Market Rumours

OECD Sees Continued Growth
2010-04-12 06:05 LONDON -- The world's leading economies should continue to grow in the early months of 2010, although some are showing signs of a slowdown in the pace of growth, according to a survey of leading indicators released by the Organization for Economic Cooperation and Development Monday.The figures point to "expansion" for developed economies as a whole, although France and Italy--which led the pickup in the early stages of the recovery--are now reporting signs of a slower pace of economic expansion, the survey shows.The Composite Leading Indicator for the OECD's 30 members rose again in February to reach 103.6 from 102.9 in January."OECD composite leading indicators for February 2010 continue to point to economic expansion, albeit at a different pace across countries and regions," the OECD said.A level above 100 suggests expansion while a figure below suggests contraction, although when the index is below 100 but is rising, the index shows the economy in question is recovering.The leading indicator for the euro area rose to 104.6 in February from January's 104.1.And, in a turnaround of fortunes, France and Italy--which both outperformed at the beginning of the recovery--are now showing signs of slower growth.The OECD index reported that the indicator for France rose to 105.2 in February from 105.1 in January, while in Italy it rose to 106.4 from January's 106.1. The OECD index for Germany, meanwhile, reported a stronger rise to 105.0 in February from 104.1 a month earlier.The most recent euro-zone gross domestic product data showed that the meager quarterly increase that had been reported in the preliminary releases for the fourth quarter had been revised down to show no growth occurred in the final three months of 2009 compared with the third quarter.And, there are concerns over the outcome for the first quarter of 2010 as heavy snow and bad weather hampered production of goods and deterred consumer shopping in January and some of February.The composite index for the major seven economies--which comprise France, Canada, Japan, Germany, Italy, the U.K. and the U.S.--rose to 103.7 in February from 103.0 in January.The U.K. index rose to 105.4 in February from 105.0 a month earlier, while in the U.S. the index rose to 102.7 and Canada also posted an increase to 104.7.Among the large developing economies, China posted an unchanged index for a second straight month in February at 102.8, while the Russian measure rose to 102.3 from January's 101.8.The indicators for Brazil and India, meanwhile, point to a recovery, rising to 99.6 and 100.8, respectively. The indicator for Japan rose to 102.9 in February from January's 102.0.

Greek Aid Boosts Bonds, Euro Gains Sluggish
2010-04-12 05:19 LONDON -- Greek bonds rallied strongly early Monday on weekend news that the euro zone agreed to details on a EUR30 billion emergency loan-facility for Greece, but a sluggish recovery for the euro indicated continued concern over Greece's longer-term solvency.The cost of insuring Greek sovereign debt against default dropped sharply in early trading Monday, with five-year sovereign credit default swaps trading at around 350 basis points, from 420 basis points late Friday.That represents a drop of USD70,000 on the annual cost of insuring USD10 million of Greek government debt for five years.In cash bonds, the gap in yields between 10-year bonds from Greece and comparable bonds from Germany narrowed markedly, to 3.94% from 4.09%, demonstrating that investors now demand a lower premium amid perceptions of lower chance of a Greek default.For shorter-dated paper, the shrinkage in spreads was even more dramatic, with the gap in yields on two-year Greek and German bonds tumbling to 5.80% from 6.97% Friday.The euro currency market was more guarded. The euro climbed sharply at the end of last week as details of the aid package for Greece from the European Union and the International Monetary Fund started to emerge.On Monday, traders are showing little appetite to push that rally further, suggesting that they still hold doubts over Greece's longer-term funding plans and that they are keen to see more details on precisely how the EUR30 billion loan from the EU could be activated."The aid package has gained time," said currencies analysts at French bank BNP Paribas in London. "But with financial aid coming at relatively expensive terms, we fear the problem is just delayed and not solved," the bank told clients.At 0750 GMT, the euro was trading at $1.3604 against the dollar, according to trading system EBS, having edged lower through early European hours.Analysts at HSBC said EUR30 billion plus a likely EUR15 billion from the International Monetary Fund would easily cover the amount the government needs for the rest of this year."However, as we have consistently stated, 2010 is not the biggest challenge," says the broker. "Lowering the deficit towards 3% of GDP in the subsequent three years will be much tougher and the markets will require much more convincing along the way."Greek and European Union officials say that the rescue package for the moment remains a contingency plan and that Greece hasn't yet asked for its activation."The question is whether that mechanism will convince the markets, simply as a gun on the table. If it doesn't convince them, it is a mechanism that exists and can be used," Greek Prime Minister George Papandreou said in a Sunday interview.

