Aug 10
2
Spotlight turns to US over huge budget deficit
International Market Report 2nd August 2010
The benchmark Nikkei rose 118.49 points to 9,655.79, while the broader gained 0.9 percent to 857.24. The Dow Jones industrial average dropped 1.22 points to 10,465.94. The Standard & Poor’s 500 Index gained 0.05 points to 1,101.58. The Nasdaq Composite Index gained 3.01 pointsto 2,254.70.
The debt focus seems to be panning across the Atlantic from Europe to the United States. The Congressional Budget Office in the US has warned that unless politicians act fast, growing budget deficits will cause public debt to rise to unsupportable levels. It points out that US government debt has grown so rapidly that compared to the size of the economy; it is now higher than it has ever been except during the period around World War II. In a similar vein, Moody’s says the US has no clear plan to address its debt burden and that if this continues the ratings agency may be tempted to downgrade America’s credit rating. A downgrade for the guarantor, the back-stop, the safe haven of the financial system would be a truly frightening prospect. Europe certainly knows how it feels to fall under the gaze of international bond markets.
Chinas manufacturing sector cooled further last month in response to the gradual withdrawal of monetary and fiscal stimuli and a drive by the government to rein in real estate speculation. The purchasing managers’ index (PMI) fell to 51.2 in July from 52.1 in June and 53.9 in May, the China Federation of Logistics and Purchasing (CFLP) said yesterday. The PMI is designed to provide a timely snapshot of business conditions across a wide range of industries. A figure above 50 indicates expansion; a number below 50 points to contraction. Although the index has now fallen for three months in a row, it has been above the boom-bust mark of 50 since February 2009.
Due for release today
CHF Retail sales Y/Y 8.15am
GBP Manufacturing PMI 9.30am
USD ISM Manufacturing PMI 9.30am
USD Fed Chairman Bernanke speaks 3.15pm
NZD Labor Cost Index q/q 11.45pm
