Wednesday, March 3, 2010

NTERNATIONAL NEWS WRAP 03.03.10 $GS $SPY $DIA

NTERNATIONAL NEWS WRAP

·         Greece - the Greek gov't has approved fresh austerity steps that are worth EU4.8B.  Among the measures approved - the VAT will be increased from 19% to 21% while civil service salaries and entitlements will be cut.  CDS spreads on the usual suspects in Europe are all flattish as the budget cuts were widely expected (Italy, Spain, Greece, etc, are all flattish).  The market is still waiting for further headlines on the much anticipated German/French-engineered ~EU30B bailout for Greece involving German and French state-owned banks.  Greece’s PM has apparently told the country’s cabinet that he will seek IMF assistance if EU aid isn’t forthcoming. 

·         Euro trading – US regulators are asking hedge funds not to destroy trading records pertaining to their euro trading.  The Department of Justice sent requests to save the records to at least some of the hedge funds whose executives attended the dinner cited in the recent pg 1 WSJ article.  Bloomberg

·         Euro trading - Many of the world’s biggest hedge funds have become increasingly concerned about fierce criticism by European politicians that their country bets have heightened the crisis of confidence in some markets.  Some HFs have concluded that the political and regulatory risks associated with positions against individual countries in the currency bloc were now too unpalatable.  However, while HFs are backing away from individual country sovereign CDS, they are using the euro to express their outlooks – “Hedge funds are now expressing the same view on the weaknesses of individual eurozone countries via the euro”.  FT     http://www.ft.com/cms/s/0/ebec7004-262e-11df-aff3-00144feabdc0.html?ftcamp=rss   

·         The Euro’s “original sin” – WSJ article – while some are trying to blame the current European debt crisis on “Wall St”-engineered swaps and other foreign machinations, the Journal argues that the problems were bourn at home.  “Greece hasn't met the deficit rule in any year except 2006. It has never been within 30 percentage points of the debt ceiling.  Greece has revised its deficit figures, always upward, every year since 1997—often considerably”.  http://online.wsj.com/article/SB20001424052748704548604575097800234925746.html#mod=todays_us_page_one  

·         German non-auto retail sales were unchanged in January, which was still better than expected. Both us and the consensus had expected a weaker outcome of around -0.6%m/m. Our forecast reflected possible payback from a large 0.9%m/m gain in December and to a lesser extent the possibility of the severe weather depressing sales. Today’s report and recent revisions to prior months leave German retail spending looking significantly better at the turn of the year.  Fuzesi   

·         Greece - Greece's biggest public sector union ADEDY reacted angrily to new austerity measures on Wednesday, warning they could trigger social unrest.  "We will be on the streets with all our might. I am afraid there will be a social explosion," ADEDY's General Secretary Ilias Iliopoulos told Reuters. "People will start going hungry soon."; the union, which plans a 24hr strike on Mar 16, said it will hold a protest in Athens on Thurs.  Bloomberg/Reuters   

·         Russia - Russia’s central bank seeks to increase the share of gold in its international reserves, First Deputy Chairman Alexei Ulyukayev said.  “We buy as much gold as the industry can produce without harming the market.”  Bloomberg

·         UK Feb. Services PMI rose more than expected.  An index based on replies from about 700 service companies jumped to 58.4, from 54.5 in January, the Chartered Institute of Purchasing and Supply and Markit Economics said in a statement today in London. The median forecast of 29 economists in a Bloomberg News survey was 55. A reading above 50 indicates expansion. [Bloomberg]

·         Eurozone Jan Retail Sales Fell Less Than Expected. Dn 0.3% vs. St. dn 0.5%. [DJ]

·         ECB preview - ECB to keep its subdued growth and inflation forecasts unchanged; Newswires suggest the ECB may slightly reduce the generosity of its liquidity supply; ECB unlikely to make concessions on Greece this week.  Greg Fuzesi    

·         BOE preview - We continue to anticipate a firmer pick up beyond Q1, which will keep the MPC from extending QE and turn their mind toward tightening. In the meantime, commentary from the MPC is keeping the possibility of an extension in QE firmly on the table. While we doubt the data have done enough to generate votes for an extension in QE as early as Thurs’ meeting, we would expect an ongoing mixed to weak data flow to prompt David Miles (at least) to vote for further QE in April.  M Barr.   

