TOP
Moodys places US AAA Govt bond rating and related ratings on review for possible downgrade citing “rising possibility debt limit will not be raised on a timely basis”. Says probability of a US default on interest payments to be “low but no longer minimis” {http://bit.ly/nprjhf}
President Barack Obama abruptly walking out of a key meeting Wednesday evening with Republicans seeking a deal to raise the federal borrowing limit. “I have reached the point where I say enough,” Obama reportedly said. {http://reut.rs/npVT3X}
Bernanke semiannual testimony to Congress: He indicated that the Fed will maintain a “highly accommodative” policy for the time being, and that additional policy “support” could be forthcoming if economic weakness persisted and deflationary risks re-emerged. US economist Kevin Logan write up: {http://bit.ly/olgAOn}
The IMF joined Germany in pushing for private sector investors to help cut Greece’s debt mountain as the euro zone sought to break an impasse on how and when to grant the country urgent aid {http://reut.rs/nko500}
USDJPY jumped from 78.70 to 79.50 at 6.30am UK time. Official intervention denied.
EUROPE
The IMF warned that the Greek sovereign debt burden risked spiralling out of control and that it would be “appropriate” for private bondholders to share in any restructuring. The IMF’s intervention, in a staff report published on Wednesday, comes as eurozone finance ministers have moved towards forcing private investors to accept a reduction in the value of their assets, a move regarded with great suspicion by the ECB. – FT
Helaba, a German public sector bank, is pulling out from the EU’s bank stress tests to avoid a public failure, heightening concerns over the credibility of Fridays results – FT
EU leaders need to come up with a comprehensive plan for tackling the region’s debt crisis if they hold an emergency summit on Friday, the Irish PM said on Wednesday after Ireland had to swallow its first ever junk credit rating
The EU’s banking “stress tests,” designed to bolster confidence in the Continent’s financial system, are facing a last-minute scramble as regulators adjust the exam’s terms and bankers and politicians criticize the process and lobby for changes.The European Banking Authority, the pan-EU regulator that is conducting the exercise, plans to announce the test results on Friday. The tests measure the abilities of 91 major banks in 21 European countries to withstand a sharply deteriorating economic environment. – WSJ
Impasse Could Drag Belgium into Euro Crisis…Belgium is the holder of an unenviable world record. For over a year, the country has not had an elected
goverment. But the paralyzing conflict between the Flemish and Walloons comes with a high risk. The divided country could get caught up in the euro crisis – De Spiegel {http://bit.ly/nB0P0H}
EUROPE: Europe will need to boost its rescue fund to a massive E2 trillion to tackle the eurozone debt crisis, economists warn, amid persistent market turmoil, the Times reports
UK debt set to pass 100pc of GDP, says watchdog {http://tgr.ph/q8lOOS }
Italian auction at 10am today
The strong rise of the Swiss franc versus the euro is a source of concern to the Swiss National Bank, which has the means to act if deflationary risks were to reemerge, Vice-Chairman Thomas Jordan said.
Turkey’s EU minister said that candidate Turkey might freeze relations with the rotating EU presidency if Cyprus assumed the post in July 2012 without a solution to the divided island
US
Feds Fisher: The U.S. economy is poised to grow at an “accelerating clip” thanks to the Fed’s super-easy monetary policy, and there is no call for the central bank to do more
The Bank of Canada will raise interest rates sometime in the fourth quarter as a sturdy, if unspectacular, domestic recovery offsets global headwinds, according to a Reuters survey. The median forecast of a July Reuters poll of 37 economists and strategists pushed back previous rate hike forecasts of a third-quarter increase projected in a May poll.
