Les nouvelles économiques du 18 mars 2011

  On the economic front, the index of business conditions from the Philadelphia Fed came out yesterday rose sharply in March, far exceeding the estimates of experts. Reaching 43.4, the index reached a higher level since January 1984.
   Moreover, Sweden, country outside the euro area has already announced he will not join the pact for the euro "adopted to avoid new debt crises at the summit of 24 and 25 March .
   Central banks have also made ​​the front page of the news yesterday. The SNB kept as expected the fluctuation of interest rates by reference, the Libor unchanged between 0% and 0.75%.
   Unlike central banks, the Reserve Bank of India has decided to raise rates by 25 basis points to 6.75% in order to cope with rising inflation. Last February the wholesale prices have indeed reached 8.3% annual rate.
   Inflation is also a major concern in Brazil. On the occasion of an interview with financial daily Valor President Dilma Rousseff firmly committed to the fight against inflationary pressures that have reached 5.9% in 2010. These comments foreshadow a further rise in interest rates by the Brazilian central bank.

 

Events Fukushima promote ample yen

  Events in Japan have continued to have a major impact on the evolution of the foreign exchange market. Many investors retreated strategically on safe haven, the yen and Swiss franc, while uncertainty remains about the nuclear accident at the plant in Fukushima.
   In this context, the Swiss franc reached record highs against the greenback but especially the yen hit a high for almost sixteen years against the U.S. dollar to 80 yen per dollar. Traders are betting on massive repatriations of Japanese assets abroad to rebuild the country which is pushing up the yen.
   The carry trade strategies are losing ground, the yen has also taken a lot of ground against the Australian dollar has fallen 1.5% against the yen in just one sitting. In this context, it is likely that the Bank of Japan is encouraged in the coming days to intervene directly in the foreign exchange market, which would be a first since last September.
   In the euro area, the situation has deteriorated a bit but the Japanese concerns have not yet shaken the single currency. The euro has lost about 100 pips against the dollar in just one session yesterday as a result of the degradation of Portugal's sovereign rating. This degradation by Moody's has caught the markets and has significantly affected the outcome of the Portuguese bond issue yesterday. Lisbon immediately responded to this degradation as premature. Indeed, there are only two days, financial markets and the agencies still welcomed the recent steps taken by the Heads of State and Government of the eurozone to deal with financial problems of member countries. Rather paradoxical situation that recalls the crisis that sovereign remains a burden for the single European currency.

The yen is resistant to massive injections of liquidity from the BoJ

  The situation on financial markets has improved slightly thanks to reassuring speeches made by several leading officials. First, on the ground, according to the IAEA, the nuclear crisis now seems much more controlled and a Chernobyl-like scenario over the hours pass away. Moreover, the Japanese government and central bank seem to be able to reassure some investors.
  Financial markets were yesterday dealt a very careful eye on the conference calls with representatives of the G20 and the finance ministers and central bank governors of the G7. In both cases, no action was taken, but support was clearly displayed in Japan in order. Some experts, however, not ruling out eventual concerted action of some central banks to influence the evolution of exchange. For now, the official in Tokyo that the government is still able to act alone, without outside support.
  The real problem for now seems mostly confined to the Forex market. Indeed, under the effect of risk aversion and repatriation of Japanese assets held abroad, the yen reached the highest levels against major currencies exchanged. This worries many Tokyo but could also cause problems for end to major trading partners of Japan. Conversely, after the sessions very depressing since Monday, the main global stock exchanges have gone back up, making an impressive rebound. And Frankfurt closed up 2.20% while Paris had a gain of 2.43% and that Tokyo had closed down 1.44%, decreased the need to put in perspective with the dramatic rise in the Nikkei 5.6% Wednesday.
  Usually quick to degrade the troubled country, the major global credit rating agencies have been rather quiet since the earthquake in Japan. All have held speech reassuring the country's ability to overcome the crisis, rejecting for now a deterioration in the sovereign rating, which could have negative effects on the flexibility of the government in this period of reconstruction.

The economic news of the March 16, 2011

   The Fed announced it was maintaining the course of its monetary policy very accommodative but expected that it will closely monitor inflationary risks.
   The index of homebuilder sentiment has emerged slightly up in March for the first time in four months, according to data from NAHB and Wells Fargo Bank. Indeed, the index was established, as expected by the consensus, at 17. Beyond 50, the index shows that a majority of manufacturers had a favorable market.
   Moreover, import prices have risen more than expected in February, rising 1.4% against 0.9% expected. Prices in January have however been revised downward to 1.3% against an estimate of 1.5%. This is the fifth consecutive month of increase for import prices.
   Finally, the Empire State Survey has increased more than expected in March to $ 17.5 against 17.0 expected by analysts. This is the best level since June 2010.

The economic news of the March 15, 2011

According to a first estimate of the Greek Authority statistics, GDP would have declined 4.5% in 2010, slightly more than the latest government estimates.
    Furthermore, the rating agency Fitch has reassured the United Kingdom stating that the "AAA" rating seems more solid thanks to the commitment of London to reduce the budget deficit. The agency, however, that inflationary pressures could prompt the BoE to increase more than expected interest rates.
    Finally, following the events Tramat in Japan, a barrel of oil dropped 2.07 dollars from below 100 to New York yesterday.

Earthquake: an emergency meeting at the South Korean central bank

The central bank of South Korea met today to urgently examine the impact of the earthquake and tsunami, which devastated Japan yesterday on the financial markets and the foreign exchange market according to local agency South Korean Yonhap.
    The central bank apparently scrutinized the state of South Korean stock exchange market in order to understand the impact of this particular tragic event.
    Intervention measures to calm the market and are not excluded by Monday according to financial analysts.
    On the nations surrounding Japan have also scheduled meetings of urgency as the situation deteriorates with the archipelago, now, a nuclear leak that forced the evacuation of several towns.
    At the opening of markets on Monday, a strong aversion to risk should be felt, prompting investors to the dollar. The yen is expected to experience significant volatility unless the BOJ intervenes, which seems inevitable.

After the earthquake, the Japanese central bank says ready to act

    According to latest reports, the earthquake would have caused thousands of casualties and damage would be counted in billions of dollars. Many businesses were affected, some manufacturing giants like Toyota, Nissan and Sony was forced to suspend production on several of their production sites, raising fears of a very sharp slowdown in economic growth. Many refineries have been destroyed and also other major companies. It is still too early to make an accurate estimate of the natural disaster on the economy.   To meet the emergency, the central bank quickly put together a team of disaster management under the direct authority of the Governor Shirakawa and will operate from Tokyo, a city that has not been as affected as the Northern countries. The immediate concern is so great that the central bank should try to reassure markets by ensuring the supply of liquidity.   Moreover, the forthcoming meeting of the central bank, which was scheduled over two days, Monday and Tuesday, should take place on Monday to quickly announce measures to support and stabilize financial markets. However, the margin is already very low for the central bank since interest rates at their lowest, at 0.1%.   This natural disaster occurs at the worst time for the country struggling against a persistent deflation and also against the threat of further deterioration in the sovereign rating. In January, S & P had lowered the rating of the country for the first time since 2002 and, following in February, Moody's had increased the pressure by putting the note of Japan under a negative outlook.   Even before the earthquake, the government was in a very difficult position, struggling to balance the budget for the fiscal year will start on 1 April, which could lead to the downfall of the current prime minister.  The quake could hasten events including an upcoming deterioration of the sovereign rating of the country that could turn on the yen. Until now, because of its safe haven status, the currency was stable against other currencies.