TradeTheNews.com USA market update: QE addicts send shares higher ahead of FOMC patch

The U.S. Market Update: QE addicts send shares higher rate before FOMC

By sending more dependent correction EQ before FOMC
Dow Jones S & P 500, NASDAQ 109 31 9.3

Economic data ******
- (USA) of the FCT / GS weekly sales of chain stores w / e 16th June: 0.0% w / w, 3.6% y / y
- (PL) Poland May Jobs M / M: 0.0% v 0.0% e, A / C: 0.3% and 0.3% v
- (PL) Poland Wages May means of M / M: -2.7% -2.5% ev A / C: 3.8% 4.0% ve
- (United States) May Starts: v 722Ke 708k, Building Permits: 780K 730K V
- (CA) Canada in April large M / M: 1.5% 0.2% ve
- (IS) Israel in May, the first "S" indicator M / M: 0.2% v 0.2% prior
- (USA) Redbook retail w / e 16th June: 2.5% y / y in May BAT: 0.5%
- (EU) foreign exchange reserves of the ECB this week before 226.9B 225.0B v
- (U.S.) jobs in April shocks: M v 3.685Me
- (EU) EFSF sold 1.466B vs. calculations 1.5b indicates 0.1421% 6 months 0.2033% average annual return before v; offers start to finish: 2.1xv 2.5 times before
- (EU) ECB drains 210.5B 210.5B vs. white deposit

The European and American markets are strong gains this morning, as traders expect the FOMC decision tomorrow and the convenience of the probable formation of a government in Greece. New Democratic Party of Greece seems to have a coalition government brought together with another party PASOK and the Left, as with PM Samaras. Overall, the analysts expect the Fed to some form of quantitative easing (QE3) to implement in the session, either by expanding its balance sheet and / or extension of its operating budget. In Europe, opened in the German ZEW survey, the lowest door to rate cuts by the ECB and the softer UK CPI data increases the chances of a rate cut by the Bank of England and QE. In addition to these positive catalysts, housing and construction starts report could help was very good. Residential construction has fallen slightly from tip of 3-1/2 years in April, while approvals have risen sharply, reflecting a nascent recovery in residential construction in progress.

- FedEx, more or less the profit and revenue expectations in its Q4 report, however, expectations for Q1 FY13 and were decidedly disappointing. In addition, the company's operating margin suffered a very strong y / y comp, after several quarters of comp easy comparison. U.S. and international packages daily volume fell last year. Management increased its cost reduction plans. In the press conference said the leader of the European company is very well despite the crisis. FDX is 3%, after losing about 2% in premarket trading.

- Oracle announced its results for the fourth quarter, 3 days earlier than planned after the revelation yesterday's stronger-than-expected quarterly results. The early release came after the news of the imminent departure raises the senior sales concern that the company was stagnating. Note that the firm Q1 earnings guidance was a little soft, while no recovery of the recipe for company material in the first quarter. ORCL part is 3%.

- Walgreen shares are 6% after the company acquired a 45% stake in Alliance Boots, based in Switzerland in a $ 6.7 billion in cash and stock. The purchase represents the first foray of international society, and Walgreen have the opportunity to the rest of Alliance Boots to buy in three years. The company said its Q3 profit first news of the offer, including a 6.6% decline in sales thanks to a terrific compositions by March / April sales development. The company increased its dividend by 22%.

- Discover are financial products and Q2 revenues above expectations, but the benefits of Ay / y basis has been reduced. The results included an ominous sign: see increased its reserves for credit losses by a significant amount. Sales of both cards and transaction volumes have been by healthy margins. DFS shares are 1% in the markets.

- Shares of Microsoft rose by almost 4% this morning after the company tender opening tablet computer. The reactions to the Microsoft Surface device were different: Analysts agree that the specifications of the device are impressive, but few expect the tablet to much dent in the huge advantages of making iPad. In addition, the unit's success could relate to individual users and companies to embrace Windows 8 and radical rethinking of the Windows interface.

Looking ahead ******
- (FI) Finland Parliament votes on the European Stability Mechanism (ESM)
- (U.S.) Diamond convinced JP Morgan
- (MX) G-20 Leaders' Summit in Los Cabos, Mexico
- 11.30 (U.S.) Treasury to sell $ 30 billion in Letters of 4 weeks
- 16.30 (U.S.) API weekly crude inventories
- 17:00 (CO) in Colombia in April trade balance: It is not $ 10, before the basis, imports cif F: No's. V $ 4900000000 before
- 18.50 clock (JP) Balance of trade in goods from Japan in May:-v-522.0B prior 544.4Be WO-v-347.7Be 480.2Be
- 18.50 clock (JP) BoJ minutes

? EU market update: Spanish 10-year yields remain above the level of 6% as many questions about Spain.

Monday, June 11, 2012 5:38:18 AM TradeTheNews.com EU Market Update: Spanish 10-year yields remain above the 6% level as plenty of questions remain regarding Spain.***Economic Data***
- (EU) ECB: ?1.9B borrowed in overnight loan facility vs. ?1.5B prior; ?788.2B parked in deposit facility vs. ?756.6B prior
- (JP) Japan May Consumer Confidence: 40.7 v 39.8e
- (JP) Japan May Preliminary Machine Tool Orders Y/Y: -2.9% v v 0.4% prior
- (FR) France Apr Industrial Production M/M: +1.5% v -0.1%e; Y/Y: +0.9% v -0.3%e >- (FR) France Apr Manufacturing Production M/M: -0.7% v -0.7%e; Y/Y: -1.4% v -0.9%e
- (CZ) Czech May CPI M/M: 0.2% v 0.1%e; Y/Y: 3.2% v 3.1%e
- (DK) Denmark Apr Current Account (DKK): 9.4B v 5.5Be; Trade Balance (ex-shipping): 6.1B v 6.3Be prior
- (DK) Denmark May CPI M/M: 0.0% v 0.0%e; Y/Y: 2.1% v 2.1%e
- (DK) Denmark May CPI EU Harmonized M/M: 0.0% v 0.0%e; Y/Y: 2.0% v 2.0%e
- (ES) Spain Apr House transactions Y/Y: -9.9% v -22.7% prior
- (TR) Turkey Apr Current Account: -$5.0B v -$5.0Be
- (IT) Italy Q1 Final GDP Q/Q: -0.8% v -0.8%e; Y/Y: -1.4% v -1.3%e
- (CN) China May M2 Money Supply M/M: 13.2% v 12.8%e; M1 Money Supply M/M: 3.5% v 3.2%e; M0 Money Supply M/M: 10.0% v 10.6%e >- (CN) China May New Yuan Loan (CNY): 793.2B v 700.0Be
- (NO) Norway May CPI M/M: 0.0% v 0.1% prior; Y/Y: 0.5% v 0.3% prior
- (NO) Norway May CPI Underlying M/M: 0.4% v 0.1% prior; Y/Y: 1.4% v 0.7% prior
- (NO) Norway May Producer Prices incl.Oil M/M: -2.1%v -1.6% prior; Y/Y: 2.5% v 2.5% prior
Fixed Income:
- (PH) Philippines rejected all bids in 3-month, 6-month and 12-month Bills
- (SK) Slovakia Debt Agency (ARDAL) sold ?138.0M in 4.35% 2025 Bonds; Avg Yeild 4.2583%; Bid-to-cover: 1.39x
- (NO) Norway sold NOK3.0B vs. NOK3.0B indicated in 2% 2023 Bonds; Yield 2.16%
- (DE) Germany sold ?3.53B in 6-Month BuBills; Avg Yield 0.0070% v 0.0371% prior; Bid-to-cover: 1.2x v 1.5x prior
*** SPEAKERS/FIXED INCOME/FX/COMMODITIES/ERRATUM ***
***Notes/Observations***
- Risk on sentiment prevails following ?100B Spanish banking sector aid agreement; initial impact was waning ahead of the NY morning.
- Components of China Trade Balance (exports/imports) show improvement
- China new Yuan loans shows RRR cuts are working
- Spain 10-year Govt bond unable to sustain sub-6.0% yield in session
- S&P: India may be first of BRICS nation to lose investment grade rating
***Equities*** >Indices: IBEX-35 +3.8% at 6799, FTSE 100 +1.3% at 5505, DAX +2.2% at 6265, CAC-40 +1.9% at 3116, FTSE MIB +1.9% at 13,688, SMI +1.3% at 5943, S&P 500 Futures +0.90% at 1340
- Equity indices opened the session sharply higher amid Spain's decision to seek aid for its banks and better than expected May exports data out of China. The gains for the session have been largely driven by banks in Spain, as some of the country's large financial institutions opened the session higher by over 9%. Spain IBEX-35 is continuing to outperform, as the index opened higher by over 5%. Resource related companies are broadly higher (Xstrata, Rio Tinto and BP are trading higher by approx. 2%) on higher commodity prices. Amid the rebound in the European equity markets and announcement related to Spain, corporate bond market activity has picked-up on the session. Companies speculated to issue bonds in the near-term include Accor [AC.FR], France Telecom [FTE.FR], GE Capital, Swedbank [SWEDA.SE] and Volkswagen [VOW3.DE].
- Shares of Tesco [TSCO.UK] are trading off of the best levels for the session, following the release of the firm's Q1 sales figures. Tesco also reaffirmed its FY targets, as it noted that consumer confidence levels in the UK have been largely stable. Engineering and construction services firm Severfield-Rowen [SFR.UK] has lost over 10% after issuing a profit warning, while Mouchel [MCHL.UK] is lower by over 25%, as the firm disclosed that strategic options being considered might result in only limited value for existing shareholders. In France, Technicolor [TCH.FR] has gained over 4%, after rejecting a ?1.90/share offer from JP Morgan. Porsche [PAH3.DE] is trading higher by ~4%, as a German press report said the company might be able to avoid paying ?1.5B in taxes, as part of its merger with Volkswagen. Amid the story related to Porsche, shares of Volkswagen have risen by ~3.5%. Additionally, a separate press report said that Volkswagen is said to be planning to raise its Chinese production by approx. 100% in the next few years.
Speakers: >- Spain Treasury commented that details of bank sector aid yet to be established but the plan did include buffers on top of worst case scenarios. The dept reiterated its view that its funding program would not be changed
- EU's Almunia: Believes ?100B aid would be enough for Spain; Bailout to include conditions; interest rate and timing not yet determined
- EU Commission Official Altafaj commented that the loan to Spain might have avg interest rates of 3-4%. The agreement should not impact Spain's deficit, but would impact its indebtedness. Loan to have strict conditions related to the overhaul of Spain's banking sector but the amount of the loans might not reach ?100B level
- Moody's commented that developments in Spain and Greece might prompt Euro Area sovereign rating downgrades
- Portugal PM Coelho: No reason to ask for new conditions for Portugal's financial aid program following the rescue request for Spanish banks
- Finland Fin Min Urpilainen stated that Finland would demand collateral or its share of emergency loans to shore up the Spanish banking system if aid comes from EFSF facility
- ECB Constancio urged accountants to adopt a long-term view to risks as focusing on shareholder volume provideed only short-term perspective. Fair value accounting could be "Outright wrong" and that current provisioning methodology was a risk to financial stability
- JP Morgan commented on Spain: Country's debt to GDP ratio would jump to around 90% from 81% if the entire ?100B package is used
- Germany Public Banking Assoc official Voeb commented that the sovereign debt crisis was heightening and putting earnings under pressure. The Spain banking sector bailout would help stabilize markets
- S&P commented on China's revised capital rules and noted there were in line with expectations and could push the banking sector to shore up capital
- S&P stated that India might be first of BRICS nation to lose its investment grade rating (**Note: currently at BBB-, outlook negative)
- Japan Govt nominated Takahide Kiuchi and Takehiro Sato as BoJ board members with a parliamentary vote expected mid-week
- Thailand Central Bank reiterated its view that it no need to take any action in FX markets at this time as recent THB currency (Baht) volatility was caused by external factors and that most capital inflows detected were short term
- OPEC President commented that there was a tremendous surplus in oil market but rejected idea of quota system at this stage. Iraq planned 2.9M bpd exports in 2013 vs. 2.4M bpd currently and saw $100-120/barrel as a reasonable price. Iraq was not substituting Iranian production at this time
Currencies:
- Relief and reversing of safe-haven flows characterized the early part of today's session but dealers still had plenty of questions regarding Spain. Thus the markets still needed to be convinced that the weekend agreement was not just a bunch of headlines masking the core problem before Greek election. Key points including where money would come from and in what form it would take (Cash or bonds). Also which banks still to be determined? Overall dealers noted that contingent liabilities were now way higher nonetheless.
The Spanish 10-year Govt bond yield briefly dipped below the 6.0% for the first time in almost a month but could not sustain the momentum to hold that level.
- Swiss names were said to be once again behind the soft tone in Euro after the open with renewed chatter circulating that the SNB might be legging out of the Euros accumulated from its defense of the EUR/CHF floor at 1.2000. The EUR/USD hovered below the pivotal 1.2630 level throughout the European morning after a test above during Asia.
Political/ In the Papers:
- Certain Greek energy companies were reported to have been seeking to obtain emergency bank loans in order to pay suppliers and prevent power cuts.
- The Telegraph's Ambrose Evans-Pritchard anticipated the ?100B bailout for Spanish banks as a loan package to the sovereign state of Spain will raise the country's public debt by up to 10% of GDP. In addition, the rescue package is less than some market estimates; JP Morgan said Spain requires ?350B; RBS placed the estimate at ?450B.
- Comments made by JP Morgan analyst expects the Spanish debt to GDP ratio would jump to around 90% from 81% if the entire ?100B package were to be used. This compares to forecasts made by Spain in April where it forecasted the 2012 debt/GDP ratio at 79.8% vs. 68.5% y/y
- The French President Hollande and his party moved closer to securing the majority needed to govern France with first round results predicting the Socialists and other leftists will take a majority of the 577 seats in the National Assembly in the second round on the 17th June. Four polling agency projections and early official results show diminished support for former President Nicolas Sarkozy's conservative UMP party across the country. They show growing support for the left, amid anger at cost-cutting austerity measures and reforms under Sarkozy seen by some as too friendly to the rich.
- According to the Populus poll 80% of the British population support a European referendum. A third support a referendum in the next few years compared to the 18% seeing no need for one in the foreseeable future.
- In a report released by Deutsche Bank the Irish housing market is expected to continue to be significantly oversupplied. The vacancy rate is at 15% with over 289K empty houses (including approx 60k vacant holiday homes). According to the bank, if current population trends are sustained, housing oversupply will take 43 years to clear.
***Looking Ahead***
***All times listed for economic events are denominated in Eastern Standard Time (Add 4 hours for GMT equivalent)
- (ES) IMF report on Spain's banking sector
- (DE) German Chancellor Merkel attends event honoring Frankfurt Mayor Roth
- (PT) Bank of Portugal Releases Data on Banks
- 6:00 (PT) Portugal Apr Trade Balance: No est v -?842M prior
- 6:00 (EU) Apr Leading Indicators: No ets v 100.4 prior
- 7:00 (IE) Ireland May Consumer Confidence: No est v 62.5 prior
- 7:30 (FI) IMF review of the Finland
- 7:30 (BR) Brazil Central Bank Weekly Economists Survey
- 8:00 (RO) Romania to sell 12-Month Bills
- 9:00 (MX) Mexico Apr Industrial Production M/M: 0.6%e v 1.5% prior; Y/Y: 4.8%e v 3.1% prior
- 9:00 (MX) Mexico Apr Final Trade Balance: $560Me v $560.2M prelim
- 9:00 (FR) France Debt Agency (AFT) to sell between ?7.8B in 3-month, 6-month and 12-month bills
- 9:30 (EU) ECB calls for bids in 7-Day Main Refinancing Tender
- 9:30 (EU) ECB calls for bids in in 1-Month Tender
- 9:30 (EU) ECB announces weekly settlements in its Govt Bond Purchase program
- 11:00 (MX) Mexico May Vehicle Production: No est v 206.4K prior; Vehicle Domestic Sales: No est v 69.9K prior; Vehicle Exports: No est v 168.9K prior
- 11:00 (US) Fed to sell $1.00-1.50B in Notes
- 11:30 (US) Treasury to sell $30B in 3-Month and $27B in 6-Month Bills
- 12:00 (EU) EU's Rehn speaks at European Parliament in Strasbourg, France
- 12:00 (US) Fed's Lockhart speaks on U.S. Economy in Chicago
- 12:00 (US) Fed's Williams delivers opening remarks in San Francisco
- 13:45 (CA) Bank of Canada's Carney gives intro at Montreal Conference
- 18:00 (US) Fed's Pianalto speaks on Improving Educational Attainment
- 20:00 (JP) BOJ Governor Shirakawa speech to San Francisco Fed. Legal disclaimer and risk disclosure All information provided by Trade The News (a product of Trade The News, Inc. "referred to as TTN hereafter") is for informational purposes only. Information provided is not meant as investment advice nor is it a recommendation to Buy or Sell securities. Although information is taken from sources deemed reliable, no guarantees or assurances can be made to the accuracy of any information provided. 1. Information can be inaccurate and/or incomplete 2. Information can be mistakenly re-released or be delayed, 3. Information may be incorrect, misread, misinterpreted or misunderstood 4. Human error is a business risk you are willing to assume 5. Technology can crash or be interrupted without notice 6. Trading decisions are the responsibility of traders, not those providing additional information. Trade The News is not liable (financial and/or non-financial) for any losses that may arise from any information provided by TTN. Trading securities involves a high degree of risk, and financial losses can and do occur on a regular basis and are part of the risk of trading and investing. Daily Forex 

