Thursday, February 25, 2010


· EU Commission publishes outlook - The EU executive kept unchanged its 2010 growth and inflation forecasts for the 16 countries using the euro and the whole 27-nation bloc for this year from early November 2009 and said risks to the projections were broadly balanced. Reuters.

· UK outlook cut - The EU Commission revised its 2010 gross domestic product forecast sharply and said it now expects GDP to grow just 0.6% in 2010. That is down from its previous forecast of growth of 0.9%. It also said it now expects GDP to grow 0.2% on the quarter in each of the first three quarters of 2010 and by 0.3% between October and December. That is a revision from its previous forecast of 0.3% growth in each of the first three quarters of this year and a 0.4% rise in the final three months. DJ

· European sovereigns – Spain is the real battleground according to the WSJ – unemployment is nearing 20%, the country is suffering a deflating housing downturn, has a large budget deficit, and is enduring a contracting economy. While Greece has received all the attention, Spain could determine “whether the euro stands or falls” according to the Journal. WSJ

· Greece – plans to issue a 10yr bond next week according to sources cited by DJ; the bond sale will come after the govt announces a new austerity package worth EU2-2.5B. The country had planned on issuing a bond issue this week but that was put on hold following Wed’s strike. The government hopes to raise EUR3 billion - EUR5 billion from the bond issuance. DJ

· Greece Update – commentary from JPMorgan’s D Mackie - Some commentators have argued that a move to greater fiscal integration in the Euro area would somehow solve the Greek fiscal crisis in a less painful way, from the Greek perspective, due to either greater cyclical transfers or larger transfers of a more structural nature from richer to poorer parts of the region. However, while a move towards a fiscal union might help Greece a little, in our view Greece would still need to undergo a significant fiscal consolidation.

· Greece update in the NYT – “banks bet Greece defaults on debt they helped hide” – the Times says that CDS trades on Greek debt are rising, “making it harder for Athens to raise the money it needs to pay its bills” NYT

· Greece – comments from Moody’s – Moody’s said on Thurs that any changes to its ratings for Greece would depend on whether the country was smoothly enacting its fiscal consolidation plans; Pierre Cailleteau, managing director of sovereign risk at Moody’s, said a downgrade may come by the end of March (a downgrade would make Greek gov’t bonds ineligible as collateral for loans under ECB rule changes planned later this year) – Reuters /Bloomberg

· Greece – comments from S&P (this hit during US trading on Wed at ~11amET) – S&P says they maintain rating and neg. outlook despite Greece's recent fiscal consolidation plan....."In our view, a further downgrade of one to two notches is possible within a month,"

· London needs to show hedge funds some love - Over the past three years, more than 50 London hedge funds have abandoned the UK or set up branch offices in low-tax countries so staff can leave. FT

· European confidence in the economic outlook unexpectedly worsened in February. An index of executive and consumer sentiment in the 16 nation using the euro slipped to 95.9 from a revised 96 in January, the European Commission in Brussels said today. Economists projected an increase to 96.4. [Bloomberg]

· Germany Feb. labor numbers come in weaker than expected. Data released by the Federal Labor Office showed the seasonally adjusted number of unemployed rose only 7,000 in February, compared with expectations of a 20,000 rise. [DJ]

· UK Business Investment fell sharply in Q4. Business investment fell 5.8% from the third quarter, leaving it 24.1% weaker than it was in the fourth quarter of 2008, according to seasonally adjusted figures. [DJ]

· Italian business confidence rose more than expected in February. The business confidence index in the euro zone's third-largest economy rose to 84.0 in February (St. 83.5%) from 83.2 in January, as the outlook for orders and output prospects improved. [DJ]

· French Feb. Consumer Confidence fell more than expected. The consumer confidence index in the euro zone's second-largest economy fell to -33 in February from -30 the month before, disappointing economists polled by Dow Jones Newswires, who had expected a figure of -29. [DJ]

· European retail sales declined in February with a gauge of euro-area retail sales from Markit Economics falling to 44.2 from January (a reading below 50 indicates contraction). [Bloomberg]

· ECB Officials Reject IMF-Proposed Inflation Target. European Central Bank officials dismissed a proposal by International Monetary Fund economists that monetary-policy makers increase inflation targets to 4 percent, arguing that such a shift would damage economies. [Bloomberg]

· Chinese banks plan ~$30B+ cash call - China’s state-controlled banks are rushing to raise money from public markets to shore up their balance sheets. This week alone, Chinese lenders have announced plans to raise up to Rmb76bn ($11bn) through equity and bond sales, with at least Rmb150bn ($22bn) of bank fundraising in the pipeline FT

· China rates - The People’s Bank of China this week kept its one-year bill yield unchanged for a fourth straight sale, following two increases in January, and that damped speculation interest rates will shortly be raised – Bloomberg

· China - China reaffirmed its determination on Thursday to hold down the yuan's exchange rate to help its beleaguered exporters. Reuters

· China increasingly scrutinizing local gov’t debt – authorities are worried that large off-balance-sheet debt balances by local governments will be difficult to pay back. That's likely to constrain the number of infrastructure projects that local governments launch this year, meaning a smaller boost to the economy WSJ

· China is most likely to allow its currency to appreciate through a “crawling peg,” similar to the method it used to strengthen the currency between 2005 and 2008, according to Standard Bank Plc. [Bloomberg]

· China´s property market will probably go through a "more meaningful correction" this year because the price gains in 2009 aren´t sustainable, Christopher Lee, corporate ratings director at Standard & Poor´s, said. [Bloomberg]

· China may start margin trading trials late next month, the China Securities Journal reported today on its Web site, citing Nie Qingping, an official with the China Securities Regulatory Commission. [Bloomberg]

· China could post trade deficits over the next six months, as the export recovery remains weak while the trend of strong import growth remains intact, according to reports Thursday citing a Commerce Ministry spokesman. Marketwatch

· Indian growth projections – India’s economic growth may surpass ~8% in the coming fiscal year, allowing for a reduction in stimulus measures. “The economy has posted a remarkable recovery from the global recession,” according to the annual Economic Survey prepared by officials advising Finance Minister Pranab Mukherjee, released in New Delhi today. “The recovery creates scope for a gradual rollback, in due course, of some of the measures undertaken over the last 15 to 18 months.” Bloomberg

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