Market Rumours

2010/07/14 14:55DJ Forex Options: Dollar/Yen Options Edge Down On Higher Spot
TOKYO -Dollar/yen currency options edged down in Tokyo Wednesday as the underlying exchange rate climbed to near a two-week high, denting demand for hedges against falls in the U.S. unit.The dollar rose to Y89.12 in morning trade in Tokyo, near Monday's high at Y89.15, the highest since June 29. That prompted some investors to try to trim holdings of dollar-put options, which profit on the currency's slides, option dealers said.Benchmark one-month at-the-money dollar-yen currency options were at 10.15%/10.85%, down slightly from 10.25%/10.95% Tuesday in New York.Dealers said option prices may stay under pressure for the rest of the week, particularly if U.S. corporate earnings suggest that companies weathered European debt woes and financial market jitters in the spring. Second quarter earnings from Intel Corp. (INTC), released early in Asian hours, were strong, adding to the view that earnings overall may surprise to the upside.'The dollar is likely to remain in a slight uptrend against the yen if earnings bring more good news,' a senior dealer at a Japanese trust bank said.

2010/07/14 14:26=DJ WORLD FOREX: Dollar Up Vs Yen On View U.S. Data May Beat Forecast -3-
TOKYO -The dollar rose against the yen in Asia Wednesday on speculation that good earnings reports from U.S. firms suggest important U.S. data due later in the day may turn out to be better than expected. Results released earlier this week showed Intel Corp. and Alcoa Inc. posted better-than-expected profits in the second quarter, prompting Tokyo dealers to believe other U.S. big firms also performed well during the same period. The strong earnings could be taken as a sign that the nation's economic recovery remains robust and that the key U.S. retail sales data due at 1230 GMT may beat expectations by economists. That view prompted Asian investors to buy the greenback, said Shinichi Hayashi, a senior dealer at Shinkin Central Bank. A Dow Jones poll of economists forecasts the data will show overall sales will fall 0.3% in June from May, when they lost 1.2%. The U.S. currency was at Y89.00 as of 0450 GMT compared with Y88.58 in New York Tuesday, and it may rise to Y90.00 if automated stop-loss buying orders around Y89.20 are executed, dealers said. Still, dealers must be cautious about keep buying the dollar above Y89.00 because there is also a risk that the U.S. unit will fall sharply later in the day, said Minoru Shioiri, chief manager of forex trading at Mitsubishi UFJ Morgan Stanley Securities. In addition to the U.S. data, investors will also be paying attention to the Federal Open Market Committee meeting minutes due at 1800 GMT. 'This will be important today because if the Fed is dovish in the document, that would probably weigh on recently-cheerful sentiment and can act as a cue for investors to resume dollar-selling again,' he said. Elsewhere, the euro has been changing hands around Y113.15 versus Y112.64 in New York overnight and the sterling rose to Y135.50. Several Tokyo dealers said a big Japanese bank bought these units aggressively, probably on behalf of its clients who are non-financial institutions. A giant U.S. bank also jumped on the bandwagon, they said. 'A lot of dealers in Asia are talking about this issue today. The amount that a Japanese bank bought was unusually large for a regular transaction,' said a senior dealer at a government-affiliated financial firm. The euro was at $1.2714 from $1.2721 on Tuesday. The ICE Dollar index, which tracks the greenback against a trade-weighted basket of currencies, was at 83.587 from 83.538.

