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Tuesday, 10 August 2010 Global Markets

News Highlights
Foreign Exchange Rates (as at 09 Aug 2010)
As at 10 Aug Asian High Asian Low NY High NY Low
JPY 85.95 85.75 85.34 85.96 85.55 n Last Friday, the US employment report for July showed a
EUR 1.3214 1.3308 1.3270 1.3303 1.3216 headline non-farm payrolls number of -131K, down from -
GBP 1.5879 1.5995 1.5943 1.5973 1.5890 221K in June and compared to consensus expectations of -
CHF 1.0495 1.0413 1.0381 1.0499 1.0378 65K. Historical revisions contributed to the report's negative
AUD 0.9159 0.9201 0.9168 0.9206 0.9153 surprise, with June revised to +221K from +125K.
NZD 0.7279 0.7332 0.7304 0.7322 0.7267
Separately, the unemployment rate remained static at 9.5%
CAD 1.0275 1.0292 1.0261 1.0300 1.0257
on consensus expectations of a rise to 9.6%. Most
importantly, the private payrolls number disappointed,
Interest Rates
Current Next CB Meet UOB’s Forecast coming in at +71K, compared to expectations of a rise to
USD Fed Funds Rate 0.25% 10 Aug 0.00-0.25% +90K from June’s revised 31K. The US jobs report led to a
EUR Refinancing Rate 1.00% 02 Sep 1.00% negative knee-jerk reaction in markets. The USD fell and
GBP Repo Rate 0.50% 09 Sep 0.50% the benchmark 10-yrd on US treasuries fell around 6bps.
AUD Official Cash Rate 4.50% 07 Sep 4.50% The USD/JPY dropped to a session low of 85.20, close to
NZD Official Cash Rate 3.00% 16 Sep 3.00%
CAD Overnight Rate 0.75% 08 Sep 1.00%
the November 2009 low of JPY84.80.
JPY Official Cash Rate 0.10% 10 Aug 0.10%
n Key economic data releases today include Germany HICP
Stock Indices (as at 09 Aug 2010) Inflation (Jul F) (consensus 0.3% m/m, 1.2% y/y), Japan’s BOJ
Closing % chg Rate Decision (consensus 0.10%); France’s Manufacturing
Dow Jones Industrial Average 10698.75 +0.42 Production (Jun) (consensus 0.4% m/m); France’s Industrial
S&P 500 1127.79 +0.55
Production (Jun) (consensus -0.2% m/m, 7.3% y/y); UK Trade
NASDAQ Composite 2305.69 +0.75
Tokyo Nikkei 225 9572.49 -0.72
Balance - Non EU (Jun) (consensus -4,250M GBP); UK Trade
London FTSE 100 5410.52 +1.47 Balance - Total (Jun) (consensus -3,650M GBP); US
Frankfurt DAX 6351.60 +1.47 Wholesale Inventories (Jun) (consensus 0.4% m/m); US
All Ordinaries 4615.60 +0.64 FOMC Rate Decision (consensus 0.25%). The key drivers
this week’s are likely to be today’s FOMC and BOJ policy
Commodities (as at 09 Aug 2010)
announcements. The other key releases this week would
Closing % chg
NNYMEX Crude (September) 81.48 +0.97 be out of US: Friday - US July CPI (consensus: 0.2% m/m);
Comex Gold (August) 1200.7 -0.22 US July retail sales (consensus: 0.4%); USQ2 productivity
Reuters CRB Index 274.59 -0.04 (consensus: 0.3%), Eurozone – Tuesday: France Industrial
Production (consensus: -0.2%), Eurozone June Industrial
production (consensus: 0.6%m/m), Friday: Eurozone Q2
Bond Yields (as at 09 Aug 2010)
Closing Net chg GDP data (consensus: 0.7%q/q). The UK MPC inflation
US 2-Year Bond 0.53% +2 report will be out this Wednesday.
US 10-Year Long Bond 2.83% +1
JP 10-Year JGB 1.03% -3 n US equities rose on Monday following positive corporate
EU 10-Year Bund 2.53% +1 announcements ahead of the FOMC meeting. The DJIA was
UK 10-Year Long Gilt 3.24% +2
up 45.19 points (0.42%), to 10698.75. The fast-food giant
posted a 7% increase in global same-store sales for July, its
Key Events highest monthly gain since January 2009. The Nasdaq
Date Event climbed 17.22 (0.75%) to 2305.69. The S&P rose 6.15
10 Aug Fed open Market Committee meets on Interest Rate at (0.55%), to 1127.79. Market attention now shifts to
1300GMT forthcoming policy announcements from the U.S. Federal
10 Aug FOMC rate decision at 1815GMT
12 Aug Fed Duke speaks at Chicago Fed on Community Reinvest- Open Market Committee and the Bank of Japan, both due
ment Act at 1400GMT Tuesday.

