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LONDON (Dow Jones)--U.K. consumer price inflation fell to its lowest annual rate for thirty months in August, casting further doubt on the need for any more interest rate hikes from the Bank of England this autumn. The Office for National Statistics said Tuesday that annual CPI inflation was 1.8% in August, down from 1.9% in July. The rate was also just below the 1.9% level expected by economists surveyed by Dow Jones Newswires last week. On the month, the consumer price index was up 0.4%, compared with a fall of 0.6% in July. That was in line with expectations. The annual rate of inflation was last lower in February 2005, when it was 1.7%. CPI inflation has now been lower than the BOE's 2.0% target rate for two months in a row. That will further cement expectations that the central bank's Monetary Policy Committee won't see the need to raise interest rates for the rest of 2007, leaving bank rate at 5.75%. The MPC had previously raised rates five times in the twelve months to August. The ONS also said that the retail price index rose 0.6% on the month in August, and 4.1% on the year. The Dow Jones Newswires forecast was for it to go up 0.4% on the month and be at an annual rate of 4.0%. In July the RPI fell 0.6% on the month and rose 3.8% in annual terms. Copyright © 2007 Dow Jones & Company, Inc.

UK Aug CPI +0.4% On Month; +1.8% On Year UK Aug CPI Was Forecast +0.4% On Month; +1.9% On Year UK Aug Core CPI Was +0.4% On Month; +1.8% On Year UK Aug RPI +0.6% On Month; +4.1% On Year

LONDON (Dow Jones)--The euro zone's trade surplus with the rest of the world narrowed in July from June, but export growth remained strong despite the strength of the region's currency. The 13 countries that share the euro recorded a surplus of EUR4.6 billion in trade in goods with the rest of the world in July, the European statistics agency Eurostat said Monday, narrower than the figure reported in June, but well ahead of the EUR1.1 billion surplus recorded a year earlier. Eurostat revised June's surplus down to EUR7.6 billion from an originally reported EUR7.8 billion surplus. The data came in below the EUR5.1 billion surplus predicted by economists in a Dow Jones survey last week, but still suggest that exports continue to perform well. Eurostat said exports grew 15% year-on-year, rising to EUR129.7 billion from EUR113.1 billion, while imports rose 12%, and the euro zone's internal dispatches grew 10%. The recent strength of the euro against the dollar has prompted complaints from some politicians that the exchange rate would harm exports and business prospects for the region. Last week, the euro reached a fresh new high against the dollar. And while Monday's data suggest that the currency isn't affecting export growth, they are unlikely to affect the European Central Bank's outlook on interest rates. The ECB left its key interest rate on hold at its September monthly policy meeting due to uncertainty about the impact of the ongoing liquidity crisis that has been affecting financial markets since the end of July. Many economists had expected the ECB's Governing Council to raise the rate by 25 basis points to 4.25% before the year's end, but many now think this is heavily dependent on whether or not the market turbulence persists. In the first six months of the year, the data showed that the euro zone's trade surplus with the U.K. increased, compared with the first six months of 2006, while its surplus with the U.S. fell. The region's deficit with China continued to widen, while the deficit with Russia narrowed further. The euro zone's energy deficit was EUR105.7 billion in the six months to June, slightly narrower than the EUR125.4 billion deficit recorded in the six months to June 2006. Exports of manufactured goods remained strong, growing 10% on the year. Copyright © 2007 Dow Jones & Company, Inc.

