crisis in the same way it had for Greece.

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Following suit from last week’s surprise unemployment claims data, this week’s report also beat out forecasts, revealing only 400,000 new claims for unemployment benefits this week. The numbers are not stellar by any means, but a slowdown in unemployment insurance claims signals a modest strengthening of the US job market.

ADP’s report on Wednesday regarding private sector job growth also revealed a major upswing in job creation. Forecasts had anticipated approximately 100,000 new jobs. The actual report came in at 118,000 new jobs. That also marks 14 consecutive months of job growth in the private sector. Some could hold this data up as a rebuke to criticism of President Obama’s handling of the economy during the worst recession since 1929, but that is a matter for future historians to debate.

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Results for this month’s reading on German factory orders surprised many investors this morning. Data released by Deutsche Bundesbank today at 11:00 GMT highlighted a solid 1.8% uptick in demand for factory goods. The news has been mixed for the euro zone’s common currency, the euro (EUR), however, as the region struggles with debt woes in Italy and Spain.

Expectations for today’s report were for a contraction in demand as the euro zone continues to struggle with mired sluggishness. Analysts were anticipating a contraction ranging from 0.2% to 0.9%, making the sudden uptick of 1.8% all the more impactful on today’s market. Should such numbers persist through the remaining months of summer, the region could be in a better position to better tackle the debt crisis affecting Germany’s peripheral neighbors.

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Aug. 4 (Bloomberg) — Niall Ferguson, a history professor at Harvard University and a Bloomberg Television contributing editor, talks about China’s response to the U.S. debt ceiling debate in Washington. Ferguson speaks with Deirdre Bolton on Bloomberg Television’s “InsideTrack.” (Source: Bloomberg)