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  2. madden
    Definition
    The Institute for Supply Management surveys nearly 400 manufacturing firms on employment, production, new orders, supplier deliveries, and inventories. A composite diffusion index of national manufacturing conditions is constructed, where reading above (below) 50 percent indicate an expanding (contracting) factory sector. Export orders, import orders, backlog orders and prices paid for raw and unfinished materials are also measured, but these are not included in the overall index.
    Why Do Investors Care?
    Investors need to keep their fingers on the pulse of the economy because it dictates how various types of investments will perform. By tracking economic data such as the ISM manufacturing index, investors will know what the economic backdrop is for the various markets. The stock market likes to see healthy economic growth because that translates to higher corporate profits. The bond market prefers less rapid growth and is extremely sensitive to whether the economy is growing too quickly and causing potential inflationary pressures.
     
    The ISM manufacturing data give a detailed look at the manufacturing sector, how busy it is and where things are headed. Since the manufacturing sector is a major source of cyclical variability in the economy, this report has a big influence on the markets. More than one of the ISM sub-indexes provides insight on commodity prices and clues regarding the potential for developing inflation. The Federal Reserve keeps a close watch on this report that helps it to determine the direction of interest rates when inflation signals are flashing in these data. As a result, the bond market is highly sensitive to this report.
  3. madden
    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.
  7. madden
    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.
  8. madden
    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.
  9. madden
    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.
  10. madden
    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.
  12. madden
    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.
  13. madden
    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.
  14. madden
    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.
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