Monday, July 30, 2012

RTTNews Forex Daily Update


Economic News July 30, 2012

German wholesale trade turnover rebounded in June after declining for the past three months, the latest figures from the Federal Statistical Office showed Monday. (Jul 30, 2012) Full Article

U.K. mortgage approvals declined more than expected in June, the Bank of England said Monday. (Jul 30, 2012) Full Article

Swedish economic growth quickened in the second quarter of 2012, driven by strong export performance, the latest figures from Statistics Sweden revealed Monday. (Jul 30, 2012) Full Article

UK's high street sales increased for the third consecutive month in July, but the rate of growth slowed from the previous month, data from a survey by the Confederation of British Industry (CBI) showed Monday. (Jul 30, 2012) Full Article

The Reserve Bank of India on Monday said inflation is likely to be sticky during 2012-13 despite weak growth outlook. (Jul 30, 2012) Full Article

Forex Top Story

Industrial production in Japan was down a seasonally adjusted 0.1 percent on month in June, the Ministry of Economy, Trade and Industry said in Monday's preliminary reading - contracting for the third consecutive month. (Jul 30, 2012) Full Article

Confidence among South Korean manufacturers declined to its lowest level in more than three years amid fears that a worsening Eurozone situation may affect firms' export intentions in the coming month. (Jul 30, 2012) Full Article

Home prices in the UK declined for the first time this year in July as the deepening recession and Eurozone debt worries curbed demand for properties, a survey by Hometrack revealed Monday. (Jul 30, 2012) Full Article ?
Is the housing market recovery still a pipe dream? The fears intensified following the release of June’s housing market reports, which suggested a loss of momentum. Existing home sales, new home sales and pending home sales all weakened from the month-ago levels. The softness brings in the premonition that the debt travails of Europe are slowly nipping off the nascent housing market recovery in the bud. (Jul 30, 2012) Full Article 

Spanish economic output sank further in the second quarter, deepening the recession in the euro area's fourth largest economy, which is already hit by a banking sector crisis and the government's tough austerity measures. (Jul 30, 2012) Full Article

Eurozone economic sentiment deteriorated more-than-expected in July due to lower confidence in all sectors and marked the fourth consecutive month of downturn. (Jul 30, 2012) Full Article

India's central bank is likely to leave interest rates unchanged as inflation remains stubbornly above the comfort level. However, a reduction in cash reserve ratio is widely expected. (Jul 30, 2012) Full Article

Italy and Spain saw their borrowing costs ease on Monday as investor confidence improved on hopes of some crucial action from the European Central Bank, which holds its rate-setting session later this week. The central bank of the 17 nations having euro as their currency is expected to adopt some bolder moves to handle the debt crisis. Hopes are high after ECB President Mario Draghi pledged last week that the bank is ready to do whatever it takes to defend the euro. (Jul 30, 2012) Full Article

Commodities

The price of gold was steady Monday morning even as the euro eased on profit taking after recent smart gains. Traders await cues from this week's economic data and the outcome of FOMC meeting. (Jul 30, 2012) Full Article

The price of crude oil was steady above $90 Monday morning amid hopes for further monetary easing measures by policymakers to boost the ailing euro zone and the U.S. economy. (Jul 30, 2012) Full Article

Political News

German Chancellor Angela Merkel and Italian Prime Minister Mario Monti have vowed to defend the euro amid escalating tensions in Eurozone, close on the heels of a similar agreement between Merkel and French President Francois Hollande. (Jul 30, 2012) Full Article

The Syrian regime's attacks on the citizens of Aleppo ultimately will be "a nail in Assad's coffin," U.S. Defense Secretary Leon E. Panetta said at an in flight press briefing while flying to Tunisian capital Tunis on Sunday. (Jul 30, 2012) Full Article

NATO-led International Security Assistance Force (ISAF) has dismissed recent allegations by the Pakistani military that it has notified the coalition forces 52 times that insurgent elements were crossing the Afghan/Pakistan border as incorrect. (Jul 30, 2012) Full Article

A controversial bill criminalizing defamation has become law as Russian President Vladimir Putin signed it on Monday. (Jul 30, 2012) Full Article

Analyst Currency Comments

Westpac analysts noted that trading in the forex market were subdued on Monday in Asia due to lack of market moving news. (Jul 30, 2012) Full Article

Currency Alerts

The euro slipped against most major currencies in early European deals on Monday after a report showed that the Spanish economy contracted further in the second quarter. The gross domestic product fell 0.4 percent in the second quarter of 2012 after a 0.3 percent decline each in the first quarter of 2012 and in the fourth quarter of 2011. The outcome was in line with the Bank of Spain's estimates released early last week. (Jul 30, 2012) Full Article

The Japanese yen and the U.S. dollar strengthened against their most major counterparts in the early European session on Monday amid dismal Spanish second quarter GDP data. (Jul 30, 2012) Full Article

General News

After American swimming legend Michael Phelps, it was the turn of world football champions Spain to become another major casualty in London Olympics. (Jul 30, 2012) Full Article

