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Markets Of Their Worth ButTitle:
Problems in Europe Intensify
Forex News and Events:
Worries over Europe resurfaced yesterday as weak data, uncertain political environment and questionable support from the IMF all highlighted potential weak spots. The additional $430bn from the IMF fell short of the whispered $600bn that had circulated around the market and the additional funds came with heavy caveats that these funds were not guaranteed to go to Europe. So the lingering questions is under what conditions they might be pointed towards Europe. Meanwhile, the first release of euro-zone budget deficit and government debt figures for 2011 exposed a couple of interesting notes. First the euro-zone budget deficit dropped to 4.1% of GDP from 6.2% in 2010 but this decrease was not enough to stop government debt from climbing to 87.2% from 85.3%. Composite ...
Title:
UK Q1 GDP to Put the Brakes on More QE
The Week Ahead
Highlights
UK Q1 GDP to put the brakes on more QE
French political risk comes to a head
Italy and Spain turn attention to fiscal targets
BOJ to back up rhetoric with action
FOMC still in wait-and-see mode
Market Moves
UK Q1 GDP to put the brakes on more QE
The major data release in the UK this week will be the preliminary Q1 GDP reading. There is considerable uncertainty around this figure due to some strong data in the services sector, especially retail sales, balanced by some disappointments in the manufacturing and construction sectors. Retail sales for March rose 1.5%, more than the 0.4% expected. This was mostly due to the effects of good weather boosting demand for clothes, footwear and gardening equipment. This helped to reverse some of the ...
Title:
Insight: U.S. barnyards help China super-size food production
(Reuters) - Inside a dimly lit barn in northeast Indiana, where the air smells faintly of corn and earth, the future of China's food supply is squealing for attention.
A farmhand shuffles through the crowd of pigs inside pen 7E3, patting their fleshy pink backs and checking their water trough. The animals here at the Whiteshire Hamroc farm have been bred for one purpose: to be flown halfway around the world, on a journey fueled by China's appetite for food independence
In a country where pork is a culinary staple, the demand for a protein-rich diet is growing faster than Chinese farmers can keep up. While Americans cut back on meat consumption to the lowest levels seen in two decades, the Chinese now eat nearly 10 percent more meat than they did five years ago.
China's solution: to ...
Title:
Spanish Auction a Minor Success
Forex News and Events:
Chatter of a possible Moody's downgrade of France soveriegn rating tonight has pushed EURUSD and risk appitite lower. Yesterday, Thomas Jordon was named president of the SNB and was quick to reiterate his unwavering support of the EURCHF 1.2000 “floor”. EURCHF rallied marginally but has since fallen back. We wouldn’t expected much more upside bounce in EURCHF (which was more a function of rumors swirling and the SNB asking about forward prices then it was about the new board) and we dont anticpate a higher repeg. First of all, Jordon becoming SNB president was pretty much a “sure thing” and well priced in. Secondly, while there is greater certainty in policy continuation, it doesn’t change the macro fundamentals at play, mean that storm clouds are again forming ...
Title:
Spain clears bond auction hurdle but yields rise
(Reuters) - Spain managed to sell 2.5 billion euros ($3.3 billion) of bonds at auction on Thursday, as much as it wanted, but at a cost of rising yields as the country struggles to tame its deficit.
Including earlier issuance, Spain has now raised half of its gross target for this year, making the most of market liquidity after Europe's banks took more than a trillion euros of ultra-cheap three-year cash (LTRO) from the European Central Bank in December and February.
The Treasury sold 1.1 billion euros of a bond maturing October 31, 2014, at an average yield of 3.463 percent and a bid-to-cover ratio of 3.3, compared with a ratio of 2.0 at the last auction in October.
Spain also tested market appetite for a longer-term benchmark bond, due January 31, 2022, of which it sold 1.4 billion ...
Title:
Optimism Fades
Forex News and Events:
The optimism which sprang from yesterdays the Spanish bill auctions (which went reasonably well) and strong German ZEW seems to have been faded . EURUSD has traded back down to 1.3074, while European equities are trading in the red (after a very strong start in Asia). And what is left is the realization that despite the temporary confusion and noise, the problems in Europe are not going anywhere--rather in fact, the cracks are multiplying and widening. This crisis has always come in waves, with each wave higher than the one before. It seems that Europe rather than helping themselves by perhaps having the ECB step in aggressively to the secondary bond markets, has instead allowed it’s leaders to continuously pin their rescue hopes on the IMF and world bank. While the ...
Title:
German ZEW Improves Unexpectedly
Forex News and Events:
FX risk has rallied back on the release of the stronger-than-expected April’s German ZEW Economic Sentiment survey and decent Spanish auction. The number printed at +23.4 against a market consensus of around +20.0 and a previous reading of +22.3. This reading is a bit of a surprise since this survey was generated from financial market participants and the recent direction of peripheral yields which has been wholly negative. The additional events from Spain, from an economic and political standpoint, do not provide any quick resolutions on the European crisis. However, this survey does cover the recent ECB’s 3-year LTROs reflect on residual optimism. Given this information, we suspect that it is highly probably that traders should fade the current EURUSD as more ...
Title:
Spanish 10 yr Yields Above 6.00%
Forex News and Events:
It’s clear by the recent rally in Spanish yields, that optimism around the ECB’s liquidity injections and Greece’s debt restructuring has faded, replaced with fear over the crisis in the Euro zone is far from over. With a light calendar today, traders will be focused on European yields. Last week the market believed that they had heard hints of possible ECB bond purchases being restarted--specifically surrounding Spanish bond yields. However, reviewing the general tone of the ECB members, there still seems to be an unambiguous doubt that the central bank has the conviction or the firepower to actually halt the rising yields. And this feeling comes from within the ECB itself as president Draghi has shown very little appetite for the program that Trichet had. We still ...
Title:
Can the ECB Save the Day?
The Week Ahead
Highlights
Can the ECB save the day?
Fed speak provides more transparency but not clarity
Bank of Japan easing pressure mounts
A very mixed UK recovery
Bank of Canada to hold
RBA minutes to provide more insight
Norges Bank's battle with the Nokkie
Market Moves
Can the ECB save the day?
At the end of last week market sentiment towards the Eurozone took a turn for the worse. Stocks closed down sharply and Spanish 10-year bond yields surged to 6% at one stage. The cost to insure Spanish debt against default reached a record high; while bond yields are a mere 70 basis points away from the euro-era record highs reached in November 2011.
Problems have been simmering in Spain for some time, and there was no new news that triggered the sharp dip ...
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