UOB Economic-Treasury Research

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Wednesday, 04 August 2010 Global Markets

News Highlights
Foreign Exchange Rates (as at 03 Aug 2010)
As at 04 Aug Asian High Asian Low NY High NY Low
JPY 85.61 86.60 85.84 86.09 85.67 n US personal income report for June was a worse than
EUR 1.3231 1.3230 1.3146 1.3262 1.3183 expected the income, expenditures, and prices slowing in
GBP 1.5947 1.5959 1.5862 1.5968 1.5889 June. US personal income stagnated in June, with a change
CHF 1.0393 1.0413 1.0360 1.0405 1.0352 of 0.0% compared to consensus estimates of 0.2% growth.
AUD 0.9129 0.9131 0.9070 0.9150 0.9083 Personal income growth for the previous month was revised
NZD 0.7336 0.7346 0.7299 0.7356 0.7311
downward to 0.3% from 0.4%. Nominal consumer
CAD 1.0231 1.0259 1.0227 1.0275 1.0220
spending was also unchanged in June after increasing 0.1%
Interest Rates in May.US personal spending growth in the month of June
Current Next CB Meet UOB’s Forecast was also weaker than expected at 0.0% compared to
USD Fed Funds Rate 0.25% 10 Aug 0.00-0.25% consensus expectations of 0.1%. The numbers for May were
EUR Refinancing Rate 1.00% 05 Aug 1.00% revised lower to 0.1% from 0.2%. Real consumer spending
GBP Repo Rate 0.50% 05 Aug 0.50%
increased a mild 0.1% after increasing 0.2% in May. In
AUD Official Cash Rate 4.50% 07 Sep 4.50%
NZD Official Cash Rate 3.00% 16 Sep 3.00% regards to prices, the core PCE price index crept up 0.039%
CAD Overnight Rate 0.75% 08 Sep 1.00% in June after increasing by about 0.1% in the prior two
JPY Official Cash Rate 0.10% 10 Aug 0.10% months, though the market-based core PCE measure
continued to increase 0.1% for the fifth straight month.
Stock Indices (as at 03 Aug 2010)
Closing % chg n Factory orders fell by -1.2% in June, worse than consensus
Dow Jones Industrial Average 10636.38 -0.36 expectations of a -0.5% decline. The slowdown in factory
S&P 500 1120.46 -0.48 orders was also worse the previous month as the numbers
NASDAQ Composite 2283.52 -0.52
for May were revised downward to a -1.8% decline from -
Tokyo Nikkei 225 9694.01 +1.29
London FTSE 100 5396.48 -0.01 1.4%. Pending home sales in June fell by -2.6%, worse than
Frankfurt DAX 6307.91 +0.25 consensus expectations of 4.0% growth. The significant
All Ordinaries 4586.50 +0.70 decline the previous month was revised marginally to -
29.9% from -30.0%. Since pending home sales tend to lead
Commodities (as at 03 Aug 2010) existing home sales by one to two months, the June data
Closing % chg adds evidence that existing home sales will remain weak
NYMEX Crude (September) 82.55 +1.49 going forward.
Comex Gold (August) 1185.2 +0.15
Reuters CRB Index 276.63 -0.08
n US equities fell yesterday following the weaker-than-
expected US economic data as well as disappointing
Bond Yields (as at 03 Aug 2010) corporate earnings reports from consumer related
Closing Net chg companies such as P&G. The weak pending homes sales
US 2-Year Bond 0.53% -3 (housing), personal consumption data and bigger-than-
US 10-Year Long Bond 2.91% -5
expected drop in factory orders created significant
JP 10-Year JGB 1.04% -1
EU 10-Year Bund 2.61% -9 downward pressure in the stock markets. The DJIA fell 38
UK 10-Year Long Gilt 3.28% -7 points (0.36%), to 10636.38. Nasdaq dropped 11.84
(0.52%), to 2283.52. The S&P index also fell by 5.40
Key Events (0.48%), to 1120.46. Today the focus on the ISM non-
Date Event manufacturing report (consensus: 53), should shed light on
05 Aug BoE Monetary Policy Committee Decision at 1100GMT
05 Aug Fed Trichet speaks at ECB Monthly News Conference at
the more dominant services sector activity and ADP private
1230GMT payrolls employment report (consensus: 33k change),
coupled with the main non-farm payrolls data due on Friday
will give the FOMC updated information on key areas of
the economy when they convene at their next meeting on
August 10.

