***Economic Data***
– (RU) Russia Narrow Money Supply (RUB): 6.08T v 6.04T prior
– (FR) France Jun Consumer Confidence: 83 v 84e
– (GE) Germany Jun Saxony M/M: +0.1 % v -0.1% prior; Y/Y: 2.3% v 2.3% prior
– (CZ) Czech Jun Business Confidence: 12.3 v 12 prior; Consumer Confidence: -21.8 v -20.5 prior; Composite: 5.5 v 5.5 prior
– (HU) Hungary Apr Retail Trade Y/Y:-1.3% v +0.1%e
– (SP) Spain May Producer Prices M/M: -0.3% v +0.6% prior; Y/Y: 6.7% v 7.3% prior
– (AS) Austria Apr Industrial Production M/M: 1.3% v 0.4% prior; Y/Y: 9.7% v 9.5% prior
– (NV) Netherlands Apr Consumer Spending Y/Y: 0.5% v 0.0% prior
– (NV) Netherlands Jun Producer Confidence: v 2.5e
– (GE) Germany Jun IFO Business Climate: 114.5 v 113.4e; Current Assessment: 123.3 v 120.8e; Expectations Survey: 106.3 v 106.3e
– (IT) Italy Apr Retail Sales M/M: +0.4% v -0.1%e; Y/Y: +2.5% v -0.7%e
– (TT) Taiwan May M2 Money Supply Y/Y: 6.1% v 5.9% prior
– (PD) Central/Eastern European Jun ZEW Indicator: -2.5 v +20.9 prior
– (MA) Malaysia May CPI Y/Y: 3.3% v 3.3%e
Fixed income:
– (SA) South Africa sold total ZAR600M in 2022, 2028 and 2033 Inflation-Linked Bonds
*** SPEAKERS/FIXED INCOME/FX/COMMODITIES/ERRATUM ***
***Notes/Observations:
– China Premier Wen: Inflation whipped.
– Greece : Agreement on 5 year fiscal austerity with IMF (Dealers: the latest chapter in its mythology)
– China reiterates that it does not want to see Euro Zone debt restructuring.
– German Ifo beat expectations
Equities:
FTSE 100 +1.5% at 5758, DAX +1.4% at 7248, CAC 40 +1.8% at 3854, IBEX +0.50% at 9993, FTSE MIB +1.2% at 19,701, SMI +0.80% at 6035
– European shares rose after a streak of losses following an agreement between Greece and EU/IMF mission on legislation outlining details of the five-year austerity plan. The Greek Cabinet approved the draft legislation containing details of the five-year austerity plan. The legislation will be submitted to the Greek Parliament on Friday. Parliament will vote to approve austerity plans on Tuesday, June 29th. Banks were up on the news. Automakers were also higher following conflicting news reports that China’s NDRC was looking to cancel the purchase limit on vehicle purchases. While the report was denied by China’s auto group, NDRC has yet to comment.
– Cap Gemini [CAP.FR] rose after acquiring China-based Praxis Technology, but financial terms were not disclosed. RAB Capital [RAB.UK] rallied after stating that it was considering a buyout deal as part of its potential reorganization. It is expected that the maximum cash sum to be paid to RAB shareholders under the possible Buyout would be £27.0 million
Speakers:
– IFO Abberger commented that he saw enormous risks particularly on the international front adding that German export expectations clearly declined in June. The IFO member stated that the recent decline in oil prices was a positive impulse for the global economy but he did not expect any strong impact from planned tax cuts in Germany. He expected further interest rate hikes by the ECB in July and later in the Autumnand the move would be digestible for German companies
– IFO Economist Carstensen commented that German growth to slow down to more normal levels bit that the European debt crisis had not affected the real economy. He forecasted 2011 GDP above 3% and saw the EUR currency strengthening rather than devaluing.
– Greece Fin Min Venizelos commented that Greece was committed to EU-IMF on mid-term vote by June 30th with discussion on new Greek package to follow the mid-term vote. He added that he understand that new tax burdens to be demanding for Greeks.
– BoE Financial Policy Committee (FPC) called for the FSA should disclose UK banks sovereign exposure. Euro sovereign strain was the largest threat to the financial stability and uncertainty about sovereign exposure could cause funding problems. FSA should monitor closely collateral swap risks. The report also noted that bond yields were susceptible to reversal from low levels and a rapid yield “snap back” risk to global financial system.
