FRANCE DATA: 2Q non-farm private payrolls confirmed +0.2% q/q, -0.2% y/y
– Total 2Q non-farm/non-public payrolls +0.1% q/q, flat y/y
— Japan MOF: Q3 Sentiment Worse Than +10.1 Forecast In Q2 Poll
— Japan MOF: Major Firm Sentiment Seen Q4 +0.1 Pt, Q1 +3.9 Pt
— Japan MOF: FY10 All Firm Capex Plans +8.7% Vs Q2 Poll +9.2%
— Japan MOF: FY10 All Capex Ex-Software, Land +8.4%; Q2 +9.7%
TOKYO (MNI) – The business sentiment diffusion index for major
Japanese firms rose to a four-year high of +7.1 percentage points in the
July-September quarter from +4.0 points in the previous quarter, the
results of a quarterly government survey released on Thursday showed.
The Q3 index hit the highest level since +10.5 points marked in
In the previous survey conducted in May and released in June, the
index for the third quarter of 2010 was forecast to improve faster to
+10.1 from +4.0 in the second quarter.
The Q3 headline index was the second consecutive positive figure
following +4.0 in Q2, which showed the first positive number in three
Business sentiment has recovered from -22.4 in April-June 2009 and
-51.3 in January-March 2009.
The index is computed by subtracting the percentage of companies
reporting deteriorating business conditions from the percentage of those
reporting an improvement. A positive figure indicates the majority of
firms see butter business conditions.
The latest survey also showed that major firms’ sentiment is
expected to worsen to +0.1 percentage point in October-December (revised
down from +9.3 points seen in the previous survey) before rising to +3.9
points in January-March of 2011 (initial reading).
The survey showed that companies expect their combined capital
spending to rise 8.7% in the current fiscal year ending on March 31,
2011 from a year before, slower than the 9.2% increase projected in the
The capex plans are by all firms including those in the financial
sector. Investment in software is included but purchases of land are
excluded from the data.
Manufacturers expect a 9.4% rise in capex during this fiscal year,
down from +12.5% seen in the previous survey, while non-manufacturers
see a 8.3% rise, up from +7.5% projected about three months ago.
The survey also showed that companies expect their combined capital
spending excluding software and land to increase 8.4% in fiscal 2010,
down from +9.7% forecast in the previous survey.
The Finance Ministry and the Cabinet Office conducted the joint
survey on Aug. 15, covering 15,489 companies capitalized at Y10 million
or over, of which 12,176 replied.
** Market News International Tokyo Newsroom: 81-3-5403-4833 **
JAPAN DATA: Results of the quarterly business survey conducted by the
Ministry of Finance and the Cabinet Office:
— Q3 Major Firm Sentiment Rises To +7.1 Vs Q2 +4.0
— Q3 Sentiment Worse Than +10.1 Forecast In Q2 Poll
— Major Firm Sentiment Seen Q4 +0.1 Pt, Q1 +3.9 Pt
— FY10 All Firm Capex Plans +8.7% Vs Q2 Poll +9.2%
— FY10 All Firm Capex Ex-Software, Land +8.4% Vs Q2 Poll +9.7%
LONDON – The UK Debt Management Office (DMO) wants to
maintain its auction process as it thinks the market finds it easier to
digest regular supply, UK debt chief Robert Stheeman said.
In comments at a Euromoney conference here, Stheeman added that the
auction program is more predicatable than the syndication method of
The DMO chief added that the agency stands ready to listen to
feedback from the market and will consult fully before it issues new
types of bonds.
When asked about any possible issuance of new CPI-linked bonds,
Stheeman said “We need to see what form CPI-indexation legislation
takes,” adding that it seems “sensible” to defer any decision on
CPI-linked bonds at this stage.
Stheeman added that it was noteworthy that the linker market has
held up very well despite talk of a potential new CPI-linked bond and he
is not keen to see a fragmentation of the market.
–London newsroom: 4420 7862 7492; email: firstname.lastname@example.org,
LONDON – The UK Debt Management Office (DMO) does talk to the
Bank of England about operational matters, but it is ultimately up to
the Monetary Policy Committee to decide when and how to reverse its
quantitative easing program, according to UK debt chief Robert Stheeman.
In comments at a Euromoney conference here, Stheeman said “We have
spoken to the Bank about operational matters in relation to QE and the
Bank has said that as well.”
“We talk about way in, way out in terms of the operational side,
but not the decision about what to do and whether to do it [QE], that’s
one alone for the MPC, but about the operational side, we do speak to
the Bank and they speak to us,” he added.
