TOP
Chancellor Angela Merkel’s centre-right bloc suffered another stinging defeat on Sunday in a regional election in Germany’s poorest state, Mecklenburg-Vorpommern, with both her conservatives and their Free Democrat allies losing support {http://reut.rs/oqyYyt}
HSBC China services PMI hit historical low of 50.6 in Aug {http://bloom.bg/rnOzRs}
S&P’s say the rating of a common euro-area bond would reflect that of the “weakest” country if jointly guaranteed {http://bloom.bg/q6uvld}
Italian Economy Minister Giulio Tremonti promised on Sunday to meet Italy’s budget commitments after the ECB stepped up pressure for action by the struggling centre-right government.
Wall Street sees an 80% chance the Federal Reserve will intervene in the bond market to lower long-term interest rates, according to a Reuters poll {http://bit.ly/nIC2uA}. FT Alphaville on this {http://on.ft.com/oq55Ta}
EUROPE
This Wednesday, Germany’s Federal Constitutional Court will deliver its ruling — awaited for over a year — on suits claiming Berlin is breaking German law and European treaties by contributing to multi-billion euro bailouts of Greece, Ireland and Portugal. Legal experts think the court is highly unlikely to block the contributions altogether. But it is expected to give the German parliament a bigger say in approving them. {http://reut.rs/qTYir2}
Former German chancellor Gerhard Schroeder on Sunday called for the creation of a “United States of Europe”, saying the bloc needed a common government to avoid future economic crises. {http://reut.rs/o8aGyY}
The economist: Could Italy sink the euro? {http://econ.st/mRNimN}
IMF Lagarde: “Looking at Europe, we recommend countries to adjust their austerity programmes to a changed situation and consider measures to drive growth,” – Der Spiegel
EC President Jose Manuel Barroso on Monday said he still expected modest growth in Europe and did not anticipate a recession in Europe
Spain’s conservative opposition People’s Party (PP) has extended its lead over the ruling Socialists and is on course to win a parliamentary majority in Nov. 20 elections, according to an opinion poll on Sunday. The Sigma Dos poll in the right-leaning El Mundo gave the PP a rating of 47.1 percent, and 32.2 percent for the Socialists
UK: Resilient demand from abroad boosted British manufacturing output in the third quarter, and firms expect continued growth in coming months, a survey showed on Monday, defying other recent data that pointed to a contraction. However, the quarterly Manufacturing Outlook from British manufacturers’ organisation EEF and accountants BDO also showed that fewer manufacturers than in the second quarter are positive about the future. {http://reut.rs/oZ9yCp}
The UK’s shadow MPC, which remains concerned about the loss of Bank credibility from persistent above-target inflation, votes 5-4 for a half-point rise in interest rates, the Sunday Times reported, though the committee also says the Bank should stand ready for more quantitative easing if the eurozone situation gets out of hand.
The Telegraph – David Cameron in push to dilute Independent Commission on Banking (ICB) ring-fence reforms {http://tgr.ph/ncPXSw}
FT: The worst of the euro crisis is yet to come {http://on.ft.com/pLKELn}
PIMCO Gross urges “mid course correction” to UK economy {http://reut.rs/pho3mQ}
Bank of Greece Gov Provopoulos said that recession continues in Greece at a rate that is higher than forecast. He argued that the recession would have been smaller had reforms been promoted at a more rapid rate and the fiscal deficit contained in more drastically, eKathimerini says.
US
IMF Lagarde: “If the United States launches a credible middle-term adjustment programme, there is possibly room to abandon the short-term austerity measures and to introduce some measures to drive growth”
US: A bipartisan committee charged with reducing the US federal debt by at least $1.5 trillion begins work this week under fierce pressure to reduce spending and a threat of automatic cuts if it fails to accomplish its goal.