47 people were killed and 25 others injured in a pre-dawn fire on a passenger train in the southern Indian state of Andhra Pradesh on Monday. (Jul 30, 2012) Full Article 

British women's double scullers set an Olympic rowing record in London on Monday. (Jul 30, 2012) Full Article 

Ugandan president Yoweri Museveni has called on people to avoid all physical contact to prevent the deadly Ebola disease from spreading. (Jul 30, 2012) Full Article









Source: RTT News: Global Financial Newswires


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Friday, July 27, 2012

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GATA | THE GATA DISPATCH: Douglas Keenan: My thwarted attempt to tell of LIBOR shenanigans


Douglas Keenan: My thwarted attempt to tell of LIBOR shenanigans
Submitted by cpowell on 08:26AM ET Friday, July 27, 2012. Section: Daily Dispatches By Douglas Keenan
Financial Times, London
Thursday, July 26, 2012

http://www.ft.com/intl/cms/s/0/dc5f49c2-d67b-11e1-ba60-00144feabdc0.html

In 1991, I began trading for Morgan Stanley, the investment bank, in London. I was trading bonds, derivatives, and related securities. One of those securities was based on the three-month Libor rate: the interest rate at which banks can borrow money for three months from each other. Morgan Stanley does not trade on the interbank market so I could not directly borrow or loan money at Libor rates. What I could do, however, was trade a futures contract on the three-month Libor rate.

As an example of how a futures contract works, consider the following. Suppose that we are concerned about three-month Libor rates increasing in the future; in particular, we are concerned about what the three-month rate will be in September. If that rate is, say, 1 per cent, we can agree today to effectively lock it in. If, come September, the actual three-month rate is 2 per cent, then our contract will ensure we can still borrow at 1 per cent. Futures contracts on three-month Libor were -- and are -- traded on the London International Financial Futures Exchange (Liffe, now part of NYSE Euronext). There was a standard contract for the month of September. That contract had its rate settled on the third Wednesday of the month, at 11 o'clock.

In 1991 I had live trading screens that showed the Libor rates. In September of that year, on the third Wednesday, at 11 o'clock, I watched those screens to see where the futures contract should settle. Shortly afterwards, Liffe announced the contract settlement rate. Its rate was different from what had been shown on my screens, by a few hundredths of a per cent.

As a result, I lost money. The amount was insignificant for me, but I believed that I had been defrauded and I complained to Liffe. Liffe explained that the settlement rate was not determined by what rates were actually in the market. Instead, the British Bankers Association polled banks, asking them what the rates were. The highest and lowest quoted rates were discarded and the rest were averaged, giving the settlement rate. Liffe explained that, in doing this, they were adhering to the terms of the contract.

I talked with some of my more experienced colleagues about this. They told me banks misreported the Libor rates in a way that would generally bring them profits. I had been unaware of that, as I was relatively new to financial trading. My naivety seemed to be humorous to my colleagues.

Simply put, then, it seems the misreporting of Libor rates may have been common practice since at least 1991. Although the difference between the reported rate and the actual rate might seem small, the total amount of money involved is material, given that Libor rates affect contracts worth hundreds of trillions. Also important is what such misreporting says about the culture of finance.


During 1991, at the London office of Morgan Stanley, the head of interest rate trading was a person who has been at the centre of the current scandal: Bob Diamond. I do not recall discussing Libor misreporting with Mr Diamond but since the misreporting was common knowledge among traders, I presume he was aware. (That, however, is not a criticism of Mr Diamond: what could he have done about this?)

There have been two distinct motivations for banks to misreport Libor rates. One motivation is discussed above: to directly increase profits. The other motivation arose during the 2008 financial crisis: to mask liquidity problems.
Libor misreporting has been going on for decades. Why have investigations only recently begun? It seems highly implausible that all the investigating agencies could have been unaware for decades. Indeed, the regulators have a reputation among traders of being like Potemkin villages. I suspect what has happened is that, after the financial crises of 2008, the agencies decided they ought to perform more of their stated duties. That would also explain why the investigations appear to be ignoring any misreporting in years before 2005: to cover up the illusoriness of their earlier work.

One of the investigations is being undertaken by the House of Commons Treasury Committee. I telephoned the Committee on July 3 and spoke with a Committee specialist. I told the specialist about the foregoing and said that I was willing to testify under oath. The specialist seemed extremely interested. They said they were to have a meeting about the Libor scandal and would call me back afterwards.
I did not hear back, however, so I telephoned to ask what was happening. My testimony was not wanted, the specialist told me.

