Greek police clashed with protesters outside parliament in the early hours of Thursday ahead of a vote expected to approve a final austerity bill needed to secure international aid and avert a debt default. The government of PM Papandreou, which won a first vote on Wednesday by 155 to 138 votes, expects to pass the second and final bill covering 28 billion euros in tax hikes, spending targets and privatisations agreed as part of an EU/IMF bailout.
Bloomberg says a draft deal has been made, based on french proposal, to be possibly announced today.
The US would immediately have its top-notch credit rating slashed to “selective default” if it misses a debt payment on Aug. 4, S&P’s said. Adds sees “extremely low probablility” of US default.
UK June GFk UK consumer confidence -25 (expected -24).GfK NOP Says Retreat Inevitable Following Royal Wedding Effect. Sees Gloomy Period Ahead For The UK High Street.
Strong NZ confidence numbers (46.5 vs 38.3) saw the NZD hit all time highs.
EUROPE
France’s proposal for rolling over Greece’s debt with banks still needs to be checked to ensure it does not constitute a credit event, ECB Bini Smaghi said.
ECB Nowotny: ECB want to avoid greek default. Bankrupcy would be more painfull for greeks. Greek reforms will take “many years”. Greek default would be far more painfull than austerity drive.
Greece has pulled back from the brink of default and averted a broader eurozone crisis after backing sweeping austerity measures in a knife-edge parliamentary vote.
UK: Hundreds of thousands of British teachers and civil servants will strike over pension reform today in the most serious challenge to the coalition government’s austerity drive.
Rome is expected today to approve an austerity drive worth up to E47bn ($68bn) in savings by 2014, in a move aimed at reassuring the markets and its European partners on its fiscal discipline, the Ft reports.
Turkey’s Central Bank cut its daily forex buying auctions to $30 million from a previous $40 million on Wednesday in a move widely anticipated by markets amid a lira rout, but analysts said further action was needed.
US
As QE2 ends, market debates Fed’s next move.
U.S. President Barack Obama called for new steps to spur job growth and tax hikes on the rich, hardening a stance that will likely complicate deficit reduction talks with Republicans.
In its annual report on US economic policy, the IMF cited “unfavourable fiscal outcomes” as one of the key dangers to the US’s economic outlook. “These could take the form of a sudden increase in interest rates and/or a sovereign downgrade if an agreement on consolidation does not materialise or the debt ceiling is not raised soon enough. These risks would also have significant global repercussions, given the central role of US Treasury bonds in world financial markets.
Washington’s fiscal recklessness rules out QE3
The U.S. Fed said U.S. dollar liquidity swap arrangements have been extended by one year through Aug. 1, 2012, with the ECB , the BoC, the BoE, and the SNB. The Fed on Wednesday said the Bank of Japan will consider the extension of at its next monetary policy meeting. The swap arrangements, established in May 2010, had been authorized through Aug. 1
The SEC on Wednesday proposed new standards of conduct for banks and other firms that deal in complex financial instruments, “swaps”, the Washington Post says. The proposed rules are part of the government’s push to impose order on the vast but historically unregulated trade in derivatives, an often lucrative but risky business, the paper adds.
ASIA
China’s economy is expected to grow a robust 9.5% in the first half of 2011 and retain much of the momentum the rest of the year with little chance of a hard landing, a government think-tank said in a report published on Thursday. The State Information Centre (SIC), in the research report published in the official China Securities Journal, forecast that annual inflation would be 5.3% in the first half and 4.9 percent for the whole of 2011, overshooting Beijing’s target of capping full-year inflation at 4 percent.
China will expand trade with developing states in the Southern hemisphere in the coming years, boosting outward investment and allowing imports to double, a senior Chinese diplomat said on Wednesday.
The Markit/JMMA Japan Manufacturing Purchasing Managers Index (PMI) fell to a seasonally adjusted 50.7 in June from 51.3 in May. The index for new orders rose slightly to 50.0 in June from 49.8 in May. In April the index stood at 37.7. The output component of the PMI index rose in June to 52.7 from 51.5 in the previous month, reaching the highest level since February.
Japan’s fund managers saw their holdings of eurozone debt fall to a record low 21.8$ in June, down from 22.1% in May, the latest poll shows. Domestic bond holdings hit a record high at 38.8%, up from 38.3% in May. Globa bond holdings fell modestly to 49.5% from 49.6% in May, the Reuters poll shows
Japan: The national average land price, released twice a year by the Japan Real Estate Institute, fell 4.1% on year at the end of March 2011, slightly improving from -4.3% in September 2010
JAPAN: A 5.5-magnitude earthquake jolted central Japan at 0816 JST (2316 GMT), but the Japan Meteorological Agency did not issue any tsunami warning. The epicenter was in Nagano Prefecture.
