TOP
Australia’s central bank held interest rates steady at 4.75% as widely expected and sounded in no hurry to lift what are already the highest rates in the developed world, sending the AUD lower. CPI to remain close to target over next 12 months
UK retail sales values fell 2.1% on a like-for-like basis from May 2010, as food sales slowed a little after April’s strong growth and non-food sales also weakened, according to the British Retail Consortium.
A restructuring of Greece’s public debt, which many analysts say is inevitable, is inappropriate as long as the country follows through on promised reforms, ECBs chief Jean-Claude Trichet said {http://reut.rs/mMsSEg}
EUROPE
Eurogroup’s Juncker: the euro exchange rate is “objectively overvalued in comparison with other major reference currencies” and he is inclined to think that the Eurozone should have an exchange rate policy; on Greece, “we’re working on a formula that will not lead to a negative judgment by the ratings agency and will not mean that the country is seen to be in default
Greek PM Papandreou told his cabinet on Monday it was crucial to accept years of austerity to secure a new international bailout, a challenge for a nation already seething over corruption.
Asked on Monday whether the United States would back using additional International Monetary Fund money to help Greece further, White House spokesman Jay Carney said Europe had the means to help Greece on its own
European finance ministers will not likely be able to approve a new, second bailout loan for Greece on June 20 due to resistance from Slovakia, a German newspaper reported, citing a high-ranking EU official.
Greek Govt officials this morning saying Govt not planning any austerity referendum. Planning to cut corporate tax VAT from 2012. Expects to vote on medium term austerity plan by end of June
Portugal’s centre-right Social Democrats (PSD) began forming a coalition government with their traditional rightist allies on Monday, promising to take tough austerity steps under the country’s bailout programme.
The EU’s executive will study the possibility of issuing common bonds backed by euro zone countries, the bloc’s top economic official said on Monday, resurrecting an idea rejected by Berlin
Britain’s banks will not have repaid the cost of the financial crisis until 2026, a new report from the Robin Hood Tax campaign claims, the Independent says. The group, which is campaigning for a global tax on financial transactions, said its figures proved the levies introduced on the banks by the current government did not go far enough – and nor did the alternatives proposed by Labour, the paper says.
UK Business taxes should be cut more radically over the medium term, the Institute of Directors says today, as it publishes a report concluding the coalition has not lightened the burden significantly in its first year.
Spain will demand “100 per cent” compensation for the damage suffered by its farmers over unfounded accusations that they were the source of the E. coli
outbreak in Germany that has killed 22 people and made thousands sick.
Croatia will take a big step towards becoming the European Union’s 28th member state when it wins approval this week from the European Commission for
accession, with a target date of July 1 2013.
US
Fed Rodengren: The slowdown does change when you think the timing would be for when an exit strategy would be appropriate. Rosengren, who is one of the more dovish Fed officials on inflation, said it was too early to discuss whether the Fed should embark on a third round of quantitative easing, but did not rule it out.
Federal Fisher said the central bank has “done enough if not too much” to stimulate the economy and “one has to question the efficacy” of doing more.
U.S. President Barack Obama and German Chancellor Angela Merkel will air their differences over fiscal policy, the Eurozone crisis and the war in Libya on Tuesday in a meeting meant to illustrate a strong partnership.
Tim Geithner, Treasury secretary, warned overseas regulators against undercutting US financial regulations, citing the “tragic” example that the UK set in light-touch oversight. Mr Geithner’s remarks came as shares in larger US financial groups fell in response to comments last Friday by Daniel Tarullo, a Federal Reserve governor, calling for substantial capital surcharges for big banks.- FT
The public opinion boost President Obama received after the killing of Osama bin Laden has dissipated, and Americans’ disapproval of how he is handling the nation’s economy and the deficit has reached new highs, according to a new Washington Post-ABC News poll. By 2 to 1, Americans say the country is pretty seriously on the wrong track, and nine in 10 continue to rate the economy in negative terms, the poll shows. Nearly six in 10 say the economy has not started to recover, regardless of what official statistics may say.
Today the market will eye Bernanke/Dudley speeches. Yet it is unlikely they say much more than just pay lip-service to slowdown and say they expect it to be temporary. Its too early for anything more substantive.
New global financial regulations may have implications for monetary policy due to the effects of new regulatory tools on inflation, the Bank of Canada said. “The very fact that new macroprudential tools are being employed will have an impact on the transmission of monetary policy,” Tiff Macklem, senior deputy governor of the Bank of Canada, said
ASIA
The Bank of Japan sees recent signs of a global slowdown as a potential risk, but not significant enough to change its view that Japan’s economy will resume a moderate recovery from a post-earthquake slump by the end of this year. The central bank, however, is aware that its forecast rests on shaky grounds with no guarantee that global growth will stay robust when Japanese exporters restore output to pre-quake levels in the autumn, people familiar with the BOJ’s thinking said.