-----
The writer is an independent mathematical scientist and a former Morgan Stanley trader.
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RTTNews Forex Market Update


Economic News July 27, 2012

The Swiss economic barometer improved in July, reinforcing confidence in a further expansion of the economy in the months ahead, the KOF institute reported Friday. (Jul 27, 2012) Full Article

Italy's business confidence among manufacturers dropped more than expected to 87.1 in July from 88.7 a month ago, the statistical office Istat said on Friday. The index was forecast to drop to 88.5. (Jul 27, 2012) Full Article

A leading indicator of the Eurozone economy declined for the third consecutive month in June amid continuing weakness in manufacturing and the service sector, data from a survey by the Conference Board showed Friday. (Jul 27, 2012) Full Article

The European Commission on Friday said its has temporarily approved a bridge recapitalisation provided by the Hellenic Financial Stability Fund (HFSF) in favor of four Greek lenders, while opening an in-depth probe into whether the measure is in line with EU rules. (Jul 27, 2012) Full Article

Germany's EU harmonized inflation remained unchanged in July, but was slightly below economists' forecast, data released by the Federal Statistical Office showed Friday. (Jul 27, 2012) Full Article

U.S. economic growth slowed in the second quarter of 2012, but still grew by more than most economists had predicted. According to figures released Friday by the Commerce Department, the U.S. gross domestic product grew at 1.5 percent in the second quarter. That marks a slowdown from the 2 percent growth posted for the first quarter, but a smaller contraction than most economists, who predicted just 1.2 percent growth for Q2, had expected. The first quarter data, furthermore, was revise (Jul 27, 2012) Full Article 

Forex Top Story

South Korea posted an unadjusted record current account surplus of $5.84 billion in June, the Bank of Korea said on Friday. (Jul 27, 2012) Full Article

Core consumer prices in Japan dipped 0.2 percent on year in June, the Ministry of Internal Affairs and Communications said on Friday. That missed forecasts for a flat reading following the 0.1 percent contraction in May. (Jul 27, 2012) Full Article

China's industrial firms reported a decline in their profits for the third month in a row as slowing economy dampened demand, the latest figures from the National Bureau of Statistics revealed Friday. (Jul 27, 2012) Full Article

French consumer sentiment deteriorated for the second straight month in July as households turned more skeptic about future economic and labor market conditions. (Jul 27, 2012) Full Article

The unemployment rate in Spain climbed to a new record high in the second quarter of 2012 as recession and stringent austerity measures forced firms to shed more jobs. (Jul 27, 2012) Full Article

Italy's borrowing cost declined at its short-term bill auction on Friday after the European Central Bank chief vowed to take whatever action needed to protect euro. (Jul 27, 2012) Full Article

Commodities

The price of gold was firm near its monthly high Friday morning as the dollar was trading mixed ahead of economic growth data. (Jul 27, 2012) Full Article

The price of crude oil was ticking higher Friday morning as traders await cues from today's economic data. (Jul 27, 2012) Full Article

Political News

The United State says that Iran is not only not neutral in the Syrian conflict, but also an actor in the side of the Assad regime, which is "extremely dangerous." (Jul 27, 2012) Full Article

Japan's Economy, Trade and Industry Minister Yukio Edano on Friday called for restraint in restarting nuclear power plants in the country. (Jul 27, 2012) Full Article

Currency Alerts

The Chinese yuan advanced to a 4-day high of 6.3787 against the US dollar on Friday morning in New York as the ECB President Mario Draghi's euro supportive comments on Thursday spurred risk-appetite. (Jul 27, 2012) Full Article

The Australian and New Zealand dollars edged higher against their major opponents on Friday morning in Asia (Jul 27, 2012) Full Article

General News

In the light of escalated violence in the vicinity of several historic urban areas in Syria, the head of the United Nations agency tasked with safeguarding the world's cultural heritage has reiterated her appeal for all parties in the Syrian conflict to protect the Middle East country's cultural heritage. (Jul 27, 2012) Full Article

Chief of the U.S. Cyber Command says the United States is not adequately prepared for a serious cyber attack. (Jul 27, 2012) Full Article

Uranium resources and production are on the rise with the security of uranium supply ensured for the long term, according to a new report by the OECD Nuclear Energy Agency (NEA) and the International Atomic Energy Agency (IAEA). (Jul 27, 2012) Full Article

While there may be some extremists among the Syrian rebels, al-Qaeda is not establishing a strong footprint in that Arab country, says the Pentagon. (Jul 27, 2012) Full Article

Two service-members of the NATO-led International Security Assistance Force (ISAF) were killed in an improvised explosive device (IED) attack in Afghanistan's south on Thursday, raising the number of foreign casualties this year in the country to 260. (Jul 27, 2012) Full Article

Stocks To Watch

This railcar seller stock comes on our radar after it reported strong quarterly results and boosted its fiscal 2012 financial forecast. (Jul 27, 2012) Full Article
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ADVFN III Weekly Foreign Currency Review: Friday, 27 July 2012

Weekly Market analysis
Policy responses to the Euro-zone structural crisis and evidence of sharp slowdown in the global economy will be extremely important. The ECB will be under pressure to expand monetary policy and there will also be speculation over additional Fed action. It will still be very difficult for the global policy-makers to sustain an improvement in risk appetite and the net impact is still likely to be for a weaker Euro over the medium term.