n The USD continued to weaken yesterday on the back of a
slew of weaker than expected US economic data. The USD
saw personal income and spending, factory orders and
pending home sales numbers disappoint in quick
succession in early trading session. These were preceded
in the morning by a WSJ article which led to heightened
expectations that the Fed may be considering and remains
prepared to take additional measures to support growth,
which could well include further quantitative easing via
more securities purchases either MBS or Treasuries (which
it just completed in March). If this scenario pans out, it
effectively prevents a tightening in monetary policy and
further diminishes the appeal of holding USD over other
higher-yielding currencies. The WSJ article reported that Fed
had been discussing whether to use cash the Fed receives
when its mortgage-bond holdings mature to buy new
mortgage or Treasury bonds, instead of allowing its portfolio
to shrink gradually, as it is expected to do in the months
ahead. Yesterday’s comments by Japan's finance minister
that Japan which suggests that the government is not
considering action to curb the yen's renewed strength, led
to further USD/JPY weakness. The USD/JPY reached 85.79
from 86.49. The EUR/USD closed at 1.3231 from 1.3177,
and the GBP/USD was higher at 1.5954 from 1.5888. The
USD/CAD was slightly higher at 1.0234 from 1.0229 and
relatively unchanged for the USD/CHF at 1.0390. The AUD/
USD fell to 0.9128 from 0.9139 following the unchanged
RBA policy yesterday. The NZD/USD was higher at 0.7340
from 0.7331. Other European data released today includes
EU PMI Composite (Jul) (consensus: 56.7); UK PMI Services
(Jul) (consensus: 54.5); EU Retail Sales m/m (Jun) (consensus:
0.0%).
n US Treasuries rose yesterday on the back of renewed
concerns about the US recovery. The 2-year note's yield
URL: www.uob.com.sg/research
Email: EcoTreasury.Research@UOBgroup.com
Global Markets
Wednesday, 04 August 2010
p2
reached a record low of 0.515% in trading session, as the
weak US economic data added to the speculation that the
Fed may need to renew bond purchases to support the
economy. The 10-year note yield 2.91%, down 5bps whilst
the 2-year note was down 3bps to yield 0.53%. Today the
US Treasury dept will be announcing its quarterly refunding
statement.
n Oil prices continued to gain strength yesterday, rising above
$82 a barrel (futures reached an intra-day high of $82.64),
ignoring the set of disappointing US economic data
released yesterday. Crude oil prices settled higher at $82.55/
bbl from $81.34/bbl, due to a cheaper USD boosted as well
as speculation ahead of the EIA oil inventories report (Jul
30 EIA Weekly Petroleum Status Report) due today that is
expected to show US oil inventories falling for the first time
in three weeks. Gold futures inched slightly higher yesterday
to settle at $1185.2/oz from $1183.4/oz due to safe-haven
flows as the weak US data heightened concerns about the
global recovery. Further news yesterday that China is
moving to expand its gold market also propped up gold
prices.
n The RBA yesterday decided to leave the cash rate steady
at 4.5% for the third straight month, as expected. The RBA
statement was somewhat balanced, with the strength of
domestic economy seeming to counterbalance the impact
of some weakness globally outside Australia. Indeed, the
main themes for the RBA do not seem to have changed
much since the last Board meeting in early July, although
one differing observation was that the caution evident in
financial markets in recent months had started to abate. The
June quarter CPI numbers were mentioned explicitly in
today’s commentary as we had anticipated.
 Global Markets
Wednesday, 04 August 2010
p3

Economic Indicators
SG Time Indicators Mth Actual UOB Forecast Mkt Forecast Previous
03/08
1700 EZ PPI m/m Jun 0.3 - 0.4 0.3%
1700 EZ PPI y/y Jun 3.0 - 3.1 3.1%
2030 US Personal Income Jun 0.0 - 0.2 0.3%
2030 US Personal Spending Jun 0.0 - 0.1 0.1%
2030 US Deflator y/y Jun 1.4 - 1.3 2.1%
2030 US PCE Core m/m Jun 0.0 - 0.1 0.1%
2030 US PCE Core y/y Jun 1.4 - 1.3 1.5%
2200 US Factory Orders Jun -1.2 - -0.5 -1.8%
2200 US Pending Home Sales m/m Jun -2.6 - 4.0 -29.9%

04/08
0500 US ABC Consumer Confidence Aug 1 -50 - -46 -48
0500 US Domestic Vehicle Sales Jul 9.11 - 8.90 8.57m
0500 US Total Vehicle Sales Jul 11.85 - 11.6 11.08m
1600 EU PMI Composite Jul F - 56.7 56.7
1700 EZ Retail Sales y/y Jun - 0.1 0.2%
1700 EZ Retail Sales m/m Jun - 0.0 0.1%
2015 US ADP Employment Change Jul - 30 13k
2200 US ISM Non-Manf. Composite Jul - 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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URL: www.uob.com.sg/research
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