29 August 2011 at 5:31 GMT
While Bernanke do not deliver anything new on the policy front in his Jackson Hole speech Friday, IMF chief Lagarde was more forthright Saturday, warning that the world economy had entered a dangerous new phase and urged global policymakers to act now. She also called for immediate (maybe even forced) recapitalization of the Eurozone banking sector, warning that if this was not done (from either private or state funds) then there would be an increasing risk of a debilitating liquidity crisis. Trichet later countered that there was no European liquidity crisis and reiterated the ECB’s commitment to price stability.
Meanwhile an article in the UK’s Sunday Times suggests the ECB and European Commission are considering a radical plan to prevent a fresh European credit crisis. The plan, according to the piece, could involve policymakers offering central guarantees on certain types of bank debt (to be insured from Europe’s €440 bln EFSF stability fund) to address concerns that some Euro-zone banks have been shut out of international money markets. Note the viability of the EFSF itself was called into question by weekend reports in the UK Telegraph where growing numbers of Merkel’s coalition cabinet are set to vote against the package.
With a busy week ahead on the data front, Asia started things off slowly with a tightly-range-bound session. The only data release was second-tier with Australia’s HIA new home sales falling 8.0% m/m, a tad slower than the previous month’s 8.7% drop.
The European session features a bank holiday in the UK so there is a risk of further subdued activity. Data focuses on CPI numbers for August from Germany with numerous states reporting followed by Sweden’s retail sales and Norway’s manufacturing wages completing the picture.
The US avoided heavy damage from hurricane Irene and should be opening as normal and has a busier calendar with personal income/spending, PCE deflator, pending home sales and the Dallas Fed manufacturing activity all on tap.
To sum up actions from Friday's session, Bernanke’s Jackson Hole speech was the focus and, while he did not immediately announce any further QE measures, he repeated that the Fed had many tools at its disposal and remained ready to act if necessary with a 2-day meeting scheduled for September instead of the usual one. The fact that there appeared to be no “panic” from recent economic developments gave Wall St some comfort while the prospect of future QE kept the dollar under mild pressure.
The CHF saw early selling as rumours circulated that the SNB would push more CHF measures on the market (asking banks to levy a temporary fee on cash deposits being one of them) while weak KOF leading indicators also emphasized the weaker CHF tone. Elsewhere, UK’s Q2 GDP was unchanged from the previous forecast with GBP holding steady. Oil edged higher on hurricane Irene concerns which offered mild support to the CAD while gold continued its rebound after the recent wipeout, regaining the 1,800 handle.
On the US data front, Q2 GDP was revised marginally lower (+1.0% q/q from 1.3% previously) while the final Michigan confidence reading was a touch higher than the initial forecast, though slightly below expectations. Wall St managed its first weekly gain in almost a month as Bernanke’s message raised hopes for further stimulus down the line with the DJIA finishing +1.21% on the day, the S&P +1.51% and the Nasdaq +2.49%.
Economic Data Highlights
- US Q2 GDP out at +1.0% q/q vs. 1.1% expected and 1.3% prior
- US Aug. Final Michigan Confidence out at 55.7 vs. 55.8 expected and 54.9 prior
- China Jul. Industrial profits out at +28.3% y/y vs. 28.7% prior
- UK Aug. Hometrack Housing Survey out at -0.1% m/m, -3.7% y/y vs. -0.1%/-3.9% prior resp.
- AU Jul. HIA New Home sales out at -8.0% m/m vs. -8.7% prior
Upcoming Economic Calendar Highlights
(All Times GMT)
- GE CPI (various states) (n/a)
- Sweden Retail Sales (0730)
- Norway Manufacturing Wage Index (0800)
- US Personal Income/Spending (1230)
- US Pending Home Sales (1400)
- US Dallas Fed Manufacturing Activity (1430)