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Japanese FinMin Noda today repeated that he was closely watching yen moves, signalling Tokyo’s readiness to continue with its yen-selling intervention that media said reached a record 4 trillion yen ($50.6 billion). However Noda also said he wanted to spend more time determining the effect of Tokyo’s action, a comment which briefly pushed up the yen against the dollar as market players interpreted it as a sign Tokyo may hold off intervention in the near future. We expect no BoJ intervention occurred overnight {http://reut.rs/owEUJT}
Chinese Foreign Minister said US debt risks are escalating, adding countries should step up cooperation on global economic risks. Added that Beijing will continue to support EU & euro.
RBA lowered its GDP growth forecast to 2% from 3.25% in May, then rebound to 4.5% in 2012, stronger than the previous projection of 4.25%; said that coal recovery is slow and domestic consumption remains sluggish; Inflation will likely average 3.5% in 2011 from 3.25% previously. RBA said that underlying inflation would remain relatively high in 2012 and 2013 {http://reut.rs/okbFSe}
SAFE said that China would implement measures to reduce hot capital inflows in H2. Yu Yongding, ex PBOC advisor said that China should stop purchasing USD and allow the CNY to be determined by market forces in the short term. China is vulnerable to devaluation of the USD due to its huge assets in USD.
French President Sarkozy will discuss financial markets with German Chancellor Merkel and Spanish PM Zapatero, Sarkozy’s office said in a statement. {http://reut.rs/owEUJT}. China and Japan also called for global cooperation.
Nikkei 9283 (-3.9%), HANGSENG 20845 (-4.75%), S&P/ASX 4113 (-3.8%), SHANGHAI SE COMPOSITE 2633 (-1.8%), Gold up 0.7% – As of 07.00 GMT
EUROPE
As Europe’s sovereign debt crisis threatens Italy and Spain, a question arises about whether the IMF, the eurozone authorities’ partner in its rescue missions so far, will risk its cash and its credibility by getting more deeply involved, the FT says {http://on.ft.com/onpodK}
SNB chief Hilderbrand says will not accept a further appreciation in the CHF without acting. No effective measures are excluded
ECB Coene (Belgium national bank Gov)) sees “uncertainty” in second half of year. Sees “contagion effect” in sovereign bond spreads
The ECB bought government bonds for the first time since March, just hours after the Bank of Japan intervened in currency markets to halt the rise of the yen and the Turkish central bank cut rates to an all-time low. – FT
A French court ordered an investigation into possible misconduct by IMF head Christine Lagarde when, as finance minister, she approved a settlement to a businessman friend of President Nicolas Sarkozy
The UK Government is likely to scrap the 50p top rate of income tax after being presented with figures showing that the higher the rate, the less people pay, the Times says
Britain’s FSA regulator said on Thursday it had been in talks with the country’s banks over getting a fuller disclosure on their exposure to countries with high sovereign debt yields. Earlier on Thursday, the finance director of British bank Lloyds said the FSA had asked UK banks to detail their exposure to Belgium.
US
Bank of New York Mellon Corp. said Thursday that it will charge its customers a fee to hold cash deposits over $50 million. The bank said it has seen such a large increase in deposits over the last month that it will charge a 0.13 percent fee to clients with “extraordinary high deposit levels {http://bit.ly/rb58xx}
US DATA: Jul Monster Employment Index 144 vs 146 Jun and 143 May.”Monster Employment Index U.S. annual growth rate holds steady at 4% from June, marking the 18th consecutive month of positive year-over-year growth.
The Federal Aviation Administration is preparing to recall 4,000 furloughed workers and resume collecting airline ticket taxes as the U.S. Senate votes today on legislation to temporarily end a standoff over the agency’s funding.
ASIA
Australia is well equipped to take steps to bolster its economy should global market turmoil see a re-run of the 2009 financial crisis, Treasurer Wayne Swan said on Friday, one of the first leaders to comment on such a step in the current sell-off.
Japan EconMin Yosano said that he sees need for Japan, Europe, US to jointly take policy to contain pessimism about global economy.
JAPAN DATA: Foreign reserves data from the Ministry of Finance:
— Japan July FX Reserves $1.151 Trln Vs June $1.138 Trln
— Japan July FX Reserves Hit a New Record
CHINA: The People’s Bank of China set the yuan’s central parity rate against the U.S. dollar at 6.4451 on Friday, lower than the record high of 6.4386 set on Thursday.