–London newsroom: 4420 7862 7492; email: email@example.com,
LONDON – UK DMO Chief Robert Stheeman said that the average
maturity of its portfolio has increased from 10.6 years to 13.4 years
since 2000, adding that the Gilt market is now more developed than ten
In comments at a Euromoney conference here, Stheeman said that the
“high average Gilt maturity is seen as a strength,” adding that the debt
agency’s gilt portfolio has expanded from stg284bln to stg910bln since
Stheeman also noted that there has been a consistent increase in
long-dated Gilts, with issuance in this sector increasing to 50% vs
40% ten years ago.
The debt chief added that the reliance on Gilt Edged Market Makers
(GEMMS) remains the cornerstone of DMO policy but said that its investor
base had become more diversified.
Overseas investors held a record stg243.6bln in Gilts at the end
of March, Stheeman confirmed.
Stheeman added that the Gilt market is now more liquid and healthy
and – despite the recent turmoil – has functioned smoothly. The debt
chief also confirmed that approximately stg90bln worth of gilts has been
sold so far in 2010.
–London newsroom: 44 20 7862 7492; email: firstname.lastname@example.org;
–Will Take A Long Time To See Improvement In Employment Situation
By Brai Odion-Esene
JOHNSON CITY, Tn. (MNI) – Atlanta Federal Reserve Bank President
Dennis Lockhart Friday would not rule out a possible decision by the
Federal Reserve to expand its balance sheet, but said any action would
be dictated by the evolution of the economy.
In his prepared remarks for a speech at East Tennessee State
University, Lockhart had said the decision by the FOMC in August to
reinvest principal payments received from its MBS holdings into U.S.
Treasuries does not necessarily herald the beginning of an expansion in
the Fed’s balance sheet.
Asked by reporters later whether further expansion of Fed’s balance
sheet is something that needs to be considered in order to support the
economy, Lockhart said he does not have a view on that at this time.
“I think we’ll just have to watch the evolution of the economy and
the conditions that develop,” he said. “I would not rule it out as a
response to the weaker conditions that I am forecasting, so I keep an
open mind on that.”
Any move to expand the Fed’s balance sheet, he said, because it
necessarily brings with it a future requirement to craft an exit
strategy, “is a matter that has to be taken very seriously.”
Lockhart said despite recent claims to the contrary, he does not
see divisions within the FOMC, rather members bring “healthy
perspectives” to meetings and sometimes “very ardently argued
“But we tend to come to a working consensus,” he said.
Taking questions from the audience following his prepared remarks,
Lockhart said he believes the unemployment rate in the U.S.,
realistically, will come down “slowly.”
In the longer term, a realistic full employment target rate would
be in the range of 5.5% to 6%, he said.
“And I don’t see an easy return to that number in the near term,”
Lockhart added, “I think it’s going to take some time.”
Lockhart argued to reporters that the employment levels seen before
the recession where indicative of “a very leverage-funded bubble and
expansion that would be unwise to duplicate.”
He went to say that some of the employment that existed then was in
sectors — such as construction and some areas of manufacturing — “that
at least in the intermediate term, the medium term, are unlikely to come
back to that same level.”
Lockhart refused to provide a hard number for his growth, as well
as inflation outlook, for the rest of 2010. He did say that he expects
GDP to improve to above 2% by the end of the year.
He also said the natural growth potential of the U.S. “remains
Lockhart did agree that uncertainty is a major factor feeding the
caution of businesses and consumers, especially as it relates to the
future regulatory and fiscal environment.
On the U.S. fiscal health, Lockhart said there is a “strong
aversion” within the Fed towards the notion of monetizing the Federal
debt and called on both the administration and Congress to come up with
a “game plan.”
“The world will calm down,” he said, once the U.S. comes up with a
credible deficit reduction plan.
** Market News International **
By Mark Pender
NEW YORK (MNI) – A substantial slowing in new orders is the most
significant reading in the Institute For Supply Management’s
non-manufacturing report and reflects the high level of caution that
pervades the economy, according to survey chief Tony Nieves.
“New orders concern me more than anything, more than employment,
because of its strong drop. Everybody is holding back on spending. We’re
seeing it on the consumer side and on the business side,” Nieves said in
a phone interview with MNI.
New orders fell 4.3 points in August to 52.4 for the lowest level
of month-to-month growth in eight months. The 4.3 point decline is
similar in degree to the 4.1 point decline this April, a month preceding
the May and June drop in total business sales. The last time new orders
showed a steeper month-to-month negative change was the meltdown of
fourth quarter 2008.
