Foreign Exchange: The Aussie dollar strengthened versus the US dollar this morning, with the US dollar falling sharply on news former US Treasury Secretary Summer had withdrawn from consideration as the next Fed chairman. Summers was seen as more of a hawk, who would taper more quickly than his main rival Yellen.
The Aussie held its ground against the broadly stronger pound with growing expectations the Bank of England may have to raise interest rates earlier than previously expected, given the strengthening UK economy.
Share Markets: The US stockmarket edged higher, although the move was limited ahead of the Fed meeting this week. Although US economic data was disappointing, it was not enough to dissuade investors the Fed would begin tapering QE this month. Also instilling caution is the looming nomination of a new Fed Chair. Japan's Nikkei newspaper reported on Friday that Summers would get the nod as early as next week, although officials denied this. Over the weekend it was reported that Summers withdrew his name from consideration for the Fed chairmanship after several key Democrat senators publicly announced their opposition to his appointment. The Dow rose 0.5%, the S&P 500 was up 0.3% and the Nasdaq gained 0.2% for the session.
Bonds: US government bonds rose slightly (yields fell) after the release of weak US economic data drove expectations of a slow exit from QE. News Summers has withdrawn from consideration for the Fed chair position could boost bonds, given he was viewed as more hawkish, however speculation about tapering ahead of the Fed meeting this week will be the key driver of the bond market.
Commodities: The copper price weakened on speculation of Fed tapering ahead of the Fed meeting this week. Crude oil prices declined on reduced geopolitical concerns after the US and Russia agreed on a plan to eliminate Syria's chemical weapons.
Japan: On Friday, Japanese Economic Minister Amari discussed options on providing stimulus to the Japanese economy, including fiscal stimulus, tax breaks and corporate tax cuts. A key challenge for the Japanese government is how to provide support to the economy given that government debt levels are extremely high. The Finance Minister Aso proposed tax breaks to encouraging investment, which would be more effective than cutting the corporate tax rate. A stimulus package is expected to be announced by the end of this month, which may impact on a decision to proceed with a planned sales tax hike next year.
Industrial production was revised slightly upwards from 3.2% to 3.4% in July.
New Zealand: ANZ consumer confidence fell 3.4% to 118.8 in September, easing from a 3-year high recorded in August. The index however, remains well above 100 indicating consumers remain optimistic.
In other data, the Business NZ PMI fell from 59.5, a nine-month high in July to 57.5 in August. Despite the fall, the index is well above 50 and still indicating expansion in manufacturing.
United Kingdom: Construction output rose 2.2% in July, its first rise since April
United States: Retail sales rose 0.2% in August. Autos were up 0.9%, while gasoline was flat and clothing, DIY, sporting goods and general merchandise all reported declines. Core retail sales ex autos and gas rose 0.1% in August, although positive back revisions have the annualised pace for June-August running at 3.5%, up from 3.2% in the 3 months to May, but well below the 4.1% annualised pace in Q3 last year.
Producer prices rose 0.3% in August. Gasoline was up 2.6% and food prices were up 0.6%, although auto and light truck prices fell. The core PPI was flat for August, after a mild 0.1% rise in July. The headline annual pace fell to 1.4% in August from 2.1% in the year to July, while the core slipped to 1.1% in the year to August, from 1.2% previously, its lowest in more than three years.
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