Wednesday, 16 June 2010

BoJ rolls out loan scheme, UK inflation recedes, US stocks jump

The Bank of Japan stepped up its deflation fight on Tuesday while leaving interest rates unchanged. AFP/CNA reports:

Japan's central bank unveiled a 33-billion-US-dollar loan scheme Tuesday to boost growth and battle deflation, as it faces mounting pressure from a new government focused on economic restoration.

The Bank of Japan (BoJ) will make low-interest funds available to private banks to lend to companies, a move it hopes will in turn encourage firms to make longer-term business investments in a bid strengthen the economy...

The central bank on Tuesday kept its key lending rate unchanged at 0.10 percent, as widely expected and said "Japan's economy shows further signs of moderate recovery" aided by exports to fast-growing emerging economies.

In contrast to Japan, there is no sign of deflation whatsoever in the UK, although inflation did recede in May. From Reuters:

Lower food costs helped British inflation fall slightly faster than expected in May, boosting hopes price growth has peaked and backing the central bank's view that it will fall back to target within a year.

The Office for National Statistics said the annual rate of CPI inflation fell to 3.4 percent in May from April's 17-month high of 3.7 percent. Economists had forecast a fall to 3.5 percent.

UK house price inflation may be accelerating though, with the government saying that prices in April were 10.1 percent higher than a year ago, the highest rate of increase since October 2007, and the Royal Institution of Chartered Surveyors saying that its house price balance rose to +22 in May from +19 in April.

UK consumer confidence, however, plunged to an 11-month low in May, according to a Reuters report.

Consumer confidence fell to its lowest level in almost a year last month as the election and the prospect of an emergency budget darkened households' outlook, a survey by the Nationwide Building Society showed on Wednesday.

Nationwide's consumer confidence index fell to 65 in May, the lowest reading since June last year, from an upwardly revised reading of 75 in April.

Also falling is US homebuilders' confidence, although manufacturing continues to help keep the US economic recovery alive. Reuters reports:

Manufacturing in New York state grew in June even as hiring slowed, supporting views the factory sector is recovering...

The Empire State general business conditions index edged up to 19.57 in June from 19.11 in May, the report from the New York Federal Reserve said on Tuesday. The June reading was slightly below what economists polled by Reuters had forecast...

A separate report released on Tuesday showed U.S. import prices declined in May as petroleum costs plummeted, bolstering projections of tame inflation and low interest rates.

Import prices fell 0.6 percent, the biggest decline since July, after rising by a revised 1.1 percent in April, the Labor Department said...

Another economic report issued on Tuesday showed U.S. homebuilder sentiment fell in June by the sharpest amount since the height of the financial crisis as the homebuyer tax credit expired.

The National Association of Home Builders said the NAHB/Wells Fargo Housing Market index dropped 5 points to 17, the sharpest point decline since November 2008.

Despite the mixed US economic data, US stocks rose strongly on Tuesday. MarketWatch reports:

U.S. stocks rallied to end sharply higher on Tuesday, with equities gaining momentum as the S&P 500 Index broke through its 200-day moving average and the euro held above $1.23, signaling growing confidence with Europe's ability to deal with its debt crisis.

The Dow Jones Industrial Average (DJIA 10,405, +213.88, +2.10%) gained 213.88 points, or 2.1%, to end at 10,404.77, with all 30 of its components tallying gains, led by Boeing (BA 67.30, -0.18, -0.27%), up 4.1% and Caterpillar Inc. (CAT 63.76, +0.30, +0.47% , up 4%.

The S&P 500 (SPX 1,115, +25.60, +2.35%) rose 25.60 points, or 2.4%, to end at 1,115.23.

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