Wednesday, May 5, 2010


· Greece’s costs exceed the amount of aid it will be given from the EU/IMF according to the WSJ; this discrepancy will set Europe up for “more tough choices” unless markets reopen.  The bailout is based on the assumption that Greece will be able to borrow from private capital markets by the end of ’11 – that may prove too optimistic a timeline.  WSJ
· Greece has hired Lazard to explore a possible debt restructuring according to a report in Euroweek (dated Apr 30) and picked up on Bloomberg this morning. 
· Greece & Moody’s – the ratings agency says the IMF/EU deal doesn’t mark the end of Greece’s crisis; the key now is whether Greece can adjust to meet its new deficit targets.  Reuters 
· Greece to hold retirement age at 65 – Reuters 
· Greece protests escalate over new austerity measures - Greek government workers shut down schools and hospitals and disrupted flights; The ADEDY union federation, which represents more than 500,000 civil servants, will hold a rally at midday joined by striking teachers. A general strike, the third this year, is planned for tomorrow, with private-sector workers due to participate.  Bloomberg 
· Spain’s jobless claims fall in Apr for first time since Jul; Spanish jobless claims fell by 24,188, or 0.6%, to 4.1 million in April from March, in line with leaked data published by EFE newswire Saturday.  Hiring related to the Easter hiring helped spur the decline.  DJ 
· Spain – the NYT says Spain risks falling into the same trap as Greece, where private markets close their doors to the country and it finds itself unable to raise money at acceptable rates.  NYT
· Spain - Fitch Ratings on Tuesday reiterated its credit rating on Spain as 'AAA' with a stable outlook.  Reuters
· Germany's Merkel Says EU Must Study Possible ‘Orderly’ Sovereign Defaults - When the EU rewrites the euro rules, it should allow for “an orderly insolvency of a state in which creditors are also called upon.” Bloomberg 
· Volker Kauder (parliamentary head of the German CDU) called for the possible “orderly insolvency” of European states as “consequences” follow from the Greek crisis. Bloomberg
· Greece – Fitch says aid package lowers near-term risk for Greece sovereign debt.  Bloomberg
· ECB may have to further tear up rule book to ensure sovereign contagion doesn’t spread - may have to extend its recent Greek collateral rule change to other nations, renew a program of lending unlimited cash to banks for a year, and even start buying government debt – Bloomberg 
· EU mulls cap on speculative derivative rules would permit regulators to limit large traders in derivatives such as Greek CDS. Reuters
· UK elections – preview and takeaways of the upcoming elections – from JPMorgan’s M Barr -
· Volcano Ash Cloud Closes Airspace in Ireland And Scotland (London Telegraph)
· UK March Mortgage Approvals – Rose for first time in 4 months but fell short of estimates. Lenders granted 48,901 loans to buy homes vs. St. 49,000. Bloomberg
· UK Apr. Manufacturing PMI Stronger. 58 vs. St. 57.5. DJ
· Eurozone March PPI inline w/expectations. +0.9 yoy vs. St. +0.9%. DJ
· German retail sales – Takeaways from JPM’s G. Fuzesi - Weak headline number in March. German retail sales fell 2.4%m/m in March, leaving the 1Q10 average 3.5%q/q saar below the 4Q09 level. With car registrations in 1Q10 also well below the 4Q09 average, overall consumer spending in Germany is set to show a large decline last quarter (see final chart). However, we are cautious about overinterpreting the weakness in this morning's report. The published details of today's retail sales report seem firmer than the headline number and are not sending a clear message of weakness.
· China PMI – on Fri night, we received the official NBS manufacturing PMI series, which rose to 55.7 in April (JPMorgan: 55.5; consensus: 55.9), from 55.1 in March.  On Tues morning, we received the HSBC Markit PMI reading, which revealed the PMI to have declined to 55.4, a 6-month low.   HSBC says its study has a different methodology and gives a bigger weighting to smaller, privately owned businesses.  Bloomberg 
· Australia rates – update from JPMorgan’s S Walters - The RBA Board today lifted the cash rate another 25bps to 4.5%, as we and the consensus had expected - the surprise was that the RBA delivered a commentary that was unexpectedly hawkish. Indeed, the statement made important adjustments in three key areas. First, global growth now could be “a little above trend”, rather than just “at trend”. Second, the RBA now expects the rise in Australia’s terms of trade to be larger than previously expected. Third, the official assessment now is that inflation will be higher than previously expected.  The flipside of this, though, is that the statement also indicated that market interest rates now are back to “average” for most borrowers.  Means the RBA probably has scope to pause next month…..we look for the RBA to delay the next hike until Jul.
· Hong Kong Property Tightening – HK’s Urban Renewal Authority announced new measures inc. restrictions on corporate purchases of flats. Bloomberg
· Agricultural Bank of China - the co is expected to unveil plans for a $30B IPO as soon as this week; the plans for an offering were moved forward amid fears that the Chinese Government is sucking excess liquidity from the economy and that the window for raising capital is closing rapidly.  London Times.
· Iran holding naval exercises in Gulf - Iran's navy will on Wednesday start eight days of war games in the Gulf and the Sea of Oman – Reuters 

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