Euro-Zone Jul Trade Balance +EUR4.6B Vs +EUR1.1B Jul 06

LONDON -The U.K.'s goods trade deficit with the rest of the world widened to GBP7.1 billion in July from GBP6.5 billion in June as imports rose more than exports, the Office for National Statistics said Tuesday. The June deficit was revised from a previously published figure of GBP6.3 billion. The deficit in July was much wider than expected. Economists surveyed by Dow Jones Newswires last week forecast the trade deficit would widen to GBP6.4 billion. ONS said that total imports rose to GBP26.3 billion in the month compared with GBP25.3 billion the month before. The rise, it said, was mainly due to higher imports of consumer goods, cars, chemicals, and food, drink and tobacco. Exports also rose, but only by around GBP0.5 billion. That was driven by higher overseas purchases of U.K.-produced capital goods and chemicals, ONS said. ONS's trade data have been bedeviled by inaccuracy and revision in recent times, mainly due to problems recording import and export levels following a European-wide value-added tax scam. There was a further problem Tuesday when ONS admitted that GBP300 million of oil exports had been double-counted in June, because of an incorrect return from an oil trader. As a result, the U.K.'s oil trade balance was slightly in deficit in June, compared with a previously published surplus. In July the oil trade deficit widened further to GBP0.3 billion. Copyright ? 2007 Dow Jones & Company, Inc.

UK Jul Adj Global Trade -GBP7.1B Vs Revised -GBP6.5B UK Jun Adj Goods Trade Balance Revised From -GBP6.3B UK Jul Adj Global Goods Trade Bal Was Forecast -GBP6.4B UK Jul Adj Non-EU Trade -GBP4.5B Vs -GBP3.4B UK Jul Adj Non-EU Trade Balance Was Forecast -GBP3.3B

Romanian Aug CPI +0.86% Vs +0.29% In July- Mediafax

French July Foreign Trade Gap EUR3.3 Bln Vs June EUR3.15 Bln

Definition The international trade balance measures the difference between imports and exports of both tangible goods and services. Imports may act as a drag on domestic growth and they may also increase competitive pressures on domestic producers. Exports boost domestic production. Why Do Investors Care? Changes in the level of imports and exports, along with the difference between the two (the trade balance) are a valuable gauge of economic trends here and abroad. While these trade figures can directly impact all financial markets, they primarily affect the value of the dollar in the foreign exchange market. Imports indicate demand for foreign goods and services here in the U.S. Exports show the demand for U.S. goods in countries overseas. The dollar can be particularly sensitive to changes in the chronic trade deficit run by the United States, since this trade imbalance creates greater demand for foreign currencies. The bond market is also sensitive to the risk of importing inflation. This report gives a breakdown of U.S. trade with major countries as well, so it can be instructive for investors who are interested in diversifying globally. For example, a trend of accelerating exports to a particular country might signal economic strength and investment opportunities in that country. Legal Notices |? Copyright 2000 -2007 Econoday, Inc.

U.K. seasonally adjusted input prices fell 0.5% on the month and grew 0.7% on the year in August, below economists' expectations. Output prices rose 0.1% on the month and 2.5% on the year, the Office of National Statistics says. Core output prices, which exclude volatile items, such as food, drink, tobacco, and petrol, rose 0.2% on the month and 2.4% on the year. In a DJN survey, economists predicted that output prices would rise 0.1% on the month and 2.4% on the year. They estimated that input prices would fall 0.2% on the month and rise 0.9% on the year, and that core prices would rise 2.3% on the year. Copyright © 2007 Dow Jones & Company, Inc.

UK Aug Input PPI -0.5% on Month; +0.7% On Year UK Aug Input PPI Was Forecast -0.2% MM; +0.9% YY UK Aug Output PPI +0.1% on Month; +2.5% On Year UK Aug Output PPI Was Forecast +0.1% MM; +2.4% YY

ECB Leaves Refi Rate Unchanged At 4.0% ECB Leaves Deposit Rate Unchanged At 3.0%

Bank Of England Leaves Bank Rate Unchanged At 5.75% CPI May Remain Around, Little Below 2% Target BOE: Closely Monitoring Quantities Of Credit Extended Margin Of Spare Capacity Appears Limited

