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UOB Economic-Treasury Research

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Company Reg No. 193500026Z

Wednesday, 11 August 2010 Global Markets


News Highlights
Foreign Exchange Rates (as at 10 Aug 2010)
As at 11 Aug Asian High Asian Low NY High NY Low
JPY 85.26 86.06 85.64 86.25 85.17 n The Fed FOMC kept its benchmark fed funds target rate
EUR 1.3118 1.3219 1.3135 1.3228 1.3074 unchanged today at a range of 0.00% to 0.25%, in line
GBP 1.5790 1.5888 1.5773 1.5910 1.5710 with consensus expectations. There were no new
CHF 1.0505 1.0552 1.0495 1.0618 1.0461 quantitative easing measures announced but the statement
AUD 0.9085 0.9164 0.9105 0.9165 0.9058 highlighted that to support the recovery, the Fed will keep
NZD 0.7188 0.7285 0.7206 0.7268 0.7166
constant the Fed holdings of securities at the current level
CAD 1.0326 1.0324 1.0277 1.0389 1.0298
by reinvesting the principal payment proceeds from
maturing mortgage-backed securities into US Treasuries (2
Interest Rates
Current Next CB Meet UOB’s Forecast to 10 year maturities), in a move aimed at kick-starting the
USD Fed Funds Rate 0.25% 21 Sep 0.00-0.25% economy by helping to keep borrowing costs low. The
EUR Refinancing Rate 1.00% 02 Sep 1.00% FOMC statement revealed that "the pace of recovery in output
GBP Repo Rate 0.50% 09 Sep 0.50% and employment has slowed in recent months [previously:
AUD Official Cash Rate 4.50% 07 Sep 4.50% economic recovery is proceeding and the labour market is
NZD Official Cash Rate 3.00% 16 Sep 3.00%
CAD Overnight Rate 0.75% 08 Sep 1.00%
improving gradually]." It added that "household spending
JPY Official Cash Rate 0.10% 07 Sep 0.10% is increasing gradually," while "credit remains tight."
However, "the pace of economic recovery is likely to be
Stock Indices (as at 10 Aug 2010) more modest in the near term than had been anticipated."
Closing % chg More importantly, the statement repeated "economic
Dow Jones Industrial Average 10644.25 -0.51 conditions, including low rates of resource utilization,
S&P 500 1121.06 -0.60
subdued inflation trends, and stable inflation expectations,
NASDAQ Composite 2277.17 -1.24
Tokyo Nikkei 225 9551.05 -0.22
are likely to warrant exceptionally low levels of the federal
London FTSE 100 5376.41 -0.63 funds rate for an extended period." Intraday, the USD eased
Frankfurt DAX 6286.25 -1.03 following the release of the FOMC statement.
All Ordinaries 4563.00 -1.14
n US wholesale inventories rose 0.1% m/m in June from
Commodities (as at 10 Aug 2010)
0.5% m/m in May, on consensus expectations of 0.4%.
Closing % chg
NNYMEX Crude (September) 80.25 -1.51 This contributed to a -0.3% y/y decline since June 2009.
Comex Gold (August) 1196.2 -0.37 Inventories was divided between a 0.3% m/m rise in durable
Reuters CRB Index 272.28 -0.84 inventories and a -0.2% drop in non-durable inventories.
Ex petroleum, wholesale inventories rose 0.3% m/m in June
from 0.9% in May. Wholesale sales fell by -0.7% m/m in
Bond Yields (as at 10 Aug 2010)
Closing Net chg June from a revised -0.5% m/m in May (initially -0.3%), while
US 2-Year Bond 0.53% - wholesale stock/sales rose to 1.15 months in June compared
US 10-Year Long Bond 2.76% -7 to 1.14 months in May and 1.30 months in June 2009.
JP 10-Year JGB 1.04% +1 Overall, this report is consistent with recent data indicating
EU 10-Year Bund 2.54% +1 a slowdown in the pace of economic recovery. Companies
UK 10-Year Long Gilt 3.26% +2
are expected to continue rebuilding their inventories in H2
2010, though at a subdued pace.
Key Events
Date Event n The NFIB optimism index fell 0.9 points to 88.1 in July. It
12 Aug Fed Duke speaks at Chicago Fed on Community Reinvest- indicates that US small business owners have become
ment Act at 1400GMT downbeat in July as expectations of weaker economic
growth in 2H reinforced a reluctance to hire. The US Investor
Business Daily Index of economic optimism dipped to 43.6
Global Markets
Wednesday, 11 August 2010
p2

