Exchange traded funds (ETF) guide
Senior Analyst Rob Lee explains ETF basics
Exchange-traded funds (ETF)
An ETF is an investment vehicle on stock exchanges, they hold assets such as stocks or bonds and is valued approximately at the same price as the net asset value of its underlying assets. Most ETF’s are index tracking and are attractive because of their low cost, tax efficiency and stock like features.
Large institutional investors, authorised participants, actually buy or sells the shares of an ETF to/from the fund manager normally in large blocks for long term investment or more typically as market makers on the open market. Individual investors using retail brokers trade ETF shares on this secondary market.
The ETF offers public investors an interest in a pool of securities and other assets similar to mutual funds although the shares in an ETF can be bought or sold throughout the day like stocks on an exchange through a broker.
Investment uses
ETF’s provide diversification, low costs and tax efficiency of index funds while holding onto the features of ordinary shares. ETF’s can be utilities for long term investment or asset allocation and for frequent trading using market timing investment management.
Low costs are found due to the vehicle not having an actively managed element and because ETF’s are buffered from costs of having to buy and sell securities to accommodate purchases and redemptions of share holders.
Flexibility for buying and selling at current market prices any time of the day, unlike mutual funds and unit trusts, as a publicly traded security their shares can be purchased on margin and sold short enabling hedging, stop orders and limit orders.
Divesification, ETF’s inherently provide exposure across the entire index, industry sector, bond indexes or commodities.
Types of ETF
Index ETF: Attempts to track the index by holding in its portfolio either the contents of the index or a sample of securities in the index.
Commodity ETF (ETC Exchange Traded Commodities): Invest in commodities such as precious metals and futures. Commodity ETF’s are index funds tracking non-securities indexes.
ETC’s trade just like shares, are simple and efficient and provide exposure to an ever-increasing range of commodities and commodity indices, including energy, metals, softs and agriculture. However, it is important for an investor to realize that there are often other factors that affect the price of a commodity ETF that might not be immediately apparent; for example, buyers of an oil ETF such as USO might think that as long as oil goes up, they will profit roughly linearly. What isn’t clear to the non-professional investor is the method by which these funds gain exposure to their underlying commodities. In the case of many commodity funds, they simply roll so-called front-month futures contracts from month to month. This does give exposure to the commodity, but subjects the investor to risks involved in different prices along the term structure, such as a high cost to roll.
Bond ETF’s: Exchange-traded funds that invest in U.S. Government bonds are known as bond ETF’s. They thrive during economic recessions because investors pull their money out of the stock market and into U.S. Treasuries.
Exchange-traded grantor trusts: An exchange-traded grantor trust share represents a direct interest in a static basket of stocks selected from a particular industry.
Leveraged ETF’s: Leveraged exchange-traded funds (LETF’s), or simply leveraged ETF’s, are a special type of ETF that attempt to achieve returns that are more sensitive to market movements than non-leveraged ETF’s.
Tax efficiency
ETF’s in the United Kingdom are protected from capital gains tax by placing them in an individual savings account (ISA) or self-interest personal pension.
Trading
Perhaps the most important benefit of an ETF is the stock-like features offered. Since ETF’s trade on the market, investors can carry out the same types of trades that they can with a stock. For instance, investors can sell short, use a limit order, use a stop-loss order, buy on margin, and invest as much or as little money as they wish (there is no minimum investment requirement).
For example, an investor in a mutual fund can only purchase or sell at the end of the day at the mutual fund’s closing price. This makes stop-loss orders much less useful for mutual funds, and not all brokers even allow them. An ETF is continually priced throughout the day and therefore is not subject to this disadvantage, allowing the user to react to adverse or beneficial market condition on an intraday basis. This stock-like liquidity allows an investor to trade the ETF for cash throughout regular trading hours, and often after-hours on ECN’s (Electronic Communication Network). ETF liquidity varies according to trading volume and liquidity of the underlying securities, but very liquid ETF’s such as SPDR’s (Standard & Poor’s Depositary Receipts tracking the S&P 500) can be traded pre-market and after-hours with reasonably tight spreads. These characteristics can be important for investors concerned with liquidity risk.
Another advantage is that ETF’s, like closed-end funds, are immune from the market timing problems that have plagued open-end mutual funds. In these timing attacks, investors trade in and out of a mutual fund quickly, exploiting minor variances in price in order to profit at the expense of the long-term shareholders. With an ETF (or closed-end fund) such an operation is not possible—the underlying assets of the fund are not affected by its trading on the market.
