The biggest economic news today was largely as expected. Retail sales remains anemic but it’s yet another piece of confirmation that we are not in contraction territory.
In terms of news moving the market it was the result of Japanese election – incumbent prime minister Kan won the party election beating his challenger who was widely believed to be likely to prod BoJ to intervene and weaken the currency. This news pushed Yen even stronger. I have said before that there is nothing BoJ could do even if it wanted to weaken the Yen. It tried once before in 2004 and it was useless. The currency market is too big even for the government. If anything government intervention was seen as sign of weakness and only emboldens speculators. Look at what’s happening to CHF.
It has been a very quiet month for currencies. The biggest move MTD has been in AUD and it has only moved 0.19% against USD.
We also saw sharp advance in gold and bonds (and bunds). News media reports as safe haven buying. Well, it seems odd to me why all of a sudden there is a huge spike in demand for gold and bonds especially today when there is no obvious bad news and stocks and commodities are flat.
I still like gold a lot – macro backdrop is perfect for this asset.
Actually, what has really been racing ahead is silver. Silver was at $18 at the end of July. Today it’s at $20.44.
U.K. Housing Gauge Falls to Lowest Since May 2009
• The housing recovery may be faltering as the prospect of the biggest spending squeeze since World War II deters buyers and banks restrict access to credit.
UK inflation holds steady – higher than expected
• The Office for National Statistics said consumer price inflation came in at 3.1 percent last month in contrast to economists' expectations for a fall to 2.9 percent.
US august retail sales – isn’t good but it is still growing
• Retail sales rose 0.4% on the month, the Commerce Department said. It marked the second straight increase and was the largest gain since March. Excluding autos, August's sales rose 0.6%.
Tomorrow shapes up to be a big day with Euroland Aug CPI and US Aug industrial production and capacity utilization as well as Empire manufacturing survey. The market took off on a huge rally this month primarily on much better than expected PMI number. If these other manufacturing indicators disappoint that would cast a serious doubt that US industrial activities are on a stable footing.
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