? Is the Market Skeptical of Spain’s Bailout?

Dollar Posts Impressive Recovery as European Rescue Hope Fades Euro: Is the Market Skeptical of Spain’s Bailout? British Pound Has yet to Reap the Full Repercussions of Posen’s Dovishness Australian Dollar Tumbles Under Risk, Chinese Data Fails to Impress Swiss Franc Find Little Relief from Euro Efforts, Market Focused on SNB Yen Gains Traction as Risk Reverses, New BoJ Nominees Stir Policy Forecasts Gold Makes No Serious Moves on Another Stimulus Influx, Affections Lay Elsewhere Dollar Posts Impressive Recovery as European Rescue Hope Fades
The fallout from Spain’s bailout announcement was clearly visible across the risk spectrum, and the dollarmade no effort to hide its connection to underlying investor sentiment or the euro’s trouble. Through the opening hours of trade Monday, the weight of the announcement that European authorities would rescue its most recently troubled member (more on that below) offered some relief panicked risk aversion position. That, however, didn’t last for very long. On a high profile bounce from the 10,150-level that technical traders would recognize, saw a sharp risk aversion drive that was mirrored in dramatic form with the S&P 500. That said, we should not take this sharp turn to be an indication of momentum behind risk trends. We have a Greek election and Fed rate decision due next week –items that can truly change sentiment.
Euro: Is the Market Skeptical of Spain’s Bailout?
Back in May of 2010, European policy officials had believed that a Greek bailout would prevent further crisis from spreading to the rest of the region. Fast forward to today, in the wake of the fourth country rescue, the market doesn’t even pause to establish the merits of the effort. It is difficult to believe that direct support for Spain’s banks can stabilize the country’s own financial system much less solve the entire region’s underlying troubles. As expected heading into the weekend, Euro Zone Finance Ministers approved a request from Spain to raise funds to recapitalize the banking system. The vow alone was significant enough to offer the euro and risk trends a bounce – but follow through is something completely separate.
Skepticism surrounding this particular effort has its roots in the market’s understanding that previous rescue efforts for Greece, Ireland and Portugal have all failed to stem the contagion. So, while officials win points for acting before the situation required a last minute solution to avoid catastrophe; this policy model does not spell recovery. Even short-term hope for stability is marred by the serious lack of details in this effort. The size, administration, timing and source of the funds are all still significant holes in the effort. The ‘up to €100 billion’ program will supposedly go directly to fund banks, but that doesn’t materially make this program more effective than previous ones. Furthermore, the size of the funding and who receives them won’t be decided until after the independent review of the country’s banking sector is completed – expected supposedly on June 21. Perhaps the most damning aspect in the whole situation though is whether the funds come from the EFSF (the temporary rescue fund) or the ESM (its permanent replacement starting next month). The latter would automatically subordinate any current Spanish bond holders whereby EU countries would receive funds first in the event of a default. Of course, we only need to remember Greece’s restructuring to see the EFSF isn’t exactly safe. Nevertheless, a market sensitive to these details will start to worry not only about Spain, but potential Italy as well.
With so many questions about Spain’s rescue still lingering, there is little room to find a sudden rush of optimism and euro buying interest. This is particularly true when we recall that there is a far more immediate and binary event ahead of us: the second Greek election this weekend. In the meantime, Greece is taking a necessary gamble with a €1.25 billion auction of six-month notes in the upcoming session.
British Pound Has yet to Reap the Full Repercussions of Posen’s Dovishness
Where the Bank of England gave us little guidance after its last rate decision, we can always count on the group’s most dovish member to tell us when conditions have taken a turn for the worse. It was unusual when MPC member Posen pulled back on its calls for further stimulus a few months ago. And, after the contraction in growth and repeated concerns of the Euro Zone’s crisis impact on the UK’s financial and economic health; the dovish draw was returning. Monday, the central banker returned to his true colors when he said now was the time for the BoE and other central banks to be buying private sector assets. In the upcoming session we have factory activity and GDP estimate numbers due.
Australian Dollar Tumbles Under Risk, Chinese Data Fails to Impress
There was a round of notable Chinese data hitting the wires over the weekend, but it did little to improve the recent shine on the Aussie dollar. In the wake of the currency’s recovery last week following strong growth, improved rate prospects and China’s rate cut; the high-yield currency didn’t hesitate in its response to the risk reversal from equities Monday. The Chinese data itself was something of a mixed bag with new loans for May beating expectations (793 billion yuan) and encouraging a brighter outlook for growth while retail sales and industrial production came in under forecasts. It’s worth noting that the 12-month rate forecast is still calling for around 100 bps worth of cuts. It’s smaller, but still cuts.
Swiss Franc Find Little Relief from Euro Efforts, Market Focused on SNB
An effort to stabilize – if not improve – Europe’s financial health should theoretically relieve pressure on the EURCHF cross. That is the theory anyways. Looking at the pair itself, there was barely a hiccup in price action to the news that Spain would receive a sizable bailout. This is yet a further reflection of the market’s skepticism in the commitment and capabilities of the rescue program for this important Euro-area member. Furthermore, franc traders are preoccupied with the lead up to the SNB rate decision. Meanwhile, we have 2012 SECO growth forecasts due.
Yen Gains Traction as Risk Reverses, New BoJ Nominees Stir Policy Forecasts
In a reversal for risk trends, there is little doubt as to what the yen crosses will do. The recent rebound in the high-yield pairs was always highly sensitive to correction as the speculative element that has carried capital markets higher has banked on stability – not true recovery. In other news, Noda’s office nominated two new bank economists to fill BoJ spots. They require Diet approval, but they both have supported stimulus.
Gold Makes No Serious Moves on Another Stimulus Influx, Affections Lay Elsewhere
As if we needed another fundamental layer of support for it, gold was offer yet another sign that the Spanish bailout was not well received. The precious metal usually takes off in the face of stimulus programs as it naturally devalues a currency. That said, the metal was carving a relatively restrained range through Monday – especially when we compare it to a competitive safe haven like EURUSD.
For Real Time Forex News, visit:http://www.dailyfx.com/real_time_news/
**For a full list of upcoming event risk and past releases, go towww.dailyfx.com/calendar
ECONOMIC DATA
Next 24 Hours
Housing data cooled notably in April, though it did not reverse a steady trend of strengthening
Business sentiment could be marred by the slowing of China, EU troubles
French Non-Farm Payrolls (QoQ) (1Q F)
A final and lagging reading, this won’t distract from risk trends.
SECO 2012 Economic Forecasts (JUN)
Growth forecasts will be another piece of the speculative puzzle to the SNB
Industrial Production (MoM) (APR)
Factory output will be absorbed as another sign of Euro crisis transmission, the austerity/growth gauge and BoE stimulus potential
Industrial Production (YoY) (APR)
Manufacturing Production (MoM) (APR)
Manufacturing Production (YoY) (APR)
NFIB Small Business Optimism (MAY)
Second tier indicators for market impact but high level concerns for short-term volatility.
Import Price Index (MoM) (MAY)
Import Price Index (YoY) (MAY)
IBD/TIPP Economic Optimism (JUN)
NIESR Gross Domestic Product Estimate (MAY)
Indicator of future stimulus from the BOE.
Monthly Budget Statement (MAY)
Expected to reverse the first surplus reading since September 2008 in April.
Taken with tool orders, a good manufacturing / trade leading indicator.
BoJ Governor Masaaki Shirakawa Speaks on Global Economy
Fed's Charles Evans Speaks on U.S. Economy
Greece Sells €1.25B in 6-month Bills
ECB's Ewald Nowotny Speaks on Euro Economy
Fed's Daniel Tarullo Speaks on Shadow Banking
Merkel, Schaeuble, Amussen Speak at CDU Economic Council
BoE's Paul Tucker Speaks on U.K. Economy
SUPPORT AND RESISTANCE LEVELS
To see updated SUPPORT AND RESISTANCE LEVELS for the Majors, visitTechnical Analysis Portal
To see updated PIVOT POINT LEVELS for the Majors and Crosses, visit ourPivot Point Table
CLASSIC SUPPORT AND RESISTANCE
INTRA-DAY PROBABILITY BANDS 18:00 GMT