CURRENCIES: Euro Soars After Greece Plan Detailed
The euro surged against the dollar and yen in Asia trading Monday, after nations using the single currency outlined details of a rescue package of loans for debt-burdened Greece The European countries said they are willing to provide as much as 30 billion euros of assistance, revealing the size and the rate of loans that the troubled country can potentially access. As with the plan announced last month, euro-zone nations and the International Monetary Fund will jointly provide the loans. "All eyes will be focused on tomorrow's Greek Treasury-bill auction, which could be the trigger for Greece to activate the rescue package, if market demand refuses to materialize," said Boris Schlossberg, director of currency research at GFT. "Such a move could push the euro lower once again on fears that Greek financing problems could become chronic and the [dollar-euro] pair could drift back to 1.3500 filling the gap as the week progresses," Schlossberg said in e-mailed comments. The euro (CUR_EURUSD) surged to $1.3621 from $1.3480 in late North American trading on Friday. Against the yen, the euro rose to 127.30 yen, up 1.2%. The dollar index (DXY), which measures the greenback against a trade-weighted basket of six major currencies, slipped to 80.421 from 80.992 late Friday. The British pound (CUR_GBPUSD) also gained, to $1.5445 from $1.5366 late Friday. Against the Japanese currency, the dollar (CUR_USDYEN) rose to 93.48 yen from 93.24 yen late Friday. On Friday, the dollar declined as the euro rebounded amid rising expectations that Greece would receive an aid package as soon as the weekend.

European Stocks, Euro Up On Greece Aid
2010-04-12 05:11 LONDON -- European stocks were higher Monday, taking their cue from an upbeat session on Wall Street, and as investors reacted positively to details of the euro-zone's potential aid package for Greece. At the same time, German government bond yields and the euro received a boost, with the currency surging against the dollar and the yen.Share prices in Athens rose sharply, while the cost of insuring Greek sovereign debt fell alongside the gap in yields between Greek government bonds and German bunds."Markets are reacting positively to the news of an agreement being reached over loans to Greece," said David Morrison at GFT.Nonetheless, a few questions regarding the rescue plan remained. "What would happen after the first year? Where is the "strong conditionality" required by government leaders' March 25 statement? And, of course, will it be enough?" said ING Bank.By 0800 GMT, the Stoxx Europe 600 index had gained 0.1% to 270.1. London's FTSE 100 index was up 0.2% at 5780.2, Frankfurt's DAX index was 0.3% higher at 6272.0, and Paris's CAC-40 index was up 0.4% at 4065.7.In Athens, the ASE General Index was up 4.7% at 2,085.1.The hope is that the news will finally restore confidence in the bond market, said Morrison. "But while the euro and equities have soared, yields have only moderated. The first major hurdle will be the reaction to Greece's debt sale tomorrow."In the bond markets, June German bund futures were down 0.40 at 122.44 while, in the foreign exchanges, the euro was trading at $1.3609, up from $1.3500 in late New York business Friday, and at Y127.18, up from Y125.80.The cost of insuring Greek sovereign debt against default dropped sharply, with Greece's five-year sovereign credit default swaps around 350 basis points, according to one trader, from 420 bps late Friday, although bid-offer spreads were wide.Two-year Greek yield spreads over German paper and Greek two-year yields tumbled, with the two-year yield trading at 5.80%, compared with 6.97% at Friday's close, driving the yield spread down to 4.76 percentage points from 6.02 Friday.Under the agreement reached Sunday, euro-zone nations will provide up to EUR30 billion for Greece in the first year of any support program. Greece would pay an interest rate of around 5% for a three-year loan program, well below the interest rate of more than 7% on Greek sovereign debt last week. However, euro-zone finance ministers stressed that Greece has not requested the aid as yet.ING noted that EUR30 billion from the euro zone, plus the expected but not yet confirmed EUR10-EUR15 billion from the International Monetary Fund, would give Greece substantial relief. "Nevertheless, it will not take away the burden from significant fiscal consolidation," ING said.Banking stocks were the best stock-market performers, led higher by UBS, which rose 3.4% after saying it will swing to a first-quarter profit before taxes of at least 2.5 billion Swiss francs after a year-ago loss. It also said that outflows from wealthy clients are slowing. Banco Santander added 2.3% and Banco Bilbao Vizcaya Argentaria gained 1.8%.There are no euro-zone or U.S. economic releases of note due Monday, but investors will keep an eye on the start of the earnings season in the U.S., set to be kicked off by Alcoa. "Heading into the U.S. earnings season, expectations are for a pretty decent performance, with analysts looking for earnings per share growth of more than 30%," said Potter.On Wall Street Friday, stocks closed at fresh 18-month highs, with the Dow Jones Industrial Average closing just below 11,000 although it did hit that level shortly before the close. The gains followed a rosy earnings forecast from Chevron, which lifted other energy companies including Exxon Mobil, although Alcoa fell on an analyst's rating downgrade in advance of its earnings report Monday.The Dow closed up 0.6% at 10,997.35, its highest close since Sept. 26, 2008. The week marked the Dow's sixth-straight weekly gain, the longest weekly winning streak the Dow has had since a run that ended in April 2009. Meanwhile, the Nasdaq Composite climbed 0.7% to 2454.05 and the Standard & Poor's 500 rose 0.7% to 1194.37.In Asia, stocks were mixed Monday, with Japan buoyed by the yen's weakness against the euro, while shares in Thailand fell to a four-week low in early trade after violence erupted between anti-government protesters and the military in Bangkok over the weekend.Japan's Nikkei 225 was up 0.4%, China's Shanghai Composite index was 0.8% lower and Hong Kong's Hang Seng Index was down 0.3%. Thailand's SET benchmark index fell 3.5% but was off its earlier lows.In the European currency markets, the euro gained ground against the dollar and the yen. Moreover, the euro is likely to extend its rally on the details of the package that emerged over the weekend, said Nick Bennenbroek, head of currency strategy at Wells Fargo in New York. He said the euro could rally to the $1.3800 level by the week's end.Among the commodities, spot gold was trading at $1164.80 per troy ounce, up $2.95 from the New York close, while May Nymex crude oil futures were up 40 cents at $85.32 per barrel.


