0540 GMT [Dow Jones] 12:04amCDT
Chinese Housing Prices Fall
China's housing policies are likely to be eased further to slow down the adjustment process in the cooling market,
says JP Morgan economist Zhu Haibin. Mr. Zhu however says that the softness in real estate investment will
remain one of the major drags on China's economic growth. A next possible policy option could be the easing
in loan-to-value restrictions for second-home buyers, which is now subject to a maximum of 40%, says Mr.
Zhu. The average price of new homes in 70 Chinese cities fell at a faster pace in August, down 1.10% from
July, according to official data released Thursday. (grace.zhu@dowjones.com) Editor: MNG (END) Dow
Jones Newswires
0550 GMT [Dow Jones] 12:50amCDT
Even Toyota Is Uneasy
When even Japanese auto executives start voicing uneasiness about the yen's decline, who is left to support it? After
decades of pushing for a weak yen to help prop up exports, Japan's main auto lobby appears to be shifting its view
as the yen hits its lowest level against the U.S. dollar in six years. "It's hard to say without reservation that yen
weakness is all good," said Fumihiko Ike, head of the Japan Automobile Manufacturers Association and chairman
of Honda Motor Co. at a Thursday news conference. "The auto industry generally sees the phase of yen weakening
positively, but rapid moves are not desirable," he said, citing the post-Fukushima rise in energy-import costs.
Indeed, having shifted much of their production overseas, auto makers see fewer benefits from a weak yen. Honda's
vehicle exports from Japan fell 74% from a year earlier during the January to July period, even as its global
production rose 10%. (yuka.hayashi@wsj.com) (END) Dow Jones Newswires
LONDON, Sept 18 (IFR) 1:55amCDT
Looking At European Stocks
With Wall Street stocks fading into the close but still ending higher, European markets are set for a minor leg up
this morning with EUROSTOXX and DAX called circa 10 and 20 points higher respectively. Notably,
EUROSTOXX broke an eight session losing streak Wednesday so today’s session will be instrumental in
determining whether the 0.5% gain was just a dead cat bounce or something more substantial.
David.corbell@thomsonreuters.com/sb Copyright (c) 2014 Thomson Reuters – IFRMarkets
By Neil MacLucas 2:30amCDT
SNB Maintains 1.20 & Rates
ZURICH--The Swiss National Bank repeated Thursday that it will intervene in the foreign exchange market to
prevent the Swiss franc from surpassing 1.20 against the euro, saying the limit remains the "key instrument" to curb
upward pressure on the currency. Switzerland's central bank imposed the minimum exchange rate three years ago.
It also kept its target range for the three-month London interbank offered rate, or Libor, a key interest rate, at 0.0%
to 0.25% for the 13th successive quarter. "The SNB will continue to enforce the minimum exchange rate with the
utmost determination," the Zurich-based SNB said in a statement following its regular quarterly policy review,
adding that the currency was still highly valued. "It is prepared to purchase foreign currency in unlimited quantities,
and if necessary, it will take further measures immediately." The central bank has monitored exchange-rate moves
over fears that a strong franc could threaten the competitiveness of Swiss exporters in the European Union, their
biggest market. The SNB introduced the floor shortly after the Alpine country's currency neared parity with the
euro in the summer of 2011. The SNB kept its 2014 outlook for Swiss inflation unchanged at 0.1%. However it
lowered its projection for 2015 inflation to 0.2% from the 0.3% forecast in June. In 2016, the bank said it expected
inflation of 0.5%. Thus "for Switzerland, the risk of deflation has increased again," the bank said in a statement.
The bank trimmed its forecast for gross domestic product growth this year to "just below 1.5% from the 2%
projected in June. The SNB said the economic outlook has "deteriorated considerably" since its previous
assessment in June. Write to Neil MacLucas at neil.maclucas@wsj.com (END) Dow Jones Newswires
By Josie Cox 2:58amCDT
European Markets Waiting For Scotland
European shares tentatively tracked gains on Wall Street on Thursday, but all eyes rested on the Scottish
referendum, keeping moves in both currency and stock markets range-bound. In early trade, the Stoxx Europe 600
added 0.3%, while Germany's DAX and France's CAC rose 0.4% and 0.2% respectively. On Wednesday, the Dow
Jones Industrial Average struck yet another record closing high, as investors embraced reassurance from the Federal
Reserve that it would continue on its cautious course toward a rate hike next year.
The dollar surged to a six-year high against Japan's yen, hitting Yen108.87, while the euro fell to a 14-month low of
$1.2852 before recovering slightly, underscoring the diverging paths between the Fed and the Japanese and
European Central Bank, which are both still loosening monetary policy.
Also on Thursday, the Swiss National Bank said it was keeping rates on hold, surprising a minority that had
speculated the bank would move lower, driven by its nearly three-year-old policy to keep the euro above 1.20
against the franc.
