2010 08 31

Korea – Japan – Germany : all major exporters.
• Korean Won is still about 20% weaker now than before the financial crisis.
• Euro is at the lowest level since mid-2006
• Yen is about 30% stronger now than back in mid-2007 when it was over 120.
Guess which economy and stock market is underperforming.

I see no reason for the yen to strengthen from here as yield differential is non-existent and there is no impetus for carry trade.
However, Nikkei/Topix could be interesting as Japan looks at serious stimulus measures – I doubt that this can do much for the economy however.

Once again, there is no worry over inflation in US or Europe. I don’t see a compelling reason for the bond yield to in the medium term. And I don’t see economic news getting better anytime soon.

US consumer confidence number is no news. Yes the number did go up but it is at a dismal level. But I think this is the pattern we see in Sept and Oct in US – stabilization in economic data – as Europe starts to see deterioration. This is why the trade of Q4 is US vs Europe


Korea continues to be strong on manufacturing front
• South Korea’s industrial production grew faster than estimated in July, logging the 13th straight monthly gain as the nation’s exports withstood global risks.
• Production advanced 1.1 percent from June.
• Exports helped the economy expand 7.6 percent in the first half from a year earlier, the fastest pace in a decade.
• The weaker won buoyed second-quarter earnings at exporters including Samsung Electronics Co. and steelmaker Posco, even as the U.S., Chinese and Japanese economies cooled.
• Manufacturers’ confidence in prospects for September rebounded on the outlook for overseas demand and local holiday shopping, according to a separate report.

Japan sees moderate increase in July industrial production
• Japan's industrial production rose a seasonally adjusted 0.3 percent in July from a month earlier.
• Economists commented that the yen's rise to 15-year highs against the U.S. dollar has yet to adversely affect factories' output, although companies are expected to have to cut their output in the coming months due to slowing demands from emerging markets and the U.S.

German jobless rate holds steady in August
• Germany's unemployment rate held steady at 7.6 percent in August as an improving economy bolstered the labor market.
• "The good economic development further improved the situation on the labor market," agency board member Heinrich Alt said. "The important indicators are developing in the right direction."

Eurozone inflation falls in August
• Eurostat's preliminary estimate of August consumer price inflation showed a 1.6% annual rise, down from a 1.7% increase in July. The figure remains below the ECB's target of just less than 2%

Chicago purchasing managers index drops in August
• Manufacturing activity in the Chicago region expanded at a less rapid pace in August.
• The Chicago purchasing managers index fell to 56.7% from 62.3% in July. The drop was in line with forecasts. Readings over 50% indicate overall business expansion.

US consumer confidence up slightly in August
• The Conference Board, a private research group, said its index of consumer confidence rose to 53.5 this month from a revised 51.0 in July, first reported as 50.4.
• Consumer expectations for economic activity over the next six months – widely considered to be an important leading indicator - rebounded to 72.5 in August, after plunging to a revised 67.5, originally reported as 66.6.