Investors can profit from the difference in the share values of the underlying assets of the ETF and the trading price of the ETF’s shares. ETF shares will trade at a premium to net asset value when demand is high and at a discount to net asset value when demand is low. In effect, the ETF is providing a system for arbitraging value in the market. As the initial costs are one-off, the ETF vehicle offers some cost advantages over other forms of pooled investment vehicles.
What is Financial Spread Betting?
Financial Spread betting is one of the most exciting and fastest growing ways of speculating on the movement of an underlying share or index and for many investors it has become a flexible and cost efficient alternative to trading ordinary shares.
Advantages of Spread Betting
* No Stamp duty is payable (saving 0.5% compared to a traditional share purchase.
* Tax Free Profits: Profits on spread betting are not subject to capital gains tax.
* No direct commissions or fees are paid to the spread betting company.
* You can profit from falling or rising markets.
* They are traded on margin therefore bets can be placed with a relatively small initial outlay.
* A single account can give you Access to far greater range of financial markets.
* You can limit your risk using a “Stop Loss”.
* The ability to place very small bets, some companies let you place a trade of as low as 1p per point.
* Tax Laws are subject to change.
Drawbacks of spread betting
Financial spread betting is less suited to the long term investor,if you hold a bet open over a long period of time the costs associated increase and it may be more beneficial to have bought the underlying asset. You have no rights as an investor, including no voting rights and you will not benefit from dividends.
From Rob Lee of AiMS Trading Club and Forex training courses
London Hertfordshire Bedfordshire Cambridgeshire UK
Nine steps to economic recovery
Decade of financial stability? ACCA reveals wish list for the new decade
The financial and regulatory world in 2020 will be much stronger, but only if nine fundamental principles are followed at the start of this new decade, says ACCA (the Association of Chartered Certified Accountants) in a policy paper entitled Nine Steps to Financial Stability 2020.
1. A separation of retail – or at the very least deposit taking – from investment banking and a return of distressed banks to the private sector in a profitable way.
The banking sector undoubtedly played a role in the financial crisis, with corporate and investment banking, bringing both significant profits but ultimately also billions of pounds in toxic debt and trillions in banking bailouts around the world. Steps need to be taken to ensure that this issue is addressed and specifically, that retail banking activities, which have long accounted for much of the profit of many banks and which focus on deposits and supporting consumers, are protected.
2. A return to a savings over debt culture combined with decent State post-retirement provision
The last decades have been marked by a combination of low savings rates and high debt levels, especially in the US and UK, which both have economies largely based on consumption, the housing market and the expansion of personal debt. The time has come to rebuild the savings culture – to reject the credit card in favour of the piggy bank, and it is for the Government to cultivate an environment that encourages this. This should be addressed urgently through the reform of pensions and benefit systems in order to restore the social and economic benefits of a low time preference culture.
3. An effective transition to the low carbon economy
Recent projections from the Intergovernmental Panel on Climate Change (IPCC) warn that that unless action is taken to cut greenhouse gas emissions, global warming will exceed the danger level of a 2°C increase. According to the IPCC’s worst-case scenario, climate change could reach dangerous levels as early as 2050. Current assessments show that this is likely to happen. Unprecedented action is required nationally, regionally, and internationally to address this. For pessimists, the current economic downturn has substantially delayed green economy plans, with governments now pre-occupied with the recession and focusing on fiscal stimulus measures. However, the trillion dollar banking sector bailout is proof that governments can work together, quickly, to help resolve global catastrophes. These difficult economic times, which could actually provide a golden opportunity to encourage investment in a low-carbon economy, specifically in energy-efficient technologies and renewable energy and in creating lower-carbon growth and green jobs.
4. Full and effective governmental support for small business by ‘thinking small first’
At a time when the Government’s finances are becoming increasingly tight and small businesses are facing mounting pressures, we must not lose sight of the fact that small businesses are the growth engine of economies around the world. During the worst of the recession, one in every five net jobs lost in the UK was replaced by a self-employed person, demonstrating that the role of entrepreneurs during economic downturns is crucial. Not only do they introduce new economic activity when existing businesses tend to reduce theirs, but through this process they create new employment, paving the way towards economic recovery. In fact, some of the most innovative and fastest growing companies were started during recessions such as Wal-Mart (1962), Starbucks (1971), Microsoft (1975) and Virgin Atlantic (1982). “Thinking small first” does not mean subsidising smaller businesses at every opportunity. It means making sure that, in complying with government’s requirements and accessing its support network, a business’ size, resources and administrative capacity do not confer an implicit subsidy.