Speculation that Japan’s ruling and opposition parties could form a “grand coalition” intensified on Monday amid rising pressure on Naoto Kan, the prime
minister, to step down
Japanese FinMin Noda: To watch developments in forex markets closely
The People’s Bank of China is likely to raise benchmark interest rates by 25 basis points at the end of this week, the official Economic Information Daily said Tuesday, citing unidentified Chinese analysts. The PBOC may also raise the required reserve ratio by 50 basis points after the release of May economic data due to come out on June 14, the newspaper said.
The PBoC sets the yuan central parity rate at Cny6.4816 against the dollar today, compared with Cny6.4846 set for the previous trading day. Today’s fix marks a fresh post-FX reform high for the Chinese currency.
A drought that has gripped parts of central and southern China has retreated after downpours over the weekend that brought deadly flooding to one area, official media reports said on Tuesday. The rains shrank the area of farmland affected by drought by 39 percent to 2.3 million hectares (8,880 square miles), including in the major rice-growing provinces of Hubei and Hunan, the People’s Daily reported, citing the national flood and drought relief office
The Philippines’ annual inflation rate rose in May but not as quickly as the market had expected, raising the possibility the central bank could hold interest rates steady at a policy review next week after two rate increases in a row. Annual headline inflation in May was 4.5 percent, becoming the highest rate in a year after the April reading was revised down from that level to 4.3 percent. The market had expected inflation would hit a two-year high of 5.1 percent.
SOUTH KOREA: The central bank may leave the key rate unchanged for the third straight month in June in the face of lingering economic uncertainty, including the eurozone debt woes, Yonhap News reports citing a poll. Nine out of 15 economists forecast that the Bank of Korea (BOK) will freeze the benchmark seven-day repo rate at 3% on Friday, the survey by Yonhap Infomax, showed. The BOK is due to hold a policy meeting this Friday, with a decision
scheduled after 0100 GMT.
Asia-Pacific banks are likely to remain resilient in 2011 following a year of strong regional economic recovery, Standard & Poor’s Ratings Services says in a report.
Australian Treasurer Wayne Swan, says the Australian economy will continue to grow solidly even after the introduction of the carbon price regime. Employment will continue to grow just as strongly and by 2020 1.6 million jobs will created at the same time as pollution slows. The government will get on with the task of putting a market based mechanism in place, Wayne said
LATAM
Left-wing former army commander Ollanta Humala won Peru’s presidential election and vowed the poor will share in the country’s new wealth but financial markets plunged on fears that he will ruin the economy. Humala had more than 51.5 percent support with results in from 92 percent of ballot boxes and Keiko Fujimori, his right-wing rival and the daughter of jailed former President Alberto Fujimori, conceded defeat on Monday
Latin America ponders role of the renminbi : It is hard to exaggerate China’s growing importance in the region. Between 2000 and 2010, Latin America’s annual trade with China increased fivefold from $57bn to $310bn. During the same period, Chinese direct investment into Latin America rose from $2.7bn to $59bn. For the architects of Beijing’s renminbi plan, however, the difficulty is in converting these huge mostly dollar-denominated trade flows into Chinese currency – FT
OTHER MARKETS
NIKKEI 9440 (+0.6%), HANGSENG 22830 (-0.5%), S&P/ASX 4575 (+0.1%), SHANGHAI SE COMPOSITE 2735 (+0.25%), KOPSI 2099 (-0.6%) – As of 07.00GMT
TSYS: The yield on the 2Y was last at 0.42%, with the 5Y at 1.59%, the 10Y at 3.00% and the Bond at 4.26%.
AUSSIE BONDS: Aussie govvies knee-jerk higher in the wake of the RBA rate decision, buoyed by what is seen as a less-hawkish than feared statement. The yield on the 2Y was last 4.5 bps lower on the day at 4.835%, falling 5.5 bps in the wake of the call. The 10Y was off the day’s lows, although the yield was a net 0.5 bps higher on the day at 5.22%.
OIL: Brent crude last traded at $114.02 (-0.4%), WTI crude futures 98.57 (-0.4%)
Gold trades at 1545 (flat) and Silver at 36.74 (-0.2%)
COMING UP TODAY( times GMT/ET)
0700/0300 UK May-11 Halifax House Price Survey
0800/0400 UK May-11 UN FAO Food Price Index
0900/0500 EMU Apr-11 retail trade
1000/0600 Germany Apr-11 total manufacturing orders
1145/0745 US 04-Jun ICSC-Goldman Store Sales
1255/0855 US 04-Jun Redbook Average
1400/1000 US Jun-11 IBD/TIPP Economic Optimism Index
1530/1130 ECB Governing Council member Ewald Nowotny to participate in signing ceremony at Austrian parliament, in Vienna
1630/1230 Atlanta Federal Reserve Bank President Dennis Lockhart speech on the economic outlook to the Charlotte Economic Club, in North Carolina
1900/1500 US May-11 Treasury Allotments By Class
1900/1500 US Apr-11 Consumer Credit
1945/1545 Federal Reserve Chair Ben Bernanke speech to the International Monetary Conference
HSBC Global Research