2010/07/14 14:18=DJ BOJ WATCH: BOJ Likely To Lift This FY Growth Forecast To 2.5%
TOKYO -The Bank of Japan is likely to upgrade Thursday its real economic growth projection for the fiscal year started April from 1.8% to around 2.5%, people familiar with the matter said, due to expectations that strong exports will continue to benefit the overall economy. The upgrade suggests the BOJ's policy board is almost certain to keep its monetary policy unchanged at the end of a two-day meeting Thursday, especially as signs are emerging that domestic demand may pick up on the back of an improvement in corporate earnings. The bank has kept its policy interest rate at 0.1% since December 2008. The higher growth forecast could also help the central bank make the case that further monetary easing steps aren't needed despite political pressure to do more to loosen credit. But the BOJ's policy outlook is likely to remain unclear as the results of a recent Upper House election mean the country's ruling party may look to form a coalition with a smaller party that advocates more aggressive monetary easing to defeat deflation, putting pressure on the BOJ to consider further action. Still, for now, BOJ officials appear to be confident that the economy will stay on a recovery track as healthy exports continue to drive Japan's economy, prompting firms to boost capital spending and pay higher wages to employees. They also think BOJ's easy policy should help keep financial markets flush with funds and bolster domestic demand, a person familiar with the BOJ's thinking told Dow Jones Newswires. 'The economy is surely recovering. It's natural for the BOJ to revise up its economic projection for this fiscal year,' the person said. Recent government data show that Japanese exports rose for the sixth straight month in May, up 32.1% from a year earlier. The BOJ's June tankan survey, released earlier this month, showed that Japan's big manufacturers now plan to boost capital spending by 4.4% this fiscal year, much better than the 0.4% slide projected in the March survey. The central bank's policy board issues economic and price forecasts in April and October, and conducts interim reviews of those forecasts in January and July. On Thursday, the BOJ's nine member-policy board is likely to forecast that Japan's gross domestic product could expand at a price-adjusted 2.4%-2.6% pace this fiscal year, people familiar with the matter said. In April, the board predicted 1.8% growth. That would be in line with the government's real GDP forecast: last month it raised its growth projection for this fiscal year to 2.6% from the 1.4% predicted in January. However, strong economic growth isn't a certainty. Euro-zone sovereign debt worries could further push up the yen as investors look to pick up safe haven assets, which may weigh on exports. Amid an uncertain economic outlook, political pressure on the BOJ to ease its monetary policy further could increase, especially after Your Party won enough seats in Sunday's Upper House elections to make it a serious contender for participation in a coalition government. The party has proposed revising legislation to force the BOJ to consider more easing down the line, in an attempt to create a framework between the government and the BOJ to share policy goals. Your Party leader Yoshimi Watanabe has said he doesn't want to join a coalition government, but Prime Minister Naoto Kan will ask the party and the New Komeito to cooperate in passing bills through the Diet, the Yomiuri Shimbun daily has reported. 'It may be too early to expect that Your Party will become a coalition partner and put more pressure on the BOJ to ease policy,' said Naomi Hasegawa, senior fixed income strategist at Mitsubishi UFJ Morgan Stanley. But 'we shouldn't completely rule out the possibility because there were several cases in the past that unexpected coalition governments were formed.'

2010/07/14 11:05DJ Key BP Oil Well Test Delayed - US Official
WASHINGTON (AFP)--The start of BP PLC's (BP) crucial integrity test of the leaking Gulf of Mexico oil well has been delayed until at least Wednesday, the U.S. official leading the disaster response said. Adm. Thad Allen, the former U.S. Coast Guard chief, said he had taken the decision to delay the test after meetings with Energy Secretary Steven Chu, a Nobel Prize-winning physicist, and other top experts. 'As a result of these discussions, we decided that the process may benefit from additional analysis that will be performed tonight and tomorrow,' Allen said in as statement. BP is poised to test whether a huge 75-ton cap can choke off the leak without threatening the structural integrity of the well. The device, which contains three giant valves, was lowered late Monday and latched onto the ruptured pipe almost a mile down on the sea floor where only underwater robots can operate. Once given the go-ahead, BP engineers will gradually close the valves and shut down the flow of oil in a process expected to last between six and 48 hours. High pressure readings would mean there are no other leaks and the cap could effectively be left on to seal the well. Low pressure would indicate oil was seeping out of the external casing of the well, meaning the valves would have to be reopened to reduce the risk of causing a new gusher on the seabed. Containment operations would then have to resume.

2010/07/14 11:04=DJ TAKING STOCK:Investors Shouldn't Be Fooled By Another Breakout
Being fooled twice is enough to shame any investor, but how about three, or even four times?The current rally marks the fourth time since early May that the Dow Jones Industrial Average has bounced more than 5%. Previous bounces have taken the Dow above key resistance levels, and yet subsequent declines have resulted in even lower lows. Essentially, the recent pattern surrounding key technical breakdowns and breakouts suggests the Dow is nearing yet another turning point.It is easy for bulls to fall into another technical trap, since the Dow has climbed above the 50-day simple moving average, which has acted as resistance since the Dow first fell below it in early May, and is now peeking above a downward sloping line that started at the April 26 high and connects the June 21 high. But rather than embolden bulls, the apparent breakout should actually make them skeptical, especially following a six-session rally.There have been several false breakdowns and breakouts since the correction started in late April.The first bounce started after the Dow fell below the 200-day moving average, seen by many as a bull vs. bear market divider, for the first time in 10 months; that bounce ended the day after the Dow closed above the 50-day moving average; the next decline ended after the Dow fell below key support at the February low; another rally ended a few sessions after the Dow had broken above the 200-day moving average and traded above the 50-day in intraday trading.The Dow started the latest rally right after hitting a new low for the year. The break below the June 8 low of 9757 confirmed a head-and-shoulders pattern, which is a widely recognized longer-term bearish reversal pattern.Basically, those reacting to technical breakdowns and breakouts have been fooled many times. And keep in mind that the Dow's last six-session winning streak ended on April 26, the day before the market correction began.The current rally has extended in anticipation of a strong second-quarter earnings reporting season, or one that isn't as bad as the market seemed to be expecting earlier this month, rather than anything concrete. Economic data out of the U.S. and abroad, as well as the downgrade of Portugal's debt by Moody's Investors Service on Tuesday, indicate some of the conditions that started the market's correction--a slowing global economy and sovereign debt risk--still exist.Even if strong second-quarter results become a reality, investors have already acted on it. The Dow faces tough resistance at the 10400 to 10450 level, which encompasses the 200-day moving average and the 50% retracement of the fall from the April 26 high of 11258 to the July 5 low of 9614. The June 21 high of 10594 shouldn't give way without some good, concrete news on the economy. The Dow was up 175 points at 10391 in afternoon trading.For investors to feel safe betting on a breakout, the Dow needs to start the next bounce before it hits a new low. There should be some support at the 9950 to 10000 level, while drop below 9757 would indicate another new low was coming. At least investors can then start expecting another false breakdown, and another 5%+ bounce.

