Reuters: Financial Services and Real Estate: UPDATE 1-Australia trade deficit shrinks, adding to upbeat news

Reuters: Financial Services and Real Estate Reuters.com is your source for breaking news, business, financial and investing news, including personal finance and stocks. Reuters is the leading global provider of news, financial information and technology solutions to the world's media, financial institutions, businesses and individuals. // via fulltextrssfeed.com

UPDATE 1-Australia trade deficit shrinks, adding to upbeat news Jun 8th 2012, 02:11 Thu Jun 7, 2012 10:11pm EDT (Adds detail, analyst reaction) * Trade deficit narrows to smaller-than expected A$203 mln * Home loan approvals nudge up 0.2 pct * RBA chief to speak on economy after run of strong data By Wayne Cole SYDNEY, June 8 (Reuters) - Australia's trade deficit narrowed by much more than expected in April as iron ore shipments recovered from supply disruptions, setting the seal on a week of strong data that has provided a big boost to confidence in the economy. Government figures out Friday showed the deficit on goods and services shrank to A$203 million ($200 million) in April, down from A1.28 billion the month before and well under forecasts of A$900 million. Reserve Bank of Australia (RBA) Governor Glenn Stevens speaks at 0330 GMT and is likely to hail this week's run of rousingly upbeat data as justification for the central bank's dogged optimism on the resource-rich economy. "For the last year the missing ingredient in the domestic economy has been confidence, however this week may just change all that - providing a real catalyst for a turnaround in confidence," said Savanth Sebastian, an economist at CommSec. The A$1.4 trillion economy had expanded by a surprisingly rapid 1.3 percent in the first quarter, while annual growth of 4.3 percent was the fastest in over four years. Then the government reported employment surged 39,800 in May, when economists had been forecasting a fall of 5,000. The jobless rate of 5.1 percent compares with 8.2 percent in the United States and the UK, 7.3 percent in Canada and 11.0 percent in the European Union. All of which saw the market greatly scale back expectations for how fast and far interest rates might fall. The RBA cut its key cash rate by 25 basis points in Tuesday to 3.5 percent, bringing the total easing delivered since November last year to 125 basis points. Interbank futures <0#YIB:> now imply around an 80 percent chance of a further cut of 25 basis points in July. At the start of the week not only had a cut been fully priced in but the market had been heavily biased to an easing of 50 basis points. Overnight indexed swaps, a measure of market expectations for the cash rate, now show rates at 2.75 percent in 12 months, compared to 2.5 percent a few days ago. REBOUND IN IRON ORE Friday's figures showed Australia's trade narrowed as exports rebounded 3.3 percent to A$26.08 billion in April, the highest reading in four months. Much of the improvement came in iron ore, Australia's single biggest earner, with shipments to China, Japan and South Korea all up sharply. Iron ore and coal exports had disappointed over the first quarter due to bad weather and supply bottlenecks. China's surprise decision to cut interest rates this week could also benefit exports going forward if it shores up demand there. The Asian giant is Australia's single biggest customer, taking a huge chunk of its iron ore output. For the 10 months to April, Australia's exports of goods to China were up 8.5 percent at A$62.4 billion giving it a surplus of A$26.3 billion. On the other side of the trade accounts, imports dipped 0.9 percent in April almost entirely due to a fall in volatile fuels component. Imports of consumer goods rose 1 percent , mainly for vehicles, while capital goods increased by 2 percent as miners continue to invest heavily in new projects. Other data out on Friday showed new home loans edged up by 0.2 percent in April, to be up 8 percent on the year. Demand for loans has been subdued so far this year but could pick up following the latest round of rate cuts. Households are highly sensitive to mortgage rates as over a third have home loans, most of which are variable. Mortgage debt totals around A$1.2 trillion ($1.17 trillion), or 1.5 times household disposable income, and paying the annual interest on it takes almost a tenth of those earnings. A reduction of 25 basis points in the standard variable mortgage rates saves an average borrower around A$540 a year. Australia and New Zealand Banking Corp on Friday announced it was cutting mortgage rates by the full 25 basis points. That was a surprise to many given banks have been passing on only part of previous easings, choosing instead to maintain profit margins in the face of higher funding costs. (Reporting by Wayne Cole; Editing by Eric Meijer) Link this Share this Digg this Email Reprints

You are receiving this email because you subscribed to this feed at blogtrottr.com. If you no longer wish to receive these emails, you can unsubscribe from this feed, or manage all your subscriptions