5. A permanent secretariat for the G20 group of nations
The G20 was established in 1999 in the wake of the Asian financial crisis as a forum for cooperation and consultation on matters relating to the international financial system. A G20 summit represents a pragmatic approach to finding effective solutions to key global challenges such as financial instability and the need to reform the global financial institutions. Representing the world’s 20 leading industrialised and emerging economies, and accounting for 90% of the world’s GDP, it is a more representative and inclusive global steering committee than the Group of Eight (G8). It is clear that the financial crisis and other issues such as climate change, are too big for individual nations to tackle on their own. ACCA believes that there should be a formal agreement to make the G20 feature a long-term feature of global governance.
6. A stable, transparent, fair and certain system of taxation
It has been argued by the International Monetary Fund (IMF) that the global financial crisis has been exacerbated (though not caused) by tax policies which fuelled the credit boom that preceded the economic downturn. The IMF proposes that governments should consider changing the rules that have encouraged companies to seek finance using debt rather than equity, and allowed individuals to take out larger mortgages. Many tax regimes allow companies to deduct interest payments against tax but not against returns on equity; this has resulted in an increase both in leveraged buy-outs by private equity organisations and in the holding of debt rather than equity by other financial institutions. The IMF argues that ‘corporate level tax biases favouring debt finance including in the financial sector are pervasive, often large and hard to justify given the potential impact on financial stability.’
7. The effective adoption of International Financial Reporting Standards
The financial crisis and the current focus on accounting standards provide a unique opportunity to simplify, improve and clarify accounting standards. IFRS is helping to make financial information more transparent and comparable across countries, industry sectors and companies. In doing so, it improves investor information, comparability and investment choice.
8. Safe payments and consumer protection against bribery, money laundering, fraud and corruption
The increasing availability of the Internet and digital TV means that is becoming easier and quicker for consumers to shop without leaving home. Shopping is also becoming a truly global experience, with more and more consumers turning to their computers to buy goods such as software and CDs, higher priced items such as cars and holidays, as well as services such as insurance. Taken alone, the UK’s Internet shopping market is worth more than £21.4 billion, with more than 20 million people buying online in 2008 . Online shopping has become a multi billion pound business, but online fraud has also increased exponentially. However, online fraud is not the only risk facing those who do online shopping. There are also company insolvencies and unethical business practices to negotiate.
9. Effective corporate governance in both the public, private and third sectors.
Underlying much of the credit crunch has been a fundamental failure in corporate governance. While the financial institutions involved may have been in compliance with local requirements and codes, they have ignored the key point – good corporate governance is about boards directing and controlling the organizations so they operate in their shareholders’ interests. Boards should be answerable to company owners, to account properly for their stewardship and to ensure both sound internal control and the ethical health of the organizations. The use of overly-complex financial products, which thwarted effective supervisory control, and the unethical advancement, at the point of sale, of loans to people with little realistic hope of repaying them shows a lack of basic corporate governance. All of these issues need addressing in order to prevent a further financial crisis in the short-term.
Euro news
LONDON (Dow Jones)–Portugal is providing a fresh drag on the euro after it confirmed investors’ fears that debt stresses in the euro zone are not limited to Greece.
Late Tuesday, the country’s finance minister said the budget deficit for 2009 was equivalent to 9.3% of gross domestic product, above the 8% expected by the European Commission.
At the presentation of the government’s 2010 budget plan, Fernando Teixeira dos Santos ruled out broad-based tax hikes but promised strict cost control in an effort to bring the deficit down to 8.3% of GDP in 2010.
The deficit ratio is smaller than the 12.7% reported by Greece late last year–a shock that has punished Greek bonds and hit the euro hard in recent weeks. Nevertheless, the news confirms that Greece is not alone among the 16 euro-zone nations in suffering a harsh debt hangover.
“Everyone has been focusing on Greece, but now they are waking up to the fact that it’s not just Greece,” said Ian Stannard, a currencies analyst at French bank BNP Paribas.
At 0853 GMT, the euro was trading at $1.4033, down from the $1.4075 in late New York trading Tuesday.
