Asia spent the morning waiting for the Bank of Japan announcement and kept currencies tight-ranged but at the lower levels established overnight.
The Bank of Japan delivered a slew of easing measures (most had been suggested/anticipated by the market, but to deliver all of them was a tad more aggressive than expected). It increased its total asset purchase and loan programme by ¥10 tn (¥5 tln for JGBs, ¥5 tln for T-bills) to ¥80 tln and extended the duration of the programme to end-2013. It also scrapped the minimum 0.1 percent interest level for JGB purchases while the call target rate was left unchanged at 0-0.1 percent. All decisions were unanimous. The BOJ also downgraded its assessment of the economy, saying the pickup in economic activity had come to a pause. Governor Shirakawa’s press conference is scheduled for 0715GMT.
New Zealand posted its widest current account deficit in three years in the second quarter as the fuel import bill increases and overseas sales slide due to the strength of the Kiwi. The deficit came in at just under NZ$1.8 bln and represented 4.9 percent of GDP in the 12 months to end-June compared with 4.5 percent as at end-March. NZD slid a meager 20 points versus the US dollar on the data before recovering. Separately on the NZD, finance minister English commented that
Data overnight continued to suggest that the US housing market is at least stabilizing. The NAHB housing market index rose to 40, its highest since June 2006, from 37 last month and beat market forecasts of a 38 reading. The sub-index of expected home sales over the next six months rose to 51 from a revised 43 in August and suggests home sales data in September will continue its recent positive trend.
TIC data showed that foreign investment in the US accelerated in July to $60.2bln from $5.4bln the previous month as foreign investors continued their purchases of US fixed income assets even as risk sentiment recovered in July. In particular, official accounts were strong buyers of long-term US Treasuries, likely due to the Swiss National Bank continuing to diversifying its FX reserves.
The EUR extended its retreat from Monday’s highs as the Germany’s ZEW survey of the current situation fell to 12.6 from 18.2 while slight improvements in economic sentiment (-18.2 from -25.5 for Germany and -3.8 from -21.2 for the Euro-zone) could not prevent the slide. Spanish banks were in the headlines again as bad loans hit a record high in July prompting thoughts that it was only a matter of time before Spain asks for full-blown aid.
Data Highlights
US Q2 C/A Balance out at -$117.4 bln vs. -$125.0 bln expected and revised -$133.6 bln prior
US Jul. Net Long-term TIC Flows out at +$67.0 bln vs. +$27.5 bln expected and +$9.3 bln prior
US Sep. NAHB Housing Market Index out at +40 vs. +38 expected and +37 prior
NZ Q2 C/A Balance out at –NZ$1.797 bln vs. –NZ$1.62 bln expected and revised –NZ$1.072 bln prior
AU Jul. Westpac Leading Index out at +0.4% m/m vs. +0.5% prior
China Aug. Actual FDI out at -1.4% y/y vs. -5.8% expected and -8.7% prior
JP Bank of Japan announces additional easing measures
Upcoming Economic Calendar Highlights
(All Times GMT)
JP Leading/Coincident Index (0500)
UK BOE Minutes (0830)
EU Construction Output (0900)
Swiss ZEW Survey (0900)
US MBA Mortgage Applications (1100)
US Housing Starts (1230)
US Building Permits (1230)
CA Teranet/National Bank House Prices (1300)
US Fed’s George to speak (1345)
US Existing Home Sales (1400)
Andrew Robinson,
SAXO BANK