TOP:
Italy facing another test As Moody’s Rating Decision Looms as Italy’s 90-day period closes at the end of this week. {http://on.wsj.com/n420W6}
The government reaffirmed its intention to fully implement its fiscal reform program, following a teleconference between Greek Prime Minister George Papandreou, French President Nicolas Sarkozy and German Chancellor Angela Merkel.
NOTE: Moody’s has Italy at Aa2 at the moment for l-t foreign currency. S&P at A+ and Fitch AA-. Moody’s is lagging the other agencies. So the question is if there was going to be a downgrade, would they just match S&P or Fitch or take the lead.
RBNZ leaves rates steady At 2.50%…”If recent global developments have only a mild impact on the New Zealand economy, it is likely that the OCR will need to increase,” Bollard said. {http://bit.ly/ocMM10}
EUROPE:
Senior EU officials said the 17-nation currency area faces a “risk of a vicious circle between sovereign debt, bank funding and negative growth.” {http://www.msnbc.msn.com/id/44514735}
A group of euroskeptic members of Merkel’s junior coalition partner, the Free Democratic Party, is trying to organize a referendum among party members on a proposal to reject further euro-zone bailouts and set up a mechanism for countries to exit the euro. {http://on.wsj.com/r6ZKQh}
The Italian Parliament approved a €54 billion ($73.81 billion) austerity package after months of wrangling among PM Silvio Berlusconi’s allies {http://on.wsj.com/nvCO7O}
EU casts safety net for Greece. French and German leaders emphasized during a teleconference call with PM Papandreou on Wednesday that Greece remains an “integral part of the EZ ” despite feverish media speculation about the country’s imminent default. {http://bit.ly/rdPLDv}
IMF’s Lagarde calls for ‘Bold’ EU action to ease fiscal crisis. “It is a job that will have to be handled and achieved collectively,” (BBG)
Belgium’s future as a country appears to be at stake with politicians meeting Wednesday for a “final attempt” at talks to form a coalition government after the caretaker prime minister announced his plans to resign. {http://on.wsj.com/pNjl0y}
Andreas Whittam Smith: Germany has shifted and default is now inevitable {http://www.independent.co.uk/news/business/}
EU’s ultimatum to Germany to act now by Barroso’s {http://ind.pn/qwgabI}
Europe needs its own TARP as debt crisis deepens, Marathon AM {http://bloom.bg/nT1IsW}
Britain to sue ECB over threat to City {http://on.ft.com/o6CL43}
Dutch parliament wants ‘Plan B’ on Greece. {http://onforb.es/pP5gTW}
Finnish Finance Minister Jutta Urpilainen said talks over collateral for loans to Greece were still ongoing, and declined to comment on when a deal with other euro zone countries would be announced. {http://reut.rs/pBRNY1}
EFSF has won ‘Important Support’ From Asia, Frankel says. (bbg)
DJN-DJ GERMAN ECON MIN: 2012 GDP FORECAST CUT POSSIBLE – REPORT
Wen Jiabao, Chinese premier, has called on debt-laden European countries to put their “own houses in order” before asking China for a bail-out, in a sign of Beijing’s reluctance to be cast as a saviour for the global economy (FT)
EU borrows 5bn EUR to fund Portugal. The 10-year bond, which was rated triple A, saw strong demand despite worries about the EZ crisis; central banks and investors are happy to buy bonds from the EU as one entity despite the deepening crisis in the EZ.
Societe Generale and Credit Agricole were hit by credit rating downgrades yesterday as France’s embattled financial sector struggles to convince the market it can manage any Greek default.
As the expected end of Moody’s review to possibly downgrade Italy’s sovereign debt rating closes in, market participants are bracing for another hit to that country’s bond market.
The Greek civil servants’ union, ADEDY, signalled on Wednesday that it was gearing up for action over the government’s plans to extend a “labour reserve” scheme – aimed at putting civil servants on a heavily docked salary for 12 months before reviewing their status.
Surveys of more than 250 economists in North America, across Europe and Japan portend steadily increasing chances that central bankers will need to fire any weapons they may have left to stave off disaster. {http://www.cnbc.com/id/44527322}
Some French banks’ corporate clients have sought financing from banks outside Europe to lessen their reliance on French banks as a hedge in case lending dries up, the WSJ reports.