> US Treasury Market and Yen Relationship Tells a Story

(Black on top) term yen / 10 Yr US Treasury Note Futures (in green on bottom)
Daily
Prepared by Jamie Saettele, CMT
Jamie - a relationship we watched closely for several months (in April and may). "A new record in the 10-year note is probably not step is going to be coincides with a new record in Yen (new low in USDJPY).". This discrepancy will help during the next long USDJPY. "10 Years closed to the record high for the last 5 weeks and the USDJPY is (apparently) to stabilize in support (see USDJPY table below). Reward/risk promotes the long USDJPY at this level.
Dow Jones FXCM Dollar Index (Ticker: USDOLLAR)
Daily
Prepared by Jamie Saettele, CMT
Jamie - the Dow Jones FXCM Dollar Index (Ticker: USDOLLAR) is at its highest level since January, 2011. Having exchanged at 10218.99 this week, near term action is suggestive of a setback. Make no mistake, this camp returned to the increase but the reward and risk for bulls is not favourable at the current junction. The channel resistance is also immediate upward recovery. 10047-10076 is now.
Euro / US Dollar
Daily

Prepared by Jamie Saettele, CMT
Jamie - supports the former base channel is now resistance. The pivots (12823) Monday remains in place as the EURUSD went into free fall, a few days. Bulls take place so far 12500 but 12480 remember if reached. Deterioration more likely sense to be relieved in the form of a correction, if even just need to. 12724 is the resistance.
Pound sterling / US Dollar
Daily

Prepared by Jamie Saettele, CMT
Jamie - The GBPUSD is entered in a field which has been congestion in March (15601-15746). An area that has previously been congestion will probably cause a reaction. In other words, it is a good place for the GBPUSD find a short-term low. Near term structure is compatible with a correction to 15845. 15730 and 15775 serve as intermediate resistance.
Australian dollar / US Dollar
Daily
Prepared by Jamie Saettele, CMT
Jamie - the AUDUSD itself broke under the trend curve that extends off the coast of the Netherlands may 2010 and October 2011 and the canal slope down which defines the trend since the beginning of February. Thegap left open from 28/11/11 the 9773 was filled, but focus remains low to 9663 November. The rebound of 9689 could be the beginning of a larger correction to 9934 and perhaps 10020. There is no way of knowing in advance but reward/risk does not favour bears here. In the same way, there is nothing wrong with its commercial inversion but this requires strict risk management (use stops). The ideal trade will be probably be short circuit in early June, at a slightly higher level (9970-10020).
US Dollar / Japanese Yen
Every day bars

Prepared by Jamie Saettele, CMT
Jamie - after several days to the tracing of 61.8% from the rally of bass, February the USDJPY rallied impressive and is again claiming with resistance of average and trendline of 20 days. Over 8055 would break the series of lower highs since the top focus and shift from March to 8180. I like jumping the gun to fire on long with a stop under 7900.

Asian Market Update: EU leaders call on Greece to work harder,

- (CN) CHINA MAY HSBC FLASH MANUFACTURING PMI: 48.7 V 49.3 PRIOR FINAL (7th consecutive contraction) >- (NZ) NEW ZEALAND APR TRADE BALANCE (NZ$): 355M V 400ME (11-month high); TRADE BALANCE YTD: -541M V -651ME 
- (NZ) NEW ZEALAND ANNUAL BUDGET RELEASE: AFFIRMS TARGET OF RETURNING BUDGET TO SURPLUS IN 2015
- (AU) AUSTRALIA Q1 CBAHIA HOUSE AFFORDABILITY: 61.8 V 58.5 PRIOR
- (JP) JAPAN BOJ MONTHLY ECONOMIC REPORT: Increasingly Evident Japan Economy Is Shifting To Pickup
- (KR) SOUTH KOREA Q1 HOUSEHOLD CREDIT Y/Y: +7.0% V 7.8% PRIOR (lowest level since Sept 2009)
- (VN) Vietnam May CPI m/m: 0.2% v 0.1% prior; y/y: 8.3% v 8.9%e
- (JP) Japan investors bought ?244B in foreign bonds last week v ?1.26T bought in prior week
- (AR) Argentina Apr Primary surplus ARS1.06B v ARS1.97B y/y
***Markets Snapshot (as of 05:00GMT)***
- Nikkei225 0.5%
- S&P/ASX -0.3%
- Kospi -0.3%
- Singapore Straits Times Index +0.1%
- Shanghai Composite -0.3%
- Hang Seng -0.6%
- June S&P Futures -0.3% at 1,311
- June gold +0.7% $1,559/oz
- July Crude +0.5% at $90.38
***Overview/Top Headlines***
- Late US session strength came amid rumors that Germany would announce support for a bank deposit guarantee scheme to be announced after the EU summit. However, as the various leaders trickled out of the meeting, little new was said with continued conflicting opinions on euro zone bonds. France President Hollande said there are insufficient investment incentives in the EU, proposed Euro zone bonds. He did admit that not all countries shared his view on growth instruments, but there were several that had similar views. He also reiterated support for a transaction tax. Leaders affirmed their support for Greece staying in the EU, but urged the troubled country to stick with its mandates. EU's Juncker does not expect euro zone bonds any time soon; Preparations must be made for all scenarios. Van Rompuy said leaders agreed to strengthen economic union to match monetary union, more details to come in June. Also that no decision on where new capital would come from for EIB. EUR/USD fell below $1.2560 on the news with only a slight recovery heading into the start of the European session. EUR/JPY fell to ?99.70.
- China May HSBC flash PMI showed a 7th consecutive contraction to 48.7, new export orders also declined below 50 to 47.8. This will only strengthen calls for easing measures from China's leaders to sustain growth and reach 7.5% 2012 GDP target. Equities in China, Australia and Hong Kong slid a bit weaker on the news but softness was limited. A China NDRC researcher called on the PBoC to cut rates if CPI falls below 3% (April CPI was 3.4%). US credit rating agencies came out with cautious comments on China property markets, with a general consensus that any further tightening measures on the sector will be limited this year.
- New Zealand released its budget affirming a return to surplus in 2015 (press had speculated that it may return to surplus sooner). New Zealand warned that a Greek exit from the EU could hamper its ability to reach the goal.
- Commodities were stronger in the session with silver +0.9% to $27.75, copper +0.7% to $3.42, corn and wheat contracts were both stronger in the session. The US dollar was weaker against the Won, Philippine Peso and S$.
***Speakers/Geopolitical/In the press***
- (CN) Shadow banks in Wenzhou, China charging as much as 21.6% on loans in April (down from 25.4% in Mar) vs 7.6% official commercial bank loan target - SCMP
- (EU) EU's Van Rompuy: Ongoing work on growth is being over shadowed by efforts to ensure stability; Euro zone bonds were discussed in longer term context
- Asia Development Bank (ADB) Chief Economist Zhuang: Optimistic about Asia growth prospects - Speaking in Japan
- (CN) NDRC researcher: PBoC should cut rates if CPI falls below 3% - Chinese press
- (EU) Dutch PM Rutte: No talks on Greece exit plans; Saw support for some growth measures but no euro zone bond consensus
- (EU) ECB Pres Draghi: Sees commitment to take EMU to new stage; ESM should be a functioning firewall
***Equities***
- Baoshan Iron & Steel, 600019.CN: Sees China steel demand may increase 3-5% to 10M tons, slowest rate since 2001
- Hyundai Motor, 005380.KR: CEO Kim: On track to reach 2012 sales target of 4.29M vehicles
- VAH.AU: CEO Borghetti: Qantas' reduction in flights will not change our plans to expand - Australian Financial Review
**US Equities**
- HPQ: Reports Q2 $0.98 v $0.91e, R$30.7B v $29.9Be; details previously reported restructuring announcements from 5/17; +9.1% after hours
- NTAP: Reports Q4 $0.66 v $0.63e, R$1.70B v $1.7Be; -16.6% after hours
- CLDX: CDX-011 Demonstrates High Response Rates in Patients with Metastatic Breast Cancer Expressing Elevated Levels of GPNMB and in Triple Negative Disease; -6.3% after hours
- P: Reports Q1 -$0.09 v -$0.18e, R$80.8M v $74Me; +15.7% after hours
- KCG: Estimates loss from Facebook around $30-35M, expected to impact Q2 results - filing; -1.3% after hours
***Fixed Income/Commodities/Forex***
- JGB: Japan's MoF sells ?1.1T 20-yr 1.6% JGBs; Avg yield: 1.6410% v 1.711% prior; bid-to-cover: 3.73x v 3.34x prior
- (CN) PBoC Offers CNY20B in 91-day repos at 3.14% v 3.14% prior
- IMF releases Apr gold buys: Russia +3K oz; Mexico +94.0K oz to 4.04M oz
- GLD: SPDR Gold Trust ETF daily holdings rise by 2.7 tons to 1,268.1 tons

EU Market Update: Major European PMI Manufacturing data misses expectations; German IFO Business Confidence falls for the first time in 7 months