·         China’s government auctioned one- year bonds at a less-than-forecast yield as curbs on lending left banks with more cash; sold 26 billion yuan ($3.8 billion) of the securities at an average yield of 1.44 percent, compared with the 1.53 percent median estimate by Bloomberg – Bloomberg

·         China’s economy will perform better this year than in 2009, Su Ning, deputy governor of the People’s Bank of China, said today at a meeting of the Chinese People’s Political Consultative Conference in Beijing – Bloomberg

·         China overtakes US in attracting real estate investment - Real estate investment in China more than doubled to $156.2 billion last year, while the total for the U.S. slumped 64 percent to $38.3 billion – Bloomberg

·         China’s hidden borrowing may push government debt to 96 percent of gross domestic product next year, increasing the risk of a financial crisis in the world’s third-biggest economy, Professor Victor Shih said – Bloomberg

·         China’s February exports increased from a year earlier, Chen Deming, China’s Minister of Commerce, told reporters today at a meeting of the Chinese People’s Political Consultative Conference in Beijing.  Bloomberg

·         China refutes media reports that Chinese big bank capital adequacy ratio has changed; big banks’ capital-adequacy ratio requirements remain at 11 percent.  Bloomberg

·         China – Investors opened the most accounts to trade Chinese stocks last week in more than two months. Individual investors opened 330,875 accounts, data from the nation’s clearing house showed today, the most since the week ended Dec. 18. [Bloomberg]

·         China – the White House is considering whether to take China’s censorship of Google to the WTO – Bloomberg 

·         China - A plan to develop a low-carbon economy will be the top proposal of the Chinese People’s Political Consultative Conference, the Securities Times reported, without citing anyone. The report suggests raising the development of a low-carbon economy to the national strategic level. [Bloomberg]

·         China is actively studying an environment tax to help curb pollution – Bloomberg

·         China – the IMF says China should become more flexible on its currency and encourage more domestic consumption – CNBC/Reuters.  http://www.cnbc.com//id/35683439 

·         Chinese commercial banks absorbed about $170 billion in foreign exchange from the financial system last year, mainly through yuan-dollar swaps.  such swaps could exceed $500 billion this year, thereby taking some 3 trillion yuan out of the financial system – Reuters

·         Korea - Industrial production rose 36.9%oya (JPMorgan 38.5; consensus 38.2) in January, following 34.3% growth in December. On a seasonally adjusted month-on-month basis, IP stayed flat, following a downwardly revised gain of 2.4%m/m sa (previous 3.5%) in December. Output activity stayed relatively firm in high-tech sector, with electronic components and tele-communication equipments up 1.5%m/m, sa and 10.4%, each. However, automobiles fell 3.0% in January, after rising for two straight months, with the new car model impact fading amid the termination of auto sector's tax incentives. On a three month trend basis, IP gain rebounded slightly in January, tentatively supporting our view that real GDP growth would see a modest reacceleration in 1Q10.  J Lim. 

·         Japan - The services PMI business activity index posted the third consecutive rise in February, though the current level of the index, 44.6, was still below the recent peak of 48.1 recorded in August last year.  Miwako Nakamura    

·         Australia - Australia’s economy advanced at a healthy clip in the December quarter. Real GDP expanded 0.9%q/q (J.P. Morgan 1.1%, consensus 0.9%), three times the (revised) rate of growth in the September quarter.  The surprise for us was in household spending, which did not rise as much as we had expected.  S Walters. 

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