“When the (ISM) manufacturing report came out on Wednesday, I got
phone calls and emails saying ‘This can’t be. Why is it so good? That’s
not what we’re experiencing.’ That’s why I think this non-manufacturing
report is truly reflective of what’s going on in the economy right now.”
For a leading indication on his report, Nieves looks to new orders
on the manufacturing side. Here he’s upbeat, describing slowing underway
as no worse than moderate with that index dipping only four tenths to
Still, he does concede that new orders on both sides peaked at low
levels in this recovery and are slowing more abruptly than they did in
the last recovery. New orders on the non-manufacturing side peaked in
August 2003 at 66.9 compared to a March 2010 peak of 62.3, with the
March reading the only plus 60 reading so far this cycle. Back in 2003
through 2005, the new orders index held above 60 for 19 of 20 months.
Though many of the report’s readings are adjusted, Nieves
attributes some of August’s weakness to seasonal shut downs and
vacations. This makes him hopeful that business, specifically business
investment, will soon begin to pick up.
“In my circle, I’m hearing about a loosening up of capital
expenditures in the last quarter, and I think we’ll see even more of
this in 2011.”
Nieves sees this investment concentrated not in new structures but
in improvement of existing assets. “I’m hearing about cosmetic rehabs:
restaurants, hotels, textiles getting redone.”
** Market News International New York Newsroom 212-669-6430 **
SEOUL (MNI) – The yen’s strength against the euro has been a boon
for German and northern European export competitiveness and this should
spread to the rest of the single currency region soon, European Central
Bank Governing Council member Nout Wellink told Market News
Wellink, who is the Dutch National Bank President, said on the
sidelines of the Financial Stability Board meeting here that he doesn’t
expect an economic “double-dip” and is anticipating a continuation of
growth in 2011 after the ECB revised up its 2010 growth forecast to 1.6%
from the previous projection of 1% in June.
He noted that Europe has had a very strong second quarter and that
“the third quarter should be okay” too, though with some slowing due to
the inventory cycle ending.
Europe is now, “to a very large extent” dependent on Asia, Wellink
said, noting the strength of exports to China and other countries in the
“What is helpful by the way, but not in all respects a positive
development, is the strength of the yen,” Wellink said.
“The euro has been depreciating vis-a-vis the yen for a certain
period already [and] this improved the competitive position for Germany
in the Far East — for example, in the mobile [telephone] sector.”
“Especially Germany, and some other countries in Europe and the
north, are doing quite well at the moment and that will pass on to the
rest of the Europe soon,” Wellink predicted
He acknowledged some slowing growth as the cycle of inventory
building ends in Europe but said that he is not in favor of continuing
with fiscal stimulus.
He said that the ECB’s current monetary policy stance is well
known, but added that Europe “should try to normalize the situation.
Otherwise we are building up problems for the future two to three years
He also said that Greece is “on track” with its deficit-cutting
Looking at the rest of the world, Wellink said that India and China
are doing well, noting that evidence of slowing growth in China will
help to mitigate the risk of economic overheating and inflation.
“The only weak respondent at the moment is the US, but on the other
hand we get weak signals and positive signals from the US,” he said.
“The weak spot in the whole picture is the United States.”
** Market News International Beijing Newsroom +86-10 5864 5241**
–Adds comments on growth, inflation, bond buying, peripheral EMU states
By David Barwick
ALPBACH, Austria (MNI) – A double-dip recession in the Eurozone is
not on the horizon but excessive optimism is not warranted, European
Central Bank Governing Council member Ewald Nowotny told Market News
International late Thursday.
Speaking shortly before a dinner here, Nowotny, who heads the
Austrian National Bank, expressed satisfaction with recent exchange rate
movements of the euro, and also expressed his confidence in the policies
of troubled peripheral countries, including Greece, Ireland and Spain.
While economic growth in the Eurozone will be stronger than
expected this year, driven by Germany, it is likely to decelerate in
2011, and the slowdown could carry over into 2012 as well, Nowotny
He made clear that the ECB’s exit from non-standard measures will
be in stages, and well thought out. The bond buying program, which he
called a “clear success,” should remain in place for now even if the
volume of purchases is small, he argued.
Nowotny made clear that with no inflation threat on the horizon and
growth still “pretty weak,” monetary policy will be on hold for a long
Contained inflationary pressures are “the key” in making monetary
policy decisions, Nowotny said, though he argued that interest rates
cannot remain as low as they currently over the long term. “Of course
one has to be aware that an interest rate which is as low as the one
that we have now is an extraordinary situation, so in the long run this
cannot be seen as an equilibrium rate,” he said.
