TOP
New Greek austerity plan short of target: The draft budget calls for a deficit of 8.5% of Greece’s gross domestic product in 2011, falling short of a target of 7.6%, Reuters reported. The deficit will be reduced to 6.8% of GDP in 2012, but still short of the mark of 6.5% of GDP, according to the plan. {http://bit.ly/ot7zEc} {http://reut.rs/pJBrXk}
Banking crisis set to trigger new credit crunch. In Europe, French and Belgian government officials are due to meet on Monday to discuss the crisis enveloping Dexia as speculation mounts about a possible break-up of the Franco-Belgian lender. {http://tgr.ph/mPthf2}
Investors pull back from emerging market funds. Almost $6bn was pulled out of EM funds in the five days to Wednesday, according to EPFR Global, a fund flow data provider. {http://on.ft.com/rq8ewQ}
David Bloom, head of currency research at HSBC, says the flight to the dollar has taken place despite the fact that there has been no improvement in the US economic outlook or debt situation. “Despite the US’s continued structural problems, demand for the dollar has increased because there is simply nowhere else to hide,” he says. “The market has really only turned to the dollar by default, attracted by its high liquidity and status as the world’s primary reserve currency.” {http://on.ft.com/p01bXt}
EUROPE
Rising German frustration is adding to the Greek gloom, with German Fin Min Schaeuble strongly ruling out that Germany will contribute any further money to the EFSF in an interview with Super-Illu.
Euro off to a rocky start on Dexia, EU concerns. Dexia, which received a combined 6 billion euro bailout from Belgium and France at the height of the financial crisis in 2008, has been badly hit by its huge exposures to Greece as well as the freeze in the inter-bank lending markets. {http://reut.rs/o2lJeK}
ECB’s Noyer doesn’t expect bigger EFSF and said that concerns are exaggerated over French banks’ exposure to the sovereign debt. {http://on.wsj.com/ncrLXq} {http://bit.ly/puFKsA}
No EFSF leveraging decision at Monday Eurogroup talks. {http://bit.ly/oCOPl5}
Parliament dissolved ahead of November election. Spain’s conservative opposition People’s Party (PP) would take a landslide victory in the 20 November elections, an opinion poll found on 26 September as Socialist Prime Minister Jose Luis Rodriguez Zapatero dissolved parliament. {http://bit.ly/oaLlvv}
Greek cabinet approves budget cuts. The budget assumes that Greece’s economy will shrink about 2 per cent in 2012, on top of a projected 5.5 per cent contraction this year as private consumption plummets and the government slashes infrastructure spending and other public investment. {http://on.ft.com/pBPZ5k}
Richer EU countries try to cut pay-out. A planned €2.9bn ($3.8bn) European Union payment to Greece and other struggling countries could be reduced by at least half after some rich EU countries raised concerns about the impact on their own public finances. {http://on.ft.com/qb4kED}
We are now in the stage of the crisis where people get truly desperate. The latest crazy idea, which is being pursued by officials, is to turn the eurozone’s rescue fund into an insurance company, or worse, a collateralised debt obligation, the financial instrument of choice during the credit bubble. This is the equivalent of putting explosives into a can, before kicking it down the road. {http://on.ft.com/n9ytGU}
ECB prepares for change as Trichet finale nears. But Mr Draghi might exert more influence over the department and its policy recommendations than his predecessor. {http://on.ft.com/oKmKGx}
UK House Prices Ease 0.1% On Month – Rightmove US. {http://bit.ly/qLKi3z}
Business volumes in the UK financial sector rose at the slowest pace in more than a year and sentiment worsened for the first time since March 09. {http://reut.rs/qVdqG6}
Osborne will hand out an ?800m council tax subsidy and announce plans to boost housing starts and business innovation, in an attempt to defuse growing criticism of his rigid strategy to cut the fiscal deficit. {http://on.ft.com/q54i14}
US
Treasury fears effects of a euro break-up. {http://on.ft.com/n2HXVj}
Congress presses China on currency. The Senate is expected to vote on anti-China trade legislation on Monday, with the bill likely to pass with overwhelming bipartisan support, before being sent to the House of Representatives. The bill would require the commerce department to use estimates of currency undervaluation when calculating so-called countervailing duties, imposed against imports deemed to be state-subsidised. {http://on.ft.com/qHeQ2M}
