Sunday, September 19, 2010

Britain shows no sign of double-dip recession-Cable

LIVERPOOL, England, Sept 19 (Reuters) - Britain shows no signs of a double-dip recession and manufacturing is growing strongly, Business Secretary Vince Cable said on Sunday.

"On the double dip recession, there is no sign of it," Cable told an event at his Liberal Democrat party's conference in Liverpool.

"In fact, the private sector is growing quite strongly in certain areas, particularly manufacturing," Cable added.

"Certainly we are not heading for a double-dip recession. It's an outside risk. I can't promise that it won't happen, but it certainly looks improbable," he said.

Slowing growth in Britain's services sector have prompted concerns the economy may go into reverse only months after emerging from the worst recession in generations following the global financial crisis.

British service sector activity grew last month at its slowest pace since April 2009, with a marked fall in hiring as employers worried about an economic slowdown and public spending cuts, according to the latest Markit/CIPS services purchasing managers' index. (Reporting by Tim Castle, editing by Maureen Bavdek)

Tuesday, September 14, 2010

Australian Dollar Trades Near Two-Year High on Growth View, Fed Purchases

By Candice Zachariahs - Sep 14, 2010 4:22 PM PT

The Australian dollar traded near its strongest level in two years as a strengthening domestic economy and concern the Federal Reserve will expand efforts to keep down borrowing costs spurred demand for the currency.

New Zealand’s currency was near a seven-week high as speculation increased that U.S. policy makers will buy additional Treasury securities this year to help sustain growth as the recovery falters. Gains in the so-called kiwi were tempered on speculation the Reserve Bank of New Zealand will leave interest rates unchanged at a meeting tomorrow.

“Aussie can probably track a bit higher,” said Joseph Capurso, a currency strategist in Sydney at Commonwealth Bank of Australia, the nation’s largest lender. “The Australian economy is outperforming the rest and the market’s pricing in the prospect of quantitative easing in the U.S.”

The Australian dollar traded at 93.96 U.S. cents as of 9:22 a.m. in Sydney from 93.97 cents in New York yesterday, when it climbed to 94.58 cents, the highest level since July 2008. The currency was at 78.01 yen from 78.03 yesterday.

New Zealand’s dollar bought 73.28 cents from 73.43 cents yesterday when it advanced to 73.95, the strongest since July 27. It traded at 60.84 yen from 60.97.

Economists at Goldman Sachs & Co. expect the Fed to announce as early as November a program of asset purchases to support a weak economy. Treasury purchases may total about $1 trillion in another round of quantitative easing, said Jan Hatzius, chief U.S. economist at Goldman Sachs.

Benchmark interest rates are 4.5 percent in Australia and 3 percent in New Zealand, compared with 0.1 percent in Japan and as low as zero in the U.S., attracting investors to the South Pacific nations’ higher-yielding assets. The risk in such trades is that currency market moves will erase profits.

Sunday, September 5, 2010

ECB Trichet: Strong 2Q Confirms No Double Dip

First Published Sunday, 5 September 2010 05:37 pm - © 2010 Need to Know News

--But Too Early To Declare "Victory"

PARIS (MNI) - The Eurozone's strong second quarter growth performance confirms that there won't be a double-dip recession, but there are plenty of challenges in the coming years, ECB President Jean-Claude Trichet said in a newspaper interview published Saturday.

"I've already said on many occasions that I didn't foresee a double dip in Europe, and the latest results confirm it," Trichet told the French daily Le Figaro.

He warned against reading too much into quarterly figures, however, saying that the economy must be judged in a longer-term perspective. "That said, I am delighted with the growth in the second quarter and with the upward revision to the European Central Bank staff forecasts that I announced last Thursday," he added.

However, "with regard to growth in the coming years, we remain cautious and are not declaring victory," Trichet said.

Trichet and his ECB colleagues have said many times recently that they do not expect growth in the second half of this year to match the second quarter's torrid pace. They expect momentum to slow in the third quarter and even more so in the fourth, though they believe a modest recovery will continue.

The Eurozone economy surpassed expectations in the second quarter with a robust 1.0% q/q growth rate, driven largely by Germany's dizzying 2.2% quarterly pace. Largely on the basis of the strong second quarter, the ECB staff revised upward its midpoint growth forecast for 2010 to 1.6% from the previous projection of 1%.

Trichet suggested that the strong 2Q performance cannot be attributed to the euro's weaker tone in foreign exchange markets, which many say has been a big boon for exports - especially Germany's.

"I note with great interest that the Eurozone's second quarter growth rests above all on its domestic demand [consumption and investments]: a total contribution of 0.7% to growth of 1%, with a contribution of 0.1% from foreign trade and 0.2% from inventories," the ECB president said.

He downplayed the idea that Germany's disproportionate share of 2Q EMU growth meant that a "two-speed" Europe was emerging.

"Germany is the biggest economy in the [currency] union and the top market for the exports of the near-totality of the other countries. When it improves, it is clearly good for the Eurozone as a whole," Trichet said.

He lauded Germany, saying its success was the fruit of the measures it has undertaken in recent years to reduce production costs and increase productivity, as well as the adaptability of German companies to the realities of globalization.

In a comment that could be aimed at France, which is facing a week of strikes, protests and general tension over the government's pension reform plan, Trichet noted that Germany's success was built on "a high degree of confidence among social partners [unions and employers], which we be desirable to regain in all countries of the Eurozone."

Given its attention to production costs and the reforms it has undertaken to make the economy "more flexible," Germany "can serve as an example to all its neighbors," Trichet said.

Asked to explain why the U.S. Federal Reserve was worried about deflation while the ECB was not, Trichet said there were "important structural differences on the two sides of the Atlantic, and that the fear of deflation "manifested itself from time to time in the United States, even if, very fortunately, the risk has not materialized."

In Europe, he added, "we are lucky to have a remarkable anchoring of inflation expectations in line with our definition of price stability of less than but close to 2%." He repeated, as he has for many months, that "the ECB considers the current interest rates appropriate to give us medium-term price stability, without inflation or deflation."

Trichet also repeated his criticism of the big three ratings agencies, saying "it is not necessarily healthy" that the important task of evaluating securities be share among only three institutions at the global level. "I don't think the solution is necessarily the creation of a public institution. We must continue to reflect," he said, adding that, "the right answers in this domain as in others can only be worldwide ones."

Trichet also renewed his call for China to exercise "greater flexibility" with regard to the exchange rate of its currency, the yuan. "From this point of view, I appreciated, along with all the [finance] ministers and [central bank] governors of countries with floating currencies, the move in the direction of more flexibility that was made public by China last June 19," he said.