August 12, 2014

German Investors Confidence Slumps on Ukraine Crisis

• German investor confidence ▼ to the lowest level since 2012; The ZEW index of investor and analyst expectations ▼ to 8.6 (forecasted 18.2) in August from 27.1 in July
• The eight consecutive monthly decline and the biggest in more than two years
• Crisis in Ukraine rose and a sluggish euro-area recovery
• A gauge of current condition ▼ to 44.3 in August (forecasted 44.3) from 61.8 in July. A measure of expectations for the E.U. ▼ to 23.7 (forecasted 43.1) from 48.1

U.K. Food Sales Plunge Amid Supermarket Price War

• U.K. food sales by value ▼ the most in at least 5 ½ years in the three months through July
• Because of price cuts by supermarkets, the British Retail Consortium said
• Continued aggressive discounting by Britain’s supermarket chains may help support consumer spending at a time of record-low wage growth
• But bad for retailers?
• While food sales ▼ in the three months through July, total sales ▲ 1.3%, driven by home and furniture spending. The increase was below the twelve-month average of 2.3%
• In July, total sales ▲ 1.3% YoY

India CPI Tops Estimate in Test for Rajan (central bank governor) as Industry Moderates

• The CPI ▲ 7.96% in July YoY (forecasted 7.4%); compared with ▲7.46% in June
• Industrial production ▲3.% in June YoY (forecasted 5.4%); compared with ▲5% in May
• Finance Minister Arun Jaitley backed Rajan’s Aug. 5 decision to keep the benchmark rate unchanged at 8% for a third meeting
• The highest borrowing costs threatens to narrow the budget deficit to a seven-year-low
• A Reserve Bank of India panel proposed adopting a 4% CPI target by 2014 +_ 2% points as part of an overhaul that would also establish an independent monetary policy committee
• Monsoon rains are the main threat to inflation. It was 17% below average, putting India on course for its driest year since 2009
• A crop failure can spur consumer prices, where food accounts for about 50% of the CPI basket

  

Asian market continued to rebound but it shows a restricted movement without specific economic indicator. The investors still wait for Wednesday and Thursday's releases to forecast economic growth.

ZEW index had not affected the market on Aug. 12; economic slowdown in E.U. will affect Asian market.

In fact, ZEW index widely impact on Europe and U.S. stock market

German index ▼1.21% as ZEW index indicates growth will be slowed as Ukraine tension rises. In fact, today's market was shaken when Russian trucks deliver aids to Ukraine, non-military action. It shows how investors are scared of tensions in Ukraine as you see in the graph below.

U.S. market was affected by European market

But trading volume was significantly low, which means that investors still look at how things go. The market is most likely to move as economic indicators such as European (and U.S.) GDP, inflation and unemployment are released.

Decline in energy sector is significant. Slow growth will decrease the demand of energy and it affects the sector these days.

USD appreciated against EURO as German ZEW index shows weakness and Ukraine tensions rises. However, the decline eased as the market continued. It forecasts that the decline is a temporary.

USD/JYP still goes up and down several days within a restricted range. Yet significant movement is expected if the BOJ added monetary policy to boost growth as Q2 GDP is largely contracted.

Sources:

http://www.bloomberg.com/news/2014-08-12/german-investor-confidence-slumps-as-ukraine-crisis-worsens-1-.html

http://www.bloomberg.com/news/2014-08-11/u-k-food-sales-plunge-amid-supermarket-price-war.html

http://www.bloomberg.com/news/2014-08-12/india-cpi-tops-estimate-in-test-for-rajan-as-industry-moderates.html