Opening Comments
Economic data - Japanese August Housing Starts fell 14.2% to 729k, well below the 1.086mln expected and down 43% on a y-o-y basis. Add this to sharply falling prices reported in JPN CPI data late yesterday and recession talk is kick started. JGB fell 4 bps overnight to 1.665, the NIKKEI was off 46 and change while JPY remained within recent ranges.
German data included August Retail Sales which fell 1.4% on a m-o-m basis and 2.2% on a y-o-y basis. German 10yr rates are off 3bps at 4.342% and the DAX is down 8.00 at this writing.
The GfK Consumer Confidence Survey for September was issued in the U.k. overnight and came in down 7 versus a consensus estimate of down 6, the worst level in 6 months. Certainly more disturbing is Northern Rock tapping the BOE for another $10bln (as reported in the FT) which raises the questions about other U.K. banks that might be in straits. The FT also reports GS is lowering its 2008 U.S. GDP f/cast to 1.8%. CABLE shot up through 2.03 in overnight trade and Sterling LIBOR, USD LIBOR and EUR LIBOR all shot higher as well. Former FED Chairman Greenspan “helpfully” told the BBC he puts the chances of a U.S. recession at “less than 50%” .
U.S. data includes Personal Income and Spending for AUG, both of which are expected at 0.4%. The y-o-y PCE Deflator is expected at 1.7%. Core PCE on a m-o-m basis is expected at 0.1% and the consensus estimate for y-o-y PCE Core is at 1.8%. NTKN will be bringing the PCE data live from Commerce at 8:30am EST. At 9:45 am Chicago September PMI comes out and is expected at 53 versus 53.4 last time. At 10:00 Commerce issues m-o-m Construction Spending for August which is expected to have fallen 0.3% versus the July reading of down 0.4%. Also at 10:00am EST NAPM Milwaukee, expected at 58 and University of Michigan Confidence for September, expected at 84.
Oil opens marginally lower this morning with BRENT futures down 10 cents, North Sea off 16 cents and NYMEX front month off 23 cents even as Tropical Storm Lorenzo, briefly upgraded to a CAT 1 hurricane overnight, blows itself out on the eastern shores of the Gulf of Mexico. TS KAREN is also weakening in the Atlantic 1215 miles east of the Windward Islands. Maximum sustained winds have fallen to near 45mph and there is some expectation the storm will weaken further in the next 24 hours due to strong upper level winds. Were the storm warnings responsible for the surge in OIL y/day? Perhaps a realization that there is not an unlimited supply of OIL, demand is growing and price will determine the winner of the lion’s share of this commodity.
GOLD is up over 4 bucks at this writing as the USD continues to weaken on a worldwide basis amid fears the FOMC’s rate decision may ignite inflation in the U.S. - which is exacerbated by a weak dollar……