Not Increasing Their Consumption

Highlights - An acceleration in deposit withdrawals, combined with the prospect of an anti-austerity party winning the next election, has brought to the fore concerns about a potential Greek exit from the euro zone. - Our base case assumption is that under the most likely scenario, the Greek election will lead to a government that sticks to an EU/IMF program, even if the terms are renegotiated. - However, we do believe that Greece needs a further restructuring of its debt and we do think the country will ultimately exit the euro - we're just not convinced that Europe is ready for this to happen at the moment. - If an accident does occur and Greece does leave the euro in the near term, it would have global financial ramifications that could range from severe to catastrophic. ...

(Reuters) - Riskier assets retreated broadly on Wednesday as hopes for fresh measures to tackle the euro zone debt crisis faded and caution set in ahead of a meeting of European leaders, with sentiment hurt by renewed fears Greece would leave the euro bloc. European shares also looked likely to slump, with financial spreadbetters predicting major European markets .FTSE .FCHI .GDAXI would open as much as 1.5 percent lower. U.S. stock futures were down 0.5 percent. .EU .L .N Shares, commodities, commodity-linked currencies and the euro all slid, while safe-haven demand lifted the dollar index .DXY measured against major currencies up to 81.830, its highest since September 2010. MSCI's broadest index of Asia-Pacific shares outside Japan .MIAPJ0000PUS slumped 2.0 percent. It had risen 1.1 ...

Yen gains after BOJ stands pat; World Bank cuts China outlook, April lending looks weak; EUR falls on Papademos "grexit" mention Economic Data (JP) BANK OF JAPAN (BOJ) LEAVES TARGET RATE RANGE UNCHANGED BETWEEN 0.0% TO 0.10% (AS EXPECTED); Keeps economic assessment unchanged; Maintains asset purchase fund at ¥70T (JP) JAPAN APR MERCHANDISE TRADE BALANCE TOTAL: -¥520B V -¥471BE; ADJUSTED: -¥480B V -¥617BE (US) NORTH AMERICA SEMI EQUIPMENT INDUSTRY APR SALES BOOK TO BILL RATIO: 1.10 V 1.13 PRIOR (3RD CONSECUTIVE MONTH ABOVE PARITY, 1st decline in 7 months) (AU) AUSTRALIA APR DEWR INTERNET SKILLED VACANCIES M/M: -0.8% V -0.5% PRIOR (4-month low) (AU) AUSTRALIA MAR WESTPAC LEADING INDEX M/M: 0.4% V 0.0% PRIOR (AU) AUSTRALIA MAR CONFERENCE BOARD LEADING INDEX M/M: +0.2% V 0.0% PRIOR (SG) ...

Fundamental Analysis EUR "Fears of a Greek exit from the euro zone and the negative consequences from that are prevailing" - Ben Kwong, KGI Asia European stocks edged lower after Fitch downgraded Greece’s credit rating to ‘CCC’, implying that the country is vulnerable and highly dependent on favourable economic conditions to fulfill its financial obligations. USD "If there were scope to do another twist of some type it would be prudent to consider it, especially in the scenario where things are worse and the Fed feels like it needs to move" - Nathan Sheets, Citigroup Inc. Fed policymakers might potentially launch another round of Operation Twist rather than a direct asset purchases in case of increased risks or further weakening of the US economy. GBP "We must work together to give ...

The Weekly Bottom Line : 19/05/2012 HIGHLIGHTS OF THE WEEK United States - Global economic concerns ratcheted up this week. Widespread discussion of a Greek exit continued, Spanish banks faced rating downgrades and periphery sovereign debt yields moved higher. - Financial markets have responded to these global worries with increased risk aversion. The S&P is poised to end the week 3% lower, and 10-year treasuries are yielding just 1.7%. - U.S. economic data has proved somewhat more encouraging, but growth is still struggling to breakout beyond a moderate pace. This has kept the possibility of additional monetary stimulus alive even if the threshold remains quite high. Canada - Recent economic indicators are showing a resurgence of strength in the Canadian economy. Strong ...

(Reuters) - China will be compelled to let market forces play a larger role in managing its economy as it faces complicated challenges ranging from an aging population to rising wages and prices, a senior U.S. Treasury Department official said on Tuesday. Lael Brainard, the Treasury's undersecretary for international affairs, told a group of business people, diplomats and academics that China faces "an extraordinarily steep demographic cliff" that will reduce the advantage of a young labor force willing to work cheaply. "Wages and costs are rising rapidly. There is a self-reinforcing momentum to have market forces determine how capital is allocated, how exchange rates adjust," Brainard said during a discussion about last week's Strategic and Economic Dialogue talks in Beijing. ...

Fundamental Analysis EUR "The grim unemployment figures for March will likely encourage talk about a long overdue ‘growth pact’ for the euro zone" - Martin van Vliet, an economist at ING Group Euro area unemployment rose to the highest level since 1997 in March and manufacturing contracted in April, adding to signs the economy is still far from out of the woods. USD "Employment growth is slowing" - David Sloan, an economist at 4Cast Inc. The number of Americans, who have found a job in the private sector fell to 119,000 in April from a revised 201,000 in March, the ADP Employer Services said on Wednesday. GBP " points to clear, decent construction expansion in April" - Howard Archer, chief UK economist at IHS Global Insight U.K. construction sector expanded slower in April, compared ...

China shares slump under banks, Aussie and Kiwi weaken; China PMI declines Economic Data (CN) CHINA APR NON-MANUFACTURING PMI: 56.1 V 58.0 PRIOR (NZ) NEW ZEALAND Q1 UNEMPLOYMENT RATE: 6.7% V 6.3%E (5-quarter high); EMPLOYMENT CHANGE Q/Q: 0.4% V 0.3%E; Y/Y: 0.9% V 0.9%E; PARTICIPATION RATE Q/Q: 68.8% V 68.3%E (2nd highest on record and 3-year high) (AU) AUSTRALIA APR AIG PERFORMANCE OF SERVICE INDEX: 39.6 V 47.0 PRIOR (3-year low; 3rd month of contraction) (UK) UK APR LLOYDS BUSINESS BAROMETER: 26 V 31 PRIOR (AU) AUSTRALIA APR VFACTS NEW AUTO SALES M/M: +7.6% (KR) South Korea Apr Foreign Exchange Reserves: $316.8B v $316.0B prior Markets Snapshot (as of 04:30GMT) Nikkei225 +0.3% S&P/ASX -0.1% Kospi -0.3% Taiwan Taiex -0.2% Singapore Straits Times Index unchanged Shanghai Composite -0.4% ...

What to Expect in Tomorrow's UK Q1 GDP Data On the eve of the UK GDP release for the first quarter that will confirm whether or not the UK managed to avoid a technical recession, it is worth taking stock of the actual "strength" of the UK economy as move towards the middle of the year. Overall, the biggest disappointment so far this year has been construction data, which may have contracted by approximately 10% in the first quarter. Construction is roughly 7% of UK GDP, so a contraction of this size could easily dent overall growth figures. Close behind comes industrial and manufacturing data. IP fell at a 2.3% annual rate in February and manufacturing data has declined four months out of the last five. Although the pick-up in PMI data suggests that things may have improved in March, the ...