European Stocks, Euro Seen Up On Greece Aid
2010-04-12 02:31 Industrial Average closing just below the 11,000 level on Friday night and.. agreement in the EU over the Greek debt bailout package, equities have started the week in an upbeat mood," said Ben Potter, research analyst at IG Markets.Potter called London's FTSE 100 index to open up 27 points at 5798, Frankfurt's DAX index 25 points higher at 6275, and the CAC-40 index in Paris 11 points higher at 4062.In the bond markets, June bund futures were down 0.55 at 122.29 at 0715 GMT while in the foreign exchanges the euro was quoted at $1.3638, up from $1.3500 in late New York business Friday, and at Y127.26, up from Y125.80.Under the agreement reached Sunday, euro-zone nations will provide up to EUR30 billion for Greece in the first year of any support program. Greece would pay an interest rate of around 5% for a three-year loan program, well below the interest rate of more than 7% on Greek sovereign debt last week. However, euro-zone finance ministers stressed that Greece has not requested the aid as yet."People have long been expecting a handout for Greece, but the more definitive price and size details released over the weekend will bring some certainty and finality to the issue. This is exactly what the market has been wanting," said Potter.There are no euro-zone or U.S. economic releases of note due Monday, but investors will keep an eye on the start of the earnings season in the U.S., set to be kicked off by Alcoa. "Heading into the U.S. earnings season, expectations are for a pretty decent performance, with analysts looking for earnings per share growth of more than 30%," said Potter.On Wall Street Friday, stocks closed at fresh 18-month highs, with the Dow Jones Industrial Average closing just below 11,000 although it did hit that level shortly before the close. The gains followed a rosy earnings forecast from Chevron, which lifted other energy companies including Exxon Mobil, although Alcoa fell on an analyst's rating downgrade in advance of its earnings report Monday.The Dow closed up 0.6% at 10,997.35, its highest close since Sept. 26, 2008. The week marked the Dow's sixth-straight weekly gain, the longest weekly winning streak the Dow has had since a run that ended in April 2009. Meanwhile, the Nasdaq Composite climbed 0.7% to 2454.05 and the Standard & Poor's 500 rose 0.7% to 1194.37.In Asia, stocks were mixed Monday, with Japan buoyed by the yen's weakness against the euro, while shares in Thailand fell to a four-week low in early trade after violence erupted between anti-government protesters and the military in Bangkok over the weekend.Japan's Nikkei 225 was up 0.4%, China's Shanghai Composite index was 0.8% lower and Hong Kong's Hang Seng Index was up 0.2%. Thailand's SET benchmark index fell 3.5% but was off its earlier lows.In the European currency markets, the euro gained ground against the dollar and the yen as investors took heart from the details of the euro zone's potential aid package for Greece. Moreover, the euro is likely to extend its rally on the details of the package that emerged over the weekend, said Nick Bennenbroek, head of currency strategy at Wells Fargo in New York.He said the euro could rally to the $1.3800 level by week's end.Among the commodities, spot gold was trading at $1165.00 per troy ounce, up $3.15 from the New York close, while May Nymex crude oil futures were up 34 cents at $85.26 per barrel.