n The USD strengthened against the euro, JPY and GBP as
markets traded cautiously in anticipation of further
information from today’s Fed announcement on the US
economy and policy directions. The USD declines following
last Friday's lower-than-expected nonfarm payrolls numbers
seem to have dissipated amid cautious trading ahead of
today’s Fed policy announcement. The GBP/USD fell to
1.5892 from 1.5962, while the EUR/USD was lower at
1.3220 from 1.3294. The USD would be expected to see
further declines if the Fed signals new monetary stimulatory
measures. There are some expectations that the Fed may
choose to reinvest funds raised from maturing mortgage-
bond holdings ($200bn), rather than reducing the size of its
investment portfolio, thus further extending their quantitative
easing stance. For its part, USD/JPY rallied throughout the
session to close at 85.93 from 85.40. While AUD/USD
closed lower at 0.9165 from overnight highs of 0.9206,
USD/CAD was relatively unchanged from Friday close at
1.0275. The EUR/JPY rose to 113.60 from 113.38. Today’s
BOJ announcement may also signal the extent of JPY
strength. Yesterday Japan's Ministry of Finance also reported
that China bought up $5.3bn worth of yen in June and about
$20 billion in the first half of 2010, nearly five times as much
yen as in the previous five years combined, moves that will
buoy the strength of the JPY. While neither the BOJ nor the
Fed is expected to change rates tomorrow, both will be
watched closely for any indication of further monetary
easing later this year.
n US Treasuries weakened yesterday amid thin trade ahead
of the Federal Reserve's latest monetary policy meeting
URL: www.uob.com.sg/research
Email: EcoTreasury.Research@UOBgroup.com
Global Markets
Tuesday, 10 August 2010
p2
Tuesday afternoon. With no key economic data out
yesterday and positive equity moves yesterday, US Treasury
prices fell yesterday. Yields of the 2-year and 10-year yields
were at a low of 0.494% and 2.804% last Friday, but on
Monday, the 2-year Treasury yield was up 2bps yield 0.53%,
and the 10-year Treasury was flat (up only 1bp) to yield
2.83%.The US Treasury is also undertaking Treasury auctions
this week, aiming to sell: $34bn in 3-ears, $24 billion 10-
years and $16 billion 30-years.
n Oil prices rose yesterday ahead of the Fed's policy meeting
after declining last Friday after the lower than expected
US job data. The Sep prompt-month Nymex crude oil futures
contract settled at $81.48/bbl from $80.70/bbl. Gold prices
fell slightly in cautious trading ahead of the Fed and BOJ
policy announcements. The Comex Aug gold futures
contract was at $1200.7/oz from $1203.4/oz.
n The FT over the weekend reported that the Fed is set to
downgrade its assessment of US economic prospects when
it meets today. It notes, however, that it is unlikely to agree
big new steps to boost growth, adding that smaller measures
to help the economy could initially take the form of a
decision to reinvest proceeds from maturing mortgage-
backed securities held by the US central bank, thereby
preventing the Fed’s balance sheet from shrinking naturally.
n German exports rose 3.8% m/m in June – above the
consensus forecast for 1.0% gain. The Sentix sentiment
index rose to 8.5 in August from -1.3 in July, surpassing the
consensus forecast for a reading of 1.6. A sub-index on
current conditions rose to 16.5 from 2.0 in July.
 Global Markets
Tuesday, 10 August 2010
p3

