TOP
World’s biggest banks face 1-2.5 pct surcharge by end 2018. Surcharge will be on top of Basel III 7 percent minimum . Surcharge to be in form of core tier 1 capital. {http://bit.ly/kjCQdO}
Chinese Premier Wen Jiabao signalled for the first time that China would struggle to meet its 4% inflation target this year (although likely to be under 5%). Adds that sees the Chinese economy growing above 8-9 percent this year {http://reut.rs/kztTQ5}
China’s premier Wen said “I have confidence in European economic development,” “China is a long-term investor in Europe’s sovereign debt market. In recent years we have increased by a quite big margin holdings of euro bonds.” “In the future, as we have done in the past, we will support Europe and the euro.” {http://reut.rs/kewVEC}
Greece’s biggest union has warned that the crisis-hit country will not be able to repay its debt if the government implements fresh austerity measures that amount to a “mafia-style rescue”. {http://ind.pn/lEQycM}
US President Obama says “we cant simply cut our way to prosperity” {http://reut.rs/lVQPHV}
EUROPEAN:
Europe should not exclude the possibility of intervening on Greek interest rates, Juncker, the chairman of EZ finance ministers said in a television interview {http://reut.rs/j2GYWb}
France is proposing a new debt rollover plan whereby only 70% is rolled over, of which 50% into up to 30-year bonds (instead of 5yr), and 20% onto a “zero-coupon fund” focused on high quality securities, backing those bonds {http://reut.rs/kkJT0I}
Angela Merkel remains working hard to get German banks to agree to a Greek government debt rollover {http://bloom.bg/kdoc0h}
German FinMin Wolfgang Schaeuble warned that a veto of the Greek government’s austerity plans by parliament this week could mean Athens will not receive a bailout tranche it needs to remain solvent.
WSJ – Former Bundesbank chief Axel Weber said Europe needs to consider guaranteeing all Greece’s outstanding debt because Athens’s only viable alternative is a messy default that would be more costly and risk sparking broader financial turmoil. {http://on.wsj.com/llk70U}
In the Economist, regarding the EU financial system and the global economy/system they argue that the Greeks and Europe write down the debt now rather than later {http://econ.st/mBTGYx}
As many as four PASOK deputies are considering not voting for the governments medium-term fiscal plan in Parliament this week, leaving the ruling PASOK party with the slimmest of majorities to pass the new set of austerity measures through the House.
George Soros said it’s “probably inevitable” that a mechanism will have to be put in place to allow weaker euro-region economies to exit the single currency. {http://bloom.bg/ixlR2r}
BoE Gov Mervyn King’s speech on Friday puts him at odds with the ECB’s view on how to deal with the Greek debt situation {http://on.ft.com/mFe86t}
In a bit of a blow to Christine Lagaurde’s bid to become the next head of the IMF Australia and Canada put their support behind her main rival Mexican central bank Governor Agustin Carstens {http://bloom.bg/mzkdHH}
Lloyds will reveal this week that it is close to weaning itself off emergency state funding as its new chief executive lays out the long-awaited results of a strategic review. Lloyds Banking Groups exposure to the riskiest kind of mortgages is more than double that of any of its top five rivals.
Ireland may not have to go back to the market to borrow money until the end of 2013, Minister for Finance Michael Noonan said.
A “plan B” in the European sovereign debt crisis will eventually result in a default on as much as 82 per cent of Irish private sector debt, according to an analysis by Citi Economics.
Goldman Sachs Economist Jim O’Neil argues that much of Europe’s problems could be solved by creating a “true” euro bond {http://tgr.ph/iPSX5g}
The German view of borrowing and savings makes them very unsympathetic to the plight of Greece and other over indebted southern European countries {http://on.wsj.com/kuOvnU}
Tensions increased in Italy’s government on Sunday over an austerity plan to be approved next week, with one senior coalition member accusing Economy Minister Giulio Tremonti of trying to cause the government’s collapse.
Russian Deputy Economy Minister Andrei Klepach said there is no urgent need in tighter monetary policy thanks to fading inflationary risks
US:
The Fed is just days away from ending one of the major steps to aid the U.S. economy but the effort has done little to solve the original problem: The government and individuals alike are still heavily in debt, the WSJ reports.
US President Obama says “we cant simply cut our way to prosperity” {http://reut.rs/lVQPHV}
Investors in the US government bond market could face losses of up to $100bn if the largest economy loses its triple A rating, according to a research arm of McGraw-Hill, the parent of Standard & Poor’s. – FT
Global interest rates must rise to avoid high inflation becoming entrenched, the BIS said. It also warned that delaying deficit cuts could risk intensifying the sovereign debt crisis and have grave consequences were investors to lose confidence in a major economy such as the United States. {http://ind.pn/kHPHbN}
FT – Economic growth must slow, warns BIS {http://on.ft.com/mB8yTa}
The era of cheap clothing on the high street is probably over, as soaring demand from emerging markets keeps the price of natural fibres stubbornly high, a body representing the US cotton industry has warned.