Switzerland's central bank introduced the minimum exchange rate in September 2011, at a time when an apparently
relentless slide in the then crisis-struck euro was threatening to stir up deflation in Switzerland by slamming import
prices and pinching exporters. It hasn't intervened to defend the currency since late 2012, analysts said, but it
frequently reiterates its commitment to the exchange-rate floor. After the announcement, the franc was trading
0.2% higher against the euro at 1.2080 francs.
Scotland assumed center stage as residents started taking to the polls in a vote on whether the country will separate
from the remainder of the U.K., ending a 300-year union. Turnout is forecast to be high, with voting officials
expecting more than four million Scots to vote at 2,600 locations across the country. Pollster YouGov released a
survey on Thursday morning that put pro-union support narrowly in the lead. The survey showed 49% of the more
than 3,000 people polled between Monday and Wednesday supported keeping Scotland in the union and 45%
supported independence. The rest were undecided or didn't know, YouGov said. "Bookmaker exchanges currently
price the 'yes' probability a little above 20%," Josh O'Byrne, a currency strategist at Citigroup says. "This seems
reasonably fair compared to our estimate, although it could be sensible to assume it somewhat higher given the
degree of dispersion in the polls," he adds. The British pound climbed by around 3% during the first six months of
the year, hitting a 2014 high of $1.71 against the dollar in mid-July helped by the U.K. enjoying one of the most
robust recoveries of all European economies after the financial crisis. In August however, as the first polls emerged
showing that the Scottish vote would likely be close, the currency sold off with investors unsure of what impact a
split might have. On Thursday morning, it was trading marginally higher against the dollar at $1.627.
Geoffrey Yu, a senior currency strategist at UBS said that the results should "create an inordinate amount of
intraday [currency] volatility during the Asian session, owing to the fact that results will be drip-fed to the market in
parcels." In the government bond market, the yield on the 10-year U.K. Gilt was at 2.55%, around 0.02 percentage
point higher. Yields rise as bond prices fall. London's FTSE clung to a 0.1% gain in early trade, having closed
lower for a third consecutive session on Wednesday. In commodities markets, gold was 0.9% lower on the day at
$1,224.50 a troy ounce. Brent Crude waned 0.6% to $98.36 a barrel. Write to Josie Cox at josie.cox@wsj.com
(END) Dow Jones Newswires
By Charles Duxbury 3:16amCDT
Swedish “Growth”
STOCKHOLM--Sweden bumped up its estimate for second-quarter growth Thursday, saying higher domestic
consumption and fixed investments helped the economy to expand more than previously thought. Sweden's
statistics agency said gross domestic product rose 0.7% on the quarter, which was more than the 0.3% expected by
analysts polled by The Wall Street Journal. A first estimate from July put growth at 0.2% on the quarter. After the
data the Swedish krona rose against the euro, which fell to 9.19 kronor from 9.22 kronor. Write to Charles Duxbury
at charles.duxbury@wsj.com (END) Dow Jones Newswires
LONDON, Sept 18 (IFR) 3:30amCDT
U.K. Retail Sales Up But…
Aug retail sales were weaker than forecast at 3.9% yoy and were subject to a revision lower (exp 4.1, prev 2.5). On
a monthly basis however sales recovered to 0.4% m/m (exp 0.4, prev 0) as consumers rushed to buy high powered
vacuum cleaners before the implementation of new EU regulations limiting sales. Dec Gilts are around 7 ticks
lower than just prior to the data at 111.92. stephen.bough@thomsonreuters.com/ds Copyright (c) 2014 Thomson
Reuters – IFRMarkets
0845 GMT [Dow Jones] 3:45amCDT
Riksbank on Hold?
Sweden revises up its growth numbers for 2Q to 0.7% on the quarter from 0.2%, and that shows stronger
momentum in the economy, says Torbjorn Isaksson at Nordea. The release is a bit of mixed bag though as growth
for full year 2012 was cut by a "massive" 1.3 percentage points, he says. Still, the recent stronger performance
should be more important for the central bank and supports Nordea's call for unchanged interest rates this year, he
adds. EUR/SEK trades at 9.20. (charles.duxbury@wsj.com) Contact us in London. +44-20-7842-9464
markettalk@wsj.com (END) Dow Jones Newswires
SINGAPORE Sep 18 (IFR) 4:01amCDT
Chinese Mining Problems??
Standard & Poor’s has lowered to CC from CCC its long-term corporate credit rating on Hidili International
Development after the Chinese miner launched a tender offer for its USD400m senior unsecured notes. The rating
outlook is negative. “We downgraded Hidili because we view the company’s recent offer to buy back its senior
unsecured notes as a ‘distressed exchange’, tantamount to an immediate default,” said S&P credit analyst Jian
Cheng. Hidili has offered to buy back its outstanding notes for USD680, plus a consent payment of USD20 per
USD1,000 of face value, if bondholders accept the offer before the early tender deadline of September 29, or
USD650, if they accept after the deadline. The expiration date is October 14. UBS is dealer manager.