Flash Traffic Stocks news
Canon: Expcet Digital Camera Sales to Grow 6% in 2010 to 25.7m Units.
Interbank Forex Exchange rates 06:50 GMT
Latest Previous %Chg Daily Daily %Chg
Dollar Rates 2150 GMT High Low 12/31
USD/JPY Yen 89.23-24 89.61-67 -0.42 89.73 89.15 -4.14
EUR/USD Euro 1.4058-59 1.4074-77 -0.11 1.4096 1.4055 -1.80
GBP/USD Sterling 1.6123-25 1.6141-46 -0.11 1.6154 1.6110 -0.25
USD/CHF Swiss Franc 1.0466-72 1.0461-66 +0.05 1.0473 1.0453 +1.08
USD/CAD Canadian Dlr 1.0645-48 1.0624-28 +0.20 1.0650 1.0618 +1.26
AUD/USD Australian Dlr 0.8995-97 0.8987-89 +0.09 0.9045 0.8982 +0.13
NZD/USD New Zealand Dlr 0.7058-64 0.7075-85 -0.24 0.7094 0.7059 -2.73
Euro Rates
EUR/JPY Yen 125.44-47 126.16-18 -0.57 126.36 125.31 -5.87
EUR/GBP Sterling 0.8718-21 0.8717-21 +0.01 0.8731 0.8715 -1.57
EUR/CHF Swiss Franc 1.4717-21 1.4725-28 -0.05 1.4734 1.4717 -0.72
EUR/CAD Canadian Dlr 1.4965-70 1.4952-61 +0.09 1.4976 1.4942 -0.56
EUR/AUD Australian Dlr 1.5625-30 1.5657-64 -0.20 1.5667 1.5572 -1.95
EUR/DKK Danish Krone 7.4452-62 7.4453-55 -.001 7.4458 7.4455 +0.06
EUR/NOK Norwegian Krone 8.2123-91 8.2177-43 -0.07 8.2369 8.2012 -1.05
EUR/SEK Swedish Krona 10.2407-32 10.2353-62 +0.05 10.2516 10.2290 -0.07
EUR/CZK Czech Koruna 26.0530-30 26.0150-50 +0.15 26.0830 26.0080 -1.27
EUR/HUF Hungary Forint 271.34-54 271.15-30 +0.07 271.42 271.22 +0.28
EUR/PLN Polish Zloty 4.0770-90 4.0755-75 +0.04 4.0800 4.0752 -0.69
Yen Rates
AUD/JPY Australian Dlr 80.28-30 80.56-59 -0.35 81.11 80.21 -3.99
GBP/JPY Sterling 143.87-91 144.64-79 -0.53 144.85 143.66 -4.37
CAD/JPY Canadian Dlr 83.79-83 84.33-39 -0.64 84.44 83.74 -5.36
NZD/JPY New Zealand Dlr 62.98-02 63.44-48 -0.73 63.64 62.94 -6.75
Other Dollar Rates
USD/CZK Czech Koruna 18.524-76 18.482-25 +0.23 18.551 18.434 +0.49
USD/HUF Hungary Forint 192.87-32 192.48-91 +0.20 193.05 192.65 +2.05
USD/DKK Danish Krone 5.2958-68 5.2887-10 +0.13 5.2977 5.2821 +1.89
USD/NOK Norwegian Krone 5.8422-62 5.8389-24 +0.06 5.8559 5.8270 +0.78
USD/PLZ Polish Zloty 2.8947-62 2.8923-00 +0.08 2.9015 2.8930 +0.94
USD/RUB Russian Ruble 30.367-74 30.333-38 +0.11 30.368 30.327 +0.18
USD/SEK Swedish Krona 7.2906-46 7.2725-87 +0.25 7.2930 7.2680 +1.85
USD/EEK Estonia Kroon 11.1276-00 11.1134-81 +0.13 11.1316 11.1000 +1.81
USD/HKD Hong Kong Dlr 7.7740-50 7.7760-62 -0.03 7.7763 7.7740 +0.26
