The UK governor of the Bank of England has reaffirmed his commitment over the past 24 hrs during various interviews, to keeping the UK’s base interest rate at a record low of 0.5% under his adjusted forward guidance programme. He felt the need to go public with a statement after the UK’s unemployment level fell to 7.1% creating speculation, particularly amongst FX speculators and investors, that the UK base rate would rise from the floor to perhaps 1%. However, despite his earlier protestations some six months back, that a rate rise could happen if unemployment fell to 7%, the governor quickly acted to quell any rumours that the rate rise will be imminent.
In other UK news the latest BBA mortgage approvals for the UK in the month of December have been published this morning showing a rise, but below analysts’ expectations. But at 46.5K the approvals level is significantly ahead of the 33.6K, the print of January 2013.
Overnight the Nikkei index sold off as a Japanese government minister suggested that the monetary easing programme the BOJ are currently engaged in could end sooner than many investors and analysts first thought. The combination of this and a rout in emerging markets currencies and equities led to a sharp fall on the Nikkei index of 1.94%.
Looking towards the New York open the DJIA equity index future is currently down 0.35% with the other main USA indices also down marginally, suggesting that the USA markets will open in the red.
Retail sales in Italy flat
The retail trade index measures the monthly evolution of the turnover at current prices of enterprises with retail sale outlets. In November 2013 the seasonally adjusted retail trade index was flat with respect to October 2013 (+0.2% for food goods and -0.1% for non-food goods). The average of the last three months compared to the previous three months decreased by 0.5%. The unadjusted index increased by 0.1% with respect to November 2012.
UK’s BBA mortgage approval misses expectations
The UK’s British Banking Association released its latest mortgage approval and the print missed analysts’ expectations. The most recent approval came in at 46.5K ahead of expectations of 47.2K, the previous data print for this series came in at 45.4K. On a year on year comparison the January 2013 print came in at 33.6K.
Market overview at 10:00 am UK time
The ASX 200 closed down 0.42%, the CSI 300 closed up 0.62%, the Hang Seng down 1.25%, with the Nikkei falling sharply by 1.94% as a Japanese government minister suggested that its record monetary easing programme would have to end sooner than later. European indices have opened in the red with Euro STOXX down 0.65%, CAC down 0.43%, DAX down 0.35% and the UK FTSE is down 0.24%.
Looking towards the USA open the DJIA equity index future is down 0.35%, SPX down 0.32%, the NASDAQ future is down 0.32%. NYMEX WTI oil is up 1.04% at $96.74 per barrel, NYMEX nat gas is up a significant 3.07% at $4.88 per therm. COMEX gold is down 0.31% at $1258.60 per ounce with silver down 0.20% at $19.97 per ounce.
Forex focus
The dollar gained 0.1 percent to $1.3682 per euro early London time as it rose 0.1 percent to 103.37 yen. Japan’s currency was unchanged at 141.44 against Europe’s shared currency. For the week, the dollar was set for a 1.1 percent decline against the euro. The yen was poised to climb 0.9 percent against the dollar and decline 0.1 percent against the euro. The Aussie fell 0.7 percent to 87.07 U.S. cents after reaching 86.89, the least since July 2010. It was headed for a 0.8 percent decline since Jan. 17.
The dollar gained versus most of its major peers amid speculation the Federal Reserve will decide to reduce monetary stimulus at a meeting next week even after data showed signs that economic growth is slowing.
The yen is the best performer among its major peers this year, rising 1.9 percent against the dollar. That follows an 18 percent slide in 2013, the most among Group of 10 currencies, before it touched 105.44 per dollar on Jan. 2nd, the weakest since October 2008. The Aussie has fallen 2.4 percent against the greenback this year, extending a 14 percent drop from last year.
The pound was little changed at $1.6635 early London time after climbing to $1.6643 yesterday, the highest level since May 2011. It has gained 1.3 percent versus the U.S. currency this week, the most since the period ended Oct. 18th. Sterling traded at 82.30 pence per euro after appreciating to 81.68 pence on Jan. 22nd the strongest since Jan. 10th 2013.
Bonds briefing
The U.S. 10-year yield was little changed at 2.77 percent early London time after falling to 2.76 percent yesterday, the lowest since Dec. 3rd. The price of the 2.75 percent note due November 2023 was 99 25/32.
Treasury 10-year notes were set for a fourth weekly advance, the longest stretch since April, as weaker-than-expected U.S. data and concern emerging markets are slowing spurred demand for haven assets.
German 10-year yields fell two basis points, or 0.02 percentage point, to 1.69 percent early London time, after dropping to 1.68 percent, the lowest since Nov. 7th. The rate has dropped six basis points this week. The 2 percent bond maturing August 2023 rose 0.145, or 1.45 euros per 1,000-euro ($1,369) face amount, to 102.685. Germany’s 10-year bond yield fell to the lowest level in 11 weeks as concern emerging markets are slowing boosted demand for the safest government securities.