Thursday, May 24, 2012 5:41:17 AM TradeTheNews.com EU Market Update: Major European PMI Manufacturing data misses expectations; German IFO Business Confidence falls for the first time in 7 months***Economic Data***
- (RU) Russia Gold & Forex Reserve w/e May 18th: $514.3B v $518.8B prior
- (DE) Germany Q1 Final GDP Q/Q: 0.5% v 0.5%e; Y/Y: 1.7% v 1.7%e; GDP WDA Y/Y: 1.2% v 1.2%e
- (DE) Germany Q1 Private Consumption: 0.4% v 0.2%e; Government Spending: 0.2% v 0.3%e; Domestic Demand: -0.3% v 0.0%e; Capital Investment: -1.1% v -0.3%e; Construction Investment: -1.3% v -0.4%e; Exports: 1.7% v 0.9%e; Imports: 0.0% v 0.3%e
- (CH) Swiss Apr Trade Balance (CHG): 1.3B v 1.9Be; Real Exports M/M: -0.9% v +0.2%e; Real Imports M/M: 2.6% v 5.9% prior
- (FI) Finland Apr PPI M/M: -0.1% v +0.4% prior; Y/Y: 1.4% v 1.4% prior
- (FI) Finland Apr Preliminary Retail Sales Volume Y/Y: -2.0% v +5.3% prior
- (FR) France May Business Confidence: 93 v 94e; Production Outlook: -29 v -14 prior; Own-Company Production Outlook: -4 v -4 prior
- (FR) France May Preliminary PMI Manufacturing: 44.4 v 47.0e; PMI Services: 45.2 v 45.7e
- (CZ) Czech May Business Confidence: 6.0 v 7.5 prior; Consumer Confidence: -31.0 v -29.3 prior; Composite: -1.4 v +0.2 prior
- (HU) Hungary Mar Retail Trade Y/Y: +0.9% v -0.8%e
- (ES) Spain Mar Mortgages-capital loaned Y/Y: -41.5% v -49.6% prior; Mortgages on Houses Y/Y: -42.0 v -47.1% prior
- (DE) Germany May Advanced PMI Manufacturing: 45.0 v 47.0e (fastest rate of contraction since June 2009); PMI Services: 52.2 v 52.0e
- (NL) Netherlands Apr Unemployment Rate: 6.2 v 5.9% prior
- (NL) Netherlands May Producer Confidence: -5.0 v -3.3 prior
- (EU) Euro Zone May Advanced PMI Manufacturing: 45.0 v 46.0e (lowest reading since June 2009); PMI Services: 46.5 v 46.7e; PMI Composite: 45.9 v 46.6e
- (DE) Germany May IFO Business Climate: 106.9 v 109.4e (first MoM decline in 7 months); Current Assessment: 113.3 v 117.1e; Expectations Survey: 100.9 v 102.0e
- (UK) Q1 Preliminary GDP (Second reading) Q/Q: -0.3% v -0.2%e; Y/Y: -0.1% v 0.0%e
- (UK) Q1 Preliminary Private Consumption: 0.1% v 0.3%e; Government Spending: 1.6% v 0.0%e; Gross Fixed Capital Formation: -0.3% v -0.5%e; Exports: +0.1% v -0.3%e; Imports: 0.4% v 0.1%e
- (UK) Q1 Preliminary Total Business Investment Q/Q: +3.6% v -1.0%e; Y/Y: 14.2% v 9.2%e
- (UK) Mar Index of Services M/M: 0.5% v 0.3%e; 3M/3M: 0.1% v 0.2%e
- (UK) Apr BBA Loans for House Purchase: 32.4K v 32.0Ke
- (HK) Hong Kong Apr Trade Balance (HKD): -42.9B v -40.8Be; Exports Y/Y: 5.6% v 6.2%e; Imports Y/Y: 5.0% v 4.1%e
- (IC) Iceland May CPI M/M: 0.0% v 0.8% prior; Y/Y: 5.4% v 6.4% prior
Fixed Income
- (DK) Denmark sold approx DKK6.0B in I/L 2023 Bonds; Yield -0.14%, bid-to-cover: 1.78x
- (HU) Hungary Debt Agency (AKK) sold HUF50B v HUF45B indicated in 12-Month Bills; Avg yield 7.58% v 7.38% prior; Bid-to-cover: 1.81x v 2.12x prior
*** SPEAKERS/FIXED INCOME/FX/COMMODITIES/ERRATUM ***
***Notes/Observations***
- China May HSBC Flash Manufacturing PMI registers its 7th consecutive contraction
- Major European PMI Manufacturing miss market expectations
- German IFO falls for the first time in 7 months
- UK Q1 GDP second reading revised slightly lower
- Speculation rising of a EU wide deposit guarantee plan to be endorsed by German Chancellor Merkel
- EU growth initiatives will be announced in June, but without abandoning fiscal prudence
***Equities*** >Indices: FTSE 100 +0.80% at 5306, DAX +0.30% at 6301, CAC-40 +0.60% at 3021, IBEX-35 +0.60% at 6481, FTSE MIB +0.75% at 13,057, SMI +0.40% at 5841
- In Europe, equities opened the session broadly higher amid gains in banks. However, markets have since pared gains following the release of weaker than expected EU manufacturing PMI and German IFO data. Additionally, the decline in China's May flash manufacturing PMI has weighed on markets. In terms of upcoming event risks, durable goods and weekly jobless claims data are due out of the US later today. Also, commentary is expected later today from the German Finance Minister Schaeuble, ECB's Prsident Draghi, Fed official Dudley and ECB/Bundesbank official Asmussen.
- In the UK shares of Mothercare [MTC.UK] and Cable & Wireless Communications [CWC.UK] have both traded sharply higher after releasing their respective full year earnings reports. Additionally, Thomas Cook [TCG.UK] has gained more than 5%, after naming a new CEO. SABMiller [SAB.UK] has moved between slight gains and losses, following the release of its full year earnings report. In Spain, Bankia is trading lower by approx. 1%, as Spain's government said the firm will require about ?7.1B to comply with the country's provisioning rules. Austrian bank, Raiffeisen [RIBH.AT] has gained over 1% after reporting higher than expected Q1 earnings. In Germany, sharers of SAP [SAP.DE] and Metro [MEO.DE] have been weighed down by ex-dividend factors. Bayer [BAYN.DE] has lost approx. 1.5%, as a US FDA panel voted against recommending XARELTO as a treatment for acute coronary syndrome.
Speakers: >- German IFO Economists commented that uncertainty in Euro Zone was impacting Germany's economy, but outlook remained above its long-term avg
- ECB's Nowotny: ECB has not used its whole arsenal and reiterated that non-standard ECB measures should not endanger mid-term price stability. The situation in Greece was particularly acute and overcoming imbalances was essential but would take time
- Bank of Japan (BOJ) Monthly Economic Report maintained its overall assessment of the economy that it would return to moderate recovery path
- Japan BOJ Gov Shirakawa commented ion Parliament that distrust in fiscal reform could push up long-term interest rates and weigh upon earnings of financial companies. He reiterated view that BOJ would pursue powerful easing. Risk aversion was the biggest factor in recent FX price movements. He added that there was no clear correlation historically between monetary base and JPY currency movement. The BOJ would strive to beat deflation using current asset buying program
- IMF China representative stated that a Greek exit from EMU would be a big shock to Chinese exports but China has fiscal room to sustain growth in the face of crisis
- BoE official Bailey stated that the UK banking sector's contingency plan for potential Greek exit from euro becoming more detailed
- Finland Fin Min Urpilainen commented that Europe's challenge was to find economic growth. Collateral payment from Greece rose to ?560M
- Ireland Dep PM Gilmore stated that categorically treaty would not be changed and reiterated the view that it wanted Greece to stay inside the EMU. Lastly he added that Ireland did not have contingency plan for a Greek exit.
- Sweden FSA's Cerps stated that the agency was monitoring banking sector to USD funding as Euro crisis deepens
- Poland Dep Fin Min Radziwill commented that the PLN currency was relatively stable with its weakness related to the Euro crisis. Poland currency sales would be similar to 2011 levels. He noted that debt markets were difficult at this time but would return to the market after it stabilizes as the country is in a comfortable situation. Domestic sales were seen covering most remaining needs for 2012
- Hong Kong Chief Executive Leung stated that it would seek stronger economic growth by diversification
- India Finance Ministry Official noted that the Gov't committee to meet on Friday to discuss raising diesel prices
- Philippines Central Bank Assistant Gov Amador commented that it would review CPI forecasts at June policy meeting and saw Inflation at a manageable as lower oil costs dampened pressures. To consider global economy and Euro Zone crisis during policy meeting and added the central bank would moderate sharp volatility in FX rates
- Indonesia Finance Ministry unveiled its mineral export tax regulation
- Iran official stated that there was no basis for new round of UN Counsel (P5+1) discussions
Currencies:
- The Euro initially tried to correct oversold levels but risk aversion sentiment again maintained the upper hand throughout the bulk of the European morning. Following China's lead, the European major PMI Manufacturing data came in softer than expectations and provided further headwinds for the Euro. Citigroup analyst added to sentiment when it issued a note forecasting ECB refi rate being cut to 0.50% and the central bank to resume its 3-year lending LTRO following any Greek exit from EMU. The EUR/USD approached the 1.2500 level for 22-month lows which provided some technical and psychological support. One analyst noted that 1.2530 level was 78.6% retracement of its 2010-2011 move.
-The hour ahead of the NY morning the markets encountered a bit of a reversal as European equity markets moved back into positive territory and peripheral spreads narrowed. The record low yields of safe-haven plays seemed to have ignited some asset reallocation back into equities. The EUR/USD was back around the 1.2560 area as the NY morning approached
- The EUR/CHF cross floor at 1.200 continued to note a 'massive' bid in its defense.
Political/ In the Papers:
- The Spanish government was said to be planning to nationalize CatalunyaCaixa and NovaGalicia banks due to the inability to find a buyer. Prior reports from late March suggested that the auction process for the banks would be slowed by Spain's government, as Spain's Deposit Guarantee Fund (DGF) needed to be strengthened. At that time it was estimated that the DGF had about ?2.0B in funds.
- Plans by the government to delay certain privatizations related to the energy industry have weighed on Russia's equity markets. On Wednesday, Russia's benchmark RTS index declined by 4.4%.
- The Telegraph's Ambrose Evans-Pritchard is critical of former Greek caretaker PM Papademos. He argued If Greece were to leave the Euro, then its fate would not have to be as dire as the situation recently described by Papademos. It could restructure its economy in a similar manner to Iceland.
- According to the FT US manufacturers argued against plans by JP Morgan to launch an exchange traded fund backed by copper as it would grossly and artificially inflate prices, and cause wreak havoc on the global economy.
***Looking Ahead*** >- (ZA) South Africa Central Bank (SARB) Interest Rate Decision: Expected to leave interest rates unchanged at 5.50%
- (AR Argentina May Consumer Confidence:
- 6:00 (IR) Ireland Apr Property Prices M/M: No est v 0.0% prior; Y/Y: No est v -16.2%e
- 6:00 (CZ) Czech Republic to sell 9-month Bills
- 7:15 (UK) BOE member Miles
- 7:30 (DE) German Fin Min Schaeuble
- 7:30 (TR) Turkey May Industrial Confidence: No est v 116 prior; Capacity Utilization: No est v 74.7% prior
- 8:00 (ZA) South Africa Central Bank Gov Marcus Rate Decision press conference
- 8:00 (BR) Brazil Apr Unemployment Rate: 6.2%e v 6.2% prior
- 8:00 (RO) Romania to sell RON500M in Bonds
- 8:30 (US) Apr Durable Goods Orders: +0.2%e v -4.0% prior (revised from -4.20%); Durables Ex Transportation: +0.8%e v -0.8% prior (revised from -1.1%); Capital Goods Orders Non-defense Ex-Aircraft: 0.8%e v -0.8% prior; Capital Goods Shipment Non-defense Ex-Aircraft: -1.0%e v +2.6% prior
- 8:30 (US) Initial Jobless Claims: 370Ke v 370K prior; Continuing Claims: 3.250Me v 3.265M prior
- 8:58 (US) May Preliminary Markit PMI:
- 9:00 (IT) Italy PM Monti
- 9:00 (EU) ECB's Draghi, Bank of Italy's Visco speak at Rome Conference
- 9:00 (DE) German Chancellor Merkel speaks at German Engineering Industry Convention
- 9:00 (BE) Belgium May Business Confidence: -11e v -10.7 prior
- 9:00 (MX) Mexico Q1 GDP Y/Y: No est v 11.0% prior
- 9:30 (DE) Germany Econ Min Roesler
- 9:30 (US) Fed's Dudley to speak on Regional Economy in New York
- 9:30 (EU) EFSF CFO Frankel in Rome
- 9:30 (BR) Brazil Apr Current Account: -$4.0Be v -$3.3B prior; Foreign Direct Investment (FDI): $4.9Be v $5.9B prior
- 9:30 (US) Commercial Paper data
- 10:30 (US) EIA Natural Gas Inventories
- 11:00 (US) May Kansas City Fed Manufacturing Activity: 5 v 3 prior
- 12:20 (DE) ECB member Asmussen in Poland
- 15:00 (AR) Argentina Apr Industrial Production M/M: No est v 1.9% prior; Y/Y: 1.5%e v 2.1% prior
- 19:30 (JP) Japan Apr National CPI Y/Y: No est v 0.5% prior; Ex-Food Y/Y: No est v -0.5% prior
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:: Rally USD can challenge the expectations of the market, AUD struggles to find support