The crisis in the EZ threatens to create a major political headache for David Cameron, over whether to risk a rift with Conservative backbenchers or his Liberal Democrat coalition partners.
UK: Whitehall’s headcount was being reduced at a rate never before seen, the Institute for Government said.
New proposals to cut the interest rate that Ireland is paying for its bailout loans could save the State Eur600m per year.
Russia is poised to save Cyprus from financial meltdown with a E2.5bn loan.
Arab money may help come to the rescue of debt-ravaged Greece, according to the man responsible for fostering business ties with the oil-rich region.
Singapore’s Lee says EZ cannot be saved. {http://bit.ly/rbGaw4}
US:
The Fed considers whether to twist again. Today the Fed holds more than $500 billion in Treasuries that mature in less than three years, and less than $200 billion in Treasuries that mature in less than 10 years. {http://on.wsj.com/qmousG}
The U.S. is a “long way” from risk of default and Treasuries are still the safest dollar assets, Kim Eng Tan, senior director for sovereign debt ratings at Standard & Poor’s said at a conference today in Singapore. (bbg)
Sitting on massive piles of cash and searching for investments that promise decent returns, US banks have been doling out loans to companies with lower credit ratings, the WSJ says.
ASIA:
Japan: The government will keep its monthly economic assessment that the economy “is picking up” in its monthly economic report for September
China Securities Journal says global economy is on a slower-than-expected recovery path and that’s raised the uncertainties facing the Chinese economy.
China’s foreign exchange regulator said it will launch a pilot scheme by year-end to simplify the foreign exchange settlement process for trading in goods.
The PBoC is draining CNY10 billion via 91-day bond repurchase agreements on Thursday, traders said.
The PBoC sold CNY2 billion in three-month paper at an unchanged yield of 3.1618%, traders said.
The offshore yuan (CNH) spot rate was fixed at 6.3873 against the U.S. dollar in Hong Kong on Thursday.
Japan PM Noda: To take steps in cooperation with BoJ to prevent hallowing out of industry, concerned over one-sided JPY strength, ready to take firm FX steps
The Singapore Exchange (SGX) will be imposing tougher listing rules after a year-long review of feedback it received on its 2009 consultation paper.
Economists expect the RBI to raise the policy rate by another 25 basis points to 8.25% at its policy meeting on Friday.
The credit downgrades of two major French banks will have a “limited” impact on the health of South Korean financial companies as their exposure to those lenders remain quite small.
S. KOREA TO PURSUE FLEXIBLE CURRENCY POLICY AGAINST CRISIS: KIM
ELSEWHERE:
New Zealand: RBNZ leaves official cash rate unchanged at record low 2.5% as widely expected.
Treasurer Wayne Swan has stripped the RBA of its powers in setting the pay of its board members, various media reported.
Brazil’s proposal to support the crisis-hit euro zone garnered only lukewarm support from fellow BRICS countries on Wednesday, as doubts mounted whether the five emerging market powers have the political will or financial clout to throw a lifeline to Europe.
BOLLARD: KIWI OVERVALUED VS. LONG-TERM FUNDAMENTALS
European banks are rushing to use their gold to access much-needed dollar funding, in the latest sign of the growing liquidity crunch for the continent’s financial institutions. {http://on.ft.com/p7VkC4}
Facebook puts off IPO until 2012 {http://on.ft.com/qmzSa5}
OVERNIGHT DATA:
New Zealand: The BNZ-Business NZ seasonally adjusted PMI for August fell 0.3 point in August to 52.9 to mark third straight month of drop.
Australia: Consumer inflationary expectations in Australia rose slightly to 2.8% in September from 2.7% in August.
The RBNZ is not convinced that market and economic turbulence in Europe will have a significant adverse effect on the New Zealand economy.