LONDON (Dow Jones)--U.K. manufacturing output slumped in July, reversing the recent positive trend, led by a drop in the manufacture of transport equipment. Figures released by the Office for National Statistics Thursday showed that manufacturing output fell 0.3% on the month in July - the first decline since a 0.8% fall in February this year. On the year output rose 0.8%. That compares with a 0.1% rise on the month in June and a 1.0% annual gain. A Dow Jones Newswires survey of economists had forecast manufacturing output would rise 0.2% on the month and 1.2% in annual terms. The June data were revised from a 0.2% monthly gain and a 0.9% year-on-year increase, ONS said. Despite reporting the first drop in five months, an ONS spokes person said that this didn't signify the end of the recent pickup in the sector as the monthly data is considered a volatile measure of output in the sector and could rise once more in the coming months. Among the six sectors that fell within manufacturing, ONS said the largest fall was a 2.6% drop in transport equipment. That was the largest fall since a 2.8% drop in October 2005 and was driven by a decline in the manufacture of aircraft and the building and repair of ships. Among the seven sectors that rose, the largest gain was a 1.2% monthly rise in the production of paper, printing and publishing. The broader measure of industrial output also slipped on the month in July but by a smaller 0.1%. On the year activity picked up from the June level, rising 0.9% compared with July 2006. Output was weaker than expected, with economists in a Dow Jones Newswires survey forecasting an increase of 0.2% on the month and 1.0% on the year. In June industrial output was flat on the month, a revision from a previously reported 0.1% rise, while on the year production rose an unrevised 0.8%. In the three months to July, data that ONS said presents a more reliable picture of the sector as it smoothes out monthly fluctuations, manufacturing output rose 0.8% from the previous three-month period and was 0.9% higher than the corresponding three-month period a year ago. Industrial production, meanwhile, also rose 0.8% compared with three months earlier and was 0.8% higher compared with a year ago. Copyright © 2007 Dow Jones & Company, Inc.

The latest finance ministry data indicate revenue to the general consolidated budget totaled 76.1 billion lei ($31.8 billion) in the first eight months of this year, up from RON63.55 billion in the corresponding period last year. The ministry didn't provide expenditure data. Romania's general budget posted a surplus last month on the back of local and social security budgets. In the first eight months of this year, local budgets posted a surplus of 0.9% of GDP, sustaining again the growth in the general consolidated budget. In the first half of 2007, the general consolidated budget posted a deficit of 0.19% of GDP, compared with a surplus of 1.12% of GDP in the corresponding period a year earlier. The Romanian government has set a budget deficit ceiling of 2.8% of GDP for this year, but Vosganian said last week he expects a year-end budget deficit of about 2% of GDP. Agency Web site: http://www.mediafax.ro

Euro-Zone Jul Retail Sales +0.1% On Mo; +0.5% On Yr Euro-Zone Jul Retail Sales Forecast +0.3% MM; +1.0% YY Euro-Zone Jun Sales Revised To +0.6% On Mo; +1.0% On Yr Copyright © 2007 Dow Jones & Company, Inc.

LONDON (Dow Jones)--Retail trade in the euro zone disappointed in July, growing more slowly than economists had expected. The volume of retail sales rose just 0.1% on the month in July, dragged down by sales of nonfood products such as clothing and household goods which fell by 0.1% on the month, European statistics agency, Eurostat said Wednesday. Compared with July 2006, retail sales grew 0.5%, substantially less than economists had predicted. In a Dow Jones survey last week economists said they expected sales to grow 0.3% on the month and 1.0% on the year. Eurostat revised June's data upward, reporting a gain of 0.6% on the month, up from a previously estimated 0.4%, and growth of 1.0% on the year, up from 0.9%. Most economists had expected the growth rate to rise in July, predicting that warm weather and shop discounting would encourage shoppers to spend money. However, Wednesday's data suggest that the expected improvement in consumer sentiment and spending has yet to materialize. In Germany - the euro zone's largest economy - retail sales posted lower growth than in June, rising 0.3% on the month, compared with a stronger 1.2% a month earlier. The retail sales data are unlikely to affect the outlook of the European Central Bank, which is currently more focused on the recent financial market turmoil. The bank's governing council will meet Thursday to set interest rates for the single currency area and is widely expected to leave them on hold as it tries to assess the impact of the recent market fallout. It has raised the key interest rate eight times since December 2005 in a bid to curb inflationary pressures in the region's economy. In the 27 countries that make up the European Union, retail sales grew by 0.1% on the month and 2.2% on the year. The following table details monthly percentage changes in retail sales volume in July and June: July June Euro Zone +0.1 +0.6r Austria -1.6 +2.1r Belgium -3.5 +3.0r Finland -0.4 +1.5r France n/a +0.4r Germany +0.3 +1.2r Greece n/a +0.7r Ireland n/a -2.9r Italy n/a n/a Luxembourg -0.4 +10.6r Netherlands n/a +1.7r Portugal -1.2 +2.7r Spain 0.0 +0.4r Slovenia -0.9 +0.4 Copyright © 2007 Dow Jones & Company, Inc.