USD/MYR Malaysian Ringt 3.4255-85 3.4165-00 +0.26 3.4260 3.4140 +0.06
USD/INR Indian Rupee 46.3600-00 45.8400-00 +1.13 46.3700 45.8800 -0.09
USD/IDR Indones Rupiah 9390-400 9375-385 +0.16 9390 9375 -0.37
USD/PHP Philippine Peso 46.660-15 46.570-20 +0.19 46.660 46.250 +0.37
USD/SGD Singapore Dlr 1.4036-54 1.4032-39 +0.03 1.4047 1.4020 -0.12
USD/KRW S. Korean Won 1158.9-0.9 1156.5-8.5 +0.21 1166.5 1155.8 -0.61
USD/TWD Taiwan Dlr 32.033-40 32.020-50 +0.04 32.065 31.985 +0.14
USD/THB Thai Baht 33.02-06 33.03-06 -0.03 33.12 32.95 -1.01
USD/VND Vietnamese Dong 18469-79 18469-79 0.00 -0.03
USD/ZAR S. African Rand 7.5900-50 7.5800-00 +0.13 7.5937 7.5475 +2.47
USD/BRR Brazilian Real 1.835-37 1.835-37 0.00 1.835 1.831 +5.27
USD/MXN Mexican Peso 12.864-81 12.871-74 -0.05 12.874 12.854 -1.64
USD/ARS Argentine Peso 3.8125-75 3.8125-75 0.00 Untraded today +0.31
Source: Thomson Reuters
Todays Economic events
Jan 27 (Low, Mid, High Impact)
00:30 Australia Consumer Price Index (QoQ) (4Q)
00:30 Australia Consumer Price Index (YoY) (4Q)
05:00 Japan Bank of Japan Monthly Economic Survey
11:00 United Kingdom CBI Distributive Trades Survey – Realized (MoM) (Jan)
N/A Germany Consumer Price Index (MoM) (Jan)
N/A Germany Consumer Price Index (YoY) (Jan)
12:00 United States MBA Mortgage Applications (Jan 22)
15:00 United State New Home Sales (Dec)
15:30 United States EIA Crude Oil Stocks change (Jan 22)
18:15 United States Fed Interest Rate Decision
20:00 New Zealand RBNZ Interest Rate Decision
23:00 Australia Conference Board Australia Leading Index (Nov)
23:50 Japan Retail Trade (YoY) (Dec)
23:50 Japan Large Retailer’s Sales (Dec)
23:50 Japan Retail Trade s.a (MoM) (Dec)
UK Recent Economic Data
BASE RATE:
2009
Mar 5 down 0.50%
Feb 5 down 1.00%
Jan 8 down 1.50%
2008
Dec 4 down 2.00%
Nov 6 down 3.00%
Oct 8 down 4.50%
Apr 10 down 5.00%
Feb 7 down 5.25%
2007
Dec 6 down 5.50%
Jul 5 up 5.75%
May 10 up 5.50%
Jan 11 up 5.25%
2006
Nov 9 up 5.00%
Aug 3 up 4.75%
2005
Aug 4 dn 4.50%
2004
Aug 5 up 4.75%
Jun 10 up 4.50%
May 6 up 4.25%
Feb 5 up 4.00%
2003
Nov 6 up 3.75%
Jul 10 down 3.50%
Feb 6 down 3.75%
GROSS DOMESTIC PRODUCT:
quarterly % change yearly % change
2009
4Q +0.1 -3.2
3Q -0.2 (R) -5.1 (R)
2Q -0.6 (R) -5.5
1Q -2.4 (R) -4.9 (R)
2008
4Q -1.6 (R) -2.0 (R)
3Q -0.5 +0.3
