TOP
FT: Plan D stands for Default … and the death of the euro {http://on.ft.com/rptYNq}
Angela Merkel, the German chancellor, has warned that she will only attend an emergency summit on the eurozone financial crisis {http://on.ft.com/rtOooC} in Brussels on Thursday if there is going to be an agreement on a new rescue plan for Greece. {http://on.ft.com/r6ehns} while she also wants private investors to make a major contribution.
A restructuring of Greek debt will do little to help the country, ECB Governing Council member Jens Weidmann (who also heads Bundesbank) said in an interview with the German paper Bild am Sonntag.
US debt ceiling: Behind the scenes, Senate Republican leader Mitch McConnell and Senate Democratic leader Harry Reid were negotiating over a fallback plan proposed by McConnell that would allow Obama to raise the debt limit while sparing Republicans from having to vote in favour of it – Reuters {http://reut.rs/o4FGka}
CHF hit record highs on Monday. USDCHF touched 0.8033 while EURCHF hit 1.1374. Gold also hit new highs of $1599
New Zealand Q2 CPI was higher than expected at 1.0%qq (vs 0.8% exp). The market is now pricing in 30% chance of a 25bps cash rate hike in September, 70% chance of hike by October, and 100% chance of full 50bps of hike by January.
EUROPE
The European Banking Authority said eight of the 90 banks it examined fell short of the required amount of capital under the tests’ simulations of a deep, two-year economic downturn. Those banks faced a total shortage of €2.5 billion ($3.54 billion) of capital, which banks rely on to soak up potential losses. – WSJ
ECB Jean-Claude Trichet said Europe can surmount its sovereign debt crisis. “Naturally the Europeans can manage the issue,” Trichet said in an interview with the FT Deutschland, according to a transcript released by the Frankfurt-based ECB. “It is not a question of technique. It is a question of will and determination.” {http://bloom.bg/rqA3lt}
European banks may have to raise as much as 80 billion euros ($113 billion) of additional capital as the stress tests failed to allay investor concern about a Greek default and governments’ ability to bail out their lenders. {http://bloom.bg/opvjZ6}
U.S. Secretary of State Hillary Clinton praised Greece for its austerity measures, calling them “vital first steps” and urging the country’s leaders to continue efforts to resolve the country’s debt crisis. {http://bloom.bg/reoync}
The European Financial Stability Facility (EFSF) should be able to buy government bonds in the secondary market, ECB Governing Council member Lorenzo Bini Smaghi said
EZ governments are considering a banking levy as a way to involve private creditors in a Greek rescue, Germany’s Die Welt newspaper reported on Monday, citing diplomatic sources. {http://reut.rs/pPmARP}
Further delays in agreeing a fresh bailout package for Greece risk tipping the euro zone into a full-blown currency crisis, ECB policymaker Yves Mersch said.
Portugal’s new government will impose additional spending cuts in the next four weeks to address a budget slippage of EUR2bn it has discovered, PM Pedro Passos Coelho said, reiterating he will meet the year-end fiscal target.
Spain and Italy’s leading banks were the strongest performers in last week’s European stress tests, in a surprise result that could help relieve the funding pressure that had been building on them. – FT
ITALY BUDGET `CREDIT NEGATIVE’ FOR LOCAL GOVTS, MOODY’S SAYS
UK Interest rates will start to rise in November in anticipation of falling inflation in the new year and an increasingly strong recovery, according to predictions from the Ernst & Young ITEM Club, the Telegraph says.
UK house prices fell sharply in July. Rightmove: UK Jul Survey House Asking Prices -1.6% m/m; +0.1% y/y . UK homeowners lowered their asking prices for the first time in 2011. The last monthly fall in house asking prices was December 2010.
The sovereign debt crisis in the eurozone will drag UK economic growth down to just 1.4% this year, the Independent says
US
While President Barack Obama publicly presses congressional leaders for a multitrillion- dollar agreement in deficit-cutting talks he said are “running out of time,” aides privately are negotiating the framework of a possible compromise. {http://bloom.bg/oaTK7s}
Washington Post – A bipartisan effort in the Senate to allow President Obama to raise the federal debt ceiling in exchange for about $1.5 trillion in spending cuts over 10 years gained momentum {http://wapo.st/mUoeMa}
Global consumer confidence fell in Q2 to its lowest level in a year and a half as an uncertain economic outlook, a deepening euro zone debt crisis and rising inflation made people more cautious, a survey showed on Sunday. Consumer sentiment in the US was weaker than in the second half of 2009 at the height of the global recession, according to The Nielsen Company’s quarterly survey of global consumers {http://bit.ly/q7lNHV}
U.S. President Barack Obama urged Republicans to pave the way for quick approval of trade deals with Colombia, South Korea and Panama by cooperating with the White House to extend a program to help workers who have lost their job because of trade
The main reason U.S. companies are reluctant to step up hiring is scant demand, rather than uncertainty over government policies, according to a majority of economists in a new WSJ
MOODY’S SAYS U.S. HANDLING OF DEBT LIMIT A `CREDIT NEGATIVE’
ASIA
China accused the United States on Sunday of “grossly” interfering in its internal affairs and seriously damaging relations after President Barack Obama met exiled Tibetan spiritual leader the Dalai Lama at the White House
China’s average new home prices rose 4.2% in June from a year earlier, an uptick from an annual rise of 4.1% in May, according to Reuters calculations from official data published on Monday. This is the first time it has moved higher this year
China expects that the US will be able to resolve its debt-ceiling impasse without triggering a default, advisers to the central bank and government say. – FT
China won its first victory against the EU at the WTO on Friday in a case that could thwart further EU anti-dumping claims until there is a change in European trade law. {http://bit.ly/npX3Zp}
WSJ: China to Release Pork Reserves as Prices Soar {http://on.wsj.com/nBLZAJ}
Fitch cites China accounting standards as risk. {http://bit.ly/rdr89t}
The PBoC sets the yuan central parity rate at Cny6.4680 against the Dollar today, compared with Cny6.4665 set for the previous trading day.
