INVESTORS FOCUS ON US JOBS REPORT TO DETERMINE MAY US TAPERING MAY OCCUR - The crisis in emerging markets has dominated the economic discussion at the G20 meeting in St Petersburg in Russia. Investors are worried about when the US Federal Reserve could begin tapering its massive stimulus programme and today's jobs numbers in the US could determine when that happens.
Paul Sommerville, of Sommerville Advisory Markets, says markets are anticipating tapering of US quantitative easing in the next week or two. "We will probably see Ben Bernanke reducing monthly bond purchases from $85 billion to around $60 billion a month. Any more would be a shock to the markets. Then he will probably make what's called a dovish statement that he won't do any more tapering for the time being," he explains.
He says there was a rather perverse situation dictating markets today in that a good jobs report from the US could send markets into a downward spiral. "The non-farm payrolls will probably come in around 180,000 which won't be enough to stop tapering. I think Bernanke will announce his move around September 18 or 19," he states.
Paul Sommerville says the G20 are petrified by what is happening because the global recovery is very dependent on the stimulus being deployed by the Fed. "The recovery is fragile and any recovery will be a big concern to the emerging markets because they are benefiting from the cheap money flowing in and if it stops they are in trouble," he said. The effects of drawback are spilling over into the developed economies too with UK gilts going over 3%, German bunds topping 2% and US 10 year yields hitting 3% overnight.
MORNING BRIEFS - US non-farm payrolls - the monthly jobs report - are out today and could determine when the Federal Reserve will scale back on its flow of cheap dollars. The so-called tapering of stimulus dominated the economic discussion at the G20 summit in St Petersburg, which was supposed to focus on tax avoidance measures.
The anticipated event is having a negative effect on emerging markets and their currencies. It also resulted in the cost of 10 year borrowing in the US topping 3% overnight.
*** Employers' group IBEC says businesses are continuing to pay boomtime commercial rates and water charges. The group points out that company turnover on average has declined by 25% in recent years, but this has not been reflected in local charges. The report points to a divergence in water charges across different local authorities with businesses in Wicklow paying the most. IBEC is calling on local authorities to reduce costs and pass on the savings.
*** Apple is focusing in on the Asian market in its latest growth plans. The tech giant is in the final stages of agreeing a deal with Japan's largest mobile carrier, NTT DoCoMo, to offer iPhones on its network. Apple already supplies other Japanese carriers, but sees plenty of room for growth in the Japanese market, which has only 40% smartphone penetration. Yesterday the company announced that as well as its product announcement in the States next week, it will broadcast another event in China. That is leading to speculation of a deal with China Mobil - one of the biggest network providers in the world. There is also talk of a cheaper iPhone which may be aimed at the Chinese market.
*** Singapore is taking over as Asia's foreign exchange hub. Its central bank said the city state overtook Japan as foreign exchange trading volume soared around 44% in the last few years. Daily trading volumes have reached in excess of $380 billion.