Key events for the forthcoming week
Date
 Time (GMT)
 Data release/event
Wednesday August 1st
 18.15
 US Federal Reserve policy meeting
Thursday August 2nd
 11.00
 Bank of England policy meeting
Thursday August 2nd
 11.45
 ECB policy meeting
Friday August 3rd
12.30
 US Non-farm payrolls
Dollar:

The US economic data has maintained a generally weaker tone with a series of weaker business surveys and expectations that the housing sector was also at risk of stalling. Federal Reserve policies will remain very important and there will still be expectations of further measures to boost monetary policy further if there is evidence of further economic deterioration.  International considerations will also remain extremely important and, although there has been some easing of immediate dollar demand, net capital flows should still provide important support for the US currency as central bank flows remains supportive.

The dollar failed to hold its best levels over the week and dipped sharply over the second half with losses against the Euro and commodity currencies as defensive demand eased slightly.

There was a sharp decline in the latest US Richmond Fed index which reinforced fears surrounding a slowdown in the economy as business surveys remain mixed.

There were mixed US economic reports as jobless claims fell to 353,000 in the latest week from 386,000 previously while there was a headline 1.6% increase in durable goods orders. In contrast, there was a decline in core orders which maintained unease over the underlying investment trends. There was also a small decline in pending home sales according to the latest release.

There were still expectations that the Fed would move to additional quantitative easing which stemmed dollar demand ahead of next week’s FOMC meeting.

Euro
The Euro-zone crisis will continue to dominate in the short-term.  There will be major fears surrounding the Spanish outlook with increasing unease surrounding Italy and expectations that Greece will leave the Euro area. The ECB comments increased speculation over aggressive action, potentially including quantitative easing.  There will still be major economic and political opposition to unorthodox policies within Germany. It is also the case that any aggressive monetary policy action would tend to undermine the Euro even if the Euro structure can be broadly sustained. In this environment, the Euro will find it difficult to sustain any relief rallies.

After hitting fresh two-year lows, there was a sharp corrective Euro rally back to the 1.23 area on Thursday. As far as the economic data is concerned, there was a third successive decline in the German IFO index to 103.3 for July from 105.2 previously as conditions continued to deteriorate, although this was not an extremely low figure in an historic context. The manufacturing PMI index also dipped to a three-year low.

The IMF-led troika started their visit to Greece and the underlying tone from officials was generally negative with one EU official describing Greece as being pretty terrible, increasing speculation that Greece would effectively be pushed out of the Euro. A research report from Citibank also stated that the chances of Greece leaving the Euro-zone were now around 90% on a 12-month view.

Spanish officials denied that the country was on the point of requesting a sovereign bailout and these comments were later repeated by a German Finance Ministry spokesman. The comments helped alleviate the immediate sense of panic surrounding Spanish markets as bond yields declined from record highs above 7.7%.

There were also comments from ECB member Nowotny who suggested the possibility of accelerated moves to granting the ESM a banking licence. Such a move would allow the ESM to buy government bonds in the secondary market.

The trigger for the Euro’s advance were comments from ECB Chairman Draghi in a pre-Olympic London investment conference.  The ECB chief stated that the bank would take whatever it takes to protect the Euro and in forceful comments he stated that ‘ believe me, it will be enough’. Potentially the most important part of the remarks were comments that if borrowing costs hampered the transmission of monetary policy then this would come under the bank’s mandate. This suggested that the bank would consider some form of quantitative easing in the form of bond buying or a resurrection of the dormant SMP to drag peripheral bond yields lower.

Market optimism that the ECB would take action triggered a sharp decline in Spanish and Italian bond yields. The benchmark Spanish yields fell back to below the 7.0% level as yield spreads over bunds also narrowed sharply.  The IMF is due to announce its latest report on Spain on Friday and sentiment could deteriorate again rapidly.

Yen: 

Unease over the global economy will tend to support defensive capital inflows into the Japanese currency, especially with continuing fears surrounding the Euro-zone outlook.  With consumer prices still declining, there will be additional pressure for further monetary easing by the Bank of Japan. Regional competitiveness factors will also be extremely important with pressure for yen gains to be resisted, especially if the Chinese yuan weakens. The yen is still likely to resist aggressive selling given global influences.   

The dollar found support in the 78 area against the yen while rallies quickly stalled in the 78.30 area after a brief surge following a media report that Japan was moving closer to intervention to weaken the currency.

Deputy Bank of Japan Governor Yamaguchi warned that there would be a further policy easing if yen strength threatened the recovery.  The Chinese yuan continued to edge weaker as it hit a 2012 low against the US currency. A weaker yuan would increase competitiveness issues and intensify pressure for yen gains to be resisted.

Domestically, the latest inflation data was weaker than expected with national core consumer prices falling by 0.2% in the year to June while Tokyo prices fell 0.8%. The trend for falling prices will increase speculation of further Bank of Japan action to relax monetary policy. The yen also edged weaker following gains for regional bourses, although the gains were broadly limited.

Sterling
There will be further concerns surrounding the UK growth prospects, especially after the much weaker than expected GDP data for the second quarter. There will be additional pressure for more aggressive Bank of England action to provide support and there will also be pressure for a shift in fiscal policy. The AAA credit rating will be an important factor with greater speculation that it could be lost which would also jeopardise defensive capital inflows.  Overall, Sterling will find it difficult to make sustained progress given the fundamentals.

