TOP
New Zealand’s central bank held interest rates steady as expected and said it would keep them there for now, but signalled it may tighten policy as soon as the end of the year as the economy gathers steam, sending the currency higher {http://reut.rs/kn7vj7}
The Feds Beige Book’s conclusions fit with other signs from recent government reports showing consumers struggling with higher gasoline prices and reduced job opportunities. That said the report was marginally upbeat, with the weakness confined to only 4/12 regions, NY, Philly and Chicago. Also mentioned that japanese tsunami had caused serious supply chain disruption
1y USDCNY NDFs up 300 pts today as after the WSJ article mentions people are playing for potential CNY CNH convergence. Yesterday evening Bank of China Ltd. received its first approval to bring yuan it accumulated offshore back to mainland China, in a rare move that is part of Beijing’s plan to promote the global trading of the country’s currency.{http://on.wsj.com/j9z5V3}
US
Fed Bullard: A U.S. default would have severe reverberations in global markets, Bullard said just hours after Fitch Ratings warned it could slash U.S. credit ratings if the government misses bond payments {http://reut.rs/k5JXZF}
Tim Geithner, US Treasury secretary, has urged Europe to ensure that new rules governing the vast derivatives markets are aligned with those in the US, risking further inflaming sensitivities over the US approach to global regulatory reform, the FT reports
Fed Hoenig said financial markets “will throw a tantrum of tantrums” when the Fed signals it is ready to start tightening, Reuters said
President Barack Obama’s advisers have discussed seeking a temporary cut in the payroll taxes businesses pay on wages amid economic reports suggesting the recovery is slowing, according to people familiar with the
matter.
A large majority of Americans say the U.S. economy would probably suffer serious harm if Congress fails to give the federal government more borrowing authority, the Washington Post reports
WSJ reportsFed supports a 10% bank buffer, ie Basle 7%+ extra 3%. Some international policy makers support 2-2.5%, france less. {http://on.wsj.com/jvYCo3}
Pimco’s Gross Says There Will Be No QE3
The U.S. is approaching a financial crisis worse than 2008, Jim Rogers, chief executive, Rogers Holdings, warned CNBC.
EUROPE
The Greek government warned dissenters in the ruling party on Wednesday against rejecting an austerity plan agreed under a new international bailout deal, after unemplyment data (16.2% ) showed the depth of the nation’s economic crisis.
BoE chief economist Spencer Dale and external MPC member Martin Weale are predicted to continue with their minority call for a 25 basis point rate rise, while Adam Posen is expected to vote again for an extra 50 billion pounds in quantitative easing. Interest rates are expected to stay on hold
German Chancellor Angela Merkel has called on her party to back further aid for Greece or risk spreading financial market contagion to Spain and other euro zone countries, the Irish Times says
After initially resisting the idea of any Greek debt restructuring, the ECB is warming to the idea of having private investors share the burden of rescuing Greece, potentially clearing the way for a debt swap. {http://reut.rs/mtH1Xe}
The top candidate to run the IMF, French FinMin Lagarde, said she backed a bigger say for China at the Fund while making clear that the euro zone crisis would be a priority if she wins the job.
British business minister Vince Cable threatened the country’s banks with punitive taxes if they fail to meet lending targets aimed at boosting a stuttering economy as a top lender said regulatory efforts to make banks safer could backfire.
UK PRESS: amid a stream of gloomy data that has raised renewed fears of a double-dip recession in the UK,further QE could soon be back on the agenda, the FT says. Fears for Britain’s recovery and speculation that the Bank of England could resume billions of pounds in bond purchases have triggered a rally in the UK government bond market, the paper says
ASIA
Japanese FinMin Yoshihiko Noda, an advocate of a higher sales tax to fix state finances, emerged on Thursday as a possible frontrunner to replace Naoto Kan as premier after a newspaper said ruling party executives would back his candidacy.
Revised data showed Japan’s economy shrank 0.9 percent in the first quarter, unchanged from the initial estimate as inventory adjustments offset weaker corporate spending, but analysts said a recovery is on track as industrial production rebounds .
All 54 of Japan’s nuclear reactors may be shut by next April, adding more than $30 billion a year to the country’s energy costs, if communities object to plant operating plans due to safety concerns, trade ministry officials said
JAPAN PRESS: The government is mulling compiling the fiscal 2011 second supplementary budget totalling Y10-Y15, to help reconstruct the quake-hit areas in northeastern Japan, the Nikkei reports
WSJ reports Chinese house prices are falling {http://on.wsj.com/ivH70A}
HSBC FT article: RMB internationalisation – too big to ignore {http://on.ft.com/kcyPbk}
China’s main stock index for hard currency B shares plunged more than 7 percent in early afternoon trade on Thursday, under pressure from the country’s plan to launch an international board on the Shanghai Stock Exchange, traders said
China should adopt a “single rate” flat personal income tax to replace the current progressive tax rate system to help lower the average income tax rate, China Daily cited Li Daokui, an adviser to the People’s Bank of China, as saying.
China overtook the US as the world’s largest consumer of energy last year, during which global consumption growth was at its highest rate since 1973, according to the BP statistical review of world energy. The BP publication shows that China accounted for 20.3 per cent of consumption, surpassing the US, with a 19 per cent share of the global total.