ASIA
Confidence at Japanese companies turned positive in July for the first time since the March 11 earthquake devastated the country’s northeast coast, a Reuters Tankan poll showed {http://reut.rs/n4sydG}
Japanese FinMin Yoshihiko Noda warned on Thursday that recent yen strength does not reflect economic fundamentals
China may maintain growth of about 9% this year, avoiding a “hard landing,” as spending on low-cost homes and developing inland provinces counters the impact of Europe’s debt crisis and monetary tightening. Investment by local governments and private businesses helped drive a 9.5% gain in second-quarter gross domestic product from a year earlier, the National Bureau of Statistics said in Beijing yesterday. That was faster than estimated as growth in industrial output and retail sales accelerated and copper and aluminum production reached records. – Bloomberg
China should not loosen monetary policy during its current efforts to fight inflation, the official China Securities Journal said in a front-page editorial. “The risks of an economic slowdown, or even a “hard landing,” have been removed, and there is no need to worry too much about the risks of overtightening
The PBoC drained liquidity from the interbank market via open market operations this week for the first time in nine weeks as appetite for central bank sterilization paper improved with liquidity conditions
Strong economic growth in China will likely limit the credit costs of local government debt and cushion any blow to the country’s major banks, even as non-performing loans rise, Standard & Poor’s said
CHINA SETS YUAN REFERENCE RATE AT 6.4640 AGAINST U.S. DOLLAR
The Bank of Korea kept interest rates unchanged, as widely expected, after raising them in June, a likely temporary suspension of its efforts to tame inflation by increasing borrowing costs. Governor Kim Choong Soo and his board held the benchmark seven-day repurchase rate at 3.25 percent, the central bank said in a statement in Seoul today.
Singapore’s economy shrank for the first time in three quarters as manufacturing slumped, adding to evidence the slowdowns in Europe and the U.S. are curbing growth in Asia. The island’s currency weakened from a record. Gross domestic product fell an annualized 7.8% in Q2 from the previous three months, when it climbed a revised 27.%, the trade ministry said today, citing preliminary data. The median estimate of 13 economists surveyed by Bloomberg News was for no growth.
NZ GDP growth revised up to 0.8% in Q1 (better than expected)
AUSTRALIA: Consumer inflationary expectations in Australia rose to 3.4% in July from 3.3% in June, the latest survey from Melbourne Institute Thursday showed
Three bombs ripped through India’s commercial capital Mumbai Wednesday night, killing 21 people and injuring more than 100 in the deadliest attack in the city since the 2008 assault by Islamist militants, Channel NewsAsia reports
OTHER MARKETS
NIKKEI 9936 (-0.3%), HANGSENG 21795 (-0.6%), S&P/ASX 4487 (-0.65), SHANGHAI SE COMPOSITE 2795 (flat), KOPSI 2119 (-0.5%)
US STOCKS CLOSE: Dow and Nasdaq ended with modest gains after being much
higher earlier in the day. Dow added 45 points or 0.36% to end at 12,492 while Nasdaq was up 15 points or 0.54% to close at 2,797.
TSYS: The yield on teh 2Y was last at 0.36%, with the 5Y at 1.44%, the 10Y at 2.8% and the Bond at 4.18%. The curve very modestly steeper ahead of the 30-yr sale.
OIL: Crude futures are trading modestly lower Thursday. The front-month Nymex WTI contract was last 47 cents lower at $97.58, just shy of the session lows. The WTI/Brent August spread was trading at $20.70.
Gold at 1585 (+0.1%), silver at 38.46 (+0.8%)
COMING UP TODAY( times GMT/ET)
0800/0400 ECB Monthly Bulletin for July
0900/0500 Italy Jun-11 final HICP
0900/0500 EMU May-11 final HICP
– UK Stg2.0 bln 4.25% Dec 2040 Gilt Tap
– Italy E750mn-E1.25bn3.75% Apr 2016 BTP Tap
– Italy E750mn-E1.75bn4.50% Mar 2026 BTP Tap
– Italy E1.5-E2.0bln 4.00% Feb 2017 BTP Tap
– Italy ” 4.75% Aug 2023 BTP Tap
1230/0830 US 09-Jul Jobless Claims
1230/0830 US Jun-11 Retail & Food Sales
1230/0830 US Jun-11 Producer Price Index
1330/0930 Treasury CFPB special advisor Elizabeth Warren testifies to the House Oversight and Government Reform Committee in Washington
1345/0945 US 10-Jul Bloomberg Comfort Index
1400/1000 Federal Reserve Chair Ben Bernanke delivers semi-annual monetary policy report to the Senate Banking Committee in Washington
1400/1000 US May-11 Business Inventories
1430/1030 US 08-Jul EIA Natural Gas Stocks
1700/1300 US Treasury auctions $13.0 bln in reopened 29y-11m
2030/1630 US 04-Jul Money Supply
HSBC Global Research