Sterling found support on dips towards the 1.5450 level against the US currency and rallied firmly to a peak close to 1.57. Sterling was unable to hold gains beyond 0.78 against the Euro.

The latest GDP release was much weaker than expected with a reported 0.7% decline for the flash second-quarter estimate.  This was the third successive quarterly contraction with the economy undermined by a further sharp decline in construction as industrial output also weakened.  There was some recovery in the latest services-sector output with a 0.5% gain in the three months to May.

The latest mortgage lending data was significantly weaker than expected for June with BBA approvals of 26,300 from 29,600 previously which increased unease over bank lending trends and the outlook for consumer spending.

The weak data will undermine confidence and lead to speculation over further Bank of England easing measures, potentially including an interest rate cut. There will also be increased fears that the UK AAA rating will be cut which would undermine the potential for capital inflows. There will also be additional political stresses with the Chancellor in particular under intense pressure.

There was further speculation that the UK AAA rating would be in jeopardy following the much weaker than expected GDP data release on Wednesday. Although the immediate market impact was limited, there will be the threat of a reduction in capital inflows into Sterling as institutional flows decline.

Swiss franc:

With confidence in the Euro-zone outlook remaining extremely weak, defensive flows into the Swiss currency are likely to continue. The National Bank will still be forced to defend the minimum Euro level on a daily basis and if pressure increases further there will be strong demands for the bank to consider capital controls or negative official interest rates. For now, the central bank is likely to stand firm and resist pressure for the Euro minimum to be abandoned.

The dollar hit resistance above 0.9950 against the US dollar and dipped sharply to lows below 0.9750 before staging a slight recovery.  Despite a strong Euro advance against the dollar it was trapped close to the 1.2010 level against the Swiss currency.

National Bank Chairman Jordan reiterated the determination to maintain the 1.20 minimum Euro level and also stated that it was theoretically possible for currency reserves to rise without limit. Markets will, however, be less confident that the bank’s nerve will hold if there is an intensification in capital flows from the Euro area.

Any alleviation of stresses surrounding the Euro-zone and more aggressive policy easing by the ECB could ease immediate pressure on the 1.20 minimum level. There were no initial signs that capital inflows had eased which will maintain pressure on the National Bank as reserves continue to rise rapidly.


Australian dollar
The Australian dollar found support on dips to below 1.02 against the US currency during the week and rallied firmly to a peak above 1.04. Trends in risk appetite continued to dominate markets and there was a strong boost in confidence following ECB Chairman Draghi’s comments that everything would be done to save the Euro.

There was a rebound in global equity markets and a generally weaker US currency which underpinned the Australian currency. The domestic influences were limited with a slightly weaker than expected inflation reading for the second quarter.

The Australian dollar will find it difficult to sustain any further gains, especially given unease surrounding domestic and regional growth trends.

Canadian dollar:

The Canadian currency found support on dips beyond 1.02 against the US currency during the week and pushed to a high around 1.0050 as oil and commodity prices rallied.  There was a stronger than expected reading for retail sales, although international considerations tended to dominate.

Although there were some underlying concerns surrounding debt levels and housing, this was overshadowed by a lack of confidence in fundamentals elsewhere.

Concerns surrounding the global economy and commodity-price trends will tend to limit scope for Canadian dollar gains even if there is a near-term solid tone.

Indian rupee:

The rupee found support beyond 56 against the US dollar during the week and pushed to a high in the 55.5 region. There was a relief rally in risk conditions late in the week as the Euro rallied which helped support the rupee.

There was also a slightly greater degree of confidence surrounding the domestic fundamentals as markets waited for the latest GDP data. There was still an underlying mood of caution, especially with further concerns surrounding a slowdown in the regional and global economy.

Persistent doubts surrounding the regional economy will still tend to limit the scope for rupee gains even if domestic confidence and reform optimism is sustained.

Hong Kong dollar
The Hong Kong dollar was confined to narrow ranges during the week, but there was support close to the 7.76 level as the currency was blocked in the 7.7550 area.

The currency failed to gain much support from an improvement in risk appetite as there were still important concerns surrounding the Chinese economy with a weaker Chinese yuan also curbing any Hong Kong dollar support.

Uncertainty surrounding the Chinese outlook should prevent serious near-term pressure on the peg with narrow ranges likely to persist for now.

Chinese yuan:

The Chinese yuan maintained a weaker tone for much of the week and dipped to 2012 lows beyond 6.38 against the US currency. The PBOC was content to let the yuan weaken as it set a series of lower fixes. There was a modest reversal later in the week following the strong Euro rally.

There were still major concerns surrounding the Chinese economic outlook with expectations of weakening demand. There were still expectations of further cuts in reserve ratio requirements which dampened currency support, especially with the Shanghai bourse near 2012 lows and with a continuing threat of capital outflows.

The IMF stated that the yuan was now only slightly undervalued, pulling back from calls for sharp appreciation.

The yuan is likely to be subjected to underlying selling pressure given a developing dollar shortage given unease over the growth outlook and slowdown in exports.


