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FUNDAMENTAL OUTLOOK at 0800 GMT (EDT +0400) WORLD Risk appetite suffered overnight after the Wall Street Journal reminded investors that Moody’s has the ratings of 114 European banks on review for a possible downgrade. We note that this review was announced in mid-February and that the article contained little new information. Elsewhere, China‘s weekend decision to widen the USDCNY trading band from ?0.5% to ?1%, effective today, had very little effect on G10 currencies. Rather, the key message is that greater CNY volatility will be tolerated – one of the many anticipated steps towards the PBoC’s long-term goal of full regime liberalisation. The move could benefit G10 commodity bloc currencies at the margin to the extent it signals confidence in China‘s economy, but China‘s broader macro ...

(Reuters) - The oil market has broken a two-year cycle of tightening supply conditions, the International Energy Agency (IEA) said on Thursday, as demand softens and Saudi Arabia increases output in response to tensions with Iran. The agency said in its monthly report that there had potentially been a rise in global oil stocks of 1 million barrels per day (bpd) over the last quarter, and the impact on prices had not yet been fully realized. "The cycle of repeatedly tightening fundamentals since 2009 has been broken for now," it said. The IEA, which advises 28 industrialized nations on energy policy, said the possibility that countries, led by the United States, could release stocks from strategic reserves, together with a pledge from top oil producer Saudi Arabia to supply clients ahead ...

If you're waiting for the next meltdown in U.S. stocks or in commodities, you may want to get over it. After several false dawns following the global financial crisis, more investors are starting to believe the current rally in stocks, commodities and emerging markets could be a long-lasting one. The S&P 500 closed above 1,400 points last week for the first time since the 2008 financial crisis. Investors piled into U.S. equity funds, with the biggest weekly inflows since mid-September. "Is this risk rally for real? I think the answer to that question is yes, but it's not a straight line up," said Art Steinmetz, chief investment officer at Oppenheimer Funds in New York, managing more than $177 billion in assets. Oppenheimer is currently betting on stocks tied to upswings in the economy, ...

(Reuters) - If you're waiting for the next meltdown in U.S. stocks or in commodities, you may want to get over it. After several false dawns following the global financial crisis, more investors are starting to believe the current rally in stocks, commodities and emerging markets could be a long-lasting one. The S&P 500 .SPX closed above 1,400 points last week for the first time since the 2008 financial crisis. Investors piled into U.S. equity funds, with the biggest weekly inflows since mid-September. "Is this risk rally for real? I think the answer to that question is yes, but it's not a straight line up," said Art Steinmetz, chief investment officer at Oppenheimer Funds in New York, managing more than $177 billion in assets. Oppenheimer is currently betting on stocks tied to ...

(Reuters) - Oil markets are difficult to read at the best of times, but what if key data point in different directions and even the world's biggest producer and main consumer can't agree? Policy and investment decisions become very difficult. Oil has risen 15 percent this year to around $125 per barrel on talk the world market is tight and facing a supply crunch. Speculation over possible war with Iran and even the closure of the Strait of Hormuz in the Middle East Gulf has encouraged investors to buy oil in the hope of making large profits. Some industry data suggest the market is right to be worried. Other figures say it may be a wild over reaction. Baseline numbers for demand, supply and inventories are being read quite differently and in some cases are pointing in opposite ...

FUNDAMENTAL OUTLOOK at 0800 GMT (EDT +0400) WORLD The Bank of Japan kept market participants waiting much longer than usual for their overnight policy decision. The delay prompted speculation that a further round of easing might be in the pipeline, but USDJPY dropped 30 pips when no material shift in stance emerged. Crucially, unlike the previous meeting, there was no change to the BoJ’s JGB-purchase ambitions: rinban operations will continue at the same pace, and purchases of shorter-dated JGBs by the asset purchase facility will also continue as before. There were four very minor tweaks to a second-tier lending facility though. This gave it a new lease of life but the adjustments were otherwise insignificant and well below the threshold needed to influence the yen. Attention now shifts ...

Economic Data Analysis Central Banks - Still Easing for Now Ongoing negotiations over Greek bail out, with ECB standing pat ahead of next LTRO. MPC likely to continue QE with further £50bn, but difficult judgements lie ahead. RBA to cut rates this week; easing Chinese inflation pressures could herald PBoC loosening. Another week closes with the promise of a deal on the Greek PSI debt swap. The urgency for such a deal is rising with a hard deadline of 13 February approaching. The coming week will be a question of sequencing. The coming days should see Greece agree with the Troika measures to address deficit target slippage. This needs to be done by Monday's Euro Area finance ministers meeting so it can approve Greece's second bail out package, in turn necessary to allow the ...

Economic Data Analysis : 06/01/2012 A New Direction for 2012? Global risk sentiment boosted by global PMIs and US employment gains. Euro crisis still dominant theme. Neither Merkel-Sarkozy nor ECB to alter landscape. MPC to delay extending QE until next month's meeting. The first trading days of 2012 brought more upbeat news than the gloomy prognostications of end-2011 anticipated. For sure, risks of a further intensification of the Euro area crisis continue to hang over the global outlook. However, this week has seen improvement in global PMIs and record gains in US employment (albeit more subdued in the official payrolls release). This has boosted risk sentiment and key equity markets have risen in the first week of this year, with the relative outperformance of the US ...

(Reuters) - Janet Yellen, the Federal Reserve's influential vice chair, said on Tuesday the U.S. central bank has room to ease monetary policy further, possibly by providing more information on the path of interest rates. A second top official, Atlanta Federal Reserve Bank President Dennis Lockhart, said he sees a benefit in providing more information on the policy assumptions underlying Fed forecasts. He made clear, however, that he believes the current policy stance is appropriate. With its usual economic lever of interest rates already pressed close to zero and its balance sheet triple the size of its pre-crisis norm, the central bank has been considering how it can better use communications as a policy tool. The Fed has been debating for months ways to provide more clarity on when ...