Expert Analysis of Today's Market

• In NY mixed trading Friday, the dollar was slightly lower against the yen, lower versus the dollar-block currencies and higher against the European currencies.


• Sterling fell against key currencies after Northern Rock Plc received the biggest emergency bailout in 30 years from the Bank of England. The GBP/USD dropped on speculation the turmoil in the financial markets will prevent the BOE from raising interest rates.

Financial and Economic News and Comments

US & Canada

• US retail sales rose a less-than-forecast 0.3% m/m and 3.5% y/y in August, following an upwardly revised 0.5% m/m and 3.2% y/y gain in July, the Commerce Department said. Purchases excluding automobiles unexpectedly fell 0.4%.

• The US current-account deficit narrowed to $190.8 billion in Q2, after a revised $197.1 billion in Q1, the Commerce Department said.


• US industrial production rose 0.2% m/m, following an upwardly revised 0.5% gain in July, a Fed report showed. The modest rise left an unchanged capacity utilization rate from July’s revised 82.2% as manufacturing capacity use fell to 80.7%.


• US business inventories rose 0.5% in July to a seasonally adjusted $1.419 trillion, after increasing 0.4% in June, the Commerce Department said. Business sales rose 1.1% m/m in July after falling 0.3% m/m in June. The inventory to sales ratio eased to 1.26 months in July from 1.27 in June.


• US import prices fell 0.3% m/m in August to leave 1.9% y/y gain. Petroleum prices fell 1.3% m/m as ex-petrol prices edged 0.1% m/m lower for the month. Export prices increased 0.2% m/m and 3.6% y/y. Agricultural prices rose 1.0% m/m and 18.0% y/y.


• US consumer confidence for September rose slightly to 83.8, in line with expectations, following a strong 7.7% decline in August, the Reuters/Univerisity of Michigan sentiment index showed. One-year inflation expectations edged lower to 3.1% in September from 3.2% in August.

Europe

• Eurozone CPI inflation rose 1.7% y/y in August, compared to a 1.8% y/y rise in July, Eurostat reported. However, core CPI inflation accelerated to 2.0% y/y in August from 1.9% y/y in July. The ECB inflation-target upper limit is 2.0%. Core inflation has inched higher the last two years, while total inflation has moderated on lower energy costs. However, energy costs are likely to increase in September. The higher energy costs in September and high core inflation will pressure the ECB to hike interest rates when the credit turmoil ends.

• Northern Rock Plc got emergency funding from the Bank of England, despite the BOE promise not to bail out lenders the other day, after rising credit costs left the mortgage provider unable to make new loans. Northern Rock is the UK’s third-biggest lender by gross mortgages with loans worth £17.4 billion ($35 billion) as of June 30. The loan to Northern Rock is of undefined duration the mortgage lender can use mortgages as collateral.


• The average London home price declined 2.5% m/m in September to £384,439 ($774,000), according to Rightmove Plc. For Britain as a whole, prices fell 2.6%.

Asia-Pacific

• China raised interest rates for the fifth time since March 2007 to curb the fastest inflation since 1996. The benchmark one-year lending rate will increase to a 9-year high of 7.29% from 7.02%, starting tomorrow, the People’s Bank of China said. The PBC wants to strengthen monetary and credit controls, guide investment growth and stabilize inflation expectations. The one-year deposit rate will rise to 3.87% from 3.6%.

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