UOB Economic-Treasury Research

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Thursday, 05 August 2010 Global Markets

News Highlights
Foreign Exchange Rates (as at 04 Aug 2010)
As at 05 Aug Asian High Asian Low NY High NY Low
JPY 86.32 85.91 85.32 86.39 85.39 n US ISM non-manufacturing composite index for July came
EUR 1.3156 1.3240 1.3194 1.3233 1.3131 in at 54.3, slightly higher than consensus expectations of
GBP 1.5885 1.5965 1.5916 1.5961 1.5857 53.0. The index shows service companies have been
CHF 1.0531 1.0434 1.0398 1.0555 1.0381 expanding every month this year, but at a less robust pace
AUD 0.9159 0.9147 0.9095 0.9184 0.9107 than the manufacturing sector. The service sector accounts
NZD 0.7286 0.7355 0.7318 0.7356 0.7298
for about 80% of US employment. The index showed
CAD 1.0182 1.0261 1.0232 1.0271 1.0163
businesses reporting new orders grew faster last month.
Interest Rates
Current Next CB Meet UOB’s Forecast n The ADP employment change stood at 42k in July, above
USD Fed Funds Rate 0.25% 10 Aug 0.00-0.25% consensus estimates of 30k and from a revised gain of 19k
EUR Refinancing Rate 1.00% 05 Aug 1.00% in June. The original June ADP figure was 13k jobs. Private
GBP Repo Rate 0.50% 05 Aug 0.50% payroll saw the small gains as large businesses added no
AUD Official Cash Rate 4.50% 07 Sep 4.50% new workers. The report serves as a precursor to Friday's
NZD Official Cash Rate 3.00% 16 Sep 3.00%
CAD Overnight Rate 0.75% 08 Sep 1.00%
jobs report. Today, the US government will release its weekly
JPY Official Cash Rate 0.10% 10 Aug 0.10% jobless claims data (consensus: 459k), and on Friday the
much-anticipated US nonfarm payrolls report. Market
Stock Indices (as at 04 Aug 2010) participants did not revise their expectations for Friday's
Closing % chg employment report after the solid data yesterday. The median
Dow Jones Industrial Average 10680.43 +0.41 forecast is still a drop of 60k jobs because of Census layoffs,
S&P 500 1127.24 +0.61
but the report is expected to show a gain of around 100k
NASDAQ Composite 2303.57 +0.88
Tokyo Nikkei 225 9489.34 -2.11
jobs in the private sector alone. The non-farm payrolls is
London FTSE 100 5386.16 -0.19 expected to report a fall of 70k for July after declining 125k
Frankfurt DAX 6331.33 +0.37 in June after taking into consideration Census workers.
All Ordinaries 4559.7 -0.58 Private sector payrolls are expected to rise by 95k on Friday,
and the unemployment rate to move higher to 9.6%.
Commodities (as at 04 Aug2010)
However, the slight upside surprise on the ADP employment
Closing % chg
NYMEX Crude (September) 82.47 -0.10 change numbers, can be seen as boding well for the key
Comex Gold (July) 1193.7 +0.72 release of the non-farm payroll data on US Friday morning.
Reuters CRB Index 278.98 +0.85
n US Mortgage Bankers Association data showed mortgage
applications rose by 1.3% in the week ended July 30,
Bond Yields (as at 04 Aug2010)
Closing Net chg possibly due to lower interest rates which fueled demand
US 2-Year Bond 0.57% +4 for home refinancing loans, thus providing a glimmer of
US 10-Year Long Bond 2.95% +4 positive news for the beleaguered housing market. The
JP 10-Year JGB 1.01% -3 report stated that low rates buoyed demand for home
EU 10-Year Bund 2.60% -1 refinancing loans. The 4 week moving average of mortgage
UK 10-Year Long Gilt 3.29% +1
applications was up 0.3%. Borrowing costs on 30 year fixed
rate mortgages, excluding fees averaged 4.60%, down
Key Events 0.09% points from week before.
Date Event
05 Aug BoE Monetary Policy Committee Decision at 1100GMT n Key US equity indices had a wobbly start but began to
05 Aug Fed Trichet speaks at ECB Monthly News Conference at stabilize in positive territory in the afternoon and ended
1230GMT
well in the black as markets responded to positive ADP
and ISM data releases and the fact that the overall
momentum of corporate earnings releases remains
decidedly positive. The DJIA climbed 44.05 points (0.41%),
to 10680.43. The Nasdaq advanced 20.05 (0.88%), to
2303.57. The S&P added 6.78 (0.61%), to 1127.24, with
 Global Markets
Thursday, 05 August 2010
p2