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ADVFN III Morning Euro Markets Bulletin - Friday, 27 July 2012


ADVFN III Morning Euro Markets Bulletin
Daily world financial news
Friday, 27 July 2012
London Market Report
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Stocks edge higher, Barclays in demand

Market Movers
techMARK 2,060.55 +0.05%
FTSE 100 5,575.23 +0.04%
FTSE 250 11,090.74 +0.46%
Peripheral bond yields ease
Markets still digesting Draghi comments
Barclays up after first-half beat

The Footsie edged higher in early trading on Friday with Barclays providing a lift after its interim results. Markets were still reacting to yesterday's comments by Mario Draghi, who said that he will do 'whatever it takes' to save the euro.

Bond yields in Spain and Italy continued to fall today after the President of the European Central Bank (ECB), Mario Draghi, said the bank would do “whatever it takes to preserve the euro...and believe me, it will be big enough”. This is the clearest indication yet the ECB may be prepared to buy the debt of under pressure Eurozone countries in order to drive down yields.

The yield on a Spanish 10-year bond was 12 basis points (bp) lower at 6.808% this morning, while the Italian equivalent was down 4.4bp at 6.012%.

However, Gerhard Schwarz, the head of equity strategy from Baadar Bank, issued a word of caution in an e-mailed note to clients this morning: "Investors should remember that there is no quick fix to the crisis. The ECB going alone will probably act not as decisive as sky-high expectations now suggest. Current fiscal policy tools are not near a level that would shield Italy and Spain on a lasting basis from market pressures. Expect the ECB meeting next week to underwhelm."
FTSE 100: Repentent Barclays beats expectations
A contrite Marcus Agius, Chairman of under-fire bank Barclays, apologised for the company's involvement in the LIBOR fixing scandal as he unveiled half-year profits ahead of market expectations, causing shares to jump high early on. Adjusted profit before tax in the first half of 2012 rose 13% to £4,227m from £3,725m in the first half of 2011, versus market expectations of £3,958m.

Banking peer HSBC was also in demand after saying that it will offload its 44% stake in card-processing joint venture Global Payments Asia-Pacific for $242m in cash.

Commodities giant Glencore rose as it came closer to completing the £3.9bn takeover of Canadian agricultural grain handler Viterra after being given the all-clear by Australian authorities.

Heading the other way was mining colossus Anglo American after first-half profits plunged from $6,571m to just $2,942m on the back of weaker commodity prices and input cost pressures.

Publishing group Pearson also fell after operating profits came in a little sky of expectations as it admitted that the first half has been a little tougher than expected for some parts of the business.

FTSE 100 - Risers
Barclays (BARC) 160.45p +4.46%
Carnival (CCL) 2,136.00p +2.54%
Evraz (EVR) 223.50p +1.27%
Weir Group (WEIR) 1,620.00p +1.25%
Marks & Spencer Group (MKS) 327.30p +1.17%
InterContinental Hotels Group (IHG) 1,567.00p +1.10%
Glencore International (GLEN) 311.55p +1.04%
Kingfisher (KGF) 264.20p +0.99%
Sage Group (SGE) 290.90p +0.97%
Eurasian Natural Resources Corp. (ENRC) 379.40p +0.90%

FTSE 100 - Fallers
Pearson (PSON) 1,242.00p -4.02%
Anglo American (AAL) 1,918.00p -2.34%
CRH (CRH) 1,144.00p -2.14%
Polymetal International (POLY) 865.00p -0.97%
Hargreaves Lansdown (HL.) 566.50p -0.87%
Unilever (ULVR) 2,241.00p -0.66%
Severn Trent (SVT) 1,702.00p -0.64%
United Utilities Group (UU.) 697.50p -0.57%
SSE (SSE) 1,303.00p -0.53%
Wolseley (WOS) 2,319.00p -0.47%

FTSE 250 - Risers
UBM (UBM) 624.50p +2.88%
William Hill (WMH) 298.20p +2.69%
Talvivaara Mining Company (TALV) 135.50p +2.65%
Dixons Retail (DXNS) 15.39p +2.46%
Ruspetro (RPO) 140.50p +2.26%
3i Group (III) 204.70p +2.04%
Ocado Group (OCDO) 76.50p +2.00%
NMC Health (NMC) 199.90p +1.99%
Daejan Holdings (DJAN) 2,890.00p +1.98%
FirstGroup (FGP) 218.10p +1.87%

FTSE 250 - Fallers
New World Resources A Shares (NWR) 301.60p -3.24%
Barr (A.G.) (BAG) 417.90p -2.97%
Invensys (ISYS) 241.40p -1.87%
KCOM Group (KCOM) 75.55p -1.56%
Dechra Pharmaceuticals (DPH) 491.20p -1.46%
Petropavlovsk (POG) 415.80p -1.40%
Euromoney Institutional Investor (ERM) 728.50p -1.15%
Cape (CIU) 279.30p -1.06%
Cranswick (CWK) 829.50p -1.01%
TalkTalk Telecom Group (TALK) 174.80p -0.91%

Europe Market Report
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Euro rises on Draghi's comments

The euro leapt on Thursday following comments by the head of the European Central Bank (ECB), Mario Draghi, who said that he was 'prepared to do whatever it takes to preserve the euro'.