CHINA: The government should maintain its current economic policies due to sustained inflationary pressure, Chen Jiagui, a researcher with the Chinese Academy of Social Science said in a commentary published in the official People’s Daily. He suggested the government should take a wait-and-see approach in the third quarter to assess the effects of current policies and then decide whether a fine-tuning is needed.
FT – If there is any lesson China can draw from the US debt ceiling crisis, it is that it must stop policies that result in further accumulation of foreign exchange reserves. Given that many large developed countries are simply printing money (and the recent rumours are that the US might return to quantitative easing) China must realise that it can no longer invest in the paper assets of the developed world.” {http://on.ft.com/qLVE2t}
South Korea calls meeting on Sunday over economy and markets
South Korea should raise its benchmark interest rate to at least 4 percent over time and allow its currency to appreciate further to better fight inflation, the International Monetary Fund’s staff said. – Bloomberg
South Korea is considering more restrictions on foreign capital inflows amid rising worries in Seoul that rapid money flows into the nation’s bond market could be destabilizing. Market expectations for the South Korean won’s continued appreciation and renewed global uncertainties have led to a steady inflow of foreign capital into local bonds. Data released by the Financial Supervisory Service Wednesday showed that net foreign investment in local debt rose by 2.9 trillion won ($2.73 billion) in July, the highest increase since October 2010, boosting foreigners’ net holdings in South Korean bonds to a record 84.22 trillion won. – WSJ
Philippines annual inflation 4.6% (exp 4.9%). Analysts said the latest inflation rate suggested the central bank could afford to keep interest rates on hold for some time while it assesses the impact of debt problems in United States and Europe on domestic liquidity and growth.
Indonesia Q2 GDP grows at 6.5 pct, in line with expectations
Indonesia banks fear results of proposed rules : The regulation, which Bank Indonesia officials said was still “a work in progress” with no fixed implementation date, would force its banks’ majority shareholders – whether local or foreign – to sell down their holdings, although state banks would be exempt. – FT
INDONESIA RUPIAH CORRECTION IS TEMPORARY, BI OFFICIAL SAYS. LONG TERM TREND IS TO STRENGTHEN.
Australia’s performance of construction index improved to 36.1 in July from 35.8 in June.
LATAM
Brazil’s President Dilma Rousseff replaced her veteran defense minister on Thursday after he made disparaging comments about fellow officials, adding to a sense that her seven-month-old government is in disarray. Jobim is the third minister to lose his job because of clashes with Rousseff or corruption allegations
Mexican consumer confidence jumped to its highest in more than three years in July in a positive sign for the country’s underperforming economy. Mexico’s consumer confidence index <MXCONF=ECI> rose to 94.2 adjusted for seasonal factors, the national statistics agency said on Thursday.
Mexico has begun testing the market for hedging next year’s oil revenues, a government official said on Thursday as a massive options trade in New York fuelled speculation that its annual program has started. In the midst of one of the biggest oil price routs of the past two years, a 5 million barrel three-way options and futures combo trade prompted talk that Mexico has begun moving this week to lock in 2012 prices.
Colombia wants to double trade and increase investment with Latin American powerhouse Brazil, but tariffs and shipping costs remain obstacles, an investment conference was told on Thursday. “There’s a special synergy, this integration with Brazil generates very important gains for both countries in all respects … South-South integration strengthens us,” Colombian President Juan Manuel Santos told an investment conference.
Industrial and Commercial Bank of China Ltd said on Friday it would buy stakes in Standard Bank Argentina and two of its affiliates from Standard Bank Group
Ltd for about $600 million as it expands into South America as part of its globalisation strategy. Shares in ICBC opened down 4.1 percent in Hong Kong on Friday, following a plunge in global stock markets.
OTHER MARKETS
Nikkei 9283 (-3.9%), HANGSENG 20845 (-4.75%), S&P/ASX 4113 (-3.8%), SHANGHAI SE COMPOSITE 2633 (-1.8%), Gold up 0.7% – As of 07.00 GMT
US STOCKS CLOSE: A dismal Thursday session saw stocks weighed by global growth concerns on a day when there was little US data to undermine confidence. The Dow crumbled 512 points or 4.31% to end at 11,384 and close to its lows of the session while the Nasdaq cratered 5.08% or 137 points to end at 2,556.
TSYS: The yield on the 2Y was last at 0.26%, with the 5Y at 1.11%, the 10Y at 2.39% and the Bond at 3.65%.
OIL: Brent crude at 107.10 (-0.2%), WTI Crude at 85.60 (-1.2%)
Gold last at 1658 (+0.7%), Silver at 39.16 (+0.7%)
VIX jumps 35% to 31.66 in biggest jump since February 2007
HSBC Global Research