2Q 0.0 (R) +1.4 (R)
1Q +0.3 (R) +2.3 (R)
2007
4Q +0.6 +2.9
3Q +0.7 (R) +3.3 (R)
2Q +0.8 +3.1 (R)
1Q +0.7 +3.0 (R)
2006
4Q +0.7 (R) +3.0
3Q +0.7 +2.9 (R)
2Q +0.7 (R) +2.6
1Q +0.7 (R) +2.3 (R)
2005
4Q +0.6 +1.8
3Q +0.4 +1.7 (R)
2Q +0.5 (R) +1.5 (R)
1Q +0.4 (R) +2.1 (R)
2004
4Q +0.7 +2.9
3Q +0.5 (R) +3.2 (R)
2Q +0.9 +3.6 (R)
1Q +0.7 +3.4
2003
4Q +0.9 +2.8 (R)
3Q +0.8 (R) +2.1 (R)
2Q +0.6 (R) +2.0 (R)
1Q +0.1 (R) +2.1 (R)
CONSUMER PRICES INDEX:
monthly % change yearly % change
2009
Dec +0.6 +2.9
Nov +0.3 +1.9
Oct +0.2 +1.5
Sep 0.0 +1.1
Aug +0.4 +1.6
Jul +0.3 +1.8
Jun +0.3 +1.8
May +0.6 +2.2
Apr +0.2 +2.3
Mar +0.2 +2.9
Feb +0.9 +3.2
Jan -0.7 +3.0
2008
Dec -0.4 +3.1
Nov -0.1 +4.1
Oct -0.2 +4.5
Sep +0.5 +5.2
Aug +0.6 +4.7
Jul +0.7 +4.4
Jun +0.7 +3.8
May +0.6 +3.3
Apr +0.8 +3.0
Mar +0.4 +2.5
Feb +0.7 +2.5
Jan -0.7 +2.2
2007
Dec +0.6 +2.1
Nov +0.3 +2.1
Oct +0.5 +2.1
Sep +0.1 +1.8
Aug +0.4 +1.8
Jul -0.6 +1.9
Jun +0.2 +2.4
May +0.3 +2.6
Apr +0.3 +2.8
Mar +0.5 +3.1
Feb +0.4 +2.8
Jan -0.8 +2.7
2006
Dec +0.6 +3.0
Nov +0.3 +2.7
Oct +0.2 +2.4
Sep +0.1 +2.4
Aug +0.4 +2.5
Jul -0.1 +2.4
Jun +0.3 +2.5
May +0.5 +2.2
Apr +0.6 +2.0
Mar +0.2 +1.8
Feb +0.3 +2.0
Jan -0.5 +1.9
2005
Dec +0.3 +1.9
Nov 0.0 +2.1
Oct +0.1 +2.3
Sep +0.2 +2.5
Aug +0.4 +2.4
Jul +0.1 +2.3
Jun 0.0 +2.0
May +0.4 +1.9
Apr +0.4 +1.9
Mar +0.4 +1.9
Feb +0.3 +1.6
Jan -0.5 +1.6
2004
Dec +0.5 +1.6
Nov +0.2 +1.5
Oct +0.3 +1.2
Sep +0.1 +1.1
Aug +0.3 +1.3
Jul -0.3 +1.4
Jun -0.1 +1.6
May +0.4 +1.5
Apr +0.4 +1.2
Mar +0.2 +1.1
Feb +0.3 +1.3
Jan -0.5 +1.4
2003
Dec +0.4 +1.3
Nov -0.1 +1.3
Oct +0.2 +1.4
Sep +0.3 +1.4
Aug N/A +1.4
Jul N/A +1.3
Jun N/A +1.1
May N/A +1.2
Apr N/A +1.5
Mar N/A +1.6
Feb N/A +1.6
Jan N/A +1.4
RETAIL SALES:
monthly % change yearly % change
2009
Dec +0.3 +2.1
Nov -0.3 +3.1 (R)
Oct +0.6 (R) +3.7 (R)
Sep +0.0 +2.9 (R)
Aug +0.0 +2.2 (R)
Jul +0.2 (R) +2.9
Jun +1.3 +3.1
May -0.6 -1.6
Apr +0.9 +2.6
Mar +1.5 (R) +0.9 (R)
Feb -2.0 (R) +0.4
Jan +0.7 +3.8 (R)
2008
Dec +1.7 (R) +4.3 (R)
Nov +0.3 +1.3 (R)
Oct -0.1 +1.9
Sep -0.5 (R) +1.7 (R)
Aug +1.2 +3.3
Jul +0.9 (R) +2.0 (R)
Jun -3.9 +2.2
May +3.5 +8.1
Apr -0.2 +4.2
Mar -0.2 +4.6
Feb +1.1
Jan +0.8 +5.7
2007
Dec -0.2 (R) +2.8 (R)
Nov +0.4 +4.2 (R)
Oct 0.0 (R) +4.2 (R)
Sep +0.3 (R) +6.0 (R)
Aug +0.7 (R) +4.8 (R)
Jul +0.7 +4.4
Jun +0.4 (R) +3.7 (R)
May +0.4 +3.9
Apr -0.1 +4.2
