UOB Economic-Treasury Research

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Friday, 06 August 2010 Global Markets

News Highlights
Foreign Exchange Rates (as at 05 Aug 2010)
As at 06 Aug Asian High Asian Low NY High NY Low
JPY 85.78 86.46 86.01 86.33 85.71 n US initial jobless claims for the week ended July 31 came
EUR 1.3176 1.3175 1.3119 1.3236 1.3135 in at 479K, higher than consensus expectations of 455K.
GBP 1.5874 1.5913 1.5820 1.5925 1.5824 The number for the previous week was revised slightly
CHF 1.0461 1.0543 1.0511 1.0512 1.0413 upward to 460K from 457K.Continuing claims for the week
AUD 0.9142 0.9175 0.9134 0.9166 0.9116 ended July 24 stood at 4537K, above consensus
NZD 0.7285 0.7301 0.7257 0.7319 0.7247
expectations of 4515K. The number for the previous week
CAD 1.0172 1.0181 1.0131 1.0178 1.0108
was revised upward to 4571K from 4565K. It contrasted
with data a day earlier indicating better-than-expected job
Interest Rates
Current Next CB Meet UOB’s Forecast growth in the private and service sectors.
USD Fed Funds Rate 0.25% 10 Aug 0.00-0.25%
EUR Refinancing Rate 1.00% 02 Sep 1.00% n The ECB kept its benchmark interest rate at a record low
GBP Repo Rate 0.50% 09 Sep 0.50% of 1.0%. ECB President Jean-Claude Trichet, said the
AUD Official Cash Rate 4.50% 07 Sep 4.50% eurozone recovery was likely to be an uneven process. He
NZD Official Cash Rate 3.00% 16 Sep 3.00%
CAD Overnight Rate 0.75% 08 Sep 1.00%
struck an upbeat note when he said "The available economic
JPY Official Cash Rate 0.10% 10 Aug 0.10% data and survey-based indicators suggest a strengthening in
the economic activity in the second quarter of 2010 and
Stock Indices (as at 05 Aug 2010) the available data for the third quarter are better than
Closing % chg expected."
Dow Jones Industrial Average 10674.98 -0.05
S&P 500 1125.81 -0.13
n The BOE left its benchmark rate at a record low of 0.5%
NASDAQ Composite 2293.06 -0.46
Tokyo Nikkei 225 9653.92 +1.73
and kept its bond-stimulus plan in place by keeping the target
London FTSE 100 5365.78 -0.38 for bond holdings at GBP 200 billion.
Frankfurt DAX 6333.58 +0.04
All Ordinaries 4584.9 +0.55 n The IMF and EU announced yesterday that Greece has
made considerable progress implementing an austerity
Commodities (as at 05 Aug 2010)
program to tackle its debt crisis and is expected to receive
Closing % chg
NNYMEX Crude (September) 82.01 -0.56 its second instalment of EUR9bn rescue loans by Sep 13.
Comex Gold (August) 1197.2 +0.29 Greece has already received EUR20bn in May as part of
Reuters CRB Index 277.67 -0.47 the EUR110bn 3 year rescue package.

n Key US stock indices were mostly in negative territory

Bond Yields (as at 05 Aug 2010)
Closing Net chg yesterday following an unexpected increase in weekly
US 2-Year Bond 0.53% -4 jobless claims that cooled investors' expectations ahead of
US 10-Year Long Bond 2.90% -5 the monthly jobs report due today. The DJIA declined 5.45
JP 10-Year JGB 1.04% +4 points (0.05%), to 10674.98. The Nasdaq shed 10.51
EU 10-Year Bund 2.56% -4 (0.46%), to 2293.06 whilst the S&P index lost 1.43, or
UK 10-Year Long Gilt 3.24% -5
0.13%, to 1125.81. Yesterday’s July same-store sales reports
also fell short of estimates, raising concerns about US
Key Events consumer spending outlook and slowdown in US economic
Date Event recovery.

n The USD was once again undermined by weaker jobless

claims data in the morning ahead of the key non-farm
payrolls numbers today. Meanwhile, relatively upbeat
comments made by ECB President Trichet buoyed the euro
in the morning and EUR/USD drove higher to settle at
 Global Markets
Friday, 06 August 2010
p2

