TOP
Moody’s cut Ireland’s credit rating to junk, warning that the debt-laden country would likely need a second bailout {http://reut.rs/pNMabr}
Greece may buy back debt at an average price of about 50 percent of bonds’ nominal value, Financial Times Deutschland reported, citing a concept discussedby euro-zone governments.
FOMC minutes: “some Fed officials felt more easing might be needed if growth too slow to cut jobless rate and inflation rate returns to low levels”, HSBC US economist Kevin Logan on data: {http://bit.ly/puBmYD}
Chinese GDP jumped to 9.5% for the year (vs 9.4% exp) – slowest since Q3 2009.Industrial output growth in June accelerates sharply from May {http://reut.rs/pE978D}
Japan issued a fresh warning against the yen’s rise to a four-month high this morning (to 78.48) with FinMin Noda and Chief Cab Sec Edano saying recent moves in the currency had been one-sided. {http://reut.rs/pvBumv}
EUROPE
The IMF called for “decisive implementation” by Italy to cut its public debt, as the country sought this week to calm market worries about the sustainability of its debt burden. Says that while its economy has strengths, the public debt is high and growth is expected to remain constrained. Adds main downside risk comes from periphery’s turmoil
GREECE: A new rescue plan for Greece being negotiated by Europe’s policy-makers is likely to cost twice as much as previously expected if it is agreed, EU officials have signalled as fears grew in the financial markets for the fate of the euro single currency, the Guardian reports
Greece Fin Min: rejects any package that involves partial default
The Italian parliament is working on approving a €40 billion ($57.05 billion) austerity plan by Sunday, officials said, a fast timetable aimed at keeping Europe’s debt crisis from infecting the continent’s third-largest economy.- WSJ
Italy’s borrowing costs soared to their highest level in over a decade amid highly volatile trading as market contagion from Greece forced Silvio Berlusconi to appeal for national unity and “sacrifices” to cut the nation’s debt mountain. {http://on.ft.com/qQlGb5}
Unicredit CEO: Appears Italian banks may be OK under the stress tests
IRELAND: While Moody’d were cutting Ireland’s sovereign debt to junk, Standard & Poor’s last night took Ireland’s biggest banks off the danger list for an imminent downgrade, but stressed that their outlook was still “negative” and that July’s E24bn recapitalisation was “only adequate”, the Irish Independent said
Credit rating agencies have worsened the crisis in the euro zone and financial markets could live without them, ECB Governing Council member Ewald Nowotny said
UK PRESS: More than a trillion pounds of extra debts will appear on the Governments books today as the vast costs of public sector pensions and
contracts to build schools and hospitals are laid bare, the Times reminds.
US
Fed Chairman Bernanke goes to Capitol Hill today to testify about the sputtering U.S. recovery, but may have to spend much of his time convincing a stubborn Congress to raise the debt ceiling
Negotiations over a deficit-reduction agreement spiraled downward as the White House and congressional leaders dug in even as anxiety mounted that they could wait too long to reach a deal to avoid a government default, the WSJ reported.
Bill Gross, who runs the world’s biggest debt fund at Pacific Investment Management Co., increased holdings of Treasuries and bonds outside the U.S. last month while cutting money-market securities.
WSJ: Minnesota’s government has been shut down since July 1 and no sign of any compromise. Perhaps what’s to come for the US as obstinate politicians refuse to budge on their positions {http://on.wsj.com/r1Dm4y}
Senate Republican leader McConnell to introduce legislation to force Obama to formally raise the debt limit, according to Congressional aides. The proposed bill would force Obama to come up with $2.1 trillion in cuts
ASIA
Australian consumer confidence dives to 2 year low. Survey showed its index of consumer sentiment sank 8.3% in July to 92.8. The index is down 17.9% from July last year. {http://bit.ly/r0vdp0}
Reports from Japan economy minister Yosano, saying Japan economy expected to show bright signs from this Autumn through to next year.
Japan:The Liberal Democratic Party and the New Komeito have agreed to approve a second extra-budget totaling some Y2 trillion, to be proposed by the ruling Democratic Party of Japan, the Nikkei reports.
South Korea’s unemployment rate stayed at the lowest level in half a year as the economic expansion spurred hiring in the manufacturing sector.The jobless rate was at 3.3 percent in June, unchanged from May, Statistics Korea said today in Gwacheon, south of Seoul. The median estimate in a Bloomberg News survey of 12 economists was for a rate of 3.4 percent.