The Philippine central bank said it will review the structure of non-deliverable forwards (NDFs) to ensure they are used for legitimate hedging needs, as policymakers look for ways to control liquidity that may put further pressure on inflation {http://www.cnbc.com/id/43789389}
SINGAPORE JUNE NON-OIL DOMESTIC EXPORTS +1.1 PCT Y/Y; REUTERS ESTIMATES +3.9 PCT
BOK TO ANNOUNCE FOREIGN-CURRENCY BOND REGULATIONS TOMORROW
The Pheu Thai Party is planning a complete overhaul of Thailand’s fiscal 2012 budget to revise spending programs in line with the next government’s pro-growth policies, The Bangkok Post reports
CORPORATES
China’s Sichuan Hanlong Group made a bid to buy out the shares it doesn’t already own in West African iron ore exploration company Sundance Resources, valuing the private conglomerate at A$1.4 billion ($1.5 billion). Last week, Hanlong, which is seeking to expand its reach in global resources,launched a A$144 million takeover bid for Bannerman Resources , which is looking for uranium in Namibia
OTHERS
NIKKEI 9975 (+0.4%), HANGSENG 21865 (flat), S&P/ASX 4475 (flat), SHANGHAI SE COMPOSITE 2820 (flat), KOPSI 2130 (-0.7%) – As of 07.00GMT
US STOCKS: US index futures are trading lower Monday, although Tokyo markets are closed for a national holiday. The S&P Sep contract was last down 7.7 points at 1307.2, with the Nasdaq Sep contract down 12.75 points at 2432.75. Dow futures are also lower, down 64 points at 12388.
OIL: Crude futures are trading lower in Asian trade Monday, with the front-month WTI contract lower by 20 cents at $97.04, just shy of the $96.97 low. The Sept Brent/WTI spread was last at $19.55.
Exchanges will have to “rethink their global strategies” because of unexpectedly strong scrutiny of proposed bourse tie-ups from antitrust regulators, according to IntercontinentalExchange (ICE), one of the world’s biggest exchanges. {http://on.ft.com/r5ZhAI}
Spot gold touched a record high on Monday, reflecting persistent worries about the euro zone debt crisis and a growing threat of a U.S. government default. Spot gold XAU= rose to an all-time peak of $1,598.41 and U.S. gold GCcv1 hit a record high of $1,599.20.
Germany and Italy are expected to oppose any second release of emergency oil reserves by the International Energy Agency, which needs the backing of all 28 of its members if it is to pour more oil on a volatile crude market. The IEA is expected to confer with its member countries by July 23 to decide whether to draw further on emergency oil stocks after its June 23 announcement of a 60 million-barrel release.
China is underreporting the amount of steel it makes by about 40m tonnes a year – roughly the amount made by Germany – according to a new analysis that provides insights into the recent high prices for the main raw material used by the world steel industry. – FT
IMM report: {http://bit.ly/mVood7}
COMING UP TODAY( times GMT/ET)
0730/0330 Riksbank publishes minutes of the Executive Board’s monetary policy meeting from 5 July
1000/0600 Bundesbank releases monthly bulletin
1230/0830 Canada May-11 New motor vehicle sales
1230/0830 Canada May-11 International sec transaction
1300/0900 US May-11 Treasury International Capital System data
1330/0930 US 15-Jul MNI Capital Goods Index
1400/1000 US Jul-11 Housing Market Index (NAHB)
1430/1030 US 16-Jul MNI Retail Trade Index
– IMF Board meets to discuss the annual Article IV review of the EU economy in Washington
1600/1200 ECB Governing Council member Mario Draghi to brief media on Financial Stability Board plenary meeting
BUDAPEST – Crop outlook (1300)
BULGARIA – June jobless data
ROMANIA – 900 million lei one-year T-bill sale (0800)
POLAND – Wages, unemployment (1400)
HSBC Global Research