UPDATE: BOJ Board Disagreed Over Likely Effects Of More Easing
TOKYO -- Bank of Japan policy board members disagreed over the likely effectiveness of expanding the central bank's fund-provision program, minutes of the board's March 16-17 meeting showed Monday, amid moderating price falls and a gradually recovering economy. The summary of the meeting showed most members agreed that "expanding measures to encourage a decline in longer-term interest rates...would contribute to underpinning improvement in economic activity and prices." But two dissenters--Miyako Suda and Tadao Noda--questioned the reasoning behind increasing the supply of funds, citing an improving economy and the likely limited impact of any additional liquidity measures, the minutes showed. The split suggests any moves toward further easing measures by the BOJ board may face obstacles unless economic and financial conditions deteriorate. But with entrenched deflation still threatening to drag on the nation's fragile economic recovery, the central bank will likely keep its current accommodative monetary policy. At the March 16-17 meeting, the BOJ's policy board decided by a 5-2 vote to offer another Y10 trillion in three-month cash at a 0.1% fixed rate to financial institutions, on top of the Y10 trillion it offered in December. The bank also voted unanimously to keep its policy interest-rate target at an ultra-low 0.1%--unchanged since December 2008. The March minutes showed that board members have become slightly more upbeat about the domestic economy, but some members remained cautious about the outlook for prices. Some members said Japan's economic "recovery had been somewhat more rapid compared with the assessment" in January--when the board reviewed its semiannual outlook report--thanks to strong exports to Asia, according to the minutes. Indeed, the central bank last week used a slightly stronger expression to describe the nation's economic conditions. It said Japan's economy "has been picking up" in its economic report for April, compared with its comment in March that the economy was "picking up." But one policy board member said "price declines were becoming widespread" in the Japanese economy, and some said they expect the pace of price falls to slow "only moderately" as an improvement in the supply and demand balance is likely to be mild. On the other hand, one member pointed to an upside risk in consumer prices due to a surge in commodity prices on the back of the rapid growth in emerging nations. Another member also noted that a recovery in economic activity could spread to prices in the near future. The core consumer price index, which excludes volatile fresh food prices, fell 1.2% from a year earlier in February, slightly less than the 1.3% fall in January, according to recent government data. The BOJ is slated to issue fresh semiannual growth and price forecasts on April 30.

Spain To Carry Out Austerity Plan
2010-04-11 19:32 Spain's prime minister, Jose Luis Rodriguez Zapatero, said his nation will carry out their economic austerity plan "whatever the cost," the Financial Times reports on its Web site Sunday.Zapatero told the FT in an interview that "We have a plan--a credible, quantified plan--which we have already begun to implement." He also said if the nation needed to make more cuts to reduce its budget deficit, it would do so, the FT reported.

Fitch Ratings Lowers Greece&apos


Blackstone, Wellcome Trust In Joint RBS Branch Bid
2010-04-09 09:13 LONDON -- Blackstone Group (BX) and U.K. charity Wellcome Trust have submitted a joint bid for Royal Bank of Scotland Group PLC's (RBS) 318 branches, a spokeswoman for the trust said Friday.The duo joined four banks bidding separately for the assets, currently valued at between GBP1.5 billion and GBP2 billion.They were Spain's Banco Santander SA (STD) and Banco Bilbao Vizcaya Argentaria SA (BBVA), Australia's National Australia Bank Ltd. (NAB.AU) and Richard Branson's privately held Virgin Money.RBS, 84%-government owned, is selling branches in England and Wales, along with NatWest branches in Scotland, and the accounts of some SME customers across the U.K., under European Union requirements.Combined, the branches have GBP23.6 billion in assets and 6,000 employees.The bank received the largest state aid in the world following its near collapse during the financial crisis in 2008. The EU has ordered it to cut market shares in some segments to make sure the bank isn't at a competitive advantage to peers that stayed independent.The Wellcome Trust spokeswoman declined to comment further on the joint bid.Wellcome Trust, which has a GBP13 billion investment portfolio, is U.K.'s largest non-governmental source of funds for biomedical research.The trust acquired a stake in Florida-based BankUnited FSB after it collapsed and was taken over by a group of investors including Blackstone and Wilbur Ross.Ross is supporting Virgin Money in its bid for the RBS branches, after taking a 21% stake in Branson's bank earlier this week.