The single currency at one point rose to $1.2329, although settled around $1.2284, against $1.2152 the previous evening.

Draghi said: “Within our mandate, the ECB is ready to do whatever it takes to preserve the euro. Believe me it will be enough.”

The currency also rose 1.3% against the Japanese yen to ¥96.04, while the British pound traded at 1.2769 euro, from 1.2750 the previous day.

The ICE dollar index, which measures the greenback against a basket of six other major currencies, declined from 83.573 on Wednesday to 82.834 yesterday.

The pound bought $1.5685, compared to $1.5501 on Wednesday, while the Australian dollar also climbed higher to fetch $1.0396, against $1.0313 the day
UK Event Calendar
INTERIMS
Anglo American, Barclays, Jardine Matheson Holdings Ltd (Singapore), Pearson, Travis Perkins

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INTERNATIONAL ECONOMIC ANNOUNCEMENTS
Balance of Payments (GER) (07:00)
GDP (Advance) (US) (13:30)
U. of Michigan Confidence (Final) (US) (15:00)

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IMSS
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US Market Report
Draghi's comments push stocks higher

Dow Jones +212 at 12,888
Nasdaq +39 at 2,893
S&P 500 +22 at 1,360
US stocks closed firmly higher on Thursday following comments by the head of the European Central Bank, Mario Draghi, who said that he was 'prepared to do whatever it takes to preserve the euro'.

The implication is that the ECB could step directly into the markets to support the bonds of under pressure nations like Italy and Spain.

Meanwhile back in the US, jobless claims and durable goods orders data provided a further boost to equities.

Initial weekly unemployment claims fell by 35,000 to 353,000 (consensus: 380,000) in the week to the 21st of July, according to the latest data from the Department of Labour.

The National Association of Realtors (NAR) pending home sales index fell by -1.4% month-on-month in June, well below the consensus estimate for a gain of 0.3%, and after the previous month´s drop of 5.4% (revised down from 5.9%).

Companies

Moody's Corp., the credit ratings agency, rose after its profits and sales during the second quarter came in ahead of market expectations.

New York Times was another strong riser, up after the newspaper publisher posted better-than-expected second quarter income.

Pioneer Drilling climbed higher following an upgrade by Goldman Sacks, which raised its rating from neutral to buy.

Heading in the opposite direction was online video-streamer Netflix, following the firm's warning on Wednesday that it may not reach its domestic subscriber growth targets for the year.

Amazon shares fell in after hours trading after the online retailer predicted a loss from operations during its third fiscal quarter.

Social networking site Facebook posted a second-quarter loss in what was its first quarter since listing as a public company. The internet giant said its revenues were offset by huge costs, mostly resulting from share-based compensation expenses.

Other markets

The September West Texas Intermediate crude futures contract rose by 0.47% to $89.39 a barrel in NYMEX trading.
10-year US treasuries fell by 11/32 dollars, with yields at 1.43%.

S&P 500 - Risers
Metropcs Communications Inc. (PCS) $8.59 +36.78%
Akamai Technologies Inc. (AKAM) $35.04 +24.04%
Sprint Nxtel Corp. (S) $4.05 +20.18%
PulteGroup Inc. (PHM) $11.86 +18.36%
LSI Logic Corp. (LSI) $7.04 +16.36%
Supervalu Inc. (SVU) $1.94 +12.14%
Whole Foods Market Inc. (WFM) $94.10 +11.32%
Cameron International Corp. (CAM) $49.91 +11.31%
Moody's Corp. (MCO) $40.09 +11.21%
Teradyne Inc. (TER) $14.85 +10.41%

S&P 500 - Fallers
Vulcan Materials Co. (VMC) $37.83 -10.31%
Interpublic Group of Companies Inc. (IPG) $9.90 -9.92%
Boston Scientific Corp. (BSX) $4.97 -6.75%
Cliffs Natural Resources Inc. (CLF) $38.57 -6.27%
Varian Medical Systems Inc. (VAR) $53.73 -6.25%
Owens-Illinois Inc. (OI) $17.58 -5.59%
Netflix Inc. (NFLX) $57.01 -5.42%
International Game Technology (IGT) $11.14 -5.27%
Electronic Arts Inc. (EA) $10.94 -4.91%
C.R. Bard Inc. (BCR) $98.46 -4.69%

Dow Jones I.A - Risers
Home Depot Inc. (HD) $52.91 +3.60%
American Express Co. (AXP) $57.76 +3.05%
Walt Disney Co. (DIS) $49.71 +2.92%
General Electric Co. (GE) $20.56 +2.80%
AT&T Inc. (T) $36.30 +2.75%
Coca-Cola Co. (KO) $78.85 +2.38%
Wal-Mart Stores Inc. (WMT) $73.67 +2.21%
Alcoa Inc. (AA) $8.19 +2.12%
Chevron Corp. (CVX) $108.27 +2.08%
3M Co. (MMM) $90.59 +2.07%