Mar +0.3 +4.8
Feb +1.6 (R) +5.1 (R)
Jan -1.8 +1.1
2006
Dec +1.1 +4.0 (R)
Nov +0.3 +3.2
Oct +1.0 (R) +3.9
Sep -0.4 +3.0 (R)
Aug +0.3 +4.3
Jul 0.0 (R) +4.3 (R)
Jun +0.7 (R) +3.6 (R)
May +0.5 +4.0
Apr +0.7 (R) +3.0
Mar +0.9 (R) +2.8 (R)
Feb +0.3 (R) +1.6 (R)
Jan -1.6 (R) +1.2 (R)
2005
Dec +0.4 +4.3 (R)
Nov +0.9 (R) +2.1
Oct +0.4 (R) +1.5
Sep +0.6 (R) +0.7
Aug +0.2 (R) +1.0 (R)
Jul -0.6 (R) +1.3 (R)
Jun +1.2 (R) +1.2 (R)
May +0.1 +1.2 (R)
Apr +0.5 +2.0 (R)
Mar -0.1 +2.4 (R)
Feb +0.3 (R) +3.6
Jan +0.7 (R) +3.5 (R)
2004
Dec -1.1 (R) +3.2
Nov +0.6 +5.9 (R)
Oct -0.5 (R) +5.6 (R)
Sep +1.1 (R) +7.0 (R)
Aug +1.1 (R) +7.0 (R)
Jul -0.6 (R) +6.4 (R)
Jun +1.0 (R) +7.0 (R)
May +0.7 (R) +7.5 (R)
Apr +0.3 +5.8 (R)
Mar +0.8 (R) +6.5 (R)
Feb 0.0 +6.5
Jan +1.2 (R) +6.9 (R)
2003
Dec +0.9 +4.0
Nov +0.4 (R) +4.2 (R)
Oct +0.6 +3.7
Sep +0.6 +3.9
Aug +0.5 (R) +3.4 (R)
Jul -0.4 +4.4
Jun +1.9 +6.0
May -0.2 (R) +3.1
Apr +0.4 (R) +2.7
Mar +0.6 +4.6
Feb +0.3 (R) +3.4 (R)
Jan -1.0 +4.2
JOBLESS CLAIMANTS:
Total (m) 3mth average earns (%)
2009
Dec 1.61
Nov 1.63 +1.6
Oct 1.64 +1.5
Sep 1.63 +1.7 (R)
Aug 1.61 +1.6
Jul 1.58 +2.2
Jun 1.56 +2.5
May 1.54 +2.6
Apr 1.51 +0.9 (R)
Mar 1.46 +3.2
Feb 1.39 +3.0
Jan 1.23 +3.4
2008
Dec 1.1600 +3.6
Nov 0.9910 +3.6
Oct 0.9809 +3.6
Sep 0.9399 +3.6
Aug 0.9049 +3.6
Jul 0.9001 +3.7
Jun 0.8401 +3.4
May 0.8248 +3.8
Apr 0.8015 +3.9
Mar 0.7943 +3.8
Feb 0.7941 +3.8
Jan 0.7969 +3.7
2007
Dec 0.8077 +3.8
Nov 0.8130 +4.0
Oct 0.8248 +4.0
Sep 0.8358 +4.1
Aug 0.8529 +3.7
Jul 0.8553 +3.5
Jun 0.8641 +3.4 (R)
May 0.8804 +3.5
Apr 0.8897 +4.1 (R)
Mar 0.9108 +4.4 (R)
Feb 0.9200 +4.6
Jan 0.9231 +4.2
2006
Dec 0.9391 +4.0
Nov 0.9472 +4.1
Oct 0.9551 +4.1
Sep 0.9567 +3.9
Aug 0.9533 +4.2
Jul 0.9551 +4.4
Jun 0.9552 +4.3
May 0.9519 +4.1
Apr 0.9471 +4.3
Mar 0.9388 +4.1
Feb 0.9264 +4.0
Jan 0.9109 +3.6
2005
Dec 0.9084 +3.7
Nov 0.9005 +3.5
Oct 0.8874 +3.7
Sep 0.8758 +4.2
Aug 0.8683 +4.2
Jul 0.8657 +4.2
Jun 0.8614 +4.0
May 0.8540 +4.1
Apr 0.8397 +4.5
Mar 0.8320 +4.5
AUD Higher (Dow Jones)
SYDNEY (Dow Jones)–The Australian dollar was higher against most major currencies late Wednesday and the yield curve flattened after a jump in the country’s leading economic index and slightly higher-than-expected inflation data kept expectations on course for another interest-rate rise by the central bank.
