Against the Grain

In the 80’s as the coal mining industry was taking off in Queensland, the Premier Joh Bjelke Peterson used to call press conferences “feeding the chooks (hens)”. He knew they would eat out of the palm of his hand and take any slightly positive news way beyond the bounds of reason. This tactic seems to have been picked up by Fed Chairman Bernanke as his Fri speech to the Jackson Hole symposium, to a select group of central bankers and economist, was seen as a kin to a Sermon on the Mount. In hind sight he stated the obvious, the US economy is slowing and the Fed will do all in their power to reverse that slowing. The question is what power do they have? On Fri the investors lapped it up driving markets in “recovery direction”. This week their resolve is likely to be tested further as we head into Aug employment data and other numbers. Already in the US y/day the doubts were back as the equities fell and bond yields declined. Worse on the currency markets the BoJ failed to intervene and the yen headed for new highs against the US$. Seems the Fed’s chook feed is not that tasty.

The commodity sector having been strong late last week has that fading feeling as prices eased back after the Aug Japanese manufacturing PMI was 50.1 (52.8). From the DRC it is reported that the government has seized another First Quantum mine this time three year old 100 ktpa Frontier cu operation. Seems part of a rather murky politico–corporate play, exciting but not good for investor confidence. The LME stocks all declined without any real impact. After the euphoria of Fri markets are very sceptical this morning in London. The US data was better or on track steadying the ship. Gold put in another strong performance again the big move on the US open, it seems whatever the economic scenario going forward investors think it will keep glittering. While oil eased as the latest Atlantic hurricane veered away from the Gulf of Mexico.

On the final demand front, things are looking up in Asia with two good sets of Jul data, Japanese retail sales rose 3.9% yoy (Jne 3.3%) and Australia up 0.7% mom (0.4%). The Aug UK GfK consumer confidence survey was -18 (-22). The Aug German unemployment rates was unchanged at 7.6% as Euroland Jul unemployment was unchanged at 10%. However it is the US where the focus is, first some old data, the Jne Case Shiller home index 147.97 (May 146.43) and composite 20 city index 0.28% (0.53%) yoy 4.23% (4.61%). More pertinent, Aug Conference Board consumer confidence were good 53.5 (50.4) and Chicago PMI as expected 56.7 (62.3). Finally the Milwaukee NAPM 59.0 (66.0). In Canada Jne GDP rose 0.2% mom (0.1%) yoy 2% (6.1%).