ASIA
China money rates jump as banks begin paying extra reserves {http://bit.ly/p9w8mG}
The China Index Academy (CIA), a Beijing-based company that studies China’s property market, said in a report that the average floor price for residential land in 133 Chinese cities currently being monitored by the institution declined 9 percent to 1,619 yuan ($253) per square meter in August. {http://bit.ly/nnloIJ}
CHINA: The People’s Bank of China set the yuan’s central parity rate against the U.S. dollar at 6.3926 on Monday, lower than last Friday’s 6.3896.
CHINA: Pork prices rose at least 0.5% in the ten days from August 21 to August 30 in 50 major Chinese cities, the National Bureau of Statistics said on Sunday
China’s policy makers should rethink the drive to internationalize the country’s currency, as it is causing a further buildup of foreign exchange reserves that harm the welfare of the country, a former adviser to the central bank wrote in an essay published Monday.
China August CPI Likely Around 6.2%, Financial News Say
Indonesia: Aug headline CPI up 4.79 y/y (forecast 4.75 pct rise). Aug core CPI up 5.15 pct y/y (forecast 4.62 pct rise)
HK Aug headline PMI fell to 47.8 (vs. 51.4 in Jul)
The Philippine government may borrow more from the local debt market to cover its remaining $500 million external debt requirement this year given volatile global financial markets, Finance officials said
LATAM
Argentina sold some $900 million of its dollar reserves last month to avert a steep drop in the peso, but officials and analysts say the country still has enough cash to protect itself from unexpected shocks. The central bank’s foreign reserves dipped below the psychologically important $50 billion level on Thursday for the first time in 13 months.
Reuters: Mexico wants to revamp decades-old laws to ease limits on foreign investment in markets with little or no competition such as the airline, telecoms and energy sectors {http://bit.ly/ptuQTj}
CORPORATE
A consortium that included the Chinese government was the biggest buyer of a 5 percent stake in China Construction Bank Corp sold last month by Bank of America , the Ft reported . The State Administration of Foreign Exchange, the National Social Security Fund and Citic Securities bought the CCB shares, the FT said, citing unnamed sources.
OTHER MARKETS
NIKKEI 8783 (-1.9%), HANGSENG 19679 (-2.6%), S&P/ASX (4142), SHANGHAI SE COMPOSITE 2493 (-1.4%), KOPSI 1788 (-4.2%) – As of 07.00GMT
US STOCKS CLOSE: Dow ended down 2.2% while Nasdaq skidded 2.58% to end at 2,480.
TSYS: 2YR AT 0.1960, 10 YR at 1.985
OIL: Brent crude at 111.60 (-0.6%).WTI at 85.60 (-1%)
Gold last at 1879 (-0.2%), Silver at 43.17 (-0.2%)
COMING UP TODAY( times GMT/ET)
0713/0313 Spain Aug-11 manufacturing PMI
0743/0343 Italy Aug-11 manufacturing PMI
0748/0348 France Aug-11 final services PMI
0753/0353 Germany Aug-11 final services PMI
0758/0358 EMU Aug-11 final services PMI
0830/0430 UK Aug-11 services PMI
0900/0500 EMU Jul-11 retail trade
– Slovakia Oct 2013 SLOVGB215 Tap
– U.S. government, markets closed for Labor Day.
1300/0900 Mexico Aug-11 Consumer confidence
1500/1100 Brazil Aug-11 HSBC Services PMI
1700/1300 Mexico Aug-11 IMEF manufacturing, non-mfg index
2301/1901 UK Aug KPMG/BRC Retail Sales
Eastern Europe
BUDAPEST – Heads of five brokerages hold press conference about “threats to the independent Hungarian capital market” (0900)
ROMANIA – Finance ministry tenders 1 billion lei in one-year treasury bills (0800)
ROMANIA – The National Statistics Board will release July average wage data (0800)
CZECH – Czech real wage Q2/11 (0900)
SLOVAKIA – Bond auction (1100)
HSBC Global Research