“But we have to observe very carefully the economic constellation
both with regard to price stability and with regard to long-term
economic perspectives, and for the time being, as we see now, there is
nothing in sight that could cause us to increase interest rates.”
The ECB is not trying to send any monetary policy signal other than
that “we see interest rates as appropriate,” Nowotny added. “Of course
we also emphasize that we never pre-commit, but for the time being, we
don’t see any specific signs for interest rate changes.”
Nowotny expressed the view that the recent exchange rate movements
of the euro are in line with economic fundamentals characterized by low
inflation and a moderate recovery.
“I think that what we see is that the development of the euro
exchange rate is in a context that seems to be economically sound, where
no specific effects have to be expected,” he said.
With regard to the inflation picture, Nowotny noted that “inflation
expectations have decreased, so that there is clearly no specific
perspective of an inflationary problem.” He conceded there are some
“weak” upward inflation pressures, such as increases in indirect taxes
being implemented by governments engaged in deficit cutting efforts.
“But first, this is a one-off effect that does not imply permanent
increases, and on the other hand, in a climate where the economy still
is pretty weak, we do not see that this could create major dynamics with
regards to inflation,” he said.
Nowotny noted a “mixed perspective” with regard to commodity prices
as a potential source of inflation pressure. While “energy prices have a
tendency even to go down, we do have specific prices, like food prices,
where we might have an increase. But all in all we do not see a major
threat from this side,” he said.
On the growth front, Nowotny said he did “not see a perspective of
a double dip [recession].” Rather, “I think that we have a very clear
growth perspective” in which some countries have “very substantial”
growth outlooks, especially Germany, which he said could post GDP growth
above 3% this year. “So I think for the Eurozone as a whole, we see a
positive development,” the Austrian central bank governor said.
However, he cited two caveats. The first is that the recent growth
spurt must be seen in the context of last year’s very sharp economic
decline, “so it is mainly a recovery effect.” Secondly, the growth is
uneven across the euro area, and there are still some countries that
“clearly have a growth problem.” But that said, “we have to orient our
policy to the Eurozone as a whole and not according to the needs or
problems of specific countries,” Nowotny stressed.
He noted, in line with new ECB staff forecasts released earlier
today, that growth in 2011 will be slower than this year. “It means we
will have growth, but we have to see that there are of course a number
of influences that might reduce the dynamics,” he said, adding that
“this may also even hold for 2012.”
There is no reason to believe the Eurozone will relapse into
recession, “but we should not be too optimistic,” Nowotny urged. On the
other hand, he noted that the “very pessimistic” outlook for the United
States’ economy “may be overblown.”
Closer to home, Nowotny noted that a number of Eurozone banks are
still dependent on ECB financing. “This clearly is an unwelcome
situation and the ECB is pressing to change it,” he said. “But the way
to change it rests mainly with national governments, because this is
always a very specific situation that cannot be dealt with using general
He said the ECB was disappointed “to a certain extent” that markets
have not better appreciated the reform efforts of Greece and Ireland,
“but on the other hand I think the market needs a certain learning
curve, so of course there has been a lot of insecurity. It takes time
until this insecurity is resolved.”
He said he believed that in Greece “the whole structure of the
country is changing. And Ireland, he added, “is working in a very
decisive way to solve” its banking problems.
With regard to Spain, he said it was a country “where stabilization
has worked very fast, so I would not expect that we have major
problems.” But there could still be ups and downs driven by market
sentiment, he cautioned.
Nowotny argued that the Eurozone’s bank stress tests, published
over the summer, “had a positive effect on markets,” though he said
their salubrious effect should not be overestimated, “because markets
are driven not so much by actual numbers but by expectations, rumors and
so on. This is of course something a stress test cannot cover.”
The Austrian central bank chief asserted that as the “clear
economic upswing in Europe” continues, and as governments get their
deficits and debt loads under control, confidence will return. “But I
cannot exclude that also in the future there will be some episodes of
He said that insolvency of a state within the Eurozone was
“something that can be ruled out. This was a fad of some months ago. I
think this is not even among speculators’ realistic perspectives
With regard to a potential restructuring of Greek debt, Nowotny
said that before it gets to that, there will be “substantial” progress
in deficit reduction, “and to the extent necessary, one can extend the
Nowotny said that in his view it was “clearly” too soon to talk
about ending the ECB’s government bond buying program, despite the very
small volume of securities actually being purchased now.
“I would maintain that this program has been a clear success,
because it was instrumental in changing expectations, and therefore I
think it is also important to stay on, even if it does not have such a
strong material influence,” he said. “I think it is important for
–David Barwick, +00-49-173-315-6588; email@example.com
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