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Euro zone FinMins promised cheaper loans, longer maturities and a more flexible rescue fund to help Greece and other EU debtors in a bid to stop financial contagion engulfing Italy and Spain {http://bit.ly/pjRYNn}. Full 1 page statement here: {http://bit.ly/oASyeu}
The euro fell to a four-month low of 1.3933 after new IMF MD Christine Lagarde said the fund was not yet ready to discuss terms of a second Greek bailout. She said “Can’t take anything for granted on Greece package”
George Soros said in a FT editorial that Greece is heading for a disorderly debt default or at least a devaluation, and repeated his call for EU leaders to adopt a “plan B” to stem contagion to the rest of the bloc {http://on.ft.com/onwdF0}
The Bank of Japan kept monetary policy steady and revised up its assessment of the economy, encouraged by a pickup in factory output and the prospects for recovery in business sentiment, which was hit by the devastating earthquake in March. {http://reut.rs/oHlFq0}
China’s new loans rose more than estimated in June and money supply growth rebounded even after the central bank raised interest rates and reserve requirements to cool credit growth that’s fueling inflation. New loans were 633.9 billion yuan, $98 billion, (exp 623bn and 551.6 billion yuan in May. M2, the broadest measure of money supply, rose 15.9%. Foreign-exchange reserves, the world’s largest, rose to $3.2 trillion at the end of June from $3.04 trillion at the end of March {http://reut.rs/ogWLf6}
EUROPE
European FinMins have sent a strong signal they are prepared to begin buying back significant amounts of Greek bonds on the open market, announcing
they would reopen discussions to use the eurozone’s €440bn bail-out fund to repurchase the debt of distressed governments. {http://on.ft.com/riFUBH}
German FinMin Schaeuble: We have time on Greece, must be decided by September. Clear that Greece’s debt sustainability must be improved. Adds that EZ is united nut situation “isn’t easy”
EC President Jose Manuel Barroso warned Portugal that leaving the euro currency would be a “tragedy”.
Portugal’s economy will contract 2.0 percent this year (prev -1.4%) and a further 1.8 percent in 2012 (prev +0.3%), the Bank of Portugal forecast on Tuesday in its quarterly economic bulletin.
There is a potentially “explosive” correlation between sovereign and bank risk, a ECB policymaker Bini Smaghi said on Monday, urging Italian banks to press on with capital increases.
EU governments will oppose proposals for a 5% increase in the bloc’s budget in 2012, instead backing a 2.02% rise in line with inflation, EU officials said
Dutch FinMin: Not ruling out Greece selective default anymore
German banks have launched a stinging attack on the imminent publication of highly detailed information about their holdings, claiming these could worsen
the sovereign debt crisis and encourage “targeted speculation” against individual financial institutions. {http://on.ft.com/onZEg5}
UK: The squeeze on consumer spending power has sent optimism among finance directors of Britain’s largest companies tumbling at its fastest rate since the collapse of Lehman Brothers in 2008, the FT says.
The Bank of England has said that it does not have enough experienced staff to carry out its new job overseeing the City of London, the Times reports.
June UK Rics survey -27% vs -25e, -28p
UK: The values of homes across Britain are unlikely to recover to near the last market peak until 2020, with prices expected to retreat further next year before staging a gradual improvement in the next decade, the FT says. According to analysis in PwC’s UK Economic Outlook report published on Tuesday, house prices are expected to remain as much as 12 per cent off the 2007 peak by 2015, the paper says.
UK consumer spending will soar by 750m during London’s Olympic Games next summer, according to a new economic study which also forecasts a sustained boost to the British economy of a total 5.1bn over the next four years, the Guardian reports
US
U.S. President Barack Obama and top U.S. lawmakers fell short of finding enough spending cuts for a deal to avoid an Aug. 2 debt default and Republicans came under fresh pressure to agree to tax hikes. The two sides achieved no breakthrough in a roughly 90-minute meeting and scheduled a third straight day of talks for Tuesday. This came after Obama, at a news conference, declared it is time for both Republicans and Democrats to “pull off the Band-aid, eat our peas” and make sacrifices.
President Barack Obama ratcheted up the pressure on Republicans in tense budget talks, saying that the time had come for them to match their rhetoric on America’s looming fiscal crisis with action on a politically difficult $4,000bn fiscal deal. – FT
The Obama administration is ramping up talks on how to revive the housing market, which is weighing on the economic recovery—and possibly the President’s re-election in 2012. Last year, advisers considered several housing-policy prescriptions but rejected them in favor of letting the market sort things out. Since then, weak demand and a stream of foreclosed properties have put renewed pressure on home prices, prompting concern within the White House.
