TOP
House Speaker John Boehner (R., Ohio), Senate Minority Leader Mitch McConnell (R., Ky.) and other GOP leaders, in a letter Monday to Fed Chairman Ben Bernanke, urged Fed officials to “resist further extraordinary intervention in the U.S. economy.”
Greece reports “satisfactory progress” in talks with troika; Talks to continue over weekend in Washington, D.C.; Greece faces rising opposition to further cutbacks
FT – Rio Tinto, one of the world’s largest natural resources companies, has warned that some of its customers were asking to delay shipments of metals, in a clear sign that the financial turmoil is starting to affect the commodities sector.
China: The People’s Bank of China set the yuan’s central parity rate against the U.S. dollar at 6.3772 on Wednesday, beating the previous record high of 6.3797 set on Sep.16.
EUROPE
Greece reports “satisfactory progress” in talks with troika; Talks to continue over weekend in Washington, D.C.; Greece faces rising opposition to further cutbacks
The European Union and China could start talks as early as next month for the first pan-European investment pact with a foreign power, the EU’s top trade official said on Tuesday.
Brazil Says Europe Must ‘Save Itself’…”Europe has to save itself because it has the tools to resolve the sovereign debt problem of Greece and other countries and the problem of bank weakness,” Brazilian Finance Minister Guido Mantega said Tuesday.
Ex PBoC adviser Yu Yongding, economist at Chinese Academy of Social Sciences, says that China should refrain from buying European bonds. China need to slow down pace of FX reserves build-up. China should cut its USD holdings in its reserves.
Europe: European Competition Commissioner Joaquin Almunia has admitted that more European banks may need to be recapitalised, the Irish Independent reports.
Lawmakers from German Chancellor Angela Merkel’s ruling coalition agreed on a draft bill to require parliamentary approval for future European bailouts, a step critics fear would hamper efforts to get aid to troubled countries quickly. If passed by parliament on Sept. 29, which is widely expected, some analysts say the new rules could tie Ms. Merkel’s hands on crucial decisions needed to deal with the euro-zone debt crisis or slow down emergency intervention.
http://online.wsj.com/article/SB10001424053111903374004576582920626030758.html?mod=WSJ_hp_LEFTWhatsNewsCollection
Euro Bonds should not be ruled out says Barroso.
http://www.bloomberg.com/news/2011-09-20/barroso-says-euro-bonds-should-be-preserved-as-debt-plan-option.html
Portugal’s prime minister said late Tuesday that should Greece default, it is possible Portugal could need a second round of aid from its European peers and the International Monetary Fund.
Greece is facing an estimated EUR4.6 billion ($6.3 billion) shortfall in its efforts to cut its 2012 budget deficit, according to an International Monetary Fund staff report presented to the fund’s executive board last week.
In an interview with SPIEGEL, CSU chairman Horst Seehofer, who is also the governor of Bavaria, reiterates that an exit of Greece from the euro zone ‘must be feasible’ if Athens can’t or doesn’t want to go on implementing reforms. He also defends Economy Minister Philipp Rosler, who raised the possibility of a Greek insolvency.
Spiegel: The FDP is probably going to hold a referendum of its members on the euro. Ever since euroskeptic Peter Gauweiler threw his hat into the ring as a candidate to become deputy party leader, the CSU conference in October has threatened to turn into a populism fest
The euro zone will avoid a double-dip recession despite signs of weakening in Germany’s economy, a top European Central Bank official said, suggesting the hurdle for interest-rate cuts or other stimulus remains high. In an interview with The Wall Street Journal, Austrian central bank governor Ewald Nowotny struck back at recent criticisms from the U.S. over Europe’s handling of the Greek debt crisis, saying Europeans can handle their own affairs.