23 May 2012 16: 15 GMT 

Index	Last	High	Low	Daily Change (%)	Daily Range (% of ATR)
DJ-FXCM Dollar Index	10201.88	10203.35	10158.2	0.38	94.30%

The Dow Jones - FXCM U.S. Dollar Index (Ticker: USDollar) is 0.38 percent higher from the open after moving 94 percent of its average true range, and the greenback may continue to appreciate against its major counterparts as market participants scale back their appetite for risk. As the flight to safety gathers pace, we should see the upward trending channel continues to take shape, but we will need to keep a close eye on the relative strength index as it fails to carve out a higher high. As the oscillator continues to come off of overbought territory, the short-term pullback in the index may ultimately turn into a larger correction, and we may see the 10,200 figure provide psychological resistance, but the head-line driven market may continue to prop up the reserve currency as European policy makers struggle to restore investor confidence.
As the USDOLLAR comes up against the upper bounds of the upward trending channel, the greenback looks poised for a correction, and we will be keeping a cautious eye on the relative strength index as it continues to flirt with overbought territory. At the same time, we will be closely watching the 10 - Day SMA (10,090) as it should provide interim support, but we may see the dollar fallback towards the 61.8 percent Fib around 9,949 (higher low) before carving out a higher high. However, as market participants turn their attention to the Summit, the renewed efforts to stem the risk was for contagion may do little to restore investor confidence, and the headlines coming out of the euro-area may continue to increase the appeal of the reserve currency as the governments operating under the fixed-exchange rate system continues to move in their own interest. In turn, the meeting may reveal a growing rift within the EU, and we will maintain our bullish forecast for the USD as it continues to benefit from safe-haven flows.
 Three of the four components weakened against the greenback, led by a 1.04 percent decline in the Australian dollar, and the high-yielding currency is likely to face additional headwinds over the next 24-hours of trading as the shift away from risk-taking behavior picks up. As the AUDUSD searches for support, we are looking at the 50.0 percent Fib from the 2010 low to the 2011 high around 0 9570 - 0 9600, and we will preserve bearish outlook for the aussie dollar as interest rate expectations deteriorate. According to Credit Switzerland overnight index swaps, market participants are pricing a 59 percent chance for another 50bp rate cut in June, but see borrowing costs falling by more than 125bp over the next 12-months as the fundamental outlook for the region deteriorates.

Building Permits, Housing Starts Signal Mixed Housing Market

Building Permits tracks the change in government issued new building permits from the prior month. Housing starts tracks the change in the number of new residential buildings that has construction during the month. Both signal to the health of the US housing market.
Larger-than-expected increases in housing starts and building permits increased household income and suggest in turn an economic expansion, and visa versa.
According to the US Department of Housing and Urban Development, privately-owned housing units authorized by building permits in February were at a seasonally adjusted annual rate of 715,000, lower than the 600 730,000. This is 7.0 percent below the revised October rate of 769,000, but is 23.7 percent above the revised April 2011 600 of 578,000.

TradeTheNews.com Asian Market Update: Risk-aversion at a boil after Moody's cut

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(CL) CHILE CENTRAL BANK LEAVES OVERNIGHT RATE TARGET AT 5.00%, AS EXPECTED
- (CN) CHINA APR NEW HOME PRICES M/M: FELL IN 43 OF 70 CITIES V 46 PRIOR; Y/Y: FELL IN 46 OF 70 CITIES V 37 PRIOR >- (JP) JAPAN CABINET MAY MONTHLY ECONOMIC REPORT: UPGRADES ECONOMIC ASSESSMENT (First upgrade in 9 months)
- (KR) South Korea Mar Conference Board Leading Economic Index: -1.5% v +2.9% prior

***Markets Snapshot (as of 04:45GMT)***
- Nikkei225 -2.5%
- S&P/ASX -2.4%
- Kospi -2.6%
- Singapore Straits Times Index -1.6%
- Shanghai Composite -1.1%
- Hang Seng -2.6%
- Jun S&P Futures -0.2% at 1,298
- June gold -0.1% at $1,573/oz
- June Crude -0.6% at $92.01

***Overview/Top Headlines***
- Asian equity markets are sliding ever lower in the final trading session of the week, giving little reverence to the G8 summit taking place this weekend in Camp David. Regional indices are off by over 2% just about across the board, S&P500 futures have reversed initial gains to fall over 7 handles, while EUR, AUD, and NZD are all at fresh multi-month lows against the greenback. Govt bonds of US and Japan meanwhile are firmly bid, broadly benefiting USD and JPY currencies. In commodities space, front-month crude has also pared initial gains to fall over $1.00 below $92/brl, while copper retraced its run-up from $3.49 all the way down to $3.45.

- Continued selling has been attributed to more bad news from Europe, where Moody's cut the ratings of 16 Spanish banks by 1-3 notches. Top two banks - Santander and BBVA - bore the brunt of the action with a 3-notch downgrade to A-3, as the credit rating agency noted deteriorating asset quality and little expectation of improvement for the sovereign economy. In China, April home prices saw accelerated declines with 1.2% y/y slide in prices vs -0.7% drop in the prior month. Prices also fell m/m and y/y in 43 and 46 cities respectively out of 70 cities.

- Japan cabinet economic monthly report saw the defiant govt upgrade its economic assessment for the first time in 9 months on expectation of continued reconstruction-related demand. Exports and consumer spending were also upgraded, even as Japan remained mindful of Europe-related risks. Finance Min Azumi noted economic data suggests Japan is in good shape and Econ Min Furukawa saw prospects for sustained recovery. Tokyo officials also argued the recent strength in JGBs reflects market perception of the safety of the asset, just as 10-yr yields hit multi-year lows of 0.82%.

***Speakers/Geopolitical/In the press***
- (CN) According to gov't economist Zhu Baoliang, lending rates could be cut as soon as the current quarter (Q2), but rates could be left unchanged amid concerns about inflation - financial press >- (CN) China Q2 GDP estimated around 7.5% y/y; Inflation around 3.3% - Chinese press citing State Information Center
- (EU) Former ECB Pres Trichet: EMU needs more integration measures such as emergency federal powers to guard against significant risks in Europe - financial press
- (JP) Japan lawmakers continue to oppose entry into TPP free trade talks - Nikkei News
- JPM: Purchased European MBS and other debt securities over the past 3 years, building a position of as much as $100B - FT

***Equities***
- (AU) S&P/ASX extends decline below 4,070; Down over 2.2% and at lowest level in 2012
- TM: To expand capacity at 2 of 3 engine plants in N America; Total investment seen at about $110M - Nikkei News
- BIDU: To cooperate with Foxconn in a launch of cloud computing smartphones - Chinese press
- ACH: Received regulatory approval for a $1B IPO in Hong Kong - financial press

**US Equities**
- CRM: Reports Q1 $0.37 v $0.34e, R$695M v $678Me; +6.4% afterhours >- GPS: Reports Q1 $0.47 v $0.46e, R$3.49B v $3.5Be; +4.7% afterhours
- INTU: Reports Q3 $2.51 v $2.48e, R$1.95B v $2.0Be; -0.1% afterhours
- MRVL: Reports Q1 $0.23 v $0.20e, R$796M v $769Me; +3.0% afterhours
- AMAT: Reports Q2 $0.27 v $0.24e, R$2.54B v $2.4Be; -0.7% afterhours

***Fixed Income/Commodities/Forex***
- AUD/USD: Extending decline below $0.9870; 6-month lows
- NZD/USD: Extending decline to $0.76; 6-month lows
- EUR/USD: Extending decline below $1.2666; fresh 4-month low
- Japan 10-yr JGB yield falls to 9-year lows below 0.82%
- iShares Silver Trust ETF daily holdings rise to 9,619 tons from 9,516 tons (highest level since Apr 11th)
- SPDR Gold Trust ETF daily holdings rise by 2.1 tons to 1,278.7 tons (highest since Apr 27th)
- (MX) Mexico central bank gov Carstens: Mexico inflation is low and stable; Volatility in MXN does not change impact inflation or call for adjustment in monetary policy - financial press
- (US) Weekly Fed Balance Sheet Assets Week ending May 16th: $2.83T v $2.85T prior; M1: -$34B v -$4.0B prior; M2: -$1.7B v +$57.1B prior

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EU Market Update: Risk Aversion remains heightened in session; GBP slumps following BOE quarterly inflation report