2010/07/14 08:44DJ Australian Consumer Sentiment Index +11.1% In July Vs June
SYDNEY -An index of consumer sentiment in Australia rose 11.1% in July from June.The index rose to 113.1 points in July in seasonally adjusted terms from 101.9 points in June, compilers Westpac Banking Corp. and the Melbourne Institute said in a statement Wednesday.In annual terms, the consumer sentiment index rose a seasonally adjusted 3.4% in July. In trend terms, the index fell 0.1% in July from June, contributing to a 0.1% annual decline."We expected to see a bounce-back in the index after it had tumbled by 12.3% since April," said Bill Evans, chief economist at Westpac."Another substantial fall would have put it in dangerous territory, with a slide comparable to that seen entering the early 1990s recession and in 2007/08 prior to the global financial crisis. There is no way this current period should be compared with those disasters," he said.But Evans was nonetheless surprised by the sharp rebound."We saw a comparable surge in confidence in 2009 when households realized that Australia had avoided recession, but at that time the index was recovering from a much lower level," he said.Bank Web Site: http://www.westpac.com.au

2010/07/14 06:05DJ Spain To Request EU Extension For Use Of Bank Bailout Fund
Ahead of the publication of bank stress-test results on July 23, Spain will ask the European Commission for an extension to use its state-financed bailout fund, or FROB, to provide capital to any banks that are found to be dangerously weakened, Finance Minister Elena Salgado said Tuesday. Following a meeting with European Union finance ministers, Salgado told journalists in Brussels Spain would ask for the extension as a 'precautionary' measure, according to an audio clip on a Spanish government website. Salgado said any possible capital shortfalls in the Spanish banking system would not be large. In an effort to boost investor confidence in EU banks, the Committee of European Banking Supervisors is testing 91 EU banks for their ability to maintain solvency in the face of adverse economic and financial conditions. After a forcing a wide restructuring of mutually owned savings banks, Spanish authorities have said their banking system is basically healthy and spearheaded the push for the EU-wide stress tests in order to show that. Nearly one third, or 27, of the banks to be tested are Spanish. Currently, 39 of Spain's 45 savings banks, or cajas, are merging and will receive EUR10.19 billion from the FROB to shore up their capital bases. Spain has set aside EUR12 billion for the FROB and it can be expanded up to EUR99 billion, though the Commission had only authorized its use until June 30. 'We believe the needs of our financial system have already been largely met,' Salgado said. Many analysts, however, believe Spanish banks will need more funds in order to ensure their solvency. Credit rating agency Fitch Ratings Monday said it thought the overall system could need between EUR23 billion and EUR88 billion in new capital.

2010/07/14 02:56DJ BOE Sentance: Rate Decisions Becoming More Difficult
LONDON -Gradual economic recovery and stubbornly high inflation are making interest rate decisions more difficult, Bank of England policymaker Andrew Sentance said Tuesday.His comments came in an interview with the British Broadcasting Corp's Radio Berkshire."I think the decisions now are becoming more difficult for two reasons. One is the economy is recovering, beginning to improve--albeit gradually. And secondly the inflation rate, insetad of ruinning below target which is what we expect has been running above target recently," he said. He said the "normal response" when inflation is running above target is to increase interest rates by some degree. Sentance said higher interest rates could make a difference to some inflationary pressures, including imported inflation. In a speech to business people earlier Tuesday, Sentance said that rates need to be gradually adjusted to reflect the significant improvement in economic conditions.