TOP:
Merkel and French President Sarkozy agreed on a joint position for a second fiscal aid package for Greece, the German government confirmed Thursday {http://on.ft.com/nobRqf}
Germany and France will propose a multi-billion euro bank levy at this morning’s summit in Brussels to guarantee private sector involvement in a second Greek rescue package, a move the Greek press says the banks will fight tooth and nail.
The White House said it was open to a short-term increase in the US borrowing limit to give “a few more days” for negotiations over a broad fiscal package {http://on.ft.com/oP340k}.
China’s July’s flash PMI fell below 50 for the first time in a year, reflecting lower manufacturing growth momentum and implying that June’s industrial production rebound was temporary.
Australia’s NAB business confidence index for the next 3 months fell to 6 in Q2 from 11 in Q1
UK Nationwide’s consumer confidence index declined to 51 in June from 55 in May. The spending index dropped to 74 in June from 80 in May.
EUROPE:
Sarkozy, the French president, rushed to Berlin on Wednesday night in an attempt to hammer out a new Greek rescue plan that could include €71bn in bail-out funds from international lenders and a €50bn tax on EZ banks, proceeds from which would be used to buy back 20 per cent of Greece’s €350bn in outstanding debt {http://on.ft.com/qEtDzM}.
Germany and France have reached a common position on a second bailout of Greece in their effort to prevent the country’s debt crisis from spreading through Europe, officials said on Thursday. Details of the common position were not revealed {http://bit.ly/oSJp7c}
Major European banks and insurers were to send EZ governments a complex proposal late last night for helping in a planned E115-bn second Greek bailout. One banking source told the paper the banks were offering a mixture of debt rollovers, maturity extensions and other measures
The ECB has refused to comment on why it seeking to hire advisers to examine its large exposures to the Irish banking system, the Irish Independent says.
UK Chancellor of the Exchequer George Osborne has said he is “very worried” that the EZ sovereign debt crisis could spin out of control and create a severe economic downturn.
Credit rating agencies are not to blame for exacerbating the eurozone debt crisis and the criticism against them has “largely been unjustified”, according to a UK House of Lords committee.
The recession and its aftermath have widened Englands north-south divide and hit low-skilled workers hardest, says an official Analysis
Santander’s planned part-flotation of its UK business is set to be delayed until next year because of uncertainty created by the ICB reform proposals and volatile markets.
UK Nationwide’s consumer confidence index declined to 51 in June from 55 in May. The spending index dropped to 74 in June from 80 in May.
Portugal’s core state sector deficit fell 21 percent in the first half of 2011 from a year earlier to 6.15 billion euros ($8.73 billion), data from the Finance Ministry’s budget office showed.
Developed world cannot thrive at ‘stall speed’ By Bill Gross {http://on.ft.com/pOrHV5}
US:
The White House encouraged congressional leaders to reach a major deficit-reduction deal by offering them a little more time, as they scrambled to find a way to prevent a government default in less than two weeks.
The Fed is actively preparing for the possibility that the United States could default as a deadline for raising the government’s $14.3 trillion borrowing limit looms, Fed policymaker Plosser said.
US Companies are laying off employees at a level not seen in nearly a year, hobbling the job market and intensifying fears about the pace of the economic recovery.
The White House signalled on Wednesday it could support a short-term increase in the U.S. borrowing limit for “a few days” if lawmakers agreed to a broad deficit reduction deal but needed more time to pass it.
The Federal Reserve may have to buy more Treasuries after it eventually shrinks its $2.6 trillion balance sheet, in what would be a technical move to reduce interest rate risk, a senior Fed official said on Wednesday.
ASIA:
A substantial appreciation of the Chinese renminbi would have little effect on trade and growth in the rest of the world even if accompanied by other economic liberalisation – IMF {http://on.ft.com/p5E9HF}.
The Chinese economy is headed for a soft landing, unpinned by solid growth and effective steps to bring down inflation, the IMF said in its annual Article IV report released today.
The yield on the CNY6 billion in three-month paper sold by the PBoC Thursday remained unchanged for a third straight week.
The PBoC sets the yuan central parity rate at Cny6.4536 against the dollar today, compared with Cny6.4592 set for the previous trading day.
Japan’s June trade balance stood at a surplus of JPY70.7bn, the first surplus in three months. June exports declined 1.6% y/y (smaller than expected), compared to -10.3% y/y in May. Imports climbed 9.8% y/y, compared to +12.3% y/y in May. Exports to China rose 1.2% y/y in June, but to US fell 6.1% y/y.
Japan’s budget process appears to be moving along steadily, with the upper house Wednesday approving a second supplementary budget and related items which are likely to be passed Friday by the opposition controlled lower house Friday.
Singapore’s central bank on Thursday raised its inflation forecast for 2011 to 4-5 percent from 3-4 percent due to higher-than-expected increases in accommodation and private road transport costs. It also warned of downside risks to its economic growth outlook of 5-7 percent for 2011, although the official forecast remains unchanged for now
The MAS has recorded its biggest loss in 40 years on the back of a strong Singapore dollar, Channel NewsAsia reports. MAS has recorded a net loss of Sgd10.9 billion for its fiscal year ended March 2011.
