September 11, 2014 1:30 PM | 4 min read | Make a Comment
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Who wants independence?:Scottish Referendum fever continues to grip market price action. Euro bourses (Stoxx Euro 600 +0.4%, FTSE100 +0.2%) have been thrown a lifeline, helped by the most recent polls on Scottish sovereignty which shows a lead for those in favor of remaining in the U.K. Gains for GBP (£1.6245) are expected to remain small until the September 18 vote
Carney on lookout:The recent shock to sterling seems to have been overcome. Fundamentally, there is no reason for a much deeper pullback from the pound. Governor Carney assurance that the BoE has emergency plans to ensure financial stability if Scotland happened to vote “yes” is helping sterling find some sort of base right now
Scot odd's slashed:Most recent poll suggest that Scotland will vote to remain part of the UK. Odd's have been slashed – there is roughly a +20% probability of a “Yes” vote, down from +35% following last weekends tight polls
Inflation, What inflation?:No surprises from Germany's consumer price growth. It stabilized at a very low rate last month, annual rate of +0.8% on the month. Unlike Germany, Europe annual inflation rate slowed to +0.3% from +0.4% in July, way below the ECB's desired +2% level
Fed fears dominate:Fears of a more “hawkish stance has both the Euro and US bond yields remaining somewhat elevated ahead of next week's FOMC meeting. Policy makers are expected to shed some light on plans to raise interest rates. Currently, higher front-end US yields continue to pressure EM currencies
Kiwi rates and “carry” trade effected:As expected, the RBNZ held its cash rate steady at +3.5% after four-consecutive increases. The accompanying policy statement was mixed – RBNZ affirmed 2014 GDP, raised Q1 2015 GDP, and cut its projections for 90-day bill rates to imply a pause until Q1 of 2015. The NZD has fallen to a new seven-month low NZD$0.8166 after Governor Wheeler indicated that NZD levels are unjustified. The Governor also noted that this is just a pause, and that the current rate of +3.5% is still below the “neutral level” of 4.5%
AUD ‘shorts' squeezed on ‘iffy' Jobs print:Australia employment saw a record high +121k net change last month – almost 9x consensus levels and the highest in the data series going back over three decades. The UE fell for the first time in four-months (+6.1%) while labor participation rate hit a 16-month high. AUD spiked to $0.9210 (matching weekly high) despite analysts warning of a “sample error” that would equate to the US creating +1.5m new jobs in a given month. The AUD has fallen by nearly a cent post Oz job numbers (AUD$0.9128)
Mutual silence broken:The BoJ's Governor Kuroda and Japan's PM Abe are reported to hold their first direct talks in nearly six-months amid talk that Abe will be pushing for further monetary stimulus to help offset the next round of sales tax hikes (¥106.98. Japan's MoF released its quarterly Business Survey Index (it managed to hit a one-year high for large manufacturing), while also increasing its projections for FY14/15 corporate capex (capital expenditure) to +5.7% from +4.5%. Japan continues to seek a weaker yen for growth
China softness continues to be a worryChina's inflation figures were generally soft, with CPI hitting a four-month low (+2% vs. +2.3%), while PPI came in negative for the 30th straight-month (-1.2% vs. -0.9%). Authorities lay blame on the decline in material prices and warned that the outlook for industrial demand is not optimistic. A gradual slowdown in the economy will only translate into lower price growth. Consumer inflation was once again skewed toward food prices – up +3% y/y, compared to +0.2% for non-food items
Crude demand falls:The IEA has again trimmed its forecast for the rise in oil demand this year for the third consecutive month. It expects that oil demand will grown by 0.9m barrels a day for the remainder of the year, down -65k barrels a day since last months projections and down a massive -300k barrels a day from July. Oil demand growth in Q2 was the lowest in nearly three-years, dented by Euro and Chinese economic weakness