– BOE’s King: Loss of confidence is a bigger risk than direct exposure to Greece
– ECB’s Noyer reiterated that Greece can be saved but must manage its budget rigorously and implement structural reforms. He reiterated concern that Greek deficits were too high and its growth low and that central banks would be more vocal in insisting on deficit cuts
– Spanish govt requests that its banks rollover Greek debt over the next five years
– SNB Quarterly Statement stated that “downside risks predominated” and reiterated its view that strong CHF currency and European debt crisis were downside risks to growth. The SNB also reiterates that it saw a “danger of overheating” on Swiss real-estate market
– South Korea Finance Minister Bahk called for contingency plans for ‘unexpected’ shocks as Global economic uncertainty was rising and noted that the economies in China and US might slow. Among risks were high commodity prices and China’s tightening policy.
– OPEC Gulf official: IEA release of strategic oil inventories brings stability in oil market and help support prices in the medium term
Currencies/Fixed income:
– The European morning began with some skepticism over the Greek-IMF 5-year agreement and only adding to the drama’s mythology. Early concerns over possible euro-area contagion remained despite signs of progress on Greece. However, the mood changed for the better and risk-appetite gained traction after better than expected German IFO data. The EUR/USD recovered its session losses and moved into positive territory. The pair tested above 1.43 in the post IFO environment after testing 1.4200 earlier today. Despite the euphoria Ifo’s Abberger warned that export expectations for German companies had clearly declined with GDP growth to slow after a stellar Q1 growth in Germany.
– The GBP/USD recovered from its three-month lows but remained below the pivotal H&S neckline of 1.6090.
– THE JPY maintained a form tone as the NY morning approached. The USD/JPY was inching back towards the 80.00 level
Political/ In the Papers:
– The Telegraph reported that some economists believe that there could be haircuts on Greece’s sovereign debt of up to 70%. Analysts at Barclays said that private debt holders would need a haircut of approx 60% in order for Greece to become solvent again. Barclays added that it believes the EU debt crisis could be contained to Greece, as it is possible that Portugal and Ireland may not default. Fathom believes that Greece’s private creditors need to take a 70% haircut.
– According to IHS Global Insight, British housing prices could decline by approximately 10% by the middle of next year. The organization expects prices to decline from the level seen in 2010. The expectations are due to factors including the slow rate of mortgage approvals.
– China think tank researcher Qu Xing said China is working with the EU and IMF to avoid debt restructuring by EU countries according to the Chinese Press. China understands that there are risks related to buying EU sovereign debt, but the purchases are seen as a form of European support. China’s Premier Wen is expected to visit various European countries between the 24-28th of June.
– Strong net exports and profits from Irish-based multinationals witnessed first quarter growth of 1.3% according to the Central Statistics Office (CSO). Economists cautioned that the turnaround was more to do with external demand than any recovery at home. Note that consumer demand dropped 1.9% for the quarter, the worst reading in two years. On a GNP basis, the economy shrank 4.3%. According to the article most economists view GNP as a more accurate picture of the Irish economy.
**Looking Ahead***
– (EU) EU Leaders hold Summit in Brussels
– 6:00 (EU) ECB’s Gonzalez-Paramo speaks at Award Ceremony in Spain
– 6:45 (IC) celand to Sell Bonds
– 7:30 (TU) Turkey Jun Industrial Confidence: no est v 117.2 prior; Capacity Utilization: 75.2%e v 75.2% prior
– 8:30 (US) May Durable Goods Orders: +1.5%e v -3.6% prior; Durables Ex Transportation: 0.9%e v -1.6% (revised from -1.6%)
– 8:30 (US) Q1 Final GDP Q/Q Annualized: 1.9%e v 1.8% prelim; Personal Consumption: 2.2%e v 2.2% prelim
– 8:30 (US) Q1 Final Core PCE Q/Q: 1.4%e v 1.4% prelim; GDP Price Index: 1.9%e v 1.9% prelim
– 9:00 (MX) Mexico May Preliminary Trade Balance: $540Me v $767M prior
– 11:00 (US) Fed to purchase $4-5B in Notes/Bonds
– 15:00 (AR) Argentina Apr Economic Activity Index M/M: No est v 0.5% prior; Y/Y: 7.6%e v 7.8% prior
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