IMF’S LIPSKY SAYS STRONGER YUAN IS ONE COMPONENT TO HELP REBALANCE CHINA’S ECONOMY
Vietnam’s economy faces “significant challenges” and authorities need to raise policy interest rates further to cope with an upward trend in inflation, the IMF said on Thursday.
A Hong Kong luxury residential property on the city’s Peak district sold for HK$800 million, or HK$96,362 per square foot, making it the most expensive independent house in the city and Asia region, per square foot, the Hong Kong Economic Times reported
BoK: Twelve of 20 analysts surveyed expect the Bank of Korea to leave rates unchanged again at its June 10 policy review amid growing signs of a global economic slowdown
India has yet again deferred a decision on raising prices of diesel, kerosene and cooking gas, needed to rein in the fiscal gap, government sources said on Wednesday, as it deals with one of the worst political crises in recent years.
*BANK INDONESIA LEAVES REFERENCE RATE UNCHANGED AT 6.75%
Australian unemployment rate unchanged at 4.9% but the actual jobs numbers. added was rather disappointing with only 7800 jobs added in that period, fell short of the analysts’ estimate of +25k, number of full time jobs also fell by 22k. Aud bills up 9-10 ticks right after the number and AUDUSD dipped from 1.0650 to a low 1.0563.
RBNZ Governor Alan Bollard says he’s not worried about inflation expectations getting anchored at high levels, but he’s “alert to the possibility.” Bollard adds that inflation has peaked in this quarter due to the effect of GST and other administrative price increases, and the next quarter may also see elevated inflation but Q4 would see low prices. Also worried about value of NZD
CORPORATE
Chinese stocks listed in the United States took a beating on Wednesday as brokers raised red flags about trading risks following a series of accounting scandals that have afflicted the sector.
Mizuho Corporate Bank says it will cut the long-term prime rate to 1.50% from 1.55% effective on Friday. Japan’s long-term prime rate is the benchmark interest rate for financial institutions of deciding on housing loan and lending rate to creditworthy firms
FT- The announcement by Nissan that it will design, engineer and build the next version of its Qashqai sport utility vehicle at its plant in Sunderland gives a boost to the UK’s plan to make car production central to its drive for a manufacturing renaissance.
LATAM
Brazil’s policymakers voted unanimously to raise the so-called Selic rate to 12.25 percent from 12 percent, a move all 21 economists in a Reuters survey expected.
Chile’s central bank said on Wednesday it would continue with daily purchases of $50 million in U.S. currency, keeping the pace of a $12 billion intervention program for 2011 aimed at taming the strong peso.
China looks ready to play a major role in the development of Cuban oil, including the island’s soon-to-be explored fields in the Gulf of Mexico, after the signing of energy-related accords during a visit this week by Vice President Xi Jinping
OTHER MARKETS
NIKKEI 9460 (+0.1%), HANGSENG 22412 (-1.1%), S&P/ASX 4545 (+0.2%), SHANGHAI SE COMPOSITE 2717 (-1.2%), KOPSI 2080 (-0.2%) – As of 07.00GMT
TSYS: The yield on teh 2Y was lasta t 0.39%, with the 5Y at 1.51%, the 10Y at 2.95% and the Bond at 4.18%. The Treasury is set to sell $13 bn 30-yr notes.
OIL: Brent crude at 117.95 (+0.1%), WTI crude at 101.25 (+0.5%)
Gold trades at $1535 (-0.1%), Silver at $36.70 (-0.4%)
OPEC talks broke down in acrimony on Wednesday without an agreement to raise output after Saudi Arabia failed to convince the oil cartel to lift production. {http://reut.rs/k5u0E9}
COMING UP TODAY( times GMT/ET)
0500/0100 Japan: May Consumer Confidence Survey
0530/0130 France 1Q-11 employment
0600/0200 Germany 1Q-11 labour costs
0600/0200 Germany Apr-11 trade balance
0630/0230 France May-11 BoF business survey
0830/0430 UK May-11 BOE Quoted Rates
0830/0430 UK Apr-11 Trade Balance
0900/0500 Philadelphia Federal Reserve Bank President Charles Plosser speech on the economic outlook to the Society of Business Economists in London
1145/0745 ECB interest rate decision
1100/0700 UK Jun-11 BOE MPC Interest Rate Announcement
1230/0800 ECB President Jean-Claude Trichet press conference
1230/0830 Canada Apr-11 International merchandise trade
1230/0830 US 04-Jun Jobless Claims
1230/0830 US Apr-11 International Trade Balance
1300/0900 Mexico Apr-11 Trade balance (r)
1345/0945 US 05-Jun Bloomberg Comfort Index
1400/1000 US Apr-11 Wholesale Inventories
1400/1000 Mexico May-11 CPI, PPI ex-oil
1430/1030 US 03-Jun EIA Natural Gas Stocks
1610/1210 Federal Reserve Bank Vice Chair Janet Yellen speech to the Cleveland Federal Reserve Bank Policy Forum on housing in Cleveland
1630/1230 CFTC Chair Gary Gensler speech to the Global Exchange and Brokerage Conference in New York
1700/1300 Central Bank of Luxembourg presents annual report
2030/1630 US 30-May Money Supply (M2)
2230/1830 Treasury special advisor Elizabeth Warren speech to the Roosevelt House Public Policy Institute in New York
2230/1830 Treasury Assistant Secretary for Financial Markets Mary Miller speech on housing finance reform to the Women in Housing Finance
HSBC Global Research