A top U.S. business leader said on Monday he expected President Barack Obama to formally submit free trade pacts with South Korea, Colombia and Panama to Congress in coming days and urged their quick approval
ASIA
The PBoC sets the yuan central parity rate at Cny6.4748 against the dollar today, compared with Cny6.4709 set for the previous trading day.
China’s rapidly expanding satellite programme could alter power dynamics in Asia and reduce the US military’s scope for operations in the region, according
to new research. {http://on.ft.com/nxExbA}
The top military leaders of the U.S. and China sparred publicly over the issue of the South China Sea following a meeting in which they appeared to have made little progress toward defusing future confrontations. – WSJ
Philippine exports fell 3.2% in May from a year earlier, their first annual fall since October 2009 as key electronics exports posted their biggest fall since April 2009. Electronics shipments, which dominate exports, fell 26.2 percent from a year earlier, and their fall in April was also larger than had been initially reported, the statistics office said.
The India May IP number 5.6% y/y was a downside surprise. The main driver behind the slowdown would appear to have been capital goods production, which can be quite volatile in nature
Australian business conditions improved modestly in June as sales and employment firmed, a survey showed on Tuesday, but that was not enough to shore up confidence of firms exposed to the high local dollar and subdued consumer demand. The seasonally-adjusted business conditions index rose 2 points to +2 in June, from zero in May which was revised down from +1 published earlier. Business confidence fell by a sharp six points to zero, from +6 in May.
NAB SAYS AUSTRALIAN ECONOMY STILL SLOWED BY CURRENCY AND FLOODS
LATAM
The Brazilian central bank is comfortable with its inflation forecast for 2011 despite a stronger-than-expected June reading, which spurred bets that even higher interest rates will be necessary to keep prices in check. Speaking to investors in New York, Central Bank President Alexandre Tombini said on Monday he was not surprised by June’s consumer inflation of 0.15 percent, which was more than double what analysts surveyed by Reuters expected.
OTHER MARKETS
NIKKEI 9934 (-1.4%), HANGSENG 21920 (-1.9%), S&P/ASX 4500 (-1.8%), SHANGHAI SE COMPOSITE 2765 (-1.4%), KOPSI at 2114 (-2%) – as of 07.00GMT
TSYS: The yield on the 2Y was last at 0.36%, with the 5Y at 1.44%, the 10Y at 2.88% and the Bond at 4.18%.
OIL: BRENT CRUDE AT 116.60 (-0.5%), WTI crude at 94.70 (-0.5%)
Gold 1551 (-0.1%), silver at 35.80 (-0.1%)
COMING UP TODAY( times GMT/ET)
– Bank of Portugal Summer Economic Bulletin
0530/0130 France Jun-11 HICP
0600/0200 Germany Jun-11 final HICP
0630/0230 Bank of Japan: Gov. Masaaki Shirakawa briefing
0645/0245 France May-11 balance of payments
0730/0330 Bank of England Deputy Governor Charles Bean speech in Canberra, Australia
0830/0430 UK May-11 CLG House Prices
0830/0430 UK Jun-11 Consumer Prices
0830/0430 UK May-11 Trade Balance – Netherlands E1.5-E2.5 bln 3.25% July 2021 DSL Reopen
1145/0745 US 09-Jul ICSC-Goldman Store Sales
1200/0800 Brazil May-11 IBGE retail sales ex-auto
1230/0830 Treasury Secretary Tim Geithner opens conference on Women in Finance in Washington
1230/0830 Canada May-11 International merchandise trade
1230/0830 US May-11 International Trade Balance
1255/0855 US 09-Jul Redbook Average
1300/0900 Mexico May-11 Industrial, Manufacturing production
1300/0900 Mexico Apr-11 Gross fixed investment
1400/1000 US Jul-11 IBD/TIPP Econ Optimism Index
1600/1200 SEC Chair Mary Schapiro closes conference on Women in Finance in Washington
1700/1300 US Treasury auctions $32.0 bln in 3-yr
1700/1300 ECB Governing Council member Ewald Nowotny speech at the University of Vienna, in Vienna
1800/1400 US FOMC Meeting Minutes
Eastern Europe
BUDAPEST – June CPI (0700)
BUDAPEST – 3-month T-bill auction (0930)
BUDAPEST – Cbank 2-week bill auction (1010)
BULGARIA – June CPI (0700)
SLOVAKIA – June CPI (0700)
CZECH – June CPI (0700)
CZECH – Unemployment, June (0700)
SLOVAKIA – Industrial orders, May (0700)
CZECH – Parlt extraordinary session with fiscal reform, pension reform on schedule (1200)
HSBC Global Research