Slovakia Threatens Euro Rescue Package…The government leader has adopted a tough cost-cutting plan and can hardly dare asking for more from her people. But that’s exactly what she must do: Slovakia is obligated to contribute some €7.7 billion ($10.9 billion) to the euro-rescue fund. It’s a hefty sum for the formerly communist country with a mere 5.4 million inhabitants. At the moment it is highly unlikely that Radicova can rally a parliamentary majority to support the plan.
Ireland forecast to hit budget deficit target for 2012. The IMF forecast a deficit of 8.9 per cent in 2012.
{http://www.irishtimes.com/newspaper/finance/2011/0921/1224304482433.html}
Ireland: Mortgage arrears rose to new peak of 9% in July.
http://www.irishtimes.com/newspaper/finance/2011/0920/1224304411212.html
US
House Speaker John Boehner (R., Ohio), Senate Minority Leader Mitch McConnell (R., Ky.) and other GOP leaders, in a letter Monday to Fed Chairman Ben Bernanke, urged Fed officials to “resist further extraordinary intervention in the U.S. economy.” They said Fed officials should avoid further action, “particularly without a clear articulation of the goals of such a policy, direction for success, ample data proving a case for economic action and quantifiable benefits to the American people
UK
UK: You need a Plan B, IMF tells Osborne. Its prediction – and the suggestion that the Chancellor, George Osborne, may have to contemplate an economic “Plan B” – provoked angry clashes between the Government and Opposition and fuelled tensions within the Coalition.
http://www.independent.co.uk/news/uk/politics/you-need-a-plan-b-imf-tells-osborne-2358202.html
UK – Britain’s most senior taxman has admitted making “governance errors” when agreeing multibillion-pound settlements with large companies, the Guardian says. Dave Hartnett, HMRC’s head of tax, has conceded that Revenue officials did not follow correct procedures in two high-profile cases that could have left taxpayers millions of pounds out of pocket, the paper adds.
UK – One in four Britons are using more than 40% of their monthly wages to pay off non-mortgage debt, according to new research from Moneysupermarket.com, The Times reports. The study indicates that average monthly repayments on products such as credit cards and personal loans are stg322 per person, 25 per cent of the average UK income at stg1,288. Repayments total almost stg9.4 billion a year, the paper says.
ASIA
China: Conference Board July LEI +0.6 to 158.6 – Conference Board July coincident economic index 205.5
China: China’s central bank and commercial banks bought a net CNY376.94 billion in foreign exchange in August, up from July’s CNY219.56 billion, according to data released by the People’s Bank of China Wednesday. June purchases stood at CNY277.33 billion.
Hong Kong/CHINA: The offshore yuan (CNH) spot rate was fixed at 6.3791 against the U.S. dollar on Wednesday in Hong Kong, compared with Tuesday’s 6.3926. China set the yuan’s central parity rate against the U.S. dollar at a record high of 6.3772 on Wednesday, beating the previous record high of 6.3797 set on Sep. 16.
China: The People’s Bank of China set the yuan’s central parity rate against the U.S. dollar at 6.3772 on Wednesday, beating the previous record high of 6.3797 set on Sep.16.
Oracle Tops Estimates on Corporate Spending…New software license sales, a predictor of future revenue, rose 16 percent to $1.5 billion, beating the 15 percent gain estimated by Jason Maynard, an analyst at Wells Fargo & Co. in San Francisco. Hardware sales declined 1.4 percent to $1.67 billion. Oracle’s shares rose as much as 4 percent to $29.48 in extended trading, after closing at $28.35 on the Nasdaq Stock Market. The stock has dropped 9.4 percent this year.
FT – Rio Tinto, one of the world’s largest natural resources companies, has warned that some of its customers were asking to delay shipments of metals, in a clear sign that the financial turmoil is starting to affect the commodities sector.
