Saturday, 27 January 2007

Amid strong data, ECB asks markets: Are you feeling lucky?

There was more good news for the US economy yesterday. Reuters reports:

New-home sales rose 4.8 percent in December to an annual pace of 1.12 million units. The median sales price rose to $235,000 in December from $232,200 in November, as builders cut the number of homes on the market to avoid inventory buildups.

Orders for U.S.-made durable goods -- items intended to last three years or more -- rose 3.1 percent in December. While much of the gain came from strong demand for Boeing jetliners, other components like machinery and primary metals also posted sharp hikes...

Analysts said recent indicators imply more underlying resilience in the economy than previously realized...

Some worried the next interest-rate move could be up.

If the next interest-rate move by the Fed is up, it would be following in the footsteps of the Bank of England, whose own resumption of monetary tightening last year might finally be making a serious dent on the UK housing market. From Reuters:

Mortgage approvals fell 11.1 percent in December from a year ago to 45,533, the first annual fall since April, a survey showed on Friday, indicating higher borrowing costs may be dampening demand.

The British Bankers' Association left its figure for underlying net mortgage lending reported last week unrevised at an increase of 5.8 billion pounds, a robust figure but well below the record 6.7 billion pounds' rise recorded in November.

Meanwhile, the even-lower interest rates in Japan have not put too much upward pressure on prices, at least not in Japan itself. From AFP/CNA:

Japanese core consumer prices rose by 0.1 percent in December from a year earlier, the government said on Friday as deflationary pressure eases in the country...

The December core consumer price index (CPI) for Tokyo alone – the leading indicator for national price trends – rose 0.2 percent compared with a year earlier.

Many expect the Bank of Japan to raise rates soon anyway.

Even more hawkish is the European Central Bank. And with good reason in view of the latest figures. From AFX/Forbes:

Euro zone M3 money supply in December grew at a rate of 9.7 pct year-on-year, up from the 9.3 pct growth rate in November, the European Central Bank said...

Loans to the private sector grew 10.7 pct year-on-year in December, down from November's 11.2 pct growth rate.

And if further rate hikes from the ECB hurt financial markets, well...too bad. From Bloomberg:

European Central Bank council member Axel Weber said investors shouldn't expect central banks to bail them out in the event of an "abrupt" drop in financial markets.

"If you misprice risk, don't come looking to us for liquidity assistance," Weber said in an interview in Davos, Switzerland at the annual meeting of the World Economic Forum. "The longer this goes on and the more risky positions are built up over time, the more luck you need."

No comments:

Post a comment