Wednesday, May 16, 2012 5:51:17 AM TradeTheNews.com EU Market Update: Risk Aversion remains heightened in session; GBP slumps following BOE quarterly inflation report***Economic Data***
- (EU) ECB: €2.0B borrowed in overnight loan facility €1.6B prior; €788.4B parked in deposit facility v €788.2B prior
- (EU) Euro Zone Apr EU 25 New Car Registrations: -6.9% v -7.0% prior (7th straight monthly decline)
- (TR) Turkey Apr Consumer Confidence: 91.1 v 93.9 prior
- (AT) Austria Apr Consumer Price Index M/M: 0.4% v 1.1% prior; Y/Y: 2.3% v 2.4% prior
- (CZ) Czech Mar Current Account (CZK): 16.8B v 13.9Be >- (IT) Italy Mar Total Trade Balance: +€2.1B v -€1.1B prior; Trade Balance EU: €1.6B v €416M prior
- (UK) Apr Jobless Claims Change: -13.7K v +5.0Ke; Claimant Count Rate: 4.9% v 5.0%e
- (UK) Mar Average Weekly Earnings 3M/Y: 0.6% v 1.0%e; Weekly Earnings ex-Bonus 3M/Y: 1.6% v 1.4%e
- (UK) Mar ILO Unemployment Rate: 8.2% v 8.4%e >- (EU) Euro Zone CPI M/M: 0.5% v 0.5%e; Y/Y: 2.6% v 2.6%e; Core CPI Y/Y: 1.6% v 1.5%e
- (CH) Swiss May Credit Suisse ZEW Expectations Survey: -4.0 v +2.1 prior
- (IC) Iceland Central Bank (Sedlabanki ) raised 7-Day Lending Rate by 50bps to 5.50%
- (EU) Euro Zone Mar Trade Balance Seasonally Adj: €4.3B v €3.8Be; Trade Balance unadj: €8.6B v €4.0Be
Fixed Income: >- (RU) Russia cancelled its 10-Year OFZ Bonds
- (EU) ECB alloted $300M in 7-Day USD Liquidity Tender at fixed 0.66% vs. $326.3M prior
- (FR) France Debt Agency (AFT) sold €8.0B vs.€7-8B indicated range in 2014, 2015, 2016 and 1017 BTANs, OATs
- Sold €2.505B in 0.75% Sept 2014 BTAN; Avg Yield 0.74% v 0.85% prior; Bid-to-cover: 2.97x v 2.29x prior
- Sold €945M in 3.5% Apr 2015 OAT; Avg Yield 0.95% v 1.06% prior; Bid-to-cover: 4.58x v 3.0x prior
- Sold €895M in 3.25% Apr 2016 OAT; Avg Yield 1.37% v 2.80% prior; Bid-to-cover: 4.97x v 4.50x prior
- Sold €3.651B in 1.75% Feb 2017 BTAN; Avg Yield 1.72% v 1.83% prior; Bid-to-cover: 2.04x v 2.69x prior
- (DE) Germany sold €4.107B in 1.75% July 2022 Bund; Avg Yield 1.47% (fresh record low) v 1.77% prior; Bid-to-cover: 1.5x v 1.1x
*** SPEAKERS/FIXED INCOME/FX/COMMODITIES/ERRATUM ***
***Notes/Observations***
- China's "Big Four" state-run banks have issued almost no new yuan loans in the first half of May
- Germany and ECB said to be at odds over EFSF guarantees
- UK Claimant Count registers its largest monthly decline since July 2010
- ECB holding a previously scheduled meeting in Frankfurt
***Equities*** >FTSE 100 -1.1% at 5378, DAX -1% at 6335, CAC-40 -0.10% at 3036, IBEX-35 -1% at 6636, FTSE MIB -0.40% at 13,253, SMI -0.05% at 5860
- European equity indices opened the session broadly lower, as indices have been pressured by banks. Additionally, resource-related companies opened lower following cautious comments out of BHP about the outlook for commodity prices. Concerns about Greece have continued to weigh on the markets, following reports from yesterday that the country is expected to hold elections in mid-June. Also, Greek banks have been in focus, amid reports that deposit outflows have accelerated following the recent Greek parliamentary elections. In terms of upcoming event risks, the US Fed is due to release the minutes from its most recent policy meeting later today. Also on Thursday's session, Spain is due to sell 2015 and 2016 bonds.
- UK-listed construction and engineering services company Lamprell [LAM.UK] has declined by over 60%, after disclosing a profit warning. Additionally ,shares of Bovis Homes [BVS.UK] and Land Securities are trading lower, following the release of their respective earnings reports. German names Rheinmetall [RHM.DE], Lanxess [LXS.DE], Prosieben [PSM.DE] and Symrise [SY1.DE] have all been weighed down by ex-dividend factors. In France, EADS [EAD.FR], EADS has gained over 1% following its Q1 earnings release. Swiss luxury watch maker Richemont [CFR.CH] has gained over 4%, as the company reported better than expected FY11 results. Danish shipping name AP Moller Maersk [MAERSKB.DK] has lost over 5% amid concerns about the company's 2012 outlook. Shares of Italian bank, Banca Monte Paschi have lost more than 2%, after the company reported a y/y decline in its Q1 net profit. Monte Paschi also reported a 4.9% sequential rise in its bad loans in Q1.
Speakers: >- Bank of England Releases Quarterly Inflation Report which raised inflation forecast with CPI seen above 2% for the next year or so compared to its Feb forecast of until Q4 2012. The report noted that Inflation report chart shows CPI at around 1.6% in 2 years and at 1.8% in 3 years assuming market interest rate path and AFT steady at £325B
- BoE Gov King stated during Q&A that contingency plans were being discussed for some time with UK Treasury and FSA regarding the euro area. On QE decision he noted that ultimately have to be driven by inflation outlook, last week decision consistent with that idea.
- Germany Fin Min Schaeuble reiterated the view that all wanted Greece to remain in the Euro but the Greek political parties had the choice and it was their responsibility. He stressed that differences between Chancellor Merkel and new French President Hollande were not large and that Germany economic growth was robust because the country was reducing its deficit. Lastly he noted that was working on Financial Transaction Tax (tobin tax) in a smaller group of EU members
- Spain PM Rajoy commented that Spain faced risk of astronomical borrowing costs in an address to Parliament
- Ireland PM Kenny noted that enormous challenges lie ahead; Ireland will continue to meet all commitments
- Ireland Fin Min Noonan stated that he hope to get back to bond market by end 2013 but might not due to uncertainty in Europe. He added that it was not a guarantee that Greece would leave the Euro Zone and maybe Greece needed a referendum whether to stay in the EMU
- Finland PM Katainen: Risk of contagion from Greece as the situation is threatening Spain, Italy and Portugal
- China PBoC Gov Zhou commented that China to steadfastly prevent systemic financial risk
- Poland Fin Min Rostowski commented that he expected there would be some significant weakening of the PLN currency (Zloty) due to Greece fears
- India Central Bank Dep Gov Kahn stated that the RBI was closely watching INR currency volatility and it would take all steps to curb such volatility
- India Central Bank Chakrabarty commented that the RBI would only intervene in FX markets to curb INR volatility
- Russia Central Bank Gov Ignatyev stated that Apr YTD Capital Outflows was $42B and that such outflows remained a serious problem for the economy. The CBR remained determined to hold inflation between 5.0-6.0%
- India Fin Min Mukherjee: Reiterates India's growth story is intact
Currencies:
- Euro zone crisis remain the leading influence in the session and kept the USD well supported against the majors and commodity-related currency pairs. The session began with a heightened amount of risk aversion prevalent but by mid-morning sentiment calmed down. Perhaps that the ECB was holding a previously scheduled conference today on Monetary Policy Conference in Frankfurt helped ease concerns. However some dealers misconstrued it as an 'emergency meeting'
- The EUR/USD continued to hit fresh 4-month lows as it tested 1.2682 in the session. The European peripheral yield was higher with the 10-year Spanish/German Gov't bond spread at 510bps for fresh EMU record. Dealers were on guard whether Moody's would make any cuts in Spanish banking sector after doing so for Italy earlier in the week. The 10-year Italian bond yield pushed firmly above the 6% area but a move towards 7% would heighten concerns and possible re-activate the ECB SMP program. With Greece heading for fresh elections next month, fears of capital flight mounted and yesterday the Greek central bank confirmed that €700M in deposit had been withdrawn in recent days.
- The implication on global growth was also on the minds of traders. China's "Big Four" state-run banks were said to have issued almost no new yuan loans in the first half of May. The AUD/USD pair was suffering not only from euro zone risks, yet also concerns that activity in China's economy may be faltering
- The GBP slumped lower to approach 1.5900 after the BOE inflation report which did raise its short term CPI view but overall remaining in target in 2-3 year time frame
Political/ In the Papers:
- The CBRE Group expects further defaults in European commercial real estate loans due to declining rents and occupancies. The trend is affecting many areas, now including large city centres such as London and Frankfurt. Values are currently down by almost 20% from their peaks in 2007.
- With the concerns related to a possible Greek collapse, the Irish Independent calculated that such an event would cost each Irish resident €380. It added that the true costs would be greater because Ireland would have to deal with a five-year financial crash if Greece were to exit the currency. According to Citi, the loans to Greece now stand at €160B, owed either to the ECB or euro zone countries as a share of the bailout (with Ireland's portion calculated at slightly above 1%, or a little over €380 per person). The independent clarified that the exact figure is difficult to assess due to Ireland's own euro zone loans.
- The Telegraph's Ambrose Evans-Pritchard looked at the risks related to Italian banks noting that the contracting economy is a challenge for domestic banks, as Italian banks are highly exposed to the economy. He also added the contagion risks that Italian banks face in relation to Greece.
- The ECB was said to have cut liquidity support for Greek banks according to the Dutch press. The cut in support was due to Greece holding off on recapitalizing its banking system, although it received €25B in funds for that purpose. At the end of January, Greek banks received €73B in liquidity support from the ECB, although the amount was down by over 50%.
***Looking Ahead***
- 6:00 (PL) Poland to sell New 5-Year Fixed Rate Bonds
- 6:00 (RU) Russia to sell Up to RUB20.0B in 10-Year OFZ Bonds
- 6:00 (FR) France Debt Agency (AFT) to sell I/L 2022, 2023 and 2027 Bonds
- (IT) IMF mission visit to Italy
- 6:00 (GR) Greece interim govt expected to be announced; election date
- 6:00 (DE) German Govt Advisor Feld
- 6:00 (PT) Portugal Q1Unemployment Rate: No est v 14.0% prior
- 7:00 (UK) Prime Minister's Question Time in House of Commons
- 7:00 (US) MBA Mortgage Applications w/e May 11th: No est v 1.7% prior
- 7:00 (ZA) South Africa Mar Retail Sales Constant M/M: No est v -2.2% prior; Y/Y: No est v 7.2% prior
- 8:00 (PL) Poland Mar Current Account: No est v -€1.6B prior; Trade Balance: No est v -€838M prior
- 8:30 (CA) Canada Mar Manufacturing Sales M/M: No est v -0.3% prior
- 8:30 (US) Apr Housing Starts: 685Ke v 654K prior; Building Permits: 730K v 764K prior (revised from 747K)
- 9:00 (DE) German Fin Min Schaeuble speech on crisis themes: University of Aachen
- 9:00 (EU) ECB's Monetary Policy Conference in Frankfurt
- 9:15 (US) Apr Industrial Production: 0.6%e v 0.0% prior; Capacity Utilization: 79.0%e v 78.6% prior; Manufacturing Production: No est v -0.2% prior
- 10:30 (US) Weekly DOE Energy Inventories
- 11:30 (BR) Brazil Central Bank weekly currency flows
- 12:00 (US) World Bank President Zoellick
- 12:30 (US) Fed's Bullard speaks on US Economy in Louisville, Kentucky
- 12:45 (EU) ECB member Gonzalez-Paramo
- 14:00 (US) Fed Releases Minutes from April 24-25 FOMC Meeting
- 14:00 (US) Minutes of FOMC Meeting
- 17:00 (CO) Colombia Mar Trade Balance: No est v $537.2M prior; Imports CIF: no est v $4.5B prior
- 18:00 (HU) Hungary Central Bank Gov Simor speaks at EBRD Conference
- 18:00 (HU) Hungary Central Bank VP Kiraly speaks
- 18:00 (EU) EU's Juncker speaks at German Fin Min Schaeuble award ceremony in Aachen, Germany
- 18:00 (CL) Chile Central Bank Economists Publish Report
- 19:50 (JP) Japan Q1 Preliminary GDP Annualized: +3.5%e v -0.7% prior; GDP Q/Q: +0.9%e v -0.2% prior; Nominal GDP Q/Q: +1.0%e v -0.5% prior Legal disclaimer and risk disclosure All information provided by Trade The News (a product of Trade The News, Inc. "referred to as TTN hereafter") is for informational purposes only. Information provided is not meant as investment advice nor is it a recommendation to Buy or Sell securities. Although information is taken from sources deemed reliable, no guarantees or assurances can be made to the accuracy of any information provided. 1. Information can be inaccurate and/or incomplete 2. Information can be mistakenly re-released or be delayed, 3. Information may be incorrect, misread, misinterpreted or misunderstood 4. Human error is a business risk you are willing to assume 5. Technology can crash or be interrupted without notice 6. Trading decisions are the responsibility of traders, not those providing additional information. Trade The News is not liable (financial and/or non-financial) for any losses that may arise from any information provided by TTN. Trading securities involves a high degree of risk, and financial losses can and do occur on a regular basis and are part of the risk of trading and investing.