1.3190 from 1.3162. ECB President Trichet had said the
available Q3 economic data is better than expected and
that money markets are slowly improving. The USD was able
to recover some of the morning's losses except vs the JPY
and CHF. The USD/CHF was down to 1.0454 from 1.0532.
The USD and euro fell against the yen. The USD/JPY was
down to 85.85 from 86.27 and the EUR/JPY was at 113.24
from 113.55. The growth-sensitive AUD/USD was down to
settle at 0.9160 from 0.9166 whilst the NZD/USD fell to
0.7307 from 0.7348 following latest data released overnight
which showed the NZ unemployment rate coming in much
higher than expected at 6.8% which suggests the RBNZ may
slow the pace of rate increases going forward. The key
economic data releases today include: Japan’s Leading Index
CI (Jun) (consensus 98.7); France Trade Balance (Jun)
(consensus EUR -4.4bn); Italy Industrial Production s.a. m/
m (Jun) (consensus 0.7%); UK Industrial Production m/m (Jun)
(consensus 0.1%); Germany Industrial Production s.a. m/m
(Jun) (consensus 0.8%) and most importantly the US Non-
farm payrolls (Jul) (consensus -50k) and the US
unemployment Rate (Jul) (consensus 9.6%) at 1330 GMT.
n US Treasuries rallied yesterday from flight to safety flows
amid the lingering uncertainty surrounding today’s payroll
US data and general ongoing doubts about the
sustainability of the economic recovery -- the 10-year yield
reached a low of 2.894% while the 2-year yield also headed
lower to 0.53% around noon. The 10-year note was 4bps
lower to yield 2.90% and the 2-year note fell 3bps to yield
0.53%. Freddie Mac reported yesterday that the average
mortgage rate for 30-yr fixed loans was 4.49%, down from
4.54% last week. The average rate on the 15-yr fixed loan
dropped to 3.95%, down from 4% last week. This is the
lowest on record. The mortgage rates have been falling in
line with Treasury yields.
n The September prompt-month crude oil prices to $82.02/
bbl from $81.55/bbl, as concerns about US economic
outlook and labour market concerns stalled the recent rally.
Gold prices rose as the weak US data enhanced safe haven
flows. The Aug Comex gold futures contract settled at
$1197.2/oz from $1193.7/oz.
n Hungary’s public sector budget deficit narrowed to 114.6%
of the full-year target in July from 118.8% in 2010H1, the
Economy Ministry said in a statement yesterday. The budget
posted a 36.1bn forint surplus in July. The deficit -- which
excludes local governments -- reached 997.5bn forints in
the January-July period compared to the full-year target of
870.3bn forints.

Economic Indicators
SG Time Indicators Mth Actual UOB Forecast Mkt Forecast Previous
05/08
1800 Gmn Factory Orders m/m sa Jun 3.2 - 1.4 -0.1%
1800 Gmn Factory Orders y/y nsa Jun 24.6 - 21.6 25.1%
1900 GBP Repo Rate Aug 5 0.50 0.50 0.50 0.50%
1945 EUR Refinancing Rate Aug 5 1.00 1.00 1.00 1.00%
2030 CA Building Permits m/m Jun 6.5 - 1.8 -8.2%
2030 US Initial Jobless Claims Jul 31 479 - 455 460k
2030 US Continuing Claims Jul 24 4537 - 4515 4571k

06/08
1300 JP Leading Index CI Jun P - 98.7 98.6
1445 FR Trade Balance (Euros) Jun - -4.4 -5.5b
1630 UK PPI Input m/m nsa Jul - -0.5 -0.2%
1630 UK PPI Output m/m nsa Jul - 0.0 -0.3%
1630 UK Industrial Production m/m Jun - 0.1 0.7%
1630 UK Manufacturing Production m/m Jun - 0.4 0.3%
2030 US Change in Nonfarm Payrolls Jul - -65 -125k
2030 US Change in Private Payrolls Jul - 90 83k

Jimmy Koh Lee Sue Ann Saktiandi Supaat

(65) 6539 3545 (65) 6539 3549 (65) 6539 8930
Jimmy.KohCT@UOBgroup.com Lee.SueAnn@UOBgroup.com Saktiandi.Supaat@UOBgroup.com
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