China’s central bank said risks from the country’s local government financing vehicles are controllable, underscoring Beijing’s effort to dispel growing concerns about potential default risks associated with local government debt.- WSJ
China secured its first top management post in the IMF on Tuesday, in a move aimed at recognizing Beijing’s growing clout in the global economy. New IMF Managing Director Christine Lagarde named Chinese economist Min Zhu, 58, a former deputy governor of the PBoC and a special adviser to the fund, to a newly-created deputy managing director post.
PBoC Advisor Li Daokui: still room to hike rates; reiterates CPI probably peaked in June
China should raise interest rates further to tame inflation and correct the negative real interest rates that undermine government efforts to spur consumption, a top government think tank The State Information Centre said
Chinese June Industrial Output +15.1% y/y vs +13.3% May
India’s industrial growth dropped to a nine-month low in May, reinforcing fears that the economy is slowing, as the central bank’s rate increases begin to stifle demand and policy concerns deter investments. Despite the gloomy picture, the Reserve Bank of India (RBI) is expected to raise policy rates again later this month – the 11th time since March 2010 citing the near double-digit inflation as a bigger worry for Asia’s third-largest economy that recorded robust growth in services and expects a normal farm year. – ET
Bank lending to South Korean households in June grew at the fastest pace in seven months. Household loans owed to banks increased a net 3.4 trillion won ($3.2 billion) last month compared to a 3.3 trillion won rise in May, led by mortgage loans, the Bank of Korea said in a statement. It marked the biggest monthly rise since November 2010
LATAM & MENA
Brazil is considering raising taxes on currency futures and other derivatives in order to help check gains in the real, a high-level member of the government’s economic team told Reuters {http://reut.rs/nHr6am}
Colonel Muammar Gaddafi has suggested he would be willing to step aside if certain conditions were met, according to people familiar with unofficial contacts between the Libyan regime and members of the Nato-led coalition supporting the country’s rebels. {http://on.ft.com/pd54HB}
OTHER MARKETS
NIKKEI 9965 (+0.4%), HANGSENG 21887 (+1%), S&P/ASX 4522 (+0.6%), CHANGHAI SE COMPOSITE 2792 (+1.4%), KOPSI 2121 (+0.6%) – As of 07.00GMT
US STOCKS CLOSE: A late slide in stocks, driven by a Moody’s downgrade of Irish debt, left both Dow and Nasdaq in the red after Dow had spent much of the day in positive territory. Dow ended down 59 points or 0.47% to end at 12,447 while Nasdaq was off 21 points or 0.74% to finsih at 2,782.
TSYS: The yield on the 10Y was last at 0.36%, with the 5Y at 1.46% and the 10Y at 2.89%. Ahead of tonight’s 10-yr sale, the 10Y WI is trading at 2.90%. The Bond is also lower, with the yield at 4.18%.
OIL: Brent crude at $117.40 (-0.3%), WTI at 97.25 (-0.2%)
Gold last trades at $1567 (flat), silver at 36.27 (+0.5%)
EIA forecast on world oil demand for 2011: sees oil demand reducing by 270k bpd for a 1.43 million bpd y/y increase; lowers 2012 forecast by 10k bpd for a 1.58 million bpd y/y increase.
Pork prices are expected to remain high until April 2012, a director of Beijing’s largest agricultural wholesale market said
US ethanol refiners are consuming more domestic corn than livestock and poultry farmers for the first time, underscoring how a government-supported biofuels
industry has contributed to surging grain demand. {http://on.ft.com/pcBQNj}
COMING UP TODAY( times GMT/ET)
0600/0200 Germany Jun wholesale prices
0700/0300 Spain Jun final HICP
0800/0400 IEA monthly oil market report
0830/0430 UK Jun Labour Force Survey
0900/0500 EMU May industrial output
0900/0500 UK OBR Fiscal Sustainability Report
0930/0530 UK OBR Head Chote Press Conference – Germany E4.0 bln 3.25% July 2021 Bund Re-opening
1330/0930 Boston Federal Reserve Bank President Eric Rosengren speech on economic outlook to a conference in Worcester, Mass.
1400/1000 Federal Reserve Chair Ben Bernanke delivers semi- annual monetary policy report to the House Financial Services Committee in Washington.
1845/1445 Treasury Assistant Secretary for Finacial Markets Mary Miller remarks on Dodd-Frank reforms at SIFMA regulatory reform summit in New York.
1100/0700 US 08-Jul MBA Mortgage Application Index
1230/0830 US Jun-11 Import/Export Price Index
1430/1030 US 08-Jul EIA Crude Oil Stocks
1700/1300 US Treasury auctions $21.0 bln in reopened 9y-10m*
1800/1400 US Jun-11 Treasury Statement
HSBC Global Research