The US is starting to import higher end products from China including parts for a bridge in San Francisco {http://nyti.ms/mnYBLW}
Rebel victories in Western Libya have helped the region get much needed supplies and even access to some things that weren’t there under the Gaddafi regime {http://nyti.ms/l1f1Ns}
ASIA:
Ratings agency Moody’s reported saying Japan govt infighting is delaying long-term fiscal reform and that the Kan govt missing the June 20 deadline on reform is credit negative. (Rtrs)
Some 42% of Japanese voters think Japan PM Kan should resign as soon as possible, double the ratio in the previous survey in May.
Overseas CB sharply increased their holdings of Japanese government bonds and other yen-denominated assets in 2010, the Nikkei reports. Yen-denominated assets held in custody at the BOJ on behalf of their foreign counterparts jumped 24.6% on the year, or Y7 trillion, to Y35 trillion or so at the end of 2010.
The Tokyo Stock Exchange group will expand into clearing of over-the-counter derivatives on July 19, starting with credit default swaps, the Nikkei reports.
The Chinese economy will likely grow 9.5% in the first half and by 9.3% over the whole year, mitigating concerns about a hard landing, a senior government economist said in remarks published today.
Premier Wen Jiabao expressed his confidence in the Hungarian economy and said China is willing to buy debt issued by the country’s treasury. “China has confidence in Hungary’s economy. China is willing to buy a certain amount of Hungarian treasury debt,” {http://bloom.bg/jExNxZ}.
Chinese Premier Wen Jiabao signalled for the first time that China would struggle to meet its 4% inflation target this year (although likely to be under 5%). Adds that sees the Chinese economy growing above 8-9 percent this year {http://reut.rs/kztTQ5}
Local governments in China had incurred about 10.7 trillion yuan ($1.65 trillion) in debt as of the end of 2010, about half of which was held by financing vehicles, the national audit office said on Monday in its first-ever audit of local government finances {http://reut.rs/kYoLtI}
The PBoC sets the yuan central parity rate at CNY6.4750 against the dollar today.
The number of Chinese companies doing business in South Korea has nearly tripled over the past decade, indicating China’s increased presence as South Korea’s major trading partner.
The Philippine central bank governor said on Saturday that domestic price pressures were moderating and the recent fall in oil prices following the release of emergency stockpiles was positive from an inflation standpoint.
FT – Thailand – The prospect of fresh political turmoil has prompted nervous foreign investors to dump Thai stocks ahead of next Sunday’s general election. Overseas investors have withdrawn more than $1bn from the Thai stock market, according to some estimates, since Yingluck Shinawatra – sister of Thailand’s divisive former leader Thaksin Shinawatra – took over the leadership of the country’s main opposition party, Puea Thai.{http://on.ft.com/kvBS4e}
ELSEWHERE:
In Latin America proper Venezuela’s President Hugo Chavez sent out a series of Twitter messages on Friday. These were the first since June 4 and some of his only public communications since having surgery earlier in the month in Cuba {http://on.wsj.com/lxSPc1} . Other sources maintain that Chavez is in really bad straits see this BBRG piece {http://bloom.bg/iAoNmM}
OVERNIGHT DATA:
New Zealand: The monthly merchandise trade balance fell from last month’s $1.1 billion to $605 million, taking the annual balance to a surplus of $1.067 billion. The consensus market forecast was for a monthly surplus of $980 million.
South Korea’s Finance Ministry says sells krw 800 bn 20-yr domestic Treasuries at 4.37%, covered 4.619 times.
CORPORATE:
Mexican billionaire Carlos Slim bought an additional 500,000 indirect shares in Criteria CaixaCorp SA (CRI). Slim now holds 18% of the listed holding company of Spain’s La Caixa banking group. {http://bloom.bg/inq2b6}
GS engaged in a number of equity derivatives trades with the Libyan Sovereign Wealth fund without having an ISDA agreement in place {http://on.wsj.com/lFIj0h}
MARKETS:
STOCKS: Major European bourses are initially seen trading lower Monday as US Globex traded index futures are also lower , although off the session lows. The S&P Sep contract was last down 2.6 points at 1261.3, with the Nasdaq Sep contract down 5.25 points at 2202.5. Dow futures are also lower, down 25 at 11856. The Nikkei 225 Index is down 0.65% at 9,615.48 mid-way through the afternoon session. The broader-based TOPIX is lower by 0.51% at 9621.68. Banks are lagging after the Basel Committee on Banking Supervision ruled to raise the capital adequacey requirements of the world’s major lenders. The Hang Seng Index ends the morning session down 0.66% at 22,025.35. The Shanghai Composite Index ends the morning session up 0.40% at 2757.31.
TSYS: The yield on the 2Y was sitting just above all-time lows at 0.33%, with the 5Y at 1.37%, the 10Y at 2.86% and the Bond at 4.18%.
COMMODITIES: Crude futures are lower in Asian trade Monday, although off the session lows. The front-mnoth WTI contract was last 49 cents lower at $90.67, having touched a low at $90.40. The WTI/Brent spread was last at $13.75, down 68 cents. Gold is currently trading at $1500 with Silver at $33.80.
HSBC Global Research