Bulls on the rebound next week?

Bulls are betting this week's Spanish budget proposals will be a preamble to a bailout request by Mariano Rajoy's government. The move would be seen as a first step to get the finances of the euro zone's fourth-largest economy in order and would clear some of the market uncertainty regarding the euro zone crisis.

Monetary policy is also on the list of market catalysts next week. Federal Reserve Chairman Ben Bernanke is scheduled to speak on Monday and the minutes of the latest FOMC meeting are set for release later in the week. The week's agenda includes meetings of the European Central Bank, the Bank of England and the Bank of Japan.

"I think we could see a rebound next week if we get some of the stars aligning and have Spain ask for a bailout, the ECB announcing favorable terms for that bailout, and if we see the Bank of Japan announce further monetary intervention," said Brian Jacobsen, chief portfolio strategist at Wells Fargo Funds Management in Menomonee Falls, Wisconsin.

"If Spain and the ECB don't deliver, we could set ourselves up for a further lateral move in the markets. A negative would be if Rajoy flat-out denies that they need a bailout."

http://www.4-traders.com/news/Wall-Street-Week-Ahead-Stock-bulls-eye-Spain-Bernanke-and-jobs--15243470/

Greece, next tranche

Greece will receive its next tranche of international aid despite budget shortfalls and slow progress on reforms because the euro zone does not want the country to leave the common currency, two German magazines reported on Saturday.

http://www.4-traders.com/news/Greece-sure-to-get-next-aid-tranche-German-magazines--15243597/?countview=0

China facing next decade

China's economy is expected to grow at a much slower pace of about seven percent over the next decade, but its stock market still has the most attractive upside among "BRIC" countries, according to  Goldman Sachs.

After three decades of breakneck development that saw annual growth average of 10 percent, China's government is trying to steer growth lower to complete structural economic reforms.

"We're all used to the drug of 10 percent growth and those days are behind us," said O'Neill.

As China makes its transition, O'Neill expects consumer-related and healthcare companies to benefit, while those that depend on heavy industry production and heavy industry commodities were likely to lose out.

China is not alone in facing slower growth. Goldman Sachs Asset Management expects all "BRIC" countries, except Brazil.

However, their collective share of the world economy will still rise, and O'Neill noted that recent policy reforms that some countries like India and Brazil have introduced are a good sign.

India introduced sweeping reforms two weeks ago, such as raising the price of heavily-subsidized diesel, aimed at shoring up government finances and attracting foreign investment to revive economic growth.

http://www.4-traders.com/GOLDMAN-SACHS-GROUP-INC-12831/news/Goldman-Sachs-Group-Inc-Goldman-sees-China-s-growth-slowing-to-7-percent-for-next-decade-15241472/?countview=0

Confidence Weakens in Euro Zone's Core

European Central Bank President Mario Draghi's new campaign to save the euro has had little or no immediate impact on the region's shrinking economy, figures published Thursday showed.

The weakening of confidence in the currency area's core suggests that those economies not yet in contraction will struggle to avoid shrinking in coming months, in turn limiting their ability to help southern European nations already in recession.

Confidence among euro-zone consumers and businesses fell for a sixth straight month in September to its lowest level in nearly three years, while the European Central Bank's monthly report on credit developments said lending to the private sector stayed weak and interbank markets remained largely blocked in August, showing no immediate response either to July's cut in official interest rates, or to Mr. Draghi's initiative.
http://on.wsj.com/QHo7Nu

Spain budget reform pain

The euro zone economy stagnated in the first three months of the year quarter-on-quarter and contracted 0.2 percent in the April-June period. Economists expect another contraction in the third quarter, which would take the euro zone into recession.

"The data also shows that while the ECB promise of bond buying and the German court ruling (endorsing the euro zone's permanent bailout fund) did a lot to calm financial markets, there is still the big issue of non-existent growth," Brzeski said.

SPAIN

Elections in Galicia, the region where Rajoy was born, and in the Basque Country on October 21 could partly explain his procrastination over the aid application. Rising calls for independence from within Catalonia, one of Spain's wealthiest regions, ahead of an early regional election set for November 25 have added to uncertainty over Rajoy's ability to make powerful regional barons accept deep fiscal sacrifices.

Reforms intended to win over skeptical investors and control spending are likely to include a new tax oversight body as recommended by Brussels, curbs on early retirement, new taxes on greenhouse gas emissions and stock transactions, and scrapping some tax exemptions.