The company is seeking consent to eliminate most of the restrictive covenants attached to the bond, as well as
certain events of default, which would allow it to increase its debt load. S&P said the negative outlook reflected the
likelihood that it would lower to SD, or selective default, Hidili’s corporate credit rating and to D from CCC the
issue rating on the notes, if the transaction is completed. Daniel.stanton@thomsonreuters.com Copyright (c) 2014
Thomson Reuters – IFRMarkets
0902 GMT [Dow Jones] 4:02amCDT
Reading The SNB
The Swiss National Bank provided no major surprises in its quarterly policy review, but the tone of its statement
was more dovish than expected, according to J. Safra Sarasin. "It noted the economic outlook has 'deteriorated
considerably', and while this may reflect the disappointing 2Q GDP data and weak eurozone growth, it's remarkable
how much the SNB lowered its medium-term inflation outlook," says chief economist Karsten Junius. "This
suggests they see the franc weakening less than expected, and this means the floor of CHF1.20 per euro is likely to
remain in place till early 2017," he argues. EUR/CHF was last at 1.2082. (neil.maclucas@dowjones.com) Contact
us in London. +44-20-7842-9464 markettalk@wsj.com (END) Dow Jones Newswires
4:14amCDT Another Country Heard From:
What’s Norges Bank Up To?
Norges Bank is no longer flirting with the potential for a rate cut. The wording on Norway's policy rate has changed
to will "remain at present level" until end-2015 from will "remain at about today's level". The change appears to be
a reaction to data since the last meeting, showing inflation and output rising more than expected. The c.bank also
flagged the prospect of a lower rate path and its policy chief now sees a rate rise in 2016 and one in 2017. Overall,
the assessment of inflation and the economy is unchanged from June, but EUR/NOK still fell sharply to below 8.20.
It is likely that the June EUR/NOK rally inspired by a more dovish Norges Bank will be fully unwound. Another
attempt at 8.10 is likely over the coming weeks. Divyang.Shah@thomsonreuters.com Copyright (c) 2014 Thomson
Reuters – IFRMarkets
By Todd Buell 4:20amCDT
Results of TLTRO
FRANKFURT--The European Central Bank said Thursday that eurozone banks borrowed EUR82.6 billion in
four-year loans from a new ECB facility aimed at spurring lending to businesses and boosting inflation from its
current ultra-low levels. The amount was below what many analysts had expected, and could raise doubts about
whether the lending program will be forceful enough to kickstart borrowing and spending in the eurozone.
The central bank's funds were offered at an interest rate of 0.15%, 0.10 percentage point higher than the
ECB's main refinancing rate. The ECB announced the loans--known as targeted longer-term refinancing
operations--in June as part of package of stimulus measures, which also included interest rate cuts. Officials hope
that by providing the incentive of cheap funding over the long term, they can entice commercial banks to pass funds
on to credit-starved firms and raise investment and hiring. This should then make a positive contribution to
employment and economic growth and could help push inflation back up in the currency bloc. "They [the loans]
are to be used to lend to the real economy, to the non-financial companies, and especially to (small and mid-sized
businesses)," ECB President Mario Draghi said last month
Annual inflation in the 18 countries that use the euro was 0.4% in August, well below the ECB's medium-term
target of just below 2%. Lending to the private sector has fallen for over two years and analysts say that a rebound
is necessary if the eurozone recovery is to gain traction. Unlike other longer-term loans that the ECB offered nearly
three years ago, the new four-year funds have strings attached: banks must prove they are increasing lending to the
private sector. If they don't, they have to repay the money after two years, albeit with no penalties. The two fouryear loans to be offered this year--another one is due in December--have a maximum available volume of about
EUR400 billion. There will be six additional installments through 2016. Analysts at Jefferies International said in a
research note Wednesday that a take-up below EUR100 billion would suggest that eurozone banks had little use for
"essentially free liquidity."
In addition to the four-year loans, the ECB committed in September to buying private-sector assets including
bundles of loans known as asset backed securities and covered bonds. The lending and purchase programs together
are aimed at significantly increasing the ECB's balance sheet back to its early 2012 levels, which implies a rise of
between EUR700 and EUR800 billion from the current level of EUR2 trillion. The size of a central bank's balance
sheet is a proxy for how accommodative the central bank's policies are. While the ECB's balance sheet has been
shrinking, other major central banks such as the Federal Reserve and Bank of Japan have been ramping theirs up
through large-scale purchases of public and private debt. Brian Blackstone contributed to this article Write to
Todd Buell at todd.buell@wsj.com (END) Dow Jones Newswires
0931 GMT [Dow Jones] 4:30amCDT
TLTRO Disappoints
The euro briefly jumped after the ECB said take-up at its first of its two targeted lending operations to banks--or
TLTROs--came in lower than expectations at EUR82.6 billion. Most analysts had expected banks to borrow around
EUR100 billion. The currency quickly fell back and is now trading 0.3% higher against the dollar at $1.2882,
roughly where it was before the announcement. On the one hand, less liquidity in the banking system could mean
tighter financial conditions, and a stronger euro. But some will also be betting that the ECB may have to do more
easing in the future if the TLTROs disappoint--which would weaken the currency. (tommy.stubbington@wsj.com)
Contact us in London. +44-20-7842-9464 markettalk@wsj.com (END) Dow Jones Newswires
LONDON, Sept 18 (IFR) 4:45amCDT
French Downgrade??
