International Headlines-ECB is currently lending close to €900bn ($1,098bn, £728bn); BOE willingness to raise rates if inflationary pressures persist $EWP

International Headlines

· ECB 3-month tender - the relatively small amount of demand at the 3-month tender (only EU131.9B) is being taken as a positive - the fear had been that ~EU220B+ would be taken up at this 3-month tender ahead of Thurs' EU440B 12-month expiration (some worst case scenarios feared that EU440B+ would be taken up at this 3-month tender).

· Europe taking measures to calm fears over its banks – the stress tests are being expanded to include more institutions and will consider a larger amount of potential risks, inc. sovereign ones – European officials said the number of banks that would be subject to a European Union stress-test exercise will expand from the 22 big banks included in an EU-wide stress test last year, to include a further 60 to 120 banks; the tests will also see if an institution can withstand the effects of a sovereign debt default in the Eurozone; the tests are due to be completed by the middle of Jul; A report with bank-by-bank results and details on the test's parameters will be published in the second half of July; European governments are gearing up to ensure capital injection mechanisms are in place in case any bank is revealed to have a deficit following the test – WSJ 

· Spain’s Cajas move forward w/consolidation + restructuring - Spain's central bank outlined details Tuesday on a state-financed bank rescue fund that it said will support a "historic" consolidation of the country's savings banks. The Bank of Spain said it authorized injecting €11 billion ($13.5 billion) in public funds to aid in the restructuring and bolster the merged banks' balance sheets.  WSJ  

· ECB takes the place of the interbank market in Europe - The ECB is currently lending close to €900bn ($1,098bn, £728bn) to eurozone commercial banks, jumping to near-record levels since the creation of the central bank 11 years ago; the ECB has become a lifeline for some of Europe’s ~3K weaker banks – FT   http://www.ft.com/cms/s/0/e0f44010-83a2-11df-b6d5-00144feabdc0.html

· European bank stress tests – Germany’s Bundesbank and financial regulator BaFin plan to meet today with officials from Germany’s largest lenders to decide whether results from Germany’s state owned banks, the Landesbanken, should be made public – Bloomberg

· ECB covered bond purchase program winds down – this move was anticipated (although like Thurs’ 12 month liquidity expiration, could raise worries that the ECB is winding down its monetary support measures just as the market started to teeter again) – the ECB Wed morning said the covered bond purchases were over and that it would be holding the paper until maturity – Reuters 

· U.K – Cautious comments from the BoE’s Posen. Posen said the UK economy is “tentatively” recovering but risks falling back into recession. Bloomberg

· UK Interest Rates – BoE’s Fisher hints at willingness to raise rates if inflationary pressures persist. Fisher reiterating that the central bank’s mandate is to fight inflation and that “should it appear likely that inflationary pressure is sustained at a higher level into the medium term, then it is clear what our mandate would require us to do.” Note that this follows Sentence’s push at the BoE’s recent meeting for a rate increase. Bloomberg

· Eurozone June Flash CPI Rose less than expected - +1.4% y/y vs. St. +1.5%. DJ

· European banks to be subject to new bonus rules - according to Reuters, bankers in Europe won't be allowed to take more than 1/3 of their bonuses in cash from the start of '11 - Reuters   http://www.cnbc.com//id/38012084

· UK economic data release delayed – the British Office of National Statistics (ONS) on Tues said it would postpone the release of the final estimate of GDP for Q1 until Jul 12 – London Telegraph.  http://www.telegraph.co.uk/finance/economics/7861869/Office-for-National-Statistics-embarrassed-by-delayed-release-of-key-GDP-data.html

· National Bank of Greece (NBG) – the FT late in NY trading on Tues said that the QIA (Qatar’s SWF) is considering buying a stake in NBG, Greece’s largest bank; the FT said that QIA may buy a ~5-7% stake in the company; however, NBG said on Wed it was not seeking a strategic investor and reiterated that it had no plans to increase its capital (Reuters) 

· Greece - Greece on Wednesday appointed an IMF official, Andreas Georgiou, as new chief of its statistics agency – Reuters  

· Japanese life insurers and institutional investors are slashing their estimated $700bn holdings of European debt. The funds are being recycled into yen, which reached ¥107 against the euro yesterday - London Telegraph

· Flight from Greek/Italian Debt - The Bank of New York ­Mellon said its flow data had picked up a relentless flight from both Greek and Italian debt.  London Telegraph

· ECB funding to Greek banks stood at 89.4 billion euros ($109.4 billion) at the end of May, 80 percent higher than at the beginning of the year, Greek central bank data showed.  Reuters

· Greece expects to meet or even exceed its deficit targets this year, the country's finance minister said (WSJ) 

· European bank taxes could threaten recovery according to the head of SocGen - Fréderic Oudéa, the chief executive of Société Générale, said the various new levies being contemplated in Europe could be particularly harmful to Europe (WSJ)  http://online.wsj.com/article/SB10001424052748703374104575337112858003650.html?mod=ITP_moneyandinvesting_1

· Germany’s June Unemployment Fell Less Than Expected – Unemployment declined by 21K jobs to 3.23M vs. St. looking for 30K fall. Bloomberg From JPM’s G. Fuzesi - The German labor market improved further. The number of unemployed fell 21,000 in June, the twelfth consecutive decline. The unemployment rate paused at 7.7%, but the pressure remains downward, also because vacancies continued to rise (+6,000 in June, all of which were non-subsidized). And the level of employment is also convincingly moving higher. The increase of 38,000 in May means that 101,000 jobs have been created since January (an increase of 0.3%, not annualized).

· Italy’s June Business Confidence came in lower than expected – June’s confidence reading was 96.1 from an upwardly revised 96.4 last month vs. St. 96.4. DJ

· UK June Home Prices rose less than expected - +0.1% m/m vs. St. +0.3%. Bloomberg