Economic Indicators
SG Time Indicators Mth Actual UOB Forecast Mkt Forecast Previous
09/08
1400 Gmn Trade Bal Jun 14.1 - 12.0 9.8b
1400 Gmn Imports sa m/m Jun 1.9 - -2.0 13.7%
1400 Gmn Exports sa m/m Jun 3.8 - 1.5 7.9%

10/08
JPY Official Cash Rate Aug 10 0.10 0.10 0.10%
1400 Gmn CPI m/m Jul F - 0.2 0.2%
1400 Gmn CPI y/y Jul F - 1.1 1.1%
1400 Gmn WPI m/m Jul - - -0.2%
1400 Gmn WPI y/y Jul - - 5.1%
1445 Fr Manufacturing Prod m/m Jun - 0.4 0.5%
1445 Fr Manufacturing Prod y/y Jun - 7.0 7.5%
1445 Fr Ind Prod m/m Jun - -0.2 1.7%
1445 Fr Ind Prod y/y Jun - 7.3 8.2%
1630 UK DCLG UK Hse Pr y/y Jun - 9.8 11.0%
2030 US Nonfarm Productivity 2Q P - 0.1 2.8%
2030 US Unit Labor Costs 2Q P - 1.5 -1.3%
2200 US Wholesale Inventories Jun - 0.4 0.5%
2200 US IBD/TIPP Econ Optimism Aug - 45.0 44.7

11/08
0215 USD Fed Funds Rate Aug 10 0.25 0.25 0.25%
0500 US ABC Consumer Confidence Aug 8 - - -50
0701 UK Nat’wide Consumer Confidence Jul - 61 63
2030 US Trade Bal Jun - -42.3 -42.3b

12/08
0200 US Monthly Budget Statement Jul - 169.0 180.7b
1700 EZ Ind Prod sa m/m Jun - 0.6 1.0%
1700 EZ Ind Prod wda y/y Jun - 9.3 9.6%
2030 US Import Pr Ind m/m Jul - 0.3 -1.3%
2030 US Import Pr Ind y/y Jul - 5.4 4.5%
2030 US Initial Jobless Claims Aug 7 - 465 479k
2030 US Continuing Claims Jul 31 - 4540 4537k

13/08
1400 Gmn GDP sa q/q 2Q P - 1.3 0.2%
1400 Gmn GDP wda y/y 2Q P - 2.4 1.6%
1400 Gmn GDP nsa y/y 2Q P - 2.6 1.7%
1700 EZ Trade Bal Jun - 1.0 -3.4b
1700 EZ GDP sa q/q 2Q A - 0.7 0.2%
1700 EZ GDP sa y/y 2Q A - 1.4 0.6%
2030 US CPI m/m Jul - 0.2 -0.1%
2030 US CPI y/y Jul - 1.2 1.1%
2030 US CPI Ex Food & Energy m/m Jul - 0.1 0.2%
2030 US CPI Ex Food & Energy y/y Jul - 0.9 0.9%
2030 US Adv Retails Sales Jul - 0.5 -0.5%
2030 US Retail Sales less autos Jul - 0.3 -0.1%
2030 US Retail Sales ex auto & gas Jul - 0.2 0.1%
2155 US U. of Michigan Confidence Aug P - 69.2 67.8
2200 US Business Inventories Jun - 0.2 0.1%

Jimmy Koh Lee Sue Ann Saktiandi Supaat

(65) 6539 3545 (65) 6539 3549 (65) 6539 8930
Jimmy.KohCT@UOBgroup.com Lee.SueAnn@UOBgroup.com Saktiandi.Supaat@UOBgroup.com
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URL: www.uob.com.sg/research
Email: EcoTreasury.Research@UOBgroup.com