Westpac Banking Corp. and Melbourne University’s Institute of Applied Economic & Social Research said their leading index of the Australian economy grew at an annualized rate of 7.6% in November, continuing a fast recovery from an annualized contraction of 3.2% in June last year.
Inflation, meanwhile, was at a slightly faster-than-expected rate of 0.5% in the fourth quarter of last year, compared with economists’ expectations for a 0.4% rise.
Some foreign exchange traders said the currency could rise further once European market participants joined the trading.
“I suspect the local market was short going in and oversees was short because of risk aversion and they’ll get squeezed overnight,” said Matt Brady, a foreign exchange trader with JPMorgan.
At 0515 GMT, the Australian dollar was quoted at US$0.9018, up from US$0.8986 late Tuesday. Against the Japanese yen, it was at Y80.47, down slightly from Y80.53. The Australian dollar was stronger against the euro, pound and New Zealand dollar.
Still, Westpac Chief Currency Strategist Robert Rennie says there is resistance for the local currency around US$0.9050 as global economic headwinds, including bank regulation concerns in the U.S. and uncertainty about Greece, may keep some level of risk aversion in the market for the next day.
“As we move into the (Reserve Bank of Australia’s interest rate decision) next week, the Aussie becomes more attractive from a yield point of view and we are expecting a positive GDP report from the U.S. on Friday,” said Westpac Chief Currency Strategist Robert Rennie. “We’ll start to move on from the negatives at the tail end of this week into next week but we’re not there just yet.”
The yield curve flattened thanks to falling long-end yields as investors focused on some global concerns, including tensions between North and South Korea and fears of a possible downgrade of Japan’s sovereign credit rating, said TD Securities Senior Strategist Annette Beacher.
The short-end was held back by the CPI data and continued expectations of an interest-rate rise next week. A 25-basis-point interest rate hike from the RBA in February is now a foregone conclusion with even more hikes possible shortly thereafter. Beacher said.
“The market has underpriced the risk of a February/March combined rate hike, with the market just now starting to price that in more at the short end, making the curve flatten even more,” she said.
The three-year futures contract was last up two ticks at 95.03, while the 10-year was up 8.5 ticks to 94.535.
Tokyo (DowJones Newswire)
TOKYO (Dow Jones)–The yen hit a five-week high versus the dollar and a nine-month high against the euro in Asia Wednesday as weak regional stocks and persistent concern over China’s monetary tightening and Europe’s debt problems fueled demand for the safe-haven Japanese currency.
Short-term speculators and Japanese exporters pushed the dollar down to Y89.14 on EBS, its lowest point since Y88.84 on Dec. 18 and about half a yen lower from its level in New York late Tuesday, dealers said.
Other majors such as the European, Australian and New Zealand currencies also sank versus the yen. The euro lost three-fourths of a yen to Y125.42, a level unseen since Y124.38 on April 28, 2009, although it stayed largely stable versus the greenback.
The yen’s upturn is likely to continue at least over the near-term because the outlook is growing murkier for not only the global economy but also politics in many nations, traders said.
“There’s concern that if you buy risky investments, you could get hit by sudden political action at any time” such as the recent U.S. government proposal of new bank regulation, which set off a global exodus from such assets, said Satoshi Okagawa, head of the foreign-exchange forward trading group at Sumitomo Mitsui Banking Corp. “It’s just hard to take risks for higher returns when there are various political risks around you.”
The dollar could break below Y89.00 even within the day if nothing happens to ease the sense of risk aversion dominating the currency markets, Okagawa said.
He added that the U.S. currency–also considered to be less-risky –could gain versus other currencies on safe-haven flows, especially against the units of commodities exporters and developing economies. But the ICE Dollar Index, which tracks the dollar against a trade-weighted basket of currencies, was down at 78.449 around 0450 GMT compared with 78.482 in New York.
The Nikkei 225 Stock Average index was down 0.5% at 10,279.24 around 0530 GMT. Fears that Chinese policy tightening would damage the global economy and Japan’s export-led economy more than offset the release earlier Wednesday of strong Japanese data showing the country’s exports up in December for the first time in 15 months.
Near-term events that could influence exchange rates include the rate-setting decision by the U.S. Federal Reserve and U.S. President Barack Obama’s planned State of the Union address later in the global day. December U.S. home sales data will also be released later Wednesday, with economists polled by Dow Jones Newswires forecasting a 2.8% on-month increase.