Russia Taps Eurobond Market Before Road Show
2010-04-09 17:54 LONDON -- Twelve years after it defaulted on its domestic debt, the Russian government is coming back to the international bond markets, with presentations for investors starting next week.The country had initially planned to tap sovereign markets for as much as $17.8 billion this year, but higher oil prices may significantly reduce this amount.Russia has hired Barclays Capital, Citigroup Inc., Credit Suisse Group and VTB Capital as joint lead managers for a planned 144A/RegS registered Eurobond issue, one of the banks leading the deal said Friday.The deal will follow a road show that starts April 13 in Munich and will take in London, Singapore, Hong Kong, Boston, Los Angeles and San Francisco before closing in New York on April 21.Officials have said Russia may see a budget deficit of up to 6.8% of gross domestic product this year, although the deficit in the first quarter was only RUB307.6 billion ($10.5 billion), or 3.2% of GDP. Some analysts have said the country could get by without borrowing at all this year if oil prices remain above $80 a barrel.The country has $447.2 billion in reserves and low sovereign debt, although the quasi-sovereign debt of state-supported companies weighs on its credit rating.Moody's Investors Service Inc. rates Russia's debt Baa1, three levels above non-investment-grade. Standard & Poor's Corp. ranks the country one level lower than Moody's, at triple-B.After defaulting on its domestic debt in 1998, Russia has accumulated the world's third-largest international reserves, which it maintains to defend the ruble and support strategic enterprises when oil prices fall, as in 2008.

US Wholesale Inventories Surge Above Expectations
2010-04-09 11:37 WASHINGTON -- U.S. wholesalers' inventories rose by 0.6% in February, far above expectations, but were triggered by gains in sales, the Commerce Department said Friday.Sales of U.S. wholesalers were up 0.8% to a seasonally adjusted $338.66 billion, the latest data showed. It was the eleventh straight monthly increase in sales, according to the Commerce Department. Sales were particularly strong for cars and petroleum.Wholesalers' ReportFebJanInventories:+0.6%+0.1%rSales:+0.8%+0.9%rInventories:Consensus: +0.3%Actual: +0.6%Wall Street analysts had expected inventories to rise by 0.3% in February. The robust gain followed an upward revision in January's inventory level showing an increase of 0.1%, rather than the 0.2% drop originally reported.February's inventory increase to $393.48 billion -- the biggest percentage gain since November 2009 -- is primarily attributed to businesses replenishing shelves to meet demand.Wells Fargo economic analyst Kim Whelan said while inventories are still slim compared to previous levels, growth -- despite being slow -- "will occur as firms will be keen to avoid a fate potentially worse than excess inventory, that is, a shortage which could lose sales."February's inventory report could prove positive for overall growth. Barclays Capital analyst Michelle Meyer said the "notable upturn in inventories" is an indication of "even stronger" first quarter growth results.Whelan of Wells Fargo agrees. "When gross domestic product figures for the first quarter are released at month's end, we expect expanding inventories will add as much as one percentage point to headline growth," Whelan said.The amount of wholesale goods on hand relative to sales was 1.16 in February. The inventory-to-sales ratio measures how many months it would take for a firm to deplete its current inventory. The ratio in January was revised to 1.16, from 1.10.Wholesalers' inventories of durable goods, those meant to last three or more years, increased 0.5% in February, along with a 0.2% gain in automotive stocks. The gain in February's durable goods was the biggest since September 2008 and was mostly driven by a 2.5% gain in computers.Durable goods sales rose 0.2% in February, while auto sales jumped 2.4%.Non-durable goods inventories climbed 0.8% as petroleum inventories increased 3.1%. Petroleum sales also jumped 3.7%.The Commerce Department data is available online at: http://www2.census.gov/wholesale/pdf/mwts/currentwhl.pdf.