European market update: Greece said the European GDP data and the German ERF survey varied session

 Tuesday, May 15, 2012 5:53:18 AM European Market Update: Greece said to make €430M bond payment today; European GDP data and German ZEW Survey were mixed in session***Economic Data***

- (JP) Japan Apr Consumer Confidence: 40.0 v 40.8e
- (SG) Singapore Mar Retail Sales M/M: 1.6% v 0.2%e; Y/Y: 9.1% v 7.2%e; Retail Sales Ex Auto Y/Y: 6.5% v 3.5%e
- (FR) France Apr Consumer Price Index M/M: 0.1% v 0.2%e; Y/Y: 2.1% v 2.2%e; CPI Ex Tobacco Index: 124.80 v 124.84e
- (FR) France Apr CPI EU Harmonized M/M: 0.2% v 0.2%e; Y/Y: 2.4% v 2.5%e
- (FR) France Q1 Preliminary Gross Domestic Product Q/Q: 0.0% v 0.0%e; Y/Y: 0.3% v 0.5%e
- (FI) Finland Mar GDP Indicator: 2.4% v 3.5% prior
- (DE) Germany Q1 Preliminary GDP Q/Q: 0.5% v 0.1%e; Y/Y: 1.7% v 0.9%e; GDP wda Y/Y: 1.2% v 0.8%e
- (FR) France Q1 Preliminary Non-Farm Payrolls Q/Q: +0.1 v -0.2%e; Wages Q/Q: 0.9% v 0.7%e
- (AT) Austria Q1 GDP Q/Q: 0.2 v 0.0% prior; Y/Y: 1.9 v 0.8% prior >- (CZ) Czech Q1 Preliminary GDP Q/Q: -1.0% v +0.1%e; Y/Y: -1.0% v +0.2%e
- (HU) Hungary Q1 Preliminary GDP Q/Q: -0.7% v -0.5%e; Y/Y: -1.3% v -0.1%e
- (HU) Hungary Mar Final Industrial Production M/M: 0.6% v 0.6% prelim; Y/Y: 0.6% v 0.6% prelim
- (TR) Turkey Feb Unemployment Rate: 10.4% v 10.2% prior
- (FI) Finland Mar Current Account: -€40M v -€230M prior
- (DK) Denmark Apr Wholesale Prices M/M: 0.2 v 0.8% prior; Y/Y: 2.2% v 2.7% prior
- (NL) Netherlands Q1 Preliminary GDP Q/Q: -0.2% v -0.3%e; Y/Y: -1.1% v -1.1%e
- (NL) Netherlands Mar Trade Balance: €4.1B v €2.9B prior
- (SE) Sweden Q1 Total Number of Employees Y/Y: 2.3% v 2.8%e
- (TR) Turkey Apr Budget Balance (TRY) 1.4B v 1.1B y/y
- (IT) Italy Q1 Preliminary GDP Q/Q: -0.8% v -0.7%e; Y/Y: -1.3% v -1.2%e
- (NO) Norway Apr Trade Balance (SEK): 38.4B v 46.4B prior
- (UK) Mar Visible Trade Balance: -£8.6B v -£8.4Be; Total Trade Balance: -£2.7B v -£2.9Be; Trade Balance Non EU: -£4.1B v -£4.7Be >- (GR) Greece Q1 Advanced GDP Q/Q: %; Y/Y: -6.2% v -7.5% prior
- (EU) Euro Zone Q1 Advanced GDP Q/Q: 0.0% v -0.2%e; Y/Y: 0.0% v -0.2%e
- (DE) Germany May Zew Economic Sentiment: 10.8 v v 19.0e; Current Situation: 44.1 v 39.0e
- (EU) Euro Zone May ZEW Economic Sentiment: -2.4 v +13.1 prior
- (PT) Portugal Q1 Preliminary GDP Q/Q: -0.1%% v -1.0%e; Y/Y: -2.2% v -3.1%e
Fixed Income: >- (GR) Greece Debt Agency (PDMA) sold €1.3B v €1.0B in 13-week Bills; avg yield 4.34% v 4.20% prior; Bid-to-cover: 2.32x v 2.46x prior
- (SE) Sweden sold SEK2.5B vs. SEK2.5B indicated in 3.5% 2022 Bonds; avg yield 1.4696%
- (ZA) South Africa sold total ZAR2.1B vs. ZAR2.1B indicated in 2018, 2026 and 2041 bonds
- (EU) ECB allotted €43.0B vs. €39.0Be in 7-Day Main Refinancing Tender at fixed 1.0%
- (HU) Hungary Debt Agency (AKK) sold HUF45B in 3-Month Bills; Avg Yield 7.16% v 7.16% prior; Bid-to-cover: 2.02x v 2.40x
- (UK) DMO sold £2.75B in 5% 2025 Gilts; Avg Yield 2.251% v 2.356% prior; Bid-to-cover: 2.09x v 1.8x prior; Tail 0.2bps vs. 0.4bps prior
- (BE) Belgium Debt Agency sold total 3.39B vs. €3.0-3.5B in 3-month and 12-month Bills
- Sold €1.465B in 3-month Bills; Avg yield 0.201% v 0.179% prior; Bid-to-cover: 3.97x v 2.62x prior
- Sold €1.925B in 12-month Bills; Avg yield 0.627% v 0.734%prior; Bid-to-cover: 2.36x v 2.32x prior
*** SPEAKERS/FIXED INCOME/FX/COMMODITIES/ERRATUM ***
***Notes/Observations***
- Moodys cuts Italian banking sector (as expected)
- RBA minutes: Need to cut rates tp offset higher bank rates; CPI has slowed
- Greece will make bond payment of €430M today
- German, Eurozone & Portugal GDP beats expectations; Italy, emerging Europe do not
- Greek President Papoulias will attempt to persuade leaders to accept a technocratic government to avert another round of elections
- Hollande inaugurated as France's new President
***Equities*** >FTSE 100 +0.10% at 5469, DAX +0.20% at 6462, CAC-40 +0.40% at 3071, IBEX 35 -0.40% at 6783, FTSE MIB -0.30% at 13,622, SMI +0.10% at 5882
- European equity indices opened the session slightly higher, following the losses seen on Monday's session. Additionally, banks opened higher, but are currently trading in negative territory, as peripheral government bond yields have moved higher. The better than expected Q1 GDP data out of Germany has been offset by disappointing growth figures out of Italy and mixed German ZEW data. Additionally, concerns related to Greece's political situation and Spanish banks have continued to linger. In Greece, the Athens Stock Exchange has risen by more than 0.50%, while Greece's 10 yr bond yield has risen by over 10bps on the session amid reports that Greece will make the €430M debt payment, which is due today.
- UK-listed Smiths Group [SMIN.UK], Babcock International [BAB.UK], Afren [AFR.UK] and G4S [GFS.UK] are all trading higher following the release of their respective financial reports. Shares of Germany's largest steel maker, Thyssenkrupp [TKA.DE] have declined by over 2% on the session, as the company reported weaker than expected quarterly revenues. Merck KGAA [MRK.DE] and Air Berlin are also trading lower after their respective Q1 earnings reports. In other German movers, Phoenix Solar [PS4.DE] has gained over 9% following its quarterly earnings release, while Sky Deutschland [SKYD.DE] is higher by over 5% as the company reported better than expected quarterly revenues.
In France, shares of Iliad [ILD.FR] are higher by over 4%, as the company's Q1 sales beat analyst expectations. Additionally, Vivendi [VIV.FR] has gained more than 3% on better than expected Q1 results. Swiss private bank Julius Baer is lower by more than 2%, as the company said its year to date gross margin was below the level seen in 2011. Italian banks opened the session mostly higher, despite the decision by Moody's to downgrade 26 Italian banks. Italian banking name Intesa [ISP.IT] is due to report its quarterly earnings later today.
Speakers: >- Greece will pay holdouts €430M of a Euro bond maturing today
- France President Hollande commented in his acceptance sppech that he vowed to open a new path for Europe and that France had always overcome challenges
- Head of Greek Independent party Kammenos denied having sent document to president's office with proposals for forming a government
- ZEW Economists commented that political uncertainty in Greece and France contributed to the drop in its May Survey and that economic risks had risen in recent weeks. Growth and consolidation did not contradict each other and that austerity must be pursued in some European countries. There was the expectation of small banking crisis during the next 6 months, as sectorally everything was quite well, except for the banking sector. The ZEW noted that the exchange rate expectations was for Euro to weaken as expectation of the Euro Zone crisis would intensify again
- EU's Juncker commented that the topic of a new Eurogroup chief was not on today's agenda. He reiterated that he was confident Spain to reach 2013 deficit target
- France Fin Min Baroin stated that the French banking sector could absorb Greek losses
- UK Chancellor Osborne commented that the Euro Region must stand behind its currency. Uncertainty was undermining Euro Area economies and that strengthening the banking sector was part of the solution
- Spain Fin Min De Guindos commented that Spain asked for ECB role in auditing banking sector. He noted that EFSF aid for banking sector was not discussed
- German CDU official Altmaier stated that it was certain that Germany and France would agree on a common euro crisis approach by the end of June at the latest. He reiterates that expected the fiscal compact to be approved by the German Parliament before the summer recess
- German SPD (opposition) stated that Chancellor Merkel policies were leading Europe into recession and called for investment and fiscal pact
- German SDP's Steinmeier (opposition) doubted that the ESM and fiscal compact would be ratified before summer recess. Party would need to decide whether it backed the fiscal pact depending on what growth measures are added. He expected Chancellor Merkel to accept an EU growth pact
- Slovakia gov't won a confidence vote on its austerity program, as expected
- India Junior Oil Min commented that India to import 15.5M tons of crude oil from Iran in FY13 compared to 17.4M tons y/y
- Norway Govt revised its 2012 budget with the overall surplus revised higher to NOK381B vs. NOK346B seen in Oct . Structural non-oil deficit was raised to to NOK116B vs. NOK112.2B seen in Oct and the non-oil Defciit to GDP to 3.5% vs. 3.9% prior. Norway cut it 2012 non-oil GDP growth to 2.7% from 3.1% prior Oct view and lowered 2012 Core CPI to 1.4% from 1.8% seen in Oct. It noted that the budget was somewhat more expansive compared to October budget
- IMF commented on Sweden and noted that various financial fragilities were apparent in the country that included household debt and a softening housing market
- Sweden Central Bank's Wickman-Parak: Reasonable to assume that the Euro crisis will be solved
- South Africa Central Bank (SARB) approved provision of liquidity facility to help banks meet Basel III requirements
- Singapore Dep PM commented that the Euro Zone debt crisis escalation might have substantially spilled over into global markets and could not rule out a deeper recession in Europe and more market stress as a result
- (IR) Iran envoy: Discussions with IAEA have been constructive
Currencies: -
- The early part of the session exhibited some consolidation of recent moves in markets, including currencies. A stronger German Q1 GDP helped to contain some of the risk aversion coupled with word that Greece would make the €430M bond payment today. However, as other Euro Area members reported their respective GDP highlighted the two-tier growth and some of the earlier euphoria faded. German ZEW investor confidence was weaker than expected and provided another headwind for any prolong Euro rebound. As the NY morning approached the EUR/USD was steady at 1.2845, about 20 pips higher from it Far East open. The market will now focus on key US economic data and EcoFin meeting.
Political/ In the Papers:
- The Trades Union Congress (TUC) reported that due to the inability to find full-time work the number of part-time workers more than doubled over the past four years. Approximately 600K men were working part-time in December while looking for full-time positions compared to 293K at the end of 2007. In addition, total in involuntary part-time work hit 1.4M (highest reading since records began in 1992).
***Looking Ahead***
- (PT) Bank of Portugal releases 2011 Annual Report
- (IT) EU's Barroso to meet Italy PM Monti
- 6:00 (EU) EFSF to sell €1.0B in 2.0% 2017 Notes
- (PE) Peru Mar Economic Activity Index Y/Y: No est v 7.2% prior
- (PE) Peru Apr Unemployment: No est v 8.7% prior
- 6:00 (EU) EU Officials Hold Meeting With Ukraine's Foreign Minister
- 6:00 (PT) Portugal Q1 Labour Costs: No est v -1.7% prior
- 7:00 (DE) German Chancellor Merkel
- 7:00 (EU) ECB; to drain €214.0B to offset govt bond purchases
- 7:30 (US) Weekly ICSC Chain Store Sales
- 7:45 (EU) EU Finance Ministers (Ecofin) press conference
- 8:00 (IC) Iceland Apr Unemployment Rate: No est v 7.1% prior
- 8:00 (PL) Poland Apr CPI M/M: 0.5%e v 0.5% prior; Y/Y: 3.9%e v 3.9% prior
- 8:30 (US) Apr Consumer Price Index M/M: 0.0%e v 0.3% prior; Y/Y: 2.3%e v 2.7% prior
- 8:30 (US) Apr CPI Ex Food & Energy M/M: 0.2%e v 0.2% prior; Y/Y: 2.3%e v 2.3% prior
- 8:30 (US) Apr Consumer Price Index NSA: 229.9000e v 229.392; CPI Core Index SA: No est v 228.432 prior >- 8:30 (US) May Empire Manufacturing: 9.50e v 6.56 prior
- 8:30 (US) Apr Advance Retail Sales: 0.2%e v 0.8% prior; Sales Less Autos: 0.2%e v 0.8% prior; Retail Sales Ex Auto & Gas: 0.3%e v 0.7% prior
- 8:55 (US) Weekly Redbook Retail Sales
- 9:00 (US) Tsy Sec Geithner
- 9:00 (BE) Belgium Mar Trade Balance: No est v -€152.3M prior
- 9:00 (US) Mar Total Net TIC Flows: $32.5Be v $107.7B prior; Net Long-term TIC Flows: No est v $10.1B prior
- 9:00 (PL) Poland Apr YTD Budget Level (PLN): No est v -23.0B prior; Budget Performance YTD: No est v 65.6% prior
- 9:00 (EU) ECB Forex data
- 9:30 (US) Fed's Duke
- 10:00 (US) Mar Business Inventories: 0.4%e v 0.6% prior
- 10:00 (MX) Mexico weekly International Reserves
- 10:00 (US) May NAHB Housing Market Index: 26e v 25 prior
- 11:00 (US) Fed to sell $8.00-8.75B in Notes
- 11:30 (US) Treasury to sell $30B in 4-Week Bills
- 11:30 (IS) Israel Apr Consumer Prices M/M: 0.8%e v 0.4% prior; Y/Y: 2.1%e v 1.9% prior
- 12:30 (FR) German Chancellor Merkel to meet France President Hollande
- 14:30 (EU) EU's Rehn Speaks at Dinner Event in Brussels
- 16:30 (US) Weekly API Energy Inventories
- (US) Republican Nebraska Primary
- (US) Republican Oregon Primary Legal disclaimer and risk disclosure All information 