French paper l’Opinion is reporting on its website that the government of France has already been told by
Moody’s that it will be downgraded from Aa1 to Aa2 tomorrow. This is has been widely rumored and
speculated on over the last week, so should come as no surprise to the market. OATs are slightly wider the last few
minutes, although aside from the Moody’s ratings gossip they’ve also had to contend with fallout from the smaller
than expected participation at the European Central Bank’s inaugural TLTRO which was also announced a few
minutes ago. Currently 10-year spreads are 0.7 bps wider to Bunds on Tradeweb, with 30-year spreads almost 1.5
bps wider. 10-year OAT futures meanwhile have bounced back after dipping on the TLTRO news, up about ¼
point from their lows when the news hit, although they are still slightly lower on the day.
Michael.Cartine@thomsonreuters.com Copyright (c) 2014 Thomson Reuters – IFRMarkets
0949 GMT [Dow Jones] 4:49amCDT
TLTRO Expectation
The lower-than-expected take-up at the first of the ECB's two TLTROs "will see QE speculation markedly increase
as it becomes clearer that the TLTROs will simply not be big enough to increase the ECB balance sheet up to the
EUR3 trillion mark," say rate strategists at Rabobank. The market reaction certainly suggests a slight increase in
QE hopes. German bunds have climbed, pushing 10-year yields back below 1%, while peripheral spreads are
tighter. (tommy.stubbington@wsj.com) Contact us in London. +44-20-7842-9464 markettalk@wsj.com (END)
Dow Jones Newswires
TOKYO, Sept 16 (IFR) 5:26amCDT
BOJ Speak [Policy Outlook]
BoJ Governor Kuroda again expressed his optimistic view on the economy in his speech in Osaka. He said that
Japan has been on a path towards the 2% price target although we are only halfway there. He admitted that the
decline in demand following the April sales tax hike continued being observed and that exports and production
have been weak, but stressed that the virtuous cycle from income to spending has been operating steadily in both
household and corporate sectors. Regarding the recent drop in T-bill yields below zero, Mr Kuroda said he does not
see as a serious problem the fact that the BoJ is buying short-term debt with negative yields.
Takahiro.Okamoto@thomsonreuters.com
5:36amCDT
PBOC Speak
When China's top leaders gathered at the seaside resort town of Beidaihe last month, they agreed the economic
focus for the rest of the year would be to put reform ahead of stimulus and accept growth could come in below their
target of 7.5%. That means a major stimulus move, such as cutting key interest rates or bank reserve ratios is
unlikely, but authorities are ready to step in if unemployment rises, according to policy insiders. The shift reflects
President Xi Jinping's talk of a "new normal", that China should adapt to relatively slower growth after three
decades of breakneck expansion, and is having a profound impact on the policymaking process. The government's
bottom line is stable employment and no widespread debt defaults. Under that scenario, growth of 7.3-7.4 percent
this year is seen as acceptable, and the government may cut the growth target in 2015. To read more
[ID:nL3N0RH1F0] Chart of China GDP vs PMI: http://link.reuters.com/huv55t
Pratima.Desai@ThomsonReuters.com Copyright (c) 2014 Thomson Reuters – IFRMarkets
7:27amCDT Clockwise: AUD/USD, GBP/USD, USD/CHF, EUR/CHF, USD/CAD, USD/JPY, EUR/CHF
By Jonathan House and Josh Mitchell 7:30amCDT
Weekly Claims Down Big
WASHINGTON-The number of new applications for unemployment benefits dropped last week to near postrecession lows, the latest indication layoffs are trending sharply lower amid generally improving economic
conditions. Initial claims for unemployment benefits fell by 36,000 to a seasonally adjusted 280,000 in the week
ended Sep. 13, the Labor Department said Thursday. That was the largest drop in nearly two years and brought
claims below the 305,000 level forecast by economists surveyed by The Wall Street Journal.
The sharp drap more than reversed a jump of 12,000 in the prior week to 316,000. That week's reading coincided
with the Labor Day holiday and claims are often distorted around holidays. The four-week moving average of
claims, which smooths out weekly volatility, was down 4,750 to 299,500.
Thursday's report placed claims just above the post-recession low 279,000, which they hit over the summer. They
have been hovering around 300,000 since then. The last time that regularly happened was in early 2006, at the
height of the last economic expansion. Thursday's report also showed the number of people continuing to draw
unemployment benefits fell by 63,000 to 2,429,000 for the week ended Sep. 6. Those figures are reported with a
one-week lag.
Companies aren't laying many people off these days because the economy is growing and payrolls are already lean.
Gross domestic product, the broadest measure of goods and services produced across the economy, grew at a
seasonally adjusted annual rate of 4.2% in the second quarter after a weather-pummeled first quarter.