The big event on next week’s economic calendar is the monthly U.S. jobs report — but nobody expects a big jump in hiring.{http://www.marketwatch.com/story/the-economys-unfinished-work-job-growth-2011-10-02}
Defense Secretary Leon Panetta said he is concerned Israel is becoming “increasingly isolated” as uprisings sweep the Middle East. {http://bit.ly/niTvSe}
ASIA
BoJ Tankan: The Bank of Japan’s quarterly Tankan survey revealed on Monday that sentiment for its large manufacturers’ index jumped in the third quarter of 2011, showing a score of +2. {http://bit.ly/pGjlyD} {http://on.ft.com/mOzo1u}
Australia Manufacturing Sector Contracts In September. The AIG- PwC Australian Performance of Manufacturing Index, or PMI, fell to 42.3 from 43.3 in August. {http://bit.ly/pEyrBc}
Australia monthly inflation gauge rises modestly in September. {http://bit.ly/oERvge}
Asia stocks plunge on European, Chinese concerns. Hang Seng Index HSI -4.91% Hang Seng China Enterprises Index — which tracks Hong Kong-listed mainland Chinese firms — dove 6.3%, with the mainland bourses closed this week for the National Day holidays. {http://bit.ly/pXTKSA} {http://bit.ly/qJFK4V}
Fitch Says Further India Fiscal Weakness Would ‘Weigh’ on Rating
India’s August Exports Rose 44.3% YoY. Exports rose 44.3% in August from a yr earlier to $24.3b: e-mailed statement. Imports rose 41.8% to $38.4b
Fitch Says Further India Fiscal Weakness Would ‘Weigh’ on Rating. India’s plan to boost debt sales by 32% in next 6 mos. means it will miss a target to cut budget deficit to a 4-yr low of 4.6% in 12 mos. ending March 31, Andrew Colquhoun, head of Asia-Pacific Sovereign Ratings, said in interview yesterday.
Shares of several high-end retail goods companies slumped Thursday in the U.S. and Europe on worries a worsening global economic climate could weaken Chinese appetite for premium branded products. {http://www.marketwatch.com/story/china-hard-landing-fears-hit-high-end-retailers-2011-09-29}
CORPORATE
Six years after Yahoo! paid more than $1bn to become the biggest investor in Alibaba, it’s now a potential takeover target for the Chinese Internet company. {http://bit.ly/q89Odz}
An increasing number of the Russia’s biggest businesses prefer to list their shares overseas. {http://bit.ly/qiFxF4}
Goldman Sachs has more than quadrupled its stake in the LME in the past two years, making it the biggest potential winner from the proposed sale of the 130-year-old exchange. {http://on.ft.com/mPI18T}
Citigroup is being investigated by Japanese regulators for possible infractions related to its marketing of financial products and could face its third major punishment in Japan in 7 years. {http://bit.ly/neqSMW}
Barclays and BoA are looking to sell their stakes in apartment company Archstone. {http://reut.rs/nCmZ4c}
MARKETS
Equities: The S&P Dec contract was last 2.0 points lower at 1124.0, with the Nasdaq Dec contract down 7.75 points at 2126.75. Dow futures are also lower, down 25 points at 10816. Japanses stocks are sharply lower Monday, although off their worst levels. The Nikkei 225 was last 2.35% lower at 8495.9, with the broader-based TOPIX down 2.73% at 740.39
Treasuries: Treasuries are trading mixed Monday, with the curve continuing to
flatten as duration extension buying continues to buoy the longer-end of the curve. Aussie bonds are higher across the board Monday, helped by fresh safe-haven demand.
Oil: Crude futures are lower again Monday, as renewed unease over the global economy weighs. The front-month Nymex WTI contract was last $1.21 lower at $77.99, having touched a low at $77.90.
CALENDAR
0713/0313 Spain Sep mfg PMI
0743/0343 Italy Sep mfg PMI
0748/0358 France Sep final mfg PMI
0753/0353 Germany Sep final mfg PMI
0758/0358 EMU Sep final mfg PMI
0828/0028 UK Sep PMI Manufacturing
1000/0600 France Sep car registrations
– US Sep-11 Domestic Vehicle Sales
1300/0900 Mexico Sep-11 Manufacturing index IAT, Producer confidence index ICP, Manufacturing orders index IPM
1330/0930 US 30-Sep MNI Capital Goods Index
1400/1000 US Sep-11 ISM Index
1400/1000 US Aug-11 Construction Spending
1400/1000 Brazil Sep-11 Trade balance
1400/1000 CFTC Chair Gary Gensler speech to the Swap Execution Facility Conference in New York.
1430/1030 US 01-Oct MNI Retail Trade Index
1500/1100 Brazil Sep-11 HSBC Manufacturing PMI
1700/1300 Mexico Sep-11 IMEF manufacturing/non-manufacturing index
2200/1800 Richmond Federal Reserve Bank President Jeffrey Lacker speech on economics after the crisis at University of Wisconsin.
HSBC Global Research