Central banks ponder interest rates, Dow hits record high

This Reuters report makes an interesting backdrop for tomorrow's ECB interest rate decision.

Euro zone producer price growth slowed in August thanks to a monthly fall in energy costs but unemployment inched up due to a rise in the number of German jobless, data showed on Tuesday.

The European Union's statistics office said producer prices rose 0.1 percent in August against July, below a market forecast of 0.2 percent, for a consensus-matching year-on-year increase of 5.7 percent.

It revised upwards July producer price growth by 0.1 percentage point to 0.7 percent month-on-month and 6.0 percent year-on-year...

Eurostat said unemployment in the 12 countries using the euro, a measure that helps gauge trends in household confidence, purchasing power and demand, rose to 7.9 percent of the workforce in August from 7.8 percent in July.

The Bank of England also has an interest rate decision to make tomorrow, but meanwhile yesterday, it reported that mortgage equity withdrawal fell to 11.3 billion pounds in the April to June period from an upwardly revised 12.9 billion in the first three months of the year. And it would also note that construction activity eased in September, the Chartered Institute for Purchasing and Supply's index for construction falling to 53.6 in September from 54.5 in August.

On the other hand, UK house prices rose 4.3 percent in September compared with a year earlier, the fastest annual rate since September 2004, according to property consultant Hometrack, while mortgage lender Nationwide's consumer confidence index added to signs of improving consumer sentiment, rising to 89 in September from 83 in August.

Meanwhile, Japan reported more direct evidence of monetary contraction. From Kyodo/Yahoo! News:

Japan's monetary base posted its biggest fall on record, of 21.2 percent, in September from a year earlier due to a sharp drop in the balance of the current-account deposits of financial institutions at the Bank of Japan, the central bank said Tuesday.

But today, the Reserve Bank of Australia left interest rates unchanged. Bloomberg reports:

The Reserve Bank of Australia's new Governor, Glenn Stevens, 48, who chaired his first board meeting yesterday, left the overnight cash rate target at 6 percent, as forecast by all 24 economists surveyed by Bloomberg News.

No change in interest rates has been good enough for US equity investors so far. From Reuters:

The Dow Jones industrial average hit an all-time high on Tuesday, surpassing the previous record set in 2000, as investors bet that sliding crude oil prices will stimulate consumer spending and lift profits.

During the session, the 110-year-old Dow climbed to 11,758.95, topping its previous intraday record of 11,750.28 reached on January 14, 2000, when investors rode the Internet stock mania. It crashed two months later.

The blue-chip Dow average also hit a record closing high, rising 56.99 points, or 0.49 percent, to end at 11.727.34 -- above its previous record close at 11,722.98, set on January 14, 2000.

Falling oil prices was key.

U.S. crude oil futures prices ended nearly 4 percent lower, after hitting fresh seven-month lows, dragged down by a U.S. inventory glut and a fading hurricane threat.

Crude for November delivery fell $2.35, or 3.9 percent, to settle at $58.68 a barrel on the New York Mercantile Exchange. Its session low was $58.60, the lowest front-month crude futures price since February 16.