More recent data has pointed to a pick-up in retail spending and business investment. But the decline in layoffs
hasn't been accompanied by vigorous enough hiring to return employment to levels seen during previous periods of
economic expansion. At 6.1%, the nation's unemployment rate remains high by historical standards, and many
economists believe this gauge overstates labor-market health. In the statement following their Wednesday meeting,
Federal Reserve officials reiterated their view that "there remains significant underutilization of labor resources" in
the U.S. economy. Chairwoman Janet Yellen elaborated further at a press conference following the meeting.
"There are still too many people who want jobs but cannot find them. Too many who are working part time but
would prefer full time work. And too many who are not searching for a job but would be if the labor market was
stronger," she said. The Labor Department report on jobless claims can be accessed at:
http://www.dol.gov/opa/media/press/eta/ui/current.htm Write to Jonathan House at jonathan.house@wsj.com and
Josh Mitchell at joshua.mitchell@wsj.com (END) Dow Jones Newswires
By Josh Mitchell and Jonathan House 7:30amCDT
House Construction Falls
WASHINGTON-U.S. home construction fell last month after surging to a post-recession high in July, a sign of
choppy progress in the housing market. Housing starts fell 14.4% in August from a month earlier to a seasonally
adjusted annual rate of 956,000 units, the Commerce Department said Thursday. The sharp drop partly reflected a
robust July, when residential construction rose 22.9% to a pace of 1.12 million units, the highest level since
November 2007, revised figures show. The agency had previously estimated starts rose 15.7% in July from June.
Building permits, a bellwether of future construction, fell 5.6% in August after rising 8.6% in July.
Economists surveyed by The Wall Street Journal had forecast housing starts to fall 5.5% last month and building
permits to decline 1.1%. The latest figures show August's drop owed mostly to a 32% fall in construction of
multifamily units--typically apartments and condominiums--a volatile segment. Building of single-family
units, roughly two-thirds of the market, fell 2.4% in August.
The monthly housing-construction report is typically revised as the agency collects more data, but the broader trend
suggests a slowly accelerating housing market. Housing starts were 8% higher in August compared to a year earlier,
and housing permits were up 5.3%.
Home building declined earlier this year but has largely recovered along with the broader housing market, due
largely to stronger employment growth. As more Americans get jobs, families are gradually re-entering the market
for homes. And interest rates have fallen back to year-ago levels, luring many buyers who had been scared off by a
runup in borrowing costs late last year.
Other signs point to momentum in housing. Wednesday, the trade group the National Association of Home Builders
said home-builder optimism rose this month to the highest level since late 2005. The group pointed to stronger
buyer traffic.
Sales of previously owned homes-the bulk of the market-have climbed steadily this summer after falling late last
year and this winter, according to the National Association of Realtors. But sales of newly built homes fell in June
and July, Commerce Department figures show. That could be a sign buyers are increasingly price sensitive and
going for cheaper, existing units. Many families also continue to rent, driving up apartment construction.
Home construction remains below the pace of the 1990s and mid-2000s, and the outlook for the market remains
murky. The Federal Reserve reaffirmed Wednesday that it plans to end its bond-buying program next month; the
program was designed to push down long-term interest rates and stimulate spending and investment, including
home sales. Most Fed policy makers also indicated they expect to raise short-term interest rates some time next
year. Rates have been pinned near zero since the recession. Higher borrowing costs threaten to keep some
prospective buyers on the sidelines. The Commerce report can be found at
http://www.census.gov/construction/nrc/pdf/newresconst.pdf Write to Josh Mitchell at joshua.mitchell@wsj.com
and Jonathan House at jonathan.house@wsj.com (END) Dow Jones Newswires
By Paul Vieira 7:30amCDT
Canadian Investment Flows
OTTAWA--Canadian investors in July made their biggest investment in foreign securities in over seven years,
while foreigners added Canadian equities and corporate debt to their holdings after a selloff in the previous month,
Statistics Canada said Thursday. In July, Canadians acquired a net 9.67 billion Canadian dollars ($8.79 billion) in
foreign securities, or the largest amount since April, 2007. For the first seven months of 2014, Canadian investors
added C$32.40 billion of foreign securities to their portfolios, or nearly three times what was bought in the same
year-ago period. Meanwhile, foreign investors purchased a net C$5.30 billion in Canadian securities in July.
Write to Paul Vieira at paul.vieira@wsj.com (END) Dow Jones Newswires
By Paul Vieira 7:30amCDT
Canadian Claims For Unemployment Fall
OTTAWA--The number of initial and renewal claims for unemployment insurance benefits in Canada fell 8.6% to
a seasonally adjusted 229,380 in July from June, Statistics Canada said Thursday. On a 12-month basis, claims
declined 3.6%. The data agency said the claims estimates were affected by the last day of June falling on a
Monday. Accordingly, some claims which might normally be received in the first week of July were received in
June. "Therefore, results should be interpreted with caution," Statistics Canada said. The number of people
receiving regular jobless benefits was 499,330 in July, down 0.7% from June and down 2.9% from a year earlier.
