Thursday, May 20, 2010

INTERNATIONAL NEWS WRAP; Euro sentiment grows increasingly negative –MUST READ

· There is a huge interest in the German vote in both houses of Parliament tomorrow regarding Germany's contribution to the European Stabilisation Mechanism. The debate in the lower house (Bundestag) is scheduled to begin at around 09:20 (Berlin time). The debate is currently scheduled for 2 hours and will then be followed by the vote. As a result, the final result should be known by noon (Berlin time). The legislation then passes to the upper house (Bundesrat), which has scheduled a session to start shortly afterwards at 12:30 (Berlin time). The Bundesrat does not have a firm timetable. It currently has five scheduled speakers, with the vote taking place after this. It seems reasonable at this stage to expect a vote by 14:00 (Berlin time) or shortly thereafter. We expect the legislation to pass in both houses of Parliament.  JPMorgan’s G Fuzesi. 
· Euro sentiment grows increasingly negative (WSJ headline today a contrary indicator?   “a rising tide threatens euro”) – the WSJ notes that some of the world’s largest money managers and central banks have become increasingly skeptical of the euro.  WSJ    
· Euro/dollar –Russia backs away from its “bellicose” rhetoric about backing away from US$ reserves as euro slumps; Russia’s central bank “changed the currency structure of reserves,” raising the U.S. currency’s share by 3 percentage points to 44.5 percent -  Bloomberg
· Euro - Eurogroup Chairman Jean-Claude Juncker said on Thursday he does not see a need to take immediate action to halt the euro's decline; Juncker was in Japan and said the exchange rate was discussed but failed to reveal to reporters whether an intervention was discussed  – Reuters/CNBC
· European debt sales - France and Spain sold a combined 11.5 billion euros of government bonds on Thursday, which analysts said drew solid demand – Reuters 
· Italian industrial orders - Italian industrial orders advanced less than expected in March (DJ)  
· UK retail sales came in +0.3% vs. the St looking for a +0.2% increase.  Bloomberg 
· Greece - Greek workers went on a 24-hour general strike on Thursday; investors will be watching closely marches planned for later today – Reuters
· France’s Lagarde says the Euro isn’t in danger – the France Economy Minister says she doesn’t share Merkle’s view that the euro was in danger – Reuters/CNBC. 
· Germany’s Finance Minister Wolfgang Schäuble says “markets are out of control” - “I’m convinced the markets are really out of control. That is why we need really effective regulation, in the sense of creating a properly functioning market mechanism.”  FT    
· German’s short ban prompting many to ask what problems may be lurking in the country’s financial system – many are worried that write-downs could rise while reserve levels remain low.  The short ban set off instant capital flight to Switzerland. BNP Paribas said €9.5bn flowed into Swiss franc deposits in a matter of hours on Wednesday morning.  The Swiss central bank intervened to hold down the franc.  London Telegraph 
· German Chancellor Angela Merkel is hosting an international conference aimed at forging a common position on financial regulation.  BBC. 
· Spain’s debt auctions - sold 3.52 billion euros ($4.36 billion) of a 4 percent debt maturing in 2020 to yield 4.045 percent. That’s 0.19 percentage points higher than the 3.855 percent yield at an auction two months ago.  attracted bids for 2.03 times the amount offered, compared with a bid-to-cover ratio of 1.55 in March.
· European mobile policies - Europe’s Digital Agenda Commissioner Neelie Kroes has formulated the goal of eliminating the difference between roaming and national tariffs to zero by 2015. At this stage this is a policy target rather than a formal proposal, however if pursued we estimate it would create a negative 1-2% drag on 2015 revenue and 2-3% drag on 2015 EBITDA forecasts for Europe's mobile operators.     
· China/Yuan – Chinese officials have said they won’t yield to global calls to adjust the yuan; expectations increasingly are that the yuan won’t change at the US/Beijing talks next week; China Daily says the yuan won’t be a major issue at talks next week  – Bloomberg
· China’s finance ministry will sell 28 billion yuan ($4.1 billion) of 50-year bonds at 4.15 percent tomorrow – Bloomberg 
· China warns US on spending - assistant finance minister Zhu Guangyao urged the US to get its fiscal house in order – CNBC 
· China Construction Bank (CCB) lowers its loan growth target - is now looking at a 15 percent increase in new loans for this year, lower than its previously announced 17 percent target, due to weakening credit demand after Beijing took sought to curb bank loans in recent months.  Reuters 
· China Construction Bank (CCB) said it may delay an $11B cap raise until ’11 due to market conditions – Reuters
· Taiwan GDP came in +13.27% vs. the ST looking for +11%; Revises 2010 GDP Growth Forecast To 6.14% From 4.72%; Revises 2010 CPI Forecast To Up 1.40% From Up 1.27% (DJ/Bloomberg) 
· Singapore GDP came in higher than expected - Gross domestic product grew 38.6 per cent from the fourth quarter on a seasonally adjusted and annualized basis, above an initial estimate of 32.1 per cent and market consensus of 33.2 per cent (FT/Reuters) 
· South Korea declared Thursday officially that North Korea deliberately sank a South Korean warship two months ago; this was expected although N Korea is doing its best to heighten tensions – N Korea threatens war - "If the (South Korean) enemies try to deal any retaliation or punishment, or if they try sanctions or a strike on us ....we will answer to this with all-out war," (WSJ/AP)
· Japan: 1Q real GDP rose 4.9%ar as expected, but details were not so upbeat - First quarter real GDP growth of 4.9%q/q, saar was very close to our forecast (JPM 5.0%, consensus 5.5%). With the upward revision of previous three quarter prints at an average of 0.9%-pt, the level of real GDP was 4.2% higher than the bottom in the same quarter last year, and recovered 46% of the 8.6% plunge from the peak in 1Q08 to the bottom. GDP deflator fell 3.0%oya, a faster fall than 2.7% in 4Q09, but that is due to the import price hike from -7.4% to +8.9%; domestic demand deflator deflation eased to 1.9% from 2.6% in 4Q09 and 2.4% in whole 2009. The main driver of the growth was exports again, rising 30.5% after 25.2% gain in 4Q09.   Masamichi Adachi    
· Mining tax contagion to spread from Australia – Bloomberg article – other resource rich countries, like Canada or S Africa, could consider moves similar to what was introduced in Australia; separately, China plans to impose a resource tax on oil and gas profits in Xinjiang on a trial basis, PetroChina Co. Chairman Jiang Jiemin said in Beijing today.  Bloomberg
· Copper could see limited price gains as China has ample supply and demand is abating – Bloomberg 
· Gold – some fund managers think prices could climb further towards ~$3K – London Telegraph 
· China will launch a pilot strategic reserve for rare-earth metals in Baotou, Inner Mongolia, as part of a government plan to manage valuable mineral resources.  Marketwatch   
· Dubai World & its core banks reach $23.5B debt deal -
· Iran – int’l crude companies continue to do a brisk business in Iranian oil products; while its perfectly legal, the companies (inc. BP and RDS) keep a low profile (WSJ)

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