IMF cuts outlook for commodities prices.
http://www.ft.com/intl/cms/s/0/25994ff8-e392-11e0-8f47-00144feabdc0.html#axzz1YXJBqIoO
New Zealnd: The pace of growth in the New Zealand economy is expected to have slowed in the June quarter, following unexpectedly strong growth in the March quarter despite the impact of devastating earthquakes. The economy is expected to have expanded 0.5% on-quarter in the June quarter compared with a 0.8% growth posted in the March quarter. Expectations for June quarter growth ranged from 0.1% to 0.7%. In the Monetary Policy Statement released on September 15, the Reserve Bank of New Zealand forecast a growth of 0.6%.
OVERNIGHT DATA
Japan:
— Japan Aug Trade Deficit Y775.34 Bln Vs Surplus 63.75 Bln Yr Earlier
— Japan Aug Trade Deficit MNI Median Forecast: Y220 Bln
— Japan Trade Balance Posts 1st Deficit in 3 Mths
— Japan Aug Exports +2.8% Y/Y, 1st Rise in 6 Months
— Japan Aug Imports +19.2% Y/Y, Up 20 Months In Row
— Japan Aug Exports To US +3.5% Y/Y, 1st Rise in 6 Months
— Japan Aug Exports To EU +6/0% Y/Y, Up 3 Months in Row
— Japan Aug Exports To Asia +0.4% Y/Y, 1st Rise in 6 Months
— Japan Aug Exports To China +2.4% Y/Y, 1st Rise in 2 Months
Australia: Westpac-MI July leading index +1.4 at 284.2 pts
– Westpac-MI July leading index annualized 3.1%; at trend
– Westpac-MI July coincident index +0.2 at 265.6 pts
– Westpac-MI June leading index y/y revised to 2.7%
South Korea: The jobless rate declined in August from a year earlier as the number of newly created jobs in the country increased, Yonhap News reports citing the government. The jobless rate stood at 3% last month, down from 3.3% a year earlier, according to Statistics Korea.
New Zealnd: From Statistics New Zealand: June Qtr Current Account Deficit NZ$2.0 bln vs NZ$1.5 bln deficit March Qtr.
NEW ZEALAND: Seasonally adjusted permanent and long-term migration showed a net inflow of 200 migrants in August, the first inflow since February 2011 after the February earthquake saw a large number leave for Australia, data from Statistics New Zealand showed.
UK: UK NATIONWIDE AUG CONSUMER CONFIDENCE 48 VS 49 IN JUL
FX MARKET
FX: European Open; A quiet start to the day in Asia with the market hanging on the some aggressive moves by the FOMC tonight and expectation that Greece will receive its next tranche of aid amid progress on Greek talks. Euro-dollar opened at $1.3701 falling briefly to $1.3679 before moving higher to $1.3724. Cable was relatively static in a $1.5726-47 range with euro-sterling edging higher from early lows of stg0.8698 to stg0.8722. Dollar-yen continued on a soft tone despite intervention fears which led to a very brief spike to Y76.86 from Y76.11, before falling back again to Y76.28. Euro-yen hit highs of Y105.21 on the dollar spike from lows of Y104.36 before settling around Y104.70. Aussie fell to $1.0233 from opening levels of $1.0265 after press headlines highlighted weak Australian growth forecasts from the IMF later recovering along with other asian currencies and a higher Yuan fix. The swiss complex experienced an unexplained spike lower in the dollar falling from chf0.8870 to chf0.8800 around 1700NY time but quickly reversed settling around $0.8870.
OTHER MARKETS
ASIA: NK +0.48% / HS -0.26% / CHINA +2.18% / ASX +0.58%
- Asia: stocks snapped a two-day drop, while copper rose amid evidence China’s economy is withstanding a global slowdown and before the U.S. Federal Reserve concludes a two-day policy meeting. The yen strengthened against most of its major peers. Global markets had a relief rally after Greece delivered a coupon payment late yesterday, but worries over the continued deadlock in US and Europe continue to weigh down sentiment. All eye’s on tonight’s FOMC.