MARKETS:
Stocks: Dow and Nasdaq ended the Wednesday session with solid gains, though both were off their best levels of the day. Dow ended up 141 points or 1.27% to end at 11,247 after seeing a session high at 11,387. Nasdaq fared better, added 40 points or 1.6% to end at 2573 but had minted a high at 2601 intra-day. Japan’s benchmark stock indices are trading higher Thursday, helped by the overnight gains in the US. The Nikkei was last 128.94 points, or 1.51%, higher at 8648. The broader-based TOPIX was higher by 9.34 points at 751.03%. The Shanghai Composite Index ends the morning down 0.02% at 2,484.45. The Hang Seng ends the morning up 0.47% at 19,134.45.
Treasuries: Treasuries are trading flat in Asian trade Thursday, awaiting comments later in the day from Fed Chair Bernanke. Aussie govvies are trading lower across the board Thursday, with the curve flattening as the long-end outperforms. Japanese government bond prices were off their morning lows due to bargain-buying but remained mixed this morning after opening lower following weak U.S. Treasury moves overnight.
Commodities: Crude futures are trading lower across the board Thursday, although off the session worst levels. The front-month WTI contract was last 25 cents lower at $88.66, having traded a range of $88.32 to $89.02.
CALENDAR:
0700/0300 ECB Executive Board member Lorenzo Bini Smaghi speech on “Forum for EU-US Legal-Economic Affairs” in Rome
0730/0330 SNB announces interest rate decision
0830/0430 UK Aug-11 Retail Sales
0900/0500 EMU Aug-11 final HICP
0900/0500 Italy Aug-11 final HICP
0900/0500 EMU 2Q employment
– UK Stg900 mln 0.75% 2047 IL Gilt Tap
– France E7.0-E8.5 bln 2.00% Sept 2013 BTAN Tap
– France ” 4.00% Apr 2014 OAT Tap
– France ” 2.50% July 2016 BTAN Tap
– France E900-E1.3 bln 1.30% July 219 OATi Tap
– France ” 1.10% July 2022 OATei Tap
– Spain E3.0-E4.0 bln 4.60% July 2019 Oblig Tap
– Spain ” 4.00% Apr 2020 Oblig Tap
– Spain ” 4.85% Oct 2020 Oblig Tap
1230/0830 Canada Jul-11 New motor vehicle sales
1230/0830 Canada Jul-11 Mfg survey – sales
1230/0830 US 10-Sep Jobless Claims
1230/0830 US 2Q-11 Current Account
1230/0830 US Aug-11 Consumer Price Index
1230/0830 US Sep-11 NY Fed Empire State Survey
1315/0915 US Aug-11 Industrial Production Capacity Utilization
2100/0945 US 11-Sep Bloomberg Comfort Index
1400/1000 US Sep-11 Philadelphia Fed Survey
1400/1000 IMF Managing Director Christine Lagarde speech on global economic challenges and solutions in Washington.
1430/1030 US 09-Sep EIA Natural Gas Stocks
1615/1215 ECB Governing Council member Jens Weidmann to give speech on “Monitoring the impacts of prudential and SIFI reforms on the EU economy”, at Eurofi Financial Forum, in Wroclaw (Poland)
1630/1230 ECB Executive Board member Juergen Stark to speak on the financial and debt crisis, in Vienna
1700/1300 House Speaker John Boehner speech on the economy and skepticisim on jobs plans in Washington.
1840/1440 ECB President Jean-Claude Trichet to host gala dinner of the Eurofi Financial Forum 2011 “Addressing the main priorities of the Polish Presidency of the EU in the financial area,” in Wroclaw
2030/1630 US 05-Sep Money Supply (M2)
Eastern Europe
BUDAPEST – final industry output data <HUINDF=ECI> (0700)
BUDAPEST – 12month Tbill auction (0930)
ROMANIA – 3year T bond tender
CZECH – Aug PPI data
CZECH – 13-week Tbill auction
Era of guaranteed profits is over-Hungary minister Hungary’s government is committed to redistributing risk and losses more equitably between the business sector and households and the period of guaranteed profits is over, Development Minister Tamas Fellegi said.
Erste Hungary says new FX plan a stability threat The Hungarian government’s new proposal to let foreign currency borrowers repay their debt in one go at a big discount to market levels may pose a significant threat to financial stability, Erste Bank’s Hungarian chief was quoted as saying on Wednesday.
HSBC Global Research