TOP
Moody’s downgraded Italy to A2 from Aa2, and warned that further downgrades were possible because of a “material increase” in funding risks for EZ countries. {http://reut.rs/qp1qub}
EU fin mins are examining ways to co-ordinate bank recapitalisations after they agreed that additional measures were urgently needed to shore up institutions, the FT reports. {http://on.ft.com/mRshk6}
Obama challenged Republican leaders on Tuesday to put his entire $447bn jobs plan to a vote, rather than breaking it up, to show US voters “exactly where members of Congress stand.” {http://reut.rs/qlBY54}
Greek PM George Papandreou held crisis phone talks with Germany’s chancellor Angela Merkel Tuesday, following the EU’s decision not to disburse further aid to Athens until it implemented crucial reforms, the Guardian reports. Papandreou told Merkel Athens “is committed to austerity measures whatever the political cost”, the paper says. {http://bit.ly/pND3Rd}
Hundreds of thousands of Greeks are protesting against the Gov’s EUR 6.6bn austerity plan. {http://bloom.bg/oJDmCx}
EUROPE
Moody’s also warned that European countries with debt ratings below Aaa may see reductions in their rankings, {http://bit.ly/p3sDaI}
The Japanese government is mulling buying additional bonds issued by Europe’s bailout fund to help contain the crisis in the debt-plagued region, the Nikkei reports. Japan already holds 20% of the total bonds issued so far by the European Financial Stability Facility (EFSF), it says. {http://reut.rs/qYvT7D}
France and Belgium are considering a bailout for Dexia, moving the banking crisis from the continent’s periphery to its heartland. {http://bloom.bg/qr4j7f}
CDS prices which show the European financial system is closer to breakdown than at any time in recent years. {http://on.ft.com/mUdJy1}
Britain has withdrawn its objections to a key piece of EU financial regulation after winning a series of last-minute concessions over the rules for derivatives markets. {http://on.ft.com/o5iBFh}
Temporary and permanent jobs growth decelerated in September to its slowest rate since August 2009, adding to mounting evidence that the UK labour market is slackening and pointing to rising unemployment ahead. {http://tgr.ph/o7rDo4}
UK shop price inflation stabilised in September after easing in August, sticking at 2.7% year on year, the latest results of the British Retail Consortium. {http://buswk.co/nBtux4}
The number of real-estate and construction companies seeking bankruptcy in England and Wales rose by 11% in the Q3 as budget cuts and economic uncertainty led to cancelled projects, Deloitte LLP said. {http://bloom.bg/nM7mHP}
The EUR weakened against the JPY and USD while Asian stocks fell after a downgrade of Italy’s credit rating added to concerns over the EZ debt crisis. {http://bit.ly/n7Jha9}
US
Herman Cain is now tied with Mitt Romney for the lead in the race for the 2012 Republican presidential nomination, while former front-runner Rick Perry has taken a steep fall, according to a CBS News poll released on Tuesday. {http://reut.rs/nJEHmd}
BONY was hit by two law suits Tuesday, as the currency-trading crisis escalates. The Justice Department and New York’s attorney general filed separate civil suits currency transaction fraud against clients. {http://on.ft.com/rh6FKq} {http://reut.rs/ox6gc1}
Highlights of Treasury Secretary Tim Geithner’s interview on CNN:
-WHETHER US RECESSN TO DEPEND ON EU
-US ECON TO ALSO DEPEND ON CONGRESS ACTIONS
-EU PROBS CLD DO A LOT MORE DAMAGE IF NO EFFECTV ACTN
-EU WILL DO WHAT THEY NEED TO DO
-EU HAS TO MOVE MORE QUICKLY WITH MORE FORCE
-US FIN SYSTM STRONGER;LESS VULNERABL TO EU CHALLENGES
-US BANKS BLAMING GOVT,REFORMS FOR EVERYTHING
-GOVT TO PREVAIL OVER BANKS TO IMPLEMENT REFORMS
US legislation that would punish China for an undervalued currency ran into opposition from Senators and the House Speaker, who said the bill was “pretty dangerous.” {http://bit.ly/nH7SN8}
Bernanke has accused China of damaging prospects for a global economic recovery through its deliberate intervention in the currency market. {http://on.ft.com/regBAJ}
Deficit-reduction talks in the Congress entered a potentially groundbreaking phase on Tuesday with Republicans signalling they could consider some revenue increases in exchange for Democrats embracing healthcare cuts. {http://reut.rs/nOMrY1}
ASIA
Chinese markets are closed the rest of the week, to mark the National Day holidays.