in August from 44.7 in July, on consensus expectations of pattern of USD selling. The EUR/USD rallied as high as
45.0. This compares to 50.3 in August 2009. This report 1.3228 following the FOMC decision and a session low of
indicates a modest improvement in the 6-month outlook as 1.3074, before closing at 1.3177 from 1.3220. The GBP/
summer doldrum conditions prevail throughout July and into USD fell to a low of 1.5710 and session high of 1.5910
the first week of August. before settling at 1.5856 from 1.5892. The USD/JPY fell to a
session low of 85.17 from 85.93 following the decision and
n US non-farm productivity fell in 2Q this year by an annual a session high of 86.254. Yesterday, The BOJ kept their rates
rate of 0.9% after rising at a revised 3.9% in 1Q. Unit unchanged yesterday but the BOJ Gov. Masaaki Shirakawa
labour costs edged up at a 0.2% annual rate after shrinking expressed concern about the damage from a strong JPY but
at a revised 3.7% in 1Q 2010. indicated the BOJ does not have plans yet to alter course on
monetary policy to stem the JPY gains.
n Today’s key economic data releases include: UK Claimant
Count Rate (Jul) (consensus 4.5%); UK Jobless Claims n US Treasuries rallied after the Fed indicated their intention
Change (Jul) (consensus -17.0K); UK ILO Unemployment of future bond buying activity to help support the US
Rate (Jun) (consensus 7.8%); UK BOE Quarterly Inflation economic recovery. Gains were the most pronounced in
Report (0930 GMT); and US Trade Balance (Jun) Treasurys maturing in the next 5 to 7 years, after the Fed
(consensus -42.3bnUSD). announced that it will reinvest the proceeds from expiring
mortgage-backed securities into Treasurys maturing in the
n US equities fell yesterday following the Fed statement next 2 to 10 years. The 10-year yields fell 7bpds to 2.76%
which signals a slow US recovery and signs of slowing and the 2-year was unchanged at 0.53%.
demand in China. The DJIA dropped 54.50 points (0.51%),
to 10644.25. The Nasdaq dropped 28.52 (1.24%), to n Gold prices settled lower at $1196.2/oz from $1200.7/oz
2277.17. The S&P slipped 6.73 (0.60%), to 1121.06. in line with the general trend before the US FOMC
statement was released. But intra-day gold prices rose after
n Intra-day the USD fell following the release of the FOMC the Fed announced a stimulative portfolio shift and left its
statement which acknowledged a slowdown in the pace benchmark rate unchanged. Oil prices pared early losses
of the US recovery and the move to prevent the Fed yesterday but still managed to settle above $80 a barrel after
balance sheet from shrinking. The USD was strengthening the Federal Reserve's announcement. Despite a weaker
going into the FOMC decision, but the lack of any significant USD, the Sep prompt-month crude oil futures contract closed
surprise to the statement prompted a return to the previous lower at $80.25/bbl from $81.48/bbl.

URL: www.uob.com.sg/research
Email: EcoTreasury.Research@UOBgroup.com
Global Markets
Wednesday, 11 August 2010
p3

Economic Indicators
SG Time Indicators Mth Actual UOB Forecast Mkt Forecast Previous
10/08
1128 JPY Official Cash Rate Aug 10 0.10 0.10 0.10 0.10%
1400 Gmn CPI m/m Jul F 0.3 - 0.2 0.2%
1400 Gmn CPI y/y Jul F 1.2 - 1.1 1.1%
1400 Gmn WPI m/m Jul -0.3 - - -0.2%
1400 Gmn WPI y/y Jul 5.3 - - 5.1%
1445 Fr Manufacturing Prod m/m Jun -1.3 - 0.4 0.6%
1445 Fr Manufacturing Prod y/y Jun 5.0 - 7.0 7.8%
1445 Fr Ind Prod m/m Jun -1.7 - -0.2 1.9%
1445 Fr Ind Prod y/y Jun 5.7 - 7.3 8.5%
1630 UK DCLG UK Hse Pr y/y Jun 9.9 - 9.8 10.6%
2030 US Nonfarm Productivity 2Q P -0.9 - 0.1 3.9%
2030 US Unit Labor Costs 2Q P 0.2 - 1.5 -3.7%
2200 US Wholesale Inventories Jun 0.1 - 0.4 0.5%
2200 US IBD/TIPP Econ Optimism Aug 43.6 - 45.0 44.7

11/08
0215 USD Fed Funds Rate Aug 10 0.25 0.25 0.25 0.25%
0500 US ABC Consumer Confidence Aug 8 -47 - - -50
0701 UK Nat’wide Consumer Confidence Jul - 61 63
2030 US Trade Bal Jun - -42.3 -42.3b

12/08
0200 US Monthly Budget Statement Jul - 169.0 180.7b
1700 EZ Ind Prod sa m/m Jun - 0.6 1.0%
1700 EZ Ind Prod wda y/y Jun - 9.3 9.6%
2030 US Import Pr Ind m/m Jul - 0.3 -1.3%
2030 US Import Pr Ind y/y Jul - 5.4 4.5%
2030 US Initial Jobless Claims Aug 7 - 465 479k
2030 US Continuing Claims Jul 31 - 4540 4537k

13/08
1400 Gmn GDP sa q/q 2Q P - 1.3 0.2%
1400 Gmn GDP wda y/y 2Q P - 2.4 1.6%
1400 Gmn GDP nsa y/y 2Q P - 2.6 1.7%
1700 EZ Trade Bal Jun - 1.0 -3.4b
1700 EZ GDP sa q/q 2Q A - 0.7 0.2%
1700 EZ GDP sa y/y 2Q A - 1.4 0.6%
2030 US CPI m/m Jul - 0.2 -0.1%
2030 US CPI y/y Jul - 1.2 1.1%
2030 US CPI Ex Food & Energy m/m Jul - 0.1 0.2%
2030 US CPI Ex Food & Energy y/y Jul - 0.9 0.9%
2030 US Adv Retails Sales Jul - 0.5 -0.5%
2030 US Retail Sales less autos Jul - 0.3 -0.1%
2030 US Retail Sales ex auto & gas Jul - 0.2 0.1%
2155 US U. of Michigan Confidence Aug P - 69.2 67.8
2200 US Business Inventories Jun - 0.2 0.1%

Jimmy Koh Lee Sue Ann Saktiandi Supaat


(65) 6539 3545 (65) 6539 3549 (65) 6539 8930
Jimmy.KohCT@UOBgroup.com Lee.SueAnn@UOBgroup.com Saktiandi.Supaat@UOBgroup.com
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URL: www.uob.com.sg/research
Email: EcoTreasury.Research@UOBgroup.com