Critics say Rajoy's measures lack substance and fail to outline convincingly how they will raise the necessary cash.
"On paper they can make it all add up, but it will be hard to make the budget credible given all the reasonable doubts on the deficit target. It will be really tough to make the markets buy it," said a member of parliament for the ruling party, who asked not to be named.
http://www.4-traders.com/news/Spain-to-pass-reforms-budget-cuts-with-eye-on-aid--15239398/?countview=0

‘Commodities More Attractive’

Gold will probably be among the biggest winners from quantitative easing, say JPMorgan Chase & Co., Standard Bank Group and Credit Suisse Group AG. Some investors buy bullion as a hedge against inflation and a weaker dollar. The metal, which reached a six-month high of $1,779.50 an ounce yesterday, will advance to a record $2,400 by the end of 2014, assuming the stimulus lasts until then, Bank of America Corp. said.

“We view owning commodities and gold in particular as more attractive post the QE3 announcement,” said Walter “Bucky” Hellwig, who helps manage $17 billion at BB&T Wealth Management in Birmingham, Alabama. “While the QE is there, it does keep the bid under commodities prices and gives them an opportunity to continue to move higher even with a sluggish economy.”

Central-bank action should boost prices across precious and industrial metals, JPMorgan said in a report Sept. 14, citing a probable decline in the dollar. Gold, silver, Brent crude oil and aluminum will probably rally more than other commodities, Standard Bank said in a Sept. 17 report.

Commodities also may rally because of supply cuts. Morgan Stanley expects copper demand to outpace supply for a fourth year in 2013. The U.S. Department of Agriculture is forecasting the smallest global corn stockpiles in six years and the lowest soybean inventories in two decades after drought across the U.S. and Europe parched crops. Sanctions against Iran are crimping oil exports from what was once the second-biggest producer in the Organization of Petroleum Exporting Countries.

“We’re heading for a period of underperformance in commodities after years of outperformance,” Misra said. “The effects of a slowdown in China and resumption of normal production trends in agriculture after this year’s drought- driven supply shocks should continue to pressure commodity prices downward.”

http://www.bloomberg.com/news/2012-09-19/fed-stimulus-fading-as-forecasters-say-best-is-over-commodities.html

European leaders are struggling

European leaders are struggling to overcome a crisis-fighting stalemate as they face discord over a banking union, foot-dragging by Spain and Italy on financial aid and Greece’s ongoing debate on how to meet bailout commitments.

In Greece, the government and its international creditors took a week-long break from negotiations on additional funding as Prime Minister Antonis Samaras’s coalition struggles to carve out 11.5 billion euros in budget cuts. The troika of creditors - - the International Monetary Fund, the ECB and the European Commission -- said on Sept. 21 they’ll take a “brief pause” after making “good progress” in talks.

Der Spiegel also cited a preliminary troika report as identifying a 20 billion-euro gap in Greece’s budget. Samaras said he’s confident the government will overcome differences over more than 7 billion euros in cuts to wages, pensions and benefits as Greece confronts a fifth year of recession and more than 25 percent unemployment.

Even as the euro area faces a recession and rising unemployment, a return of confidence in the bloc’s outlook and the threat of inflation may prevent monetary policy makers from cuttinginterest rates further, ECB Executive Board member Benoit Coeure said in the West Bank city of Ramallah.
http://www.bloomberg.com/news/2012-09-23/euro-leaders-seek-end-to-stalemate-as-discord-mounts-on-crisis.html

BOE Looks Set For More Stimulus

The Bank of England looks set to step up its stimulus efforts again this year despite renewed concerns over inflation.

http://online.wsj.com/article/SB10000872396390444165804578005651771668518.html

Waiting for Spain

The European rally has ended, and now the waiting begins. It appears likely that markets will remain unsettled for some time—possibly until European leaders convene for an October summit.

Spanish bonds strengthened in the first half of September on hopes that the ECB will buy some. But the ECB chief has made clear that he won't act until Spain asks for a bailout.

And the more bond yields fall—which happens when prices rise—the less reason Mr. Rajoy has to ask for one.

"Everyone is waiting for Spain to put its hand up," said Marchel Alexandrovich, an economist at Jefferies & Co. in London. "The sooner it happens the better."

For Mr. Rajoy, though, that is easier said than done.

A bailout means accepting the oversight of international authorities, who would lean hard on Spain to make painful cuts and unpopular reforms.