Calyon sees Romanian Leu under pressure and reiterates its call to sell the RON against Hungary's forint. Says Romanian central bank interest rates are likely to head up from 7% given rising inflation, even as the economy slows and current account deficit widens. Analyst Nigel Rendell notes "increasing nervousness over the RON's fate" as the euro is up 7% against it from early July. EUR/RON +1.2% to 3.30 in Wednesday trading. (CRE) Copyright © 2007 Dow Jones & Company, Inc.

U.K. service sector purchasing managers index surged to 57.6 in August from 57.0 in July, market sources say. DJN forecast was 56.5. The data follow an unexpected rise in the manufacturing PMI released earlier this week which rose to 56.3 from 55.9 in July. Despite the strength in the indexes the BoE remains poised to keep interest rates on hold at 5.75% when it announces its decision midday Thursday. (IAB) Copyright ? 2007 Dow Jones & Company, Inc.

Euro-Zone Aug Services PMI 58.0 Vs 58.3 In Jul - Sources Euro-Zone Aug Services PMI Forecast 57.9 German Aug Services PMI 59.8 Vs 58.5 In Jul -Sources German Aug Services PMI Forecast 58.1 French Aug Services PMI 58.4 Vs Jul 58.9 - Sources French Aug Services PMI Forecast 58.5

MADRID (Dow Jones)--Spanish Finance Minister Pedro Solbes reiterated Wednesday his belief that the European Central Bank's rate-tightening campaign is nearly over. "I don't know what the ECB will do" at its next policy meeting, Solbes said in an interview on Cadena Ser radio station. "But it's fairly evident... that most of the rise in interest rates is over," he said. Copyright © 2007 Dow Jones & Company, Inc.