Public support for Japanese PM Kan’s Cabinet fell sharply to 23.2% in a poll conducted between June 28 and 29 by Kyodo News, from 33.4% in the previous survey in early June
CHINA PRESS: Ongoing appreciation pressure is likely to see the yuan continuing to rise against the US dollar this year, the official China Securities Journal said. Over the long term, a weaker dollar will be a major factor behind yuan strength, the newspaper said in an editorial.
CHINA: CPI is set to hit a new high for the current cycle in June and the government needs to raise interest rates to bring real interest rates positive, government think tank State Information Center I said. Added..”The government should use more price tools such as interest rates and the exchange rate in the second half and gradually eliminate negative real interest rates.”
FT – Fears rise of bond defaults by Chinese groups.
DJ THINK TANK: CHINA YUAN LIKELY TO RISE 5% VS DOLLAR THIS YEAR.
WSJ – China Pork Prices at Record High, Likely to Spur Inflation. Prok rose 4.5% from a week earlier (thats now 60% in the past year)
The PBoCsets the yuan central parity rate at Cny6.4716 against the dollar today, compared with Cny6.4718 set for the previous trading day.
Sunday’s election results in Thailand should not have a significant impact on the Thai economy, which should grow by at least 3.5% to 4.5% this year, the Bangkok Post reports citing forecasts fromNESDB.
South Korea’s finance ministry now aims to keep consumer price index growth at or below 4% for the whole of this year, compared with a previous target of “about 3 %” unveiled in late 2010 and up from last year’s 2.9%. It downgraded its gross domestic product growth target to 4.5 percent for this year from the previous target of “about 5 percent.” Asia’s fourth-largest economy grew 6.2% in 2010.
SOUTH KOREA: Industrial output continued to expand for the 23rd straight month in May, raising hopes the nation’s economic recovery is gaining momentum, Yonhap News reports citing the government. Production in the mining and manufacturing industries expanded 8.3% last month from a year earlier, quickening from 6.9% growth in April.
INDONESIA ENERGY MINSTRY SAYS KOREA’S KEPCO PLANS TO INVEST $2 BLN FOR GAS AND POWER PROJECTS
NZ’s business confidence rose in June, but firms are slightly less optimistic about their own business later in the year even as inflationary expectations have eased, a survey showed on Thursday. A net 46.5% of the respondents in the National Bank of NZ’s monthly business survey in June expect the economy to improve from 38.3% in May, but the share of respondents who expect their own business to grow in the next 12 months slipped slightly to 38.7% from 39.7%
AUSTRALIA: Total credit to the private sector rose 0.3% in May, compared to a flat growth in April, and was up 3.1% in the 12-month period to May
LATAM & others
Brazilian President Dilma Rousseff said on Wednesday South America’s Mercosur trade bloc should protect local industry by raising trade barriers against cheap imports from outside the region.
Brazil central bank sees 2011 inflation at 5.8 percent. Sees 2012 inflation at 4.8% vs 4.6% before.
S.AFRICA’S MAY CREDIT GROWTH AT 5.18 Y/Y (CONSENSUS 6.35 PCT) – CENTRAL BANK
CORPORATE
The London Stock Exchange’s hopes of securing its future as part of a transatlantic deal with TMX Group evaporated last night after the UK bourse withdrew its merger plan having failed to secure enough support from shareholders of its Canadian peer.
OTHER MARKETS
NIKKEI 9814 (+0.2%), HANGSENG 22415 (+1.6%), S&P/ASX 4606 (+1.75), SHANGHAI SE COMPOSITE 2757 (+1%), KOPSI 2096 (+0.1%) – As od 07.00GMT
US STOCKS CLOSE: Dow and Nasdaq recovered from a mid-afternoon dip to end the day with moderate gains, extending their winning streak. Dow added 73 points or 0.60% to end at 12,261 while Nasdaq was up 11 points to end at 2,740.
TSYS: The yield on the 2Y was last at 0.45%, with the 5Y at 1.68%, the 10Y at 3.10% and the Bond at 4.37%.
OIL: Brent crude at 112.61 (+0.25) and WTI crude at 95.12 (+1%)
Gold $1511 (flat), silver at 35.035 (+0.4%)