The ECB's plan is new and unproven. In an ideal world, the central bank and the euro-zone bailout fund would each buy some bonds alongside private investors. But private investors could stay away, or even dump their existing holdings if they aren't certain the central bank and the fund will be consistent buyers.

http://online.wsj.com/article/SB10000872396390443995604578004472432263946.html

Spain pushed some investors back into safe-haven assets

Investors are worried about Spain's willingness to accept an EU/IMF bailout and this has overshadowed the recent progress policymakers have made in fighting the euro zone debt crisis.

German Bund prices rose 15 ticks and Italy and Spain both saw small rises in yields at Tuesday's as worries about Spain pushed some investors back into safe-haven assets.

"We take the view that delaying tactics by the Spanish government to request aid could backfire and lead to renewed upward pressure on yields because markets are effectively assuming that an aid request is more or less a done deal," said Rabobank economist Elwin de Groot.

http://www.4-traders.com/news/Hesitant-Spain-puts-euro-share-rally-into-reverse--14514335/?countview=0

European stocks fell the most in two weeks, the euro weakened and Spain’s bonds declined on concern the nation will seek financial aid. Chinese shares slumped amid escalating tensions with Japan, while oil extended its biggest drop in two months.
 China and Japan’s worst diplomatic crisis since 2005 is putting at risk a trade relationship that’s tripled in the past decade to more than $340 billion.
http://www.bloomberg.com/news/2012-09-18/asia-emerging-currencies-drop-with-copper-as-china-stocks-fall.html

Upside on Euro-Dollar

“We are expecting some more upside on euro-dollar to develop,” said Ian Stannard, head of European foreign-exchange strategy in London at Morgan Stanley, which capitulated last week on its call for a lower euro.

Morgan Stanley said in a report dated Sept. 13 that it now expects the currency will rise to $1.34 by Dec. 31, rather than fall to $1.19.

“Over the years, global investors have learned that it does not pay to fight the Fed,” Holger Schmieding, chief economist at Berenberg Bank in London, said this month in an interview. “Those betting on the demise of the euro may now have to realize that the ECB is as mighty as the Fed.”

Options traders have eased bets the euro is going to fall against the dollar by year-end since Draghi hinted the ECB would purchase debt at the Aug. 2 central bank meeting.

Futures traders decreased their bets that the euro will decline against the U.S. dollar last week, figures from the Washington-based Commodity Futures Trading Commission show. The difference in the number of wagers by hedge funds and other large speculators on a decline in the euro compared with those on a gain, so-called net shorts, was 93,658 on Sept. 11, compared with net shorts of 102,306 a week earlier.

http://www.bloomberg.com/news/2012-09-17/draghi-euro-humbles-thought-leaders-seeing-end-of-union-1-.html

More time for Greece

Euro-zone finance ministers indicated Friday they are open to giving Athens more time to meet budget targets and that they aim to decide by the end of October on whether to give Greece its next installment of a bailout money.

http://online.wsj.com/article/SB10000872396390444709004577650942381445480.html?mod=WSJEurope_hpp_LEFTTopStories

Economic trends remain dispiriting

The European Central Bank has bought time for the euro with a scheme for secondary-market purchases of bonds of countries such as Spain if they are shunned by investors. And the European Stability Mechanism is set to buy the debt as it is auctioned, after Germany's top court approved the establishment of the permanent rescue fund. Immediate market pressure has subsided.

Economic trends remain dispiriting: euro zone output is contracting, forecasts for 2013 are being downgraded and the myriad reforms needed to boost longer-term productivity and competitiveness are for the most part conspicuously absent.
http://www.4-traders.com/news/Euro-zone-making-scant-headway-on-growth-and-reform--15199137/

Greece Will Need Third Bailout

Greece will need a third bailout package from the euro zone, and the country's European creditors will have to find the money for it, according to a senior International Monetary Fund official.

But no euro-zone creditor has signaled any intention to lend more money to Greece and the Eurosystem has shown no willingness to restructure its €50 billion portfolio of Greek debt, a step that would be a public-relations disaster for a central bank keen to reassure the German public and government that it won't print money simply to fund public deficits.
http://online.wsj.com/article/SB10000872396390444023704577649332335893766.html?mod=googlenews_wsj

German approval of the ESM

German approval of the ESM was crucial to boost the euro zone's crisis fighting powers and a key requirement for the European Central Bank's new plan to buy the bonds of struggling euro members.
http://www.4-traders.com/news/Euro-bailout-fund-approval-boosts-global-stocks-euro--14514335/?countview=0

Luxury industry today

Burberry Group Plc’s (BRBY), Cie. Financiere Richemont SA, (CFR) Prada SpA (1913) and LVMH Moet Hennessy Louis Vuitton SA (MC) are among companies at the greatest risk of seeing growth shrivel as weakening economies take a toll on demand for expensive apparel and accessories, according to John Guy, an analyst at Berenberg Bank in London.