- ASX: 10 of 10 equity groups were +VE led by: Healthcare +3.03%; Utilities +1.90%; Industrials +1.29%
- Miners: RIO +0.57%, BHP +0.52% & AQP +0.60% (mixed vs SA/UK moves)
US: DOW +0.07% / S&P -0.17% / NSDQ -0.86%
- Overview: US equities finished mostly lower on Tuesday after trading higher throughout the better part of the session. The upbeat tone that prevailed throughout most of the day did not seem to have a specific driver, though heightened expectations that Greece will implement new austerity measures to quickly secure the next €8B tranche of its bailout package were cited as a tailwind. The start of the two-day FOMC meeting was highlighted as another positive for sentiment given widespread expectations for further monetary policy accommodation. In addition, while takeaways from the corporate calendar were largely industry- and company-specific in nature, they still seemed to fit with recent thoughts that the market has already priced in earnings headwinds from macro uncertainty. The afternoon pullback was chalked up to reports that Greece’s creditors may not make a decision on additional aid until October. However, it is also worth pointing out that the price action that prevailed during the earlier rally was not necessarily reflective of a traditional risk-on session as defensive sectors provided the bulk of the upside leadership, while safe-haven assets continued to attract a bid and some of the key deeper cyclical pockets of the market and small-caps underperformed.
- Sector Performance: Materials (1.01%), Industrials (0.71%), Energy (0.62%), Consumer Disc. (0.59%), Tech (0.35%), Financials (0.25%), Consumer Spls +0.13%, Telecom +0.50%, Healthcare +0.88%, Utilities +1.35%
FTSE +2% / STX 600 +1.8%
TSYS: Treasuries are narrowly mixed in a lackluster Asian session Weds, marking time ahead of the FOMC. Traders say light flows are two-way, with real money accounts largely sidelined, although there has been some Japanese name buying of the Bond. The yield on the 2Y was last at 0.15%, with the 5Y at 0.84%, the 10Y at 1.94% and the Bond at 3.20%.
AUSSIE BONDS: Aussie govviea are trading lower across the board Weds, with the curve little changed. The 2Y yield was last 6 bps higher on the day at 3.580%, with the 3Y yield 6 bps higher at 3.635%. the 10Y yield was also 6 bps cheaper on the day at 4.210%. That left the 2/10-yr spread unchanged on overnight levels at 63 bps.
JGBS: Japanese government bond prices were mostly lower this morning, weighed down by position-adjustment selling ahead of the results of the U.S. Federal Reserve’s policy-setting meeting due out later today. All eyes have shifted to the Fed’s policy decision and how global financial markets will react to it. JGB price moves were small due to players’ reluctance to trade bonds, although safe-haven asset demand remained intact.
— Benchmark 10-year yield was 0.5 bps higher at 0.995%
— 2-year bonds untraded
— 5-year yield was 0.5 bps higher at 0.340%
— 20-year yield was 0.5 bps lower at 1.730%
— 30-year yield was flat at 1.905%
OIL: Crude futures are lower in Asian trade Weds, although well shy of teh session lows. The front-month Nymex WTI contract was last 13 cents lower at $86.79, having touched a low at $86.32.
COMING UP TODAY( times GMT/ET)
0830/0430 UK Sep BOE MPC Minutes
0830/0430 UK Aug Public Finances
– Germany E5.0 bln 2.25% Sept 2021 Bund Re-opening
1100/0700 Canada Aug-11 CPI
1100/0700 US 16-Sep MBA Mortgage Application Index
1135/0735 UK BOE Spencer Dale speech
1200/0800 Norges Bank announces monetary policy decision
1245/0845 Norges Bank press conference to explain in Oslo
1300/0900 Mexico Jul-11 Retail sales, Wholesale sales
1300/0900 Mexico Jul-11 Service sector index
1300/0900 IMF releases Global Financial Stability Report, in Washington.
1400/1000 US Aug-11 Existing Home Sales (NAR)
1430/1030 US 16-Sep EIA Crude Oil Stocks
1815/1415 FOMC monetary policy announcement
– President Barack Obama addresses UN General Assembly in NYC
HSBC Global Research