Statistics Canada said the number of employment insurance beneficiaries fell 6.4% in British Columbia and 5.1% in
Quebec, but rose 9.1% in Ontario. Write to Paul Vieira at paul.vieira@wsj.com (END) Dow Jones Newswires
7:36amCDT Clockwise: AUD/USD, GBP/USD, USD/CHF, EUR/CHF, USD/CAD, USD/JPY, EUR/CHF
By Pedro Nicolaci da Costa 7:45amCDT
And Fed Policies Have Helped This Segment?
Federal Reserve Chairwoman Janet Yellen said Thursday the 2007-2009 recession left lasting scars on the poorest
American families that have yet to heal more than five years into the official economic recovery. "We have come
far from the worst moments of the crisis, and the economy continues to improve," Ms. Yellen told a conference
sponsored by the Corporation for Enterprise Development, a community development organization. "But the effects
of the recession are still being felt by many families, particularly those that had very little in savings and other
assets beforehand." She was speaking just a day after the Fed said it would continue winding down its bond-buying
program but signaled it would keep borrowing costs near zero for the foreseeable future to support a recovery that
remains at best erratic. Ms. Yellen's focus on poverty and inequality represents a shift from her predecessors, who
were more often seen at banking conferences than community development gatherings. Her first speech as Fed
chairwoman earlier this year was to a community reinvestment conference in Chicago. The central bank
chairwoman noted median net worth has actually declined since 2010 for households in the bottom fifth of the
income ladder despite a growing overall economy and a falling unemployment rate, which now stands at 6.1%.
"One reason is that income has continued to fall for these families," Ms. Yellen said. "Another likely reason for this
decline in net worth is the lingering effects of the housing crisis." She highlighted the importance of savings
buffers for households that generally don't hold financial assets. "A larger lesson from the financial crisis, of
course, is how important it is to promote asset-building, including saving for a rainy day, as protection from the ups
and downs of the economy," Ms. Yellen said. "For many lower-income families without assets, the definition of a
financial crisis is a month or two without a paycheck, or the advent of a sudden illness or some other unexpected
expense," she said. Write to Pedro Nicolaci da Costa at pedro.dacosta@wsj.com (END) Dow Jones Newswires
8:01amCDT Another (Continent) Heard From:
Central Bank of South Africa
South Africa c.bank: Forecast for headline inflation slightly better
2014 headline CPI to average 6.2% from 6.3% in July [ID:nL6N0RJ393]
Inflation seen back target 3-6% band during Q1 2015 instead of Q2
Headline inflation forecast for 2016 raised to 5.8% from 5.6%
Risks to headline inflation skewed to upside [ID:nJ8N0O800G]
Chart of CPI vs USD/ZAR: http://link.reuters.com/heq26v
Pratima.Desai@ThomsonReuters.com Copyright (c) 2014 Thomson Reuters – IFRMarkets
1339 GMT RBC 8:39amCDT
About That TLTRO:
RBC cautions against jumping to the conclusion that the low take-up for the ECB's first TLTRO auction implies it
will automatically have to provide more monetary stimulus. RBC's European economist Timo del Carpio says
participation may increase for the second operation. Additionally, the ECB hasn't set a size for its new
ABS/Covered Bond purchase programme, and del Carpio says this could be increased to compensate for TLTRO.
(nick.cawley@wsj.com) Contact us in London. +44-20-7842-9464 markettalk@wsj.com (END) Dow Jones
Newswires
1343 GMT [Dow Jones] 8:43amCDT
PIMCO Talks Its Book
If Scotland votes 'no' to independence today the pound is likely to rally only briefly before the market's focus
returns to monetary policy developments, says Thomas Kressin, currencies portfolio manager at Pimco. "When you
look at sterling, it's only recently been driven by Scotland," he says. The pound is up 0.7% against the dollar at
$1.6377, with final opinion polls pointing to a narrow victory for the 'no' camp. The downside for sterling in the
event of a surprise 'yes' vote would be much more severe, with a fall to the low $1.50s likely, Mr. Kressin says.
(tommy.stubbington@wsj.com) Contact us in London. +44-20-7842-9464 markettalk@wsj.com (END) Dow
Jones Newswires
Philadelphia Fed Survey Reports Increased Business Activity in September
PHILADELPHIA--(BUSINESS WIRE)--September 18, 2014—9:00amCDT
Headline Below Expectations, but Inside Some Encouraging News
Firms responding to the Manufacturing Business Outlook Survey indicated continued growth in the region's
manufacturing sector in September. Although the current activity index fell from its relatively high reading in
August, the other broad indicators increased from their readings last month. The survey's indicators for future
manufacturing conditions reflect general optimism about growth in activity and employment over the next six
months.
Indicators Reflect Continuing Growth
The diffusion index for current activity fell from a reading of 28.0, its highest reading since March 2011, to 22.5
this month (see Chart). The current new orders and shipments indexes edged higher this month, however,
increasing 1 point and 5 points, respectively. Indexes for both unfilled orders and delivery times were positive this
month, suggesting continued strengthening conditions.