the consumer-discretionary sector leading the climb. Today to policy rates. Today’s eurozone key news release would
several corporate earnings releases including a key one from be Germany’s factory orders s.a. m/m (Jun) (consensus
Kraft. 1.4%).

n The USD took a breather yesterday on the back of slightly
better than expected ISM services sector and ADP jobs data.
The general uncertainty ahead of the key US labor market
data due on Friday and the FOMC meeting next week may
have also led to some profit taking on short-USD positions.
The USD rose again the major currencies except the
commodity-linked currencies. The USD/JPY rose to 86.27
from 85.79. The AUD/USD was up slightly t o 0.9166 from
0.9128, the USD/CAD was down to 1.0180 from 1.0234,
whilst the NZD/USD was at 0.7348 from 0.7340. But traders
remain cautious ahead of July nonfarm payroll data on Friday
as they wait for more definitive signs of a sustained recovery
in the U.S. labor market and the broader economy. The EUR/
USD fell to 1.3162 from 1.3231 as the latest euro-zone data
yesterday showed that EU retail sales were flat in June down
from a 0.4% ruse in May - disappointed growth prospects
and lowered inflation expectations for the region. ECB’s
Trichet could also put renewed pressure on the USD today
if he hints of a divergence between euro-zone monetary
policy and US policy after the ECB meeting. The ECB and
BOE policy meeting today is unlikely to lead to any changes
n US Treasuries backed up a bit yesterday, with the
benchmark 2-year yield rising from near record lows of
0.522% to hit an intra-day high of 0.57%, after the positive
US economic data. Treasurys were also lower after word
from the US government about its next round of auctions in
the coming week. The government said it will sell a total of
$74bn in new notes and bonds, as expected. It will offer
$16bn 30-years on Thursday, $24bn 10-years on
Wednesday and $34bn 3-years on Tuesday, a decrease of
$1bn. The two-year Treasury note yield was up 3bps to
0.562%, while the 10-year rose 5bps to yield 2.95%.
n Oil prices were only slightly higher despite conflicting
signals yesterday such as the US Energy Department data
showing US gasoline inventories unexpectedly increased
and a stronger USD as well as encouraging economic data.
The Aug prompt-month Nymex crude oil futures contract
rose to $82.55/bbl from $81.34/bbl. Gold prices settled
higher at $1193.7/oz from $1185.2/oz amid speculation
about further easing of US monetary policy and the chance
of an increase in Chinese demand yesterday.

Economic Indicators
Local Time Indicators Mth Actual UOB Forecast Mkt Forecast Previous
04/08
0500 US ABC Consumer Confidence Aug 1 -50 - -46 -48
0500 US Domestic Vehicle Sales Jul 8.94 - 8.90 8.57m
0500 US Total Vehicle Sales Jul 11.56 - 11.60 11.08m
1600 EU PMI Composite Jul F 56.7 - 56.7 56.7
1700 EZ Retail Sales y/y Jun 0.4 - 0.1 0.6%
1700 EZ Retail Sales m/m Jun 0.0 - 0.0 0.4%
2015 US ADP Employment Change Jul 42 - 30 19k
2200 US ISM Non-Manf. Composite Jul 54.3 - 53.0 53.8

05/08
1800 Gmn Factory Orders m/m sa Jun - 1.4 -0.5%
1800 Gmn Factory Orders y/y nsa Jun - 21.6 24.8%
1900 GBP Repo Rate Aug 5 0.50 0.50 0.50%
1945 EUR Refinancing Rate Aug 5 1.00 1.00 1.00%
2030 CA Building Permits m/m Jun - 1.8 -10.8%
2030 US Initial Jobless Claims Jul 31 - 455 457k
2030 US Continuing Claims Jul 24 - 4514 4565k

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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