China flash HSBC PMI falls to 48.9, shows factory contraction (first fall below 50 in a year)
Thailand: June’s exports surprised on the upside with 16.8% y/y growth
SINGAPORE SAYS MONETARY POLICY STANCE ‘REMAINS APPROPRIATE’
ELSEWHERE:
Around $110 billion of corporate debt is due to mature in Australia from the second quarter through 2011, according to figures published by S&P.
Bank of NZ is the first major NZ bank to predict the RBNZ will hike the cash rate as early as September. BNZ expects a rate hike in both September and October of 25bps each, thus fully reversing the 50bps cut made by the RBNZ in March following Christchurch earthquakes.
Brazil’s central bank raises Selic rate 25bps to 12.5 pct (as widely expected). Statement drops language of “prolonged” tightening cycle
S&P said on Wednesday it removed Bahrain ratings from credit watch negative as political tensions have eased and on expectation that increased public spending will lift economic growth next year. The rating agency affirmed Bahrain’s “BBB/A-3” long- and short-term ratings.
CORPORATE:
A legal battle over alleged computer hacking of a US marketing company by a News Corp subsidiary has been referred to the FBI {http://on.ft.com/qIgitb}.
Two Chinese Internet firms have postponed their U.S. fundraising plans as investor appetite for risk waned after a series of accounting scandals tarnished the reputation of overseas listed Chinese stocks.
Intel (INTC) posts Q2 earnings of 54 cents/share, which is 3 cents better than expected, on sales of $13.03 bln vs expectations for $12.82 bln.
Ebay (ebay) posts Q2 ex-item earnings of 48 cents per share vs expectations for 46 cents on sales of $2.76 bln vs expectations for $2.61 bln.
OVERNIGHT DATA:
CHINA: HSBC FLASH JULY PMI 48.9 VS JUNE FINAL 50.1
– JULY FLASH HSBC PMI FALLS TO 28-MONTH LOW
– JULY FLASH PMI UNDER 50 FOR FIRST TIME SINCE JULY 2010
JAPAN: Trade statistics from the Ministry of Finance:
— Japan June Trade Surplus Y70.7 Bln
— Japan June Trade Balance Posts 1st Surplus in 3 Mths
AUSTRALIA: Measure of current business conditions improved slightly in the June quarter but outlook for the next three months showed a big drop, while outlook for the next 12 months showed mild softness, the June quarter NAB business survey showed.
UK Nationwide June Consumer Confidence 51 Vs 55 In May
STOCKS: A lackluster day Wednesday saw stocks unable to capitalize on the huge upside earnings surprise reported by Apple after the bell Tuesday. Dow ended down 15 points to close at 12,572 while Nasdaq slipped 12 points to close at 2,814, slipping 0.43%. Japan’s benchmark stock indices are trading modestly lower Thursday, unable to hold earlier gains. The Nikkei 225 was last 7.5 points, or 0.07%, lower at 9998.5, with the broader-based TOPIX lower by 0.18% at 859.09. The Shanghai Composite Index ends morning down 0.62% at 2776.93.
TSYS: Treasuries are still lower in Asian trade, although off their worst levels, with prices rallying from early lows after disappointing China PMI data.
COMMODITIES: Crude futures are modestly lower in Asia, although off the lows. The front-month WTI contract was last 23 cents lower at $98.19, having touched a low at $98.06. Gold is currently trading around the $1600 handle with Silver at $40.
CALENDAR:
Eurozone leaders summit in Brussels
0500/0100 Japan: weekly gasoline prices
0600/0200 Germany May construction orders
0658/0258 France Jul-11 flash manufacturing/services PMI
0728/0328 Germany Jul-11 manufacturing/services PMI
0758/0358 EMU Jul-11 manufacturing/services PMI
0800/0400 Norges Bank issues bank lending survey Q2 2011
0830/0430 UK Jun-11 Retail Sales, Public Sector Finances, SMMT data
– France E7.0-E8.0 bln 2.00% Sept 2013 BTAN Tap
– France ” 3.00% July 2014 BTAN Tap
– France ” 2.50% July 2016 BTAN Tap
– France E1.0-E1.5 bln 0.45% July 2016 BTANi Tap
– France ” 1.10% July 2022 OATei Tap
– France ” 1.80% July 2040 OATei Tap
– Spain E1.75-E2.75 bln 5.50% Apr 2021 Oblig Tap
– Spain ” 5.90% July 2026 Oblig Tap
1230/0830 Chicago Fed President Charles Evans holds briefing
1230/0830 US 16-Jul Jobless Claims
1300/0900 Mexico Jun-11 Unemployment
1330/0930 IMF holds regular biweekly press briefing.
1345/0945 US 17-Jul Bloomberg Comfort Index
1400/1000 Fed Chairman Ben Bernanke, Deputy Treasury Secretary Neal Wolin, SEC Chair Mary Schapiro and CFTC Chair Gary Gensler testify before Senate Banking Committee on oversight
1400/1000 EMU Jul-11 flash consumer confidence
1400/1000 US May-11 FHFA Home Price Index
1400/1000 US Jul-11 Philadelphia Fed Survey
1400/1000 US Jun-11 Leading Indicator
1430/1030 US 15-Jul EIA Natural Gas Stocks
1430/1030 Chicago Fed President Charles Evand
1700/1300 US Treasury auctions $13.0 bln 10Y TIP
2030/1630 US 11-Jul Money Supply (M2)
HSBC Global Research