TOP
The US senate has passed the currency bill 63-35. Passage at this stage was highly expected, but all indications are that it is unlikely to either pass the House, or the White house. HSBC write up {http://bit.ly/pGIg11} and {http://bit.ly/qa5unx}
Slovakia’s opposition leader said lawmakers must find a way to approve the EFSF enhancement which parliament rejected yesterday. {http://bit.ly/nWm8g4}
US President Obama’s $447 billion jobs plan has been blocked in the Senate. {http://bit.ly/oHoMkk}
PBoC fixed USDCNY at 6.3598 (+115pips from yesterday fix) – that’s the biggest daily increase in nearly a year.
The PBoC said it “fully opposed” the US senate vote and that politicizing yuan’s exchange rate won’t solve the US problems but will impact China’s exchange rate reform.
HKMA discovered some banks using PBOC’s window for non-trade related deals. Due to violation of the rules, the banks had to unwind their positions which explains the massive buying interest for USDCNH. So far nothing has been confirmed by officials – Oriental daily.
EUROPE
Geithner said European leaders must go beyond a planned recapitalization of banks to resolve the continent’s sovereign- debt crisis. {http://bit.ly/noOeIZ}
European authorities plan to set a higher than expected capital threshold for the region’s banks and give them six to nine months to achieve that level or face government recapitalisations – FT. {http://on.ft.com/r5zmsh}
Eurogroup’s Juncker says next tranche of aid to Greece will not be paid if Troika report finds Athens completely missing targets.
Belgium unveiled a major transfer of power from the federal to the regional level, paving the way for the formation of a new government. {http://on.ft.com/nIHkQG}
EU President Barroso has again urged the UK to help financially in a second bailout of Greece, the Times reports. The BoE’s Posen says officials are ready to do more if it’s needed.
The level of UK corporate pension scheme shortfalls is at the highest level since March 2009, sitting at ?196.4bn, the FT says. {http://on.ft.com/oosPdR}
Scottish and Southern Energy will break ranks with rival utilities by offering its electricity for sale to any household supplier this week, heralding the biggest change for almost a decade in the UK’s electricity market. {http://on.ft.com/pNygGC}
Banks in the EU face more stringent pay and bonus rules than their rivals, putting them at a disadvantage in attracting talent, the FSB said. {http://bit.ly/qKNGCq}
Berlusconi is under renewed pressure after the government lost a parliamentary vote regarding the Italian budget on Tuesday. {http://on.ft.com/nJLEur}
US
The US senate has passed the currency bill 63-35. Passage at this stage was highly expected, but all indications are that it is unlikely to either pass the House, or the White house. HSBC write up {http://bit.ly/pGIg11}
US TresSec Geitner says “we have a serious economic problem with China” The US accused Iran on Tuesday of backing a plot to kill the Saudi ambassador to Washington. {http://on.ft.com/oDq9Sr}
ASIA
PBoC says in statement that it “firmly opposes” the U.S. currency bill. The central bank said that politicizing yuan’s exchange rate won’t solve the US problems but will impact China’s exchange rate reform.
PBoC said on Wednesday that the yuan’s exchange rate is approaching reasonable level and it is not key reason for trade imbalance between China and the United States.
Asian policy makers are bolstering efforts to protect their economies from weakening global growth. {http://bit.ly/qpqXQX}
The Philippine Central Bank says they will discuss Indonesia’s rate cut at their meeting next week warning that further policy easing may add excess liquidity and create more problems.
Australia: August housing finance +1.2% m/m (exp +1.1%) vs +1.9% in July.
The Westpac-Melbourne Institute consumer sentiment index rose for the second straight month, but the latest move was very small. The index of consumer sentiment rose 0.4% in October to 97.2, after rising 8.1% to 96.9 in September.
ELSEWHERE
Israel’s cabinet has agreed a prisoner exchange deal with the Islamist group Hamas. {http://on.ft.com/rgzHU6}
Brazilian retail sales volumes fell more than expected in August (-0.4%), signalling domestic demand is starting to ebb as activity cools in Latin America’s biggest economy.
Mexican mobile phone giant America Movil on Tuesday launched its planned bid to buy the part of its sister fixed-line phone Telefonos de Mexico that it does not already own.
OTHER MARKETS
Equity: NIKKEI -0.2%, Hangseng 18255 +0.6%, S&P futures -0.15%, Shanghai SE Composite +2.3%, Kopsi +0.5%
Asian stocks dropped, after Alcoa kicked off the US reporting season with disappointing results and progress to stem the EZ debt crisis slowed. {http://bit.ly/q3ObpE} {http://on.ft.com/qJbYUY}
Treasuries: The yield on the 2Y was last at 0.30%, with the 5Y at 1.11%, the 10Y at 2.13% and the Bond at 3.07%.
Commodities: Brent crude at 110.75 (flat), WTI at 82.45 (-0.4%). Gold last at 1668 (+0.4%), Silver at 32.19 (+0.3%)
HF Paulson & Co has warned that in a “worst case” scenario, it could suffer redemptions equivalent to between a fifth and a quarter of its assets by the end of the year.
CALENDAR
– ECB Governing Council member Jozef Makuch attends colloquium, in Banska Bystrica (Slovakia)
0530/0130 France Sep-11 HICP
0600/0200 Japan monthly ESP Forecast Survey of economists
0600/0200 Germany Sep-11 wholesale prices
0630/0230 France Sep-11 BoF retail survey
0645/0245 France Aug-11 balance of payments
0730/0330 ECB Executive Board member Juergen Stark speech at conference entitled “Global Challenges and Local Opportunities: Achievements and Perspectives in the Baltic States”, in Riga
0800/0400 IEA monthly oil market report na
0830/0430 UK Oct-11 Labour Survey
0900/0500 Germany tops up 30-year Bund
0900/0500 EMU Aug-11 industrial output
– Germany E2.0 bln 3.25% July 2042 Bund Re-opening
1100/0700 US 07-Oct MBA Mortgage Application Index
1145/0745 US 08-Oct ICSC-Goldman Store Sales
1255/0855 US 08-Oct Redbook Average
1300/0900 Mexico Aug-11 Industrial, Manufacturing prod
1400/1000 Brazil Central Bank/FGV Retail Survey
1600/1200 German Finance Minister Wolfgang Schaeuble to give speech at conference on the euro, in Berlin
1700/1300 US Treasury auctions $21.0 bln reopened 9y-10m notes
1720/1320 Dallas Federal Reserve Bank President Richard Fisher speech on Fed operations and the economy to a Dallas Fed community forum.
1730/1330 Philadelphia Federal Reserve Bank President Charles Plosser speech on the economic outlook at Wharton in Philadelphia.
1800/1400 US FOMC Meeting Minutes
1815/1415 Cleveland Federal Reserve Bank President Sandra Pianalto speech on leadership in challengeing times at the University of Akron (Ohio).
1830/1430 ECB President Jean-Claude Trichet address at AFME annual dinner.
Eastern Europe
BUDAPEST – PM Orban and Economy Minister Gyorgy Matolcsy to hold presser about govt’s housing help programme (0900)
POLAND – World Refining Association holds a two-day congress Central and Easter European Refining and Petrochemicals in Gdansk
POLAND – Media Summit, scheduled participants include head of Polish telecoms companies
BULGARIA – September CPI data (0900)
CZECH – Government meeting (0900)
CZECH – September grain harvest estimate (0900)
HSBC Global Research