SINGAPORE (Dow Jones)--The Japanese currency has taken another leg higher in Asia Wednesday on comments suggesting further dark days for the yen-funded carry trade, but there is no need to get swept away yet. Japan's banking minister, Yoshimi Watanabe, has startled markets a bit with what would appear to be a fairly benign comment - that there's always the chance of further carry trade unwinding. As Westpac Banking Corp.'s Sean Callow puts it, "I guess the fear is someone in Watanabe's position might be seeing signs of outstanding yen carry positions that had on some measures seemed roughly squared." This has taken the dollar down to around Y115.74 and the euro to Y157.28, with corresponding weakness in the higher-yielding New Zealand and Australian dollars. While things have calmed down a bit in the recent weeks, there remains the risk of further bouts of global market volatility, especially as the commercial paper market is under strain. In a risk-averse environment, the Japanese currency tends to fare well. The argument goes that a rise in the yen prompts Japanese individuals to bring funds back from higher-yielding investments in places like Australia and New Zealand. A higher yen makes the carry trade less appealing as it eats into the relative yield advantage of parking funds offshore. The carry trade is also a murky beast, which creates an environment ripe for rumor and mystique. It is difficult to get any real idea of the magnitude of it. Japan officials have admitted as much. So it's hard to tell how much unwinding may then be occurring. Still, for all the chatter about hordes of nervous households in Japan bailing out of foreign assets and into bank deposits or Japanese equities, so far the market gyrations don't seem to have produced such a scenario. Periodic volatility may continue but as the aftershocks become smaller and smaller, carry-trade demand should remain. Macquarie Research's Richard Jerram notes this argument has history on its side. Looking at investment trust flows during previous episodes of yen strength in 2003-2004, Jerram says there is no evidence this had an impact on flows into foreign interest-bearing investment trusts. "There continues to be talk about unwinding of yen carry trades," he said in a note to investors. "Just as estimates of the magnitude of the positions were elusive, the talk now must be taken with the proverbial grain of salt." Jerram also disputes the idea Japanese investors would want to put their money back into local equities, anyway, which carry their own risk. "It seems unlikely that people would sell a foreign bond fund and put the proceeds into domestic equities," he says. Some of the skepticism is shared by Marc Chandler at Brown Brothers Harriman. The recent rise in the yen is not so much a function of unwinding of carry trades by Japan investors, but rather, he says, speculators at the Chicago Mercantile Exchange switching their positions to go long the yen. Noncommercial positions have turned long yen, though modestly so. Real money accounts have also been buying the yen as foreign investors have bought Japanese bonds. Regardless of where the yen gains have come from, they may not continue. As noted before, volatility is likely to become less influential in coming months as investors adopt a more sanguine view of the troubles in the U.S. housing market. Also, as Chandler notes, the October start of the second half of the Japanese fiscal year isn't far off. That could bring with it fresh demand from Japanese investors for foreign assets. There is also no immediate risk of a Bank of Japan rate hike to make local assets more appealing from a yield perspective. Credit Suisse's market pricing shows just a 10% chance of a 25 basis point rate hike at the September 19 meeting, with only 29 basis points of hikes priced in over the next 12 months. Hardly a reason to put money in the bank in Japan. Copyright © 2007 Dow Jones & Company, Inc.

Japan Bank Minister Yoshimi Watanabe says in early afternoon session that Tokyo shares may fall more on U.S. subprime mortgage problems. "I think this is in line with the views of everyone in the market," says manager at sales department at Japanese brokerage. Nikkei could dip below Aug. 17 low of 15262.10 if players see greater impact from subprime issue, such as USD/JPY fall that could significantly affect earnings outlooks for Japanese exporters, he says. Japan Bank Minister Watanabe's comment there's chance JPY carry trade unwinding will continue is likely behind recent drop in EUR, USD, NZD and others vs JPY; EUR/JPY falls as far as 157.30 with USD/JPY briefly down near 115.75. Comments keep alive view that carry trade unwinding could pick up again amid uncertain global environment. "His remarks may have been used as a cue to buy the yen," says trader at Japan bank; adds impact may be short-lived as unclear on what ground Watanabe thinks this may be the case. "It's necessary to pay attention to whether he has clear evidence the unwinding will continue," says another trader. Westpac's Sean Callow says "the fear is someone in Watanabe's position might be seeing signs of outstanding yen carry positions that had on some measures seemed roughly squared." Copyright © 2007 Dow Jones & Company, Inc.

TOKYO (Dow Jones)--Japan's banking minister, Yoshimi Watanabe, said Wednesday the impact of the U.S. subprime mortgage problems on the Japanese economy will likely be limited. "While global financial markets fell into unstable conditions, the troubles in the subprime market are unlikely to have a huge impact on Japan's real economy or financial system," Watanabe said at a press conference. However, he said there still remains a risk of a yen-carry trade unwinding. He added that Tokyo share prices may also fall more as players sell stocks to cover subprime losses. Copyright ? 2007 Dow Jones & Company, Inc.

Bank of Canada statement later today likely to sound dovish, says Tohru Sasaki, chief FX strategist at JP Morgan Chase Bank. Expects BOC to keep rates on hold, while "focus will be on BOC statement to assess how the change in environment since the last interest rate decision has influenced (its) policy stance." Adds, facing a possible U.S. economic slowdown, tightening of credit market, and with CAD hovering at high levels despite falling commodity prices, there's a high possibility BOC statement will be dovish. Copyright © 2007 Dow Jones & Company, Inc.