Japanese firms saw issuing conditions for their commercial paper ease in the past three months, being little affected by the European sovereign debt crisis, a follow up poll to the Bank of Japan’s September Tankan showed.
The Bank of Japan will decide at a two-day policy board meeting starting Thursday to extend the end date of a program that lends at low interest rates to banks in areas hit by the March 11 disaster, the Nikkei reports.
BOJ: Bank of Japan Governor Masaaki Shirakawa speaks at a lower house committee. Headlines stating they are already taking bold steps, buying assets.
*JAPAN NEEDS MORE CHINA, S. KOREA ASSETS IN RESERVES, OKUBO SAYS
*OKUBO SAYS HOLDING ASIAN CURRENCIES ‘NATURAL’ AS TRADE GROWS
*JAPAN RULING PARTY DEPUTY POLICY BOSS OKUBO SPEAKS IN INTERVIEW
{http://bloom.bg/pkeGph}
Australian activity in the services sector fell in September but still remained in the expansion zone for the second straight month, the latest services index from AIG/CBA showed.
In South Korea, Foreign exchange reserves fell by the most in nearly three years in September due mainly to the weaker dollar conversion value of non-dollar assets and suspected dollar-selling intervention, Yonhap News reports. {http://bit.ly/p9MqhB}
South Korea, Retailers’ confidence fell sharply for the fourth quarter of the year from three months earlier amid fears over another economic recession, but a majority of firms are still optimistic about their business conditions, Yonhap News reports. {http://bit.ly/mVg2ZL}
Australian lawmakers called on the Gov to investigate claims that senior CB officials suppressed evidence of corruption.
{http://bit.ly/q7GlTr}
CORPORATE
Apple’s latest version of its flagship iPhone initially disappointed investors on Tuesday. {http://on.ft.com/pJ87lH} {http://reut.rs/mQtDK0}
OTHER MARKETS
Equities: The S&P saw a late rally to close up 2.25% after news that EU fin mins were looking at bank recapitalization. {http://on.ft.com/q6vFus}
Treasuries: Treasuries are narrowly mixed in Asian trade, consolidating after the whipsaw session seen Tuesday. Oil is sharply higher with front-month WTI up $2.25.
CALENDAR
– Germany Aug car registrations
– Germany E5.0 bln 0.75% Sep 2013 Schatz Re-opening
0713/0313 Spain Sep svc PMI
0743/0343 Italy Sep svc PMI
0748/0348 France Sep final mfg PMI
0753/0353 Germany Sep final svc PMI
0758/0358 EMU Sep final svc PMI
0828/0428 UK Sep Markit/CIPS Services PMI
0830/0430 UK Q2 GDP 3rd Estimate
0830/0430 UK Q2 Balance of Payments
0900/0500 EMU 2Q GDP 3rd estimate
0900/0500 EMU Aug retail trade
1100/0700 US 30-Sep MBA Mortgage Application Index
1130/0730 US Sep-11 Challenger Layoffs
1200/0800 Brazil Aug-11 IBGE PPI y/y
1215/0815 US Sep-11 ADP Natl Employment Report
1300/0900 Canada Finance Minister Jim Flaherty speech to SIFMA in New York.
1300/0900 Mexico Aug-11 Leading Indicators (p)
1400/1000 US Sep-11 ISM Non-Mfg Index (NMI)
1400/1000 US Sep-11 ISM Non-Mfg Index (Bus Activ)
1430/1030 US 30-Sep EIA Crude Oil Stocks
1500/1100 Brazil Sep-11 HSBC Services PMI
2020/1620 US Treasury Secretary Tim Geithner Q&A at the Washington Ideas Forum in Washington.
HSBC Global Research