Dow Jones I.A - Fallers
Cisco Systems Inc. (CSCO) $15.38 -0.26%

Nasdaq 100 - Risers
Seagate Technology Plc (STX) $30.06 +14.25%
Whole Foods Market Inc. (WFM) $94.10 +11.32%
FLIR Systems Inc. (FLIR) $20.77 +7.81%
Mylan Inc. (MYL) $22.75 +4.89%
Autodesk Inc. (ADSK) $33.49 +4.85%
Marvell Technology Group Ltd. (MRVL) $11.40 +4.68%
Foster Wheeler AG (FWLT) $17.32 +4.59%
Sandisk Corp. (SNDK) $41.51 +4.47%
Starbucks Corp. (SBUX) $52.40 +3.96%
Qiagen N.V. (QGEN) $17.70 +3.87%

Nasdaq 100 - Fallers
Electronic Arts Inc. (EA) $10.94 -4.91%
O'Reilly Automotive Inc. (ORLY) $86.93 -3.52%
Logitech International S.A. (LOGI) $8.76 -2.23%
Hologic Inc. (HOLX) $17.98 -2.04%
Apollo Group Inc. (APOL) $27.51 -1.86%
Illumina Inc. (ILMN) $41.10 -1.44%
Nll Holdings Inc. (NIHD) $6.91 -1.29%
First Solar Inc. (FSLR) $14.00 -1.27%
Citrix Systems Inc. (CTXS) $74.22 -1.18%
Warner Chilcott Plc (WCRX) $17.06 -0.70%

Friday newspaper round-up: Greece, Facebook, Oil companies
Greek leaders struggled to agree on required budget cuts yesterday as Citigroup raised the probability of the country’s exit from the euro to 90 per cent. The leaders of the three parties in the new coalition Government met for three hours in a session at which they were meant to sign off on a plan for €11.7bn (£8.5bn) in budget cuts demanded by Europe and the International Monetary Fund. The meeting ended shortly before talks began between Antonis Samaras, the Prime Minister, and José Manuel Barroso, the European Commission President. However, the party leaders were unable to reach a consensus, The Times reports.

Facebook shares dropped 10% in after-hours trading following its latest results. The Californian company had been under intense pressure to deliver strong figures given the almost 30% drop in its share price since the $104bn (£66bn) flotation in May. Although revenues climbed 32% to $1.18bn in the second quarter, beating analysts' estimates, it failed to convince investors who had seen saw revenues climb 45% in the first quarter. At the same time its spending on sales and marketing more than tripled to $392m in the period. As had been forecast, the cost of share-based pay plan for employees saw Facebook report an overall loss of $157m for the quarter. But as founder and chief executive Mark Zuckerberg made an appearance on the company's conference call with Wall Street analysts on Thursday night, the focus was squarely on how quickly the social network site will be able to drive revenues, The Telegraph reports.

It was obvious for the past few weeks that the April-June period would be tough for oil companies. So thank you, Shell, BG Group, Statoil, ExxonMobil and a handful of others for confirming as much on Thursday in your differing but inimitable ways. There is a pattern to the oil sector’s second-quarter numbers: production and operating cash flow mostly up, underlying profit mostly down. The latter was partly due to things such as maintenance costs (at Shell in particular) and partly to the volatile oil price. That will not change for the next few quarters. Oil stocks look cheap relative to the wider market, trading on a price to earnings multiple in many cases of under 10 times. That is well below the historic average. For now, however, given pricing pressures, it looks about right, The Financial Times´s Lex column writes.

NatWest has become the second financial institution to report technical problems with its systems today after up to 2m Nationwide transactions were duplicated. NatWest said on its Twitter feed: "Some customers may have issues with their online banking and using their debit cards at the moment. Working as hard as we can to resolve. We'll post updates as soon as we have more information." Cash machine withdrawals using debit cards are also affected, the bank added. Earlier in the summer the bank suffered a major systems collapse when millions of customers were unable to check their balances, withdraw cash or make payments. NatWest promised that no customers would be left out of pocket as a result of the technology problems, The Telegraph says.

George Osborne was yesterday urged to stick to his faltering economic strategy as the longest double-dip recession in modern history threatened to blow a gaping hole in his budget. Angel Gurria, the head of the Organisation for Economic Co-operation and Development(OECD), told the Chancellor to ‘stay the course’ despite the 0.7% slump in gross domestic product in the second quarter of the year. It came as analysts warned that the government will borrow £162bn more than planned over the next five years as the economic malaise takes its toll on the creaking public finances. Fears are also mounting that Britain will be stripped of the coveted AAA credit rating it has held since 1978 and on which Osborne has staked his political reputation, The Daily Mail reports.

Lloyds Banking revealed on Thursday that it had received subpoenas from government agencies investigating the Libor rate-rigging scandal. The bank, which is among a number being investigated, said: “Certain members of the group have received subpoenas and requests for information from certain government agencies and are co-operating with their investigations”. Chief executive Antonio Horta-Osorio said he was prevented from giving further details while the investigations continued but he felt there would be greater clarity on the issue over the next six months. His comments came as the bank took an extra £700m hit to deal with compensation claims for mis-selling payment protection insurance, The Scotsman says.

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