_$ Dollar At Multi-Month Highs Across Market, Still Not a Secure Trend

10 May 2012 02:45 GMT Dollar At Multi-Month Highs Across Market, Still Not a Secure Trend Euro Posts its First Close Under 1.3000 Against Dollar in Nearly Four Months British Pound: Should We Put Any Stock into the BoE Rate Decision? New Zealand Dollar Suffers First 8-Day Decline Versus Dollar in Over a Decade Australian Dollar Within Stone’s Throw of Parity with AUDUSD Japanese Yen: Another High Reminds us of the Importance of Risk Trends Gold Extends its Stumble Despite Safe Haven Appeal Dollar At Multi-Month Highs Across Market, Still Not a Secure Trend

The Dow Jones FXCM Dollar Index tested the even 10,000 level and subsequently set a four-week high. That said, the benchmark is still well below the threshold of a new and meaningful bull trend. This reticence is absolutely reasonable as we find other gauges of sentiment holding back from making the larger transition to outright and potentially panicked deleveraging. Notable, the S&P 500 and Dow Jones Industrial Average sit threatening at the bottom of congestion (1350 and 12750 respectively). These are ideal gauges for the greenback itself because they represent the direct efforts of stimulus. If the market’s confidence (hope?) in intervention falters, that would be true risk aversion.

Euro Posts its First Close Under 1.3000 Against Dollar in Nearly Four Months

The fundamentals have deteriorated even further for the euro this past session, and the currency suffered for it. With the exception of the Australian dollar (which countered with its own anti-risk sell off), the number two reserve currency posted a uniform decline across the board. For fundamental traders, the most remarkable move on the session came from EURUSD which finally closed below 1.3000 for the first time since January 20. Finally clearing months of indecision, we could treat this as the catalyzing move for a meaningful bear trend like the one the Aussie dollar has found itself in. That said, the important eighth day of consecutive decline likely comes from inherent Euro-area troubles. That is not in and of itself a non-starter for the bear trend argument, but it deviates from underlying risk trends that are still holding the line. Further, the immediate euro bearish catalysts may have been put on ice. Though Greece is likely to stumble through its government issues for weeks, the EFSF has agreed to pay out its next €5.2 billion tranche. In the meantime, in Spain, troubled Bankia-BFA has been nationalized. Buying time…

British Pound: Should We Put Any Stock into the BoE Rate Decision?

The sterling was a mixed bag this past 24 hours. Against the fundamentally troubled euro and the high-risk / high-yield comm bloc, the pound showed modest gains. Then again, when set against the safe haven dollar and funding-prevalent yen; the currency was racking up losses. What does that tell us about the sterling – it is essentially in the middle of the risk spectrum and performs as well as its counterpart is performing. We may be able to change that tune in the upcoming session though with the release of a notable round of fundamental event risk. The March industrial production numbers and later-released NIESR GDP estimate figure for April will tap into the growth discussion. In that capacity, it could stir the market modestly depending on how great the surprise. The potential ‘fat tail’ event is the BoE rate decision. The probability is low that a boost to the asset purchase program will be announced, but Posen’s neutral turn came before news of the double dip recession.

New Zealand Dollar Suffers First 8-Day Decline Versus Dollar in Over a Decade

For weeks the New Zealand dollar was falling well behind the Aussie currencies bearish curve. That said, the kiwi has caught up in a very short period of time. With Wednesday’s close, NZDUSD has officially rounded out its eighth consecutive decline – that is the most consistent bear trend for the pair in over a decade. Looking at the progress made on unwinding risky positioning, the general bearing comes as no surprise; but why did the kiwi hold off until just recently? Rate expectations. Where the Aussie dollar maintained its sell off when risk trends were otherwise balanced thanks to the expectations of regular cuts from the RBA, the kiwi held up against risk selling pressure due to its modest hawkish bearing. As of this morning, there is a 57 percent probability of an RBNZ rate cut next month and 30 bps worth of cuts over 12 months.

Australian Dollar Within Stone’s Throw of Parity with AUDUSD

With capital markets on the lam and the Aussie interest rate landscape virtually guaranteeing another 100 basis points of easing over the coming year, the Aussie dollar easily succumbed to another drop against its US counterpart. For those keeping tab, that is seven bearish days in the past eight trading sessions. My interest, however, is hard levels (which is unusual). With Wednesday’s drop, AUDUSD has come with 20 pips of touching parity. You don’t have to be a technical trader to understand the prominence and magnetism of a 1.0000 exchange rate; but just in case you are of the technical sort, it is worth noting that parity also happens to be where a prominent rising trendline from April 2009 currently sits. Yet, a return to that round figure may take a little longer than some had expected following the reaction to April employment figures. The headline 15,500 increase beat the 5,000 contraction expected, but it was the drop in the jobless rate to 4.9 percent the really matters. Follow through on the other hand is not in the hands of this indicator. It belongs to risk trends. If deleveraging continues, this bounce will fade quickly.

Japanese Yen: Another High Reminds us of the Importance of Risk Trends

Another day and another multi-month high for the Japanese yen against many of its most liquid counterparts. For USDJPY, Wednesday’s trading session ended 79.61 to officially obliterate the short-term support of the past two weeks. As has been the case since this benchmark pair toped after its aggressive rally in early March, we shouldn’t be jumping in on longs until the fundamental support aligns to the technical. And, with the yen crosses that translates into a stabilization and recovery in risk appetite that supports carry trade interest. Recently, rumors have started to circulate that the Bank of Japan will make a move to intervene with USDJPY sliding back below 80 and the Nikkei 225 testing 9000. Yet, we should look beyond the possibility of intervention and gauge its effectiveness. Recall that the additional 10 trillion yen boost to the asset purchase program just recently leveraged little reaction from the currency. Direct intervention could prove just as ineffective.

Gold Extends its Stumble Despite Safe Haven Appeal

For those that are still looking for the simple fundamental connection on gold, the metal is simply not following its expected fundamental line. The precious metal’s role as a safe haven and alternative store of wealth is still the go to understanding for many. And, while those are still functions that the unique asset will follow; we must remember that when trading fundamentals, the market always follows the most market-moving driver. In gold’s case, the top catalyst is the dollar. As the most liquid currency – the greenback is the litmus test in the need for an alternative to traditional currencies. Furthermore, when risk aversion really heats up, concerns over liquidity undermine gold’s traditional safe haven appeal and inversely leverage the dollar higher. If the US equity benchmarks take out support, the previous metal will likely be another victim.

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ECONOMIC DATA

Next 24 Hours

Greece Unemployment Rate (FEB)

At the forefront of austerity, important read from Greece

A weak print, coming after Tuesday’s surplus budget announcement, to further fuel expectations of continued RBA rate cuts

Full Time Employment Change (APR)

Eco Watchers Survey: Current (APR)

Japanese economic outlook remains uncertain with resurgent Yen

Eco Watchers Survey: Outlook (APR)

French Industrial Production (YoY) (MAR)

Manufacturing and industrial-sector figures expected to be in line with previous week’s PMI figures showing deepening contraction

French Central Govt. Balance (Euros) (MAR)

French Manufacturing Production (YoY) (MAR)

ECB Publishes May Monthly Report

Italian Industrial Production wda (YoY) (MAR)

Industrial Production (MoM) (MAR)

Most recent UK manufacturing PMI worse than expected, showing UK industry on verge of contraction

Industrial Production (YoY) (MAR)

Manufacturing Production (MoM) (MAR)

Manufacturing Production (YoY) (MAR)

BOE Asset Purchase Target (MAY)

Focus to be on degree of support within MPC for expanding Asset Purchase Facility

New Housing Price Index MoM (MAR)

Real-estate bubble concerns contributing to BoC rate-hike expectations

New Housing Price Index YoY (MAR)

Import Price Index (MoM) (APR)

US trade deficit expected to widen

Import Price Index (YoY) (APR)

Initial Jobless Claims (MAY 5)

US employment growth at slowest in 6 months

UK in first double-dip recession since 1970s

Monthly Budget Statement (APR)

NZ Card Spending – Retail MoM (APR)

NZ inflation remains benign while stronger currency in April has dampened economic activity

NZ Card Spending – Total MoM (APR)

Nationwide Consumer Confidence (APR)

Steadily improving since end of 2011, but UK consumer sentiment could take turn for worse with economy in recession

Fed Chairman Bernanke Speaks on Bank Capital in Chicago

Fed’s Kocherlakota Speaks on Monetary Policy ion Minneapolis

SUPPORT AND RESISTANCE LEVELS

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CLASSIC SUPPORT AND RESISTANCE – EMERGING MARKETS 18:00 GMT

INTRA-DAY PROBABILITY BANDS 18:00 GMT