“Asia is carrying the luxury industry today, so any change in the pace of evolution there is going to affect the entire industry,” said Uché Okonkwo, executive director of Paris-based consultancy Luxe Corp. The region is “not as easy to crack as it used to be so brands need to adjust.”

Richemont’s operating expenses as a percentage of sales is about 41 percent, compared with an industry average of about 45 percent, according to the analyst. Prada has a ratio of about 35 percent, compared with Burberry’s 52 percent, he said.

http://www.bloomberg.com/news/2012-09-11/burberry-s-stagnating-sales-indicate-end-to-luxury-goods-boom.html

China full confidence?

Chinese Premier Wen Jiabao signaled there’s more room for fiscal and monetary policy to support growth, saying the nation has full confidence it will meet its economic goals for the year.

“The government has fiscal and monetary war chests to revive growth but there does not seem to be much appetite to roll out a large-scale stimulus package,” said Wang Qinwei, a London-based economist with Capital Economics who previously worked at the People’s Bank of China.

Officials in China have refrained from easing monetary policy since cutting interest rates in June and July and lowering banks’ reserve requirements three times from November to May. 


Inflation that accelerated for the first time in five months in August may limit any monetary easing.


The last stimulus resulted in a “large hangover in the form of worries about bad debt and overinvestment,” said Wang of Capital Economics. “The authorities are now increasingly aware that stimulus only worsens China’s economic imbalances.”

http://www.bloomberg.com/news/2012-09-11/wen-says-china-confident-it-will-maintain-stable-economic-growth.html

win-win situation

"After a strong performance last week marking new highs, the market is pausing, looking for additional fuel to push us above 1,440, which is the next significant market level - whether the fuel is in the form of economic data or central bank-related, the market will look for a positive in it," said Andre Bakhos, director of market analytics at Lek Securities in New York.

"It's almost a win-win situation - bad data will draw QE3, good data and we are on the path higher."

http://www.4-traders.com/AMERICAN-INTERNATIONAL-GR-4815/news/Wall-Street-to-open-lower-as-China-data-drags-14514684/?countview=0

BP to sell non-strategic oil fields

Oil major BP is in advanced talks to sell a group of oilfields in the Gulf of Mexico to US outfit Plains Exploration&Production, said two people with knowledge of the matter, according to reports in The Wall Street Journal and Bloomberg.

According to one of those sources Plains is discussing a price of about $6bn and may reach an agreement within days.

The above is part of BP chief executive officer Bob Dudley´s plan to sell $38bn in assets by the end of next year -including non-strategic ones in the Gulf of Mexico- following the accident at its Macondo well.
http://www.lse.co.uk/sharecast-news-article.asp?ArticleCode=20350555&ArticleHeadline=bp_in_talks_to_sell_non-strategic_gulf_of_mexico_oil_fields

QE, UK mining sector is improving

UBS said that the outlook for the UK mining sector is improving with quantitative easing (QE) measures now expected. The broker said: "QE triggers a return of capital flows to emerging markets, incentivising companiesto stop running for cash and embark on a commodity bullish restocking phase. As in the past, QE is likely to drive up commodity prices and in turn mining equities." Fresnillo, Vedanta, Rio Tinto and Kazakhmys were high risers early on. 

http://www.lse.co.uk/sharecast-news-article.asp?ArticleCode=20351350&ArticleHeadline=London_midday_Stocks_flat_ahead_of_another_busy_week

China: € 100 mrd voor infrastructuur

China heeft de afgelopen tijd nieuwe investeringsprogramma’s aangekondigd om de economische groei te stimuleren. Zo gaat het land onder meer 800 mrd yuan (€100 mrd) investeren in nieuwe metrolijnen en spoorwegen. De Chinese economie groeide in het tweede kwartaal met 7,6%, het laagste niveau in de afgelopen drie jaar.
http://fd.nl/economie-politiek/211620-1209/chinese-economie-onder-neerwaartse-druk?visited=true

goodbye PC

Intel said demand for chips used in business machines and orders in emerging markets are worse than expected, compounding concern that the PC market may not grow this year as consumers flock to smartphones and tablets.
http://www.bloomberg.com/news/2012-09-07/intel-cuts-third-quarter-sales-forecast-citing-weak-demand.html

the day before

The euro dipped against the dollar and European shares edged up on Wednesday with investors trading cautiously ahead of a European Central Bank meeting and a U.S. jobs report.