The survey's indicators for labor market conditions suggest notable improvement this month. The employment
index increased 12 points to its highest reading since May 2011. The percentage of firms reporting increases in
employment (26 percent) exceeded the percentage reporting decreases (5 percent). The workweek index was
positive for the seventh consecutive month but fell nearly 9 points.
Price Indexes Increase Moderately
Over 31 percent of the firms reported higher input prices this month, just slightly higher than the level reported last
month. The prices paid index increased 2 points. The prices received index, which reflects firms' own final goods
prices, also edged slightly higher, from 4.2 to 8.8. The percent of firms reporting higher prices (13 percent)
exceeded the percentage reporting lower prices (4 percent), although nearly 80 percent of the firms reported steady
prices.
Firms Expect Increases in Employment
Most of the survey's indicators of future growth declined from their 22-year high readings reached last month. The
future general activity index decreased 10 points (see Chart). The future indexes for new orders and shipments also
decreased this month, declining 7 and 9 points, respectively. Firms raised their expectations about employment
growth over the next six months. Nearly 44 percent of the firms are expecting growth in their employment levels
over the next six months, compared with 37 percent last month. The future employment index increased sharply,
from 24.7 to 39.6, its highest reading since September 1983.
In Special Questions, firms were asked to estimate their total production growth for the third quarter ending this
month along with expected growth for the fourth quarter. Firms anticipating increases in third quarter production
(59 percent) exceeded those anticipating decreases (29 percent). Firms expect average production growth of 2
percent in the third quarter. With regard to the fourth quarter, the percentage of firms forecasting acceleration in the
rate of their production growth (54 percent) was greater than the percentage forecasting deceleration in growth (21
percent).
Summary
The September Manufacturing Business Outlook Survey suggests continued expansion of the region's
manufacturing sector. Firms reported continued increases in overall activity, new orders, shipments, and
employment this month. The survey's future activity indexes remained at high readings, suggesting continued
optimism about manufacturing growth. Firms were more optimistic about employment increases over the next six
months.
NOTE: On Tuesday, September 23, at 10:00 a.m. ET, the Bank will launch the release of the Nonmanufacturing
Business Outlook Survey.
Special Questions (September 2014)*
-----------------------------------------------------------------------------1. How will your firm's total production for the third quarter compare with
that of the second quarter?
-----------------------------------------------------------------------------An increase of:
% of firms
Subtotals
------------------------------ ------------ -------------------------------% of firms reporting an increase
10% or more
8.8%
58.8%
------------------------------ ------------ -------------------------------8-10%
6.3%
------------------------------ ------------ -------------------------------6-8%
11.3%
------------------------------ -----------4-6%
6.3%
------------------------------ -----------2-4%
11.3%
------------------------------ -----------0-2%
15.0%
------------------------------ ------------ -------------------------------No change
12.5%
------------------------------ ------------ -------------------------------% of firms reporting a decline
A decline of:
28.7%
------------------------------ ------------ -------------------------------0-2%
6.3%
------------------------------ ------------ -------------------------------2-4%
8.8%
------------------------------ -----------4-6%
6.3%
------------------------------ -----------6-8%
5.0%
------------------------------ -----------8-10%
2.5%
------------------------------ -----------10% or more
0%
------------------------------ ------------ -------------------------------Average growth expected for all firms: 2.0%
==============================================================================
2. For the upcoming fourth quarter, how much growth do you expect at your
plant compared with the third quarter?
-----------------------------------------------------------------------------Significant acceleration
1.3%
------------------------------ ------------ -------------------------------Some acceleration
22.5%
------------------------------ -----------Acceleration
Slight acceleration
30.0%
53.8%
------------------------------ ------------ -------------------------------No change
25.0%
------------------------------ ------------ -------------------------------Slight deceleration
8.8%
------------------------------ ------------ -------------------------------Some deceleration
11.3%
------------------------------ -----------Significant deceleration
1.3%
Deceleration
21.2%
------------------------------ ------------ -------------------------------*Percentages may not add to 100 percent because not all firms answered all
questions.
------------------------------------------------------------------------------
MANUFACTURING
BUSINESS
OUTLOOK SURVEY
September
2014
September vs. August
Now vs. September
----------------------------------------------------------------------------------Previous
Diffusion
No
Diffusion
Diffusion
Index
Increase Change Decrease
Index
Change Decrease
Index
---------------------- -------- ------ -------- ---------- -------- --------What is your
evaluation of
the level of
general
business
activity?
