Indecision afflicts financial markets

Full astern both
Researchers at Mintel have discovered that it is mostly wives who decide on such trivia as family finances, holidays and where to send the children to school. But husbands make the really important decisions, like which striker Chelsea should buy and whether the Fed ought to raise rates next week.

Only a day after investors were celebrating the promise of fresh economic stimulus in China they were wailing at the prospect of an interest rate increase by the Federal Reserve next week. That concern weighed on Far East share prices this morning: after strengthening by nearly 8% on Wednesday, Japanese equities are down by 3% today. Commodity-oriented currencies are lower with yesterday's winner, the South African rand, taking the biggest hit. The Europeans are higher, led by the euro and the Swedish krona. 

The odd one out is the Japanese yen. Having initially moved ahead on safe-haven demand it began to weaken a couple of hours before London opened. The decline followed an observation by the prime minister's economic advisor that the Bank of Japan should increase its money-printing stimulus by ¥10 trillion (£54bn) a year.

Kiwi hit by rate outlook
As universally expected, the Reserve Bank of New Zealand cut its Official Cash Rate from 3% to 2.75% overnight. The Kiwi was hurt not by the rate cut itself but by the RBNZ's comment that "some further easing in the OCR seems likely". The Aussie was protected by better-than-expected Australian employment figures. 

The NZ dollar is three and a half cents or -1.4% lower on the day, partly because of the rate outlook and partly as a result of the general move out of "risky" assets. The Australia dollar's cent-and-a-quarter loss is proportionally less than half that, because it received support from unexpectedly strong jobs data: Unemployment ticked down to 6.2% with the addition of 17k new jobs.

Sterling is higher on the day by an average of 0.2%, equivalent to half a Canadian cent. It was wounded yesterday morning by unexpected monthly declines in manufacturing and industrial production. The pound's subsequent recovery was undone later in the day by the NIESR's estimate that the UK economy expanded by only 0.5% in the three months to August.

8/1 or 7/2?
For only the second time, the Bank of England will publish the minutes of the Monetary Policy Committee meeting at the same time as it announces the committee's rate decision. Analysts expect a repeat of last month's voting split, in which only one member favoured a rate increase.

An 8/1 vote in favour of the existing 0.5% Bank Rate is the most likely outcome and would be unlikely to affect the pound. 9/0 would sent it lower and 7/2 would encourage buyers.

Ecostats will be thin on the ground. Sweden, Norway and Portugal will report on inflation this morning. Canadian new house prices come out after lunch along with US data for export and import prices and jobless claims.