"We might not get all the details about the ECB bond buying plan tomorrow, but we know it's coming, so it's priced in. Now the question is: how bad is the situation in the U.S. economy? We'll get a better idea on Friday with the payrolls," David Thebault, head of quantitative sales trading, at Global Equities.
http://www.4-traders.com/news/Euro-edges-lower-ahead-of-ECB-meeting--14414117/?countview=0

ECB interventieplan

Draghi stuurt vandaag zijn plan naar alle ECB-bestuurders die hierover donderdag een besluit nemen. De ECB koerst er nu op aan dat de bank alleen bij grote paniek op de markten intervenieert. De eurolanden kunnen emissies van staatsobligaties vervolgens ondersteunen door een deel van het nieuw uit te geven papier op te kopen, zo is het idee.

De woordvoerder van Merkel zei maandag dat de Duitse regering het volste vertrouwen heeft dat de ECB de juiste keuzes zal maken. De regering mengt zich niet in het debat, want ‘alleen al de discussie daarover zou de onafhankelijkheid van de ECB al aantasten’.

De ECB heeft de afgelopen twee jaar al voor meer dan € 200 mrd aan staatsobligaties van Griekenland, Ierland, Portugal, Spanje en Italië opgekocht. 

http://fd.nl/economie-politiek/715662-1209/brede-steun-voor-ingreep-ecb?visited=true

“We have to be very careful that we don’t raise false expectations,” Schaeuble told Deutschlandfunk radio yesterday. “It has to remain very clear, state debt can’t be financed through monetary policy. Therefore we can’t have a decision --we would think it very wrong -- that’s not covered by the ECB mandate.”
http://www.bloomberg.com/news/2012-09-03/merkel-says-bailouts-here-to-stay-as-schaeuble-warns-on-ecb.html

Morning, EU & UK trade update

The ECB will publish new economic forecasts on Sept. 6 that council member Ewald Nowotny has said are likely to revise down the outlook for growth.

Economists are divided on whether the ECB will cut interest rates further. 

The ECB shouldn’t rush fresh anti-crisis measures until governments demonstrate they’re willing to act as well to quell the turmoil, former ECB council member Athanasios Orphanides said in Jackson.

Draghi has an “opportunity” to hold back details of the ECB’s bond program, said Ed Lalanne, a strategist at Macro Risk Advisors in New York. “I don’t think there’s going to be a full plan.”

http://www.bloomberg.com/news/2012-09-02/draghi-may-see-silver-lining-in-disappointing-investors.html

The UK manufacturing PMI has bounced sharply in August, rising to 49.5 from 45.2. The eurozone manufacturing sector contracted for the 13th month in a row in August.The manufacturing PMI for the whole eurozone rose to 45.1 from July's 37-month low of 44, according to the final data from Markit.

Business conditions worsened in most countries, with the exception of Ireland. Greece remained at the bottom of the league.

http://www.guardian.co.uk/business/2012/sep/03/eurozone-crisis-live-global-slowdown-fears-rise

morning, china trade

In China, the Purchasing Managers Index fell to 49.2 in August from 50.1 in July, the National Bureau of Statistics and China Federation of Logistics and Purchasing said Sept. 1. It’s the first time in nine months that the measure has fallen below the 50 level that signals contraction.

An index of non-manufacturing industries released today showed an expansion to 56.3 in August from 55.6 the previous month.

China’s home prices rose 0.24 percent in August from a month earlier to 8,738 yuan ($1,377) a square meter, said SouFun, the country’s biggest real estate website owner, in a statement today.

A separate report released today by HSBC Holdings Plc and Markit Economics showed China’s manufacturing contracted last month at the fastest pace since March 2009.

China should “decisively” expand the strength of its policy fine-tuning based on economic developments and market changes, according to a front-page commentary published in China’s People’s Daily newspaper.

Hong Kong’s economy shrank 0.1 percent in the second quarter from the previous three months as the sovereign debt crisis in Europe capped export demand. China’s slowdown is dragging on trade, weighing on confidence and encouraging the million of mainlanders who visit each month to spend less on luxury goods.

http://www.bloomberg.com/news/2012-09-03/asian-stocks-open-little-changed-on-u-s-stimulus-bets.html

http://www.bloomberg.com/news/2012-09-02/hong-kong-recession-risk-may-rise-as-exports-falter-tsang-says.html

http://www.bloomberg.com/news/2012-09-03/china-s-stock-futures-decline-after-manufacturing-deteriorates.html