28.0
42.2
38.0
19.8
22.5
38.6
0.0
56.0
--------------- --------- -------- ------ -------- ---------- -------- --------Company
Business
Indicators
---------------------- -------- ------ -------- ---------- -------- --------New Orders
14.7
37.6
37.0
22.1
15.5
36.6
3.4
51.7
--------------- --------- -------- ------ -------- ---------- -------- --------Shipments
16.5
40.4
40.8
18.8
21.6
33.9
0.0
58.8
--------------- --------- -------- ------ -------- ---------- -------- --------Unfilled Orders
-4.1
23.8
56.7
18.8
5.0
58.3
7.6
19.6
--------------- --------- -------- ------ -------- ---------- -------- --------Delivery Times
4.5
11.4
79.7
7.6
3.8
68.9
9.1
6.8
--------------- --------- -------- ------ -------- ---------- -------- --------Inventories
8.3
21.9
58.7
15.8
6.1
52.0
14.3
11.9
--------------- --------- -------- ------ -------- ---------- -------- --------Prices Paid
24.9
31.1
64.5
4.2
27.0
38.4
3.1
46.2
--------------- --------- -------- ------ -------- ---------- -------- --------Prices Received
4.2
13.0
79.7
4.2
8.8
49.2
5.5
31.3
--------------- --------- -------- ------ -------- ---------- -------- --------Number of
Six Months from
------------------------Previous
Diffusion
No
Index
Increase
---------
--------
66.4
----
56.0
---------
--------
----
---------
--------
----
58.9
--------67.4
--------26.6
55.1
-------58.8
--------
--------
9.4
15.9
---------
--------
--------50.3
--------29.5
---------
----
27.2
---------
10.5
----
----
----
26.2
--------
----
49.3
--------
----
36.8
--------
----
(MORE TO FOLLOW) Dow Jones Newswires
Employees
4.0
39.6
9.1
25.7
69.8
4.5
21.2
24.7
43.6
46.7
--------------- --------- -------- ------ -------- --------- --------- -------- ----- -------- --------Average
Employee
Workweek
13.3
18.9
66.6
14.5
4.4
17.8
24.4
52.8
15.5
8.9
--------------- --------- -------- ------ -------- --------- --------- -------- ----- -------- --------Capital
Expenditures
-----17.5
31.1
52.7
7.4
23.7
--------------- --------- -------- ------ -------- --------- --------- -------- ----- -------- --------NOTES:
(1) Items may not add up to 100 percent because of omission by respondents.
(2) All data are seasonally adjusted.
(3) Diffusion indexes represent the percentage indicating an increase minus the percentage
indicating a decrease.
(4) Survey results reflect data received through September 15, 2014.
CONTACT:
Federal Reserve Bank of Philadelphia
Daneil Mazone, Media Relations Representative 215-574-7163 Daneil.Mazone@phil.frb.org (END) Dow Jones
Newswires
BOSTON, Sept 18 (IFR) 9:13amCDT
In a Nutshell:
* The Philly Fed manufacturing survey was about as expected on a headline basis (22.5 vs 23 expected) but the
employment component surged to 21.2 vs 9.1, which is an especially strong read given that so many manufacturing
and service PMIs have shown stagnant employment reads.
* New Orders were also strong rising to 15.5 vs 14.7 plus Shipments (21.6 vs 16.5) and Unfilled Orders (5 vs -4.1)
were also quite strong.
* Weakness was seen in the Future Index at 56 vs 66.4 but we would point out that the 66.4 read was the strongest
since 1992.
* The market stood still on the release viewing only the headline but sellers swooped in on the bid and have
punched 10s to 2.64% just 0.2 bps shy of session highs. 5s have too been ssold but less aggressively as there has
been a better outright and curve bid ever since the short covering bell was rung on the new highs for the move and
2014 were punched out at 1.874% vs 1.865% which was the January high.
Copyright (c) 2014 Thomson Reuters – IFRMarkets
By Kathleen Madigan 9:16amCDT
Philly Fed
Mid-Atlantic manufacturers continue on an expansion path this month, according to a survey released Thursday by
the Federal Reserve Bank of Philadelphia. The subindexes, meanwhile, generally strengthened.
The Philadelphia Fed's index of general business activity covering the regional factory sector slowed to 22.5 in
September after it had unexpectedly jumped to 28.0 in August, which was the highest reading since March 2011.
Economists surveyed by The Wall Street Journal expected the latest index to drop to only 24.0. Readings under
zero denote contraction, and above-zero readings denote expansion.
On Monday, the New York Fed said manufacturing conditions in its state this month jumped to the strongest level
since October 2009. New orders and shipments in the Empire State increased, although employment sagged.
The reports suggest the nation's factory sector is ending the third quarter with some momemtum. If so, increased
manufacturing output would support overall economic growth in the fourth quarter. Within the Philadelphia Fed
survey, the subindexes generally looked stronger than the top-line index did. The new orders index edged up to
15.5 from 14.7 last month. The shipments index jumped to 21.6 from 16.5. Demand for labor was mixed. The
employees index jumped to 21.2 in September from 9.1 in August. But the workweek index index fell to 4.4 from
13.3. Philadelphia area manufacturers report more cost pressures and more are trying to raise their own selling
prices. The prices-paid index increased to 27.0 from 24.9 in August. The prices-received index more than doubled
to 8.8 after it fell sharply to 4.2 in August from 16.8 in July. Philadelphia manufacturers remain upbeat about the
next six months. The general business expectations index fell back to 56.0 after it had jumped to August's 66.4
level, which was the highest reading since June 1992. The expected-employment index increased to 39.6 from
24.7. Write to Kathleen Madigan at kathleen.madigan@wsj.com (END) Dow Jones Newswires
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