Eurozone Finance Ministers Discuss Greek Plan
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Euro zone finance ministers on Monday will look at how to give Greece financial aid should it ask for help, but there were signs France and Germany were holding out on making concrete commitments.
A senior EU source told Reuters ministers would discuss the possibility of providing loan guarantees or bilateral loans to help Athens finance its debts if needed, but said no figure would be put on the amount of help that could be extended.
The 16 countries that use the euro single currency have provided strong verbal and political support to Greece since its debt and deficit problems exploded three months ago, but have been unable to agree on the need for financial aid.
Germany, Europe's biggest economy and the country that would be the linchpin of any support, is reluctant to bail out Greece, saying the country's priority must be to get its own finances in order and make deep structural adjustments to rein in spending.
The 16 finance ministers gather in Brussels from around 1700 (1600 GMT).
Market prices for Greece's debt took heart from hopes of a more detailed commitment by the meeting, but analysts said the failure to do so could spark more selling.
"No political decisions will be made," a German government spokesman said on Monday in reference to the meeting of the Eurogroup. He reiterated that Greece had not asked for financial support and was working to resolve its problems by itself.
Greece this month unveiled a set of new austerity measures, including cutting public sector pay and raising taxes, and a poll on Sunday showed most Greeks believe it is a step in the right direction, despite provoking street protests.
The austerity measures and the euro zone's verbal support have helped ease the premium Greece must offer over benchmark German bonds as it seeks to refinance some 20 billion euros in debt in April and May. But the spread remains high and unsustainable, analysts say.
To further insulate Greece against market pressures and the threat of default, which have dented the value of the euro, finance ministers are looking at what measures could be taken should Athens be unable to finance its borrowing.
Under EU rules, neither the bloc nor individual states can assume the debts of other countries, but loan guarantees or similar measures would circumvent those restrictions.
French Economy Minister Christine Lagarde said over the weekend she did not expect any figure for aid to be announced.
"I'm certainly not expecting any decision being made, or any button being pressed, or any button being selected to be pressed, because it's totally premature," she told reporters late on Saturday.
She said Greece had "delivered enormously" with its austerity steps which include promised spending cuts equal to 2 percent of gross domestic product.
Germany, whose banks are among the largest owners of Greek sovereign debt, said Athens was taking the right steps to deal with the crisis and said no deal on financial aid was needed.
On Saturday, Britain's Guardian newspaper quoted sources as saying Monday's meeting would agree to make up to 25 billion euros of support available. A senior EU source said that was not on the table.
"I think we should be able to agree on principles of a euro area facility for coordinated assistance. The (executive) European Commission and the Eurogroup task force would have the mandate to finalise the work," the source said.
He said they would discuss the "principles and parameters" of a facility or mechanism that could be activated if needed.
"You would have a framework mechanism and you would have blank spaces for the numbers because there has been no request (from Greece) yet," the source said.
Just over half the 1,008 people surveyed for the Greek newspaper Ethnows said last week's 4.8 billion euro ($6.6 billion) package went in "the right direction", while 41.9 said it did not. Many said unions should tone down their opposition.
Policymakers are also worried the problems in Greece could further undermine confidence in the euro and spread to other heavily indebted euro zone countries such as Portugal or Spain.
The German government spokesman said Monday's meeting would also not get into the details of funding for a European Monetary Fund, an idea that has been proposed by Berlin as another measure to help protect euro zone countries with debt troubles.
Discussing reforms needed to shore up the group's rules, German Finance Minister Wolfgang Schaeuble reiterated that it should eventually be made possible, in extreme cases, for a state to leave the euro zone if it fails to manage its finances.
"We need tighter rules," he said. "That means in an extreme case, the possibility that a country that does not get its finances in order at all leaves the euro group. Such a prospect alone would ensure a totally different kind of discipline."
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Tags: EU, Eurozone, Greece, Finance, Plan, Ministers
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Daily Market Update
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Headlines:
• ECB's Paramo says in order to cope with the Greece situation the IMF can assist by providing technical assistance though “the responsibility over the future belongs to the countries that share the euro”
• Fed's Evans says low interest rates are likely to be needed “for some time” as high unemployment lingers and inflation stays below his benchmark for price stability
• Greek Prime Minister says Greece is not asking for a bailout, or financial help from anyone but trying to revamp its own economy first
• Citigroup plans to issue as much as $2 billion of trust preferred securities with yield of about 8.875%, seeking to bolster capital - Bloomberg
• RBA's Lowe says Australia's economy is likely to expand at or above its average pace over the next few years, stoking inflation pressures and house prices
• BoJ's Suda says upside and downside risks for growth are almost balanced, sticking with the bank's view that the economy will continue to expand gradually
• Australian home loans fell the most in nearly 8 yrs in Jan, as they dropped 7.9% (exp: 2% rise)
• Japan's machinery orders slipped in Jan after the biggest jump since 2000, as they dropped 3.7% from Dec, when they climbed 20.1%
Europe:
Greek Prime Minister Papandreou said U.S. President Obama expressed support for measures being taken to deal with Greece's financial crisis. He added that Greece is not asking for a bailout, or financial help from anyone but trying to revamp its own economy first.
ECB's Paramo says Greece's commitments to cut down its huge deficit are convincing for the ECB as well as the IMF and the EC. He added that in order to cope with the situation the IMF can assist Greece by providing technical assistance though “the responsibility over the future belongs to the countries that share the euro”.
British Prime Minister Brown sees risks to the economic recovery and says it is not the moment to change course and disturb the recovery in any way.
Germany and France are stepping up the pressure for urgent action by the EU to regulate speculation in sovereign debt markets, in the wake of the Greek debt crisis. German chancellor Merkel, called for the “fastest possible” adoption of new rules to clamp down on the most speculative elements of derivatives trading, including so-called naked transactions, which do not hedge the value of real assets. http://www.ft.com/cms/s/0/7a22b968-2bad-11df-a5c7-00144feabdc0.html
Romania's credit rating outlook was raised to stable (BB+) at S&P's after the govt showed its commitment to fulfilling the budgetary terms of an international bailout.
US & Canada:
Fed's Evans said low interest rates are likely to be needed “for some time” as high unemployment lingers and inflation stays below his benchmark for price stability.
Citigroup, seeking to bolster capital after repaying bailout funds to the Treasury, is selling trust preferred securities. The 30-yr fixed-to-floating rate securities may initially yield about 8.875%. Citigroup plans to issue as much as $2 billion of the securities. Bloomberg
A U.S. Govt effort to spur job creation was approved in U.S. Congress as a $149 billion package of tax breaks and unemployment aid cleared a procedural hurdle in the Senate.
Australia & New Zealand:
Australia's economy is likely to expand at or above its average pace over the next few years, stoking inflation pressures and house prices, RBA's assistant governor Lowe said. He said the main challenge for Australia in the coming years will be to expand the supply of everything from skilled labour to new homes, so the economy could grow rapidly without generating inflation.
Australian home loans fell the most in nearly 8 yrs in Jan, as the 7.9% drop in mortgage commitments in Jan came as a complete surprise against a forecast of a 2% rise.
Japan:
BoJ's Suda says upside and downside risks for growth are almost balanced, sticking with the bank's view that the economy will continue to expand gradually.
Japanese Finance Minister Kan said he saw no immediate need to have a more formal policy pact with the BoJ as the govt and the central bank already share the common goal of beating deflation.
Japan's machinery orders slipped in Jan after the biggest jump since 2000, as they dropped 3.7% from Dec, when they climbed 20.1%. The govt said after the report that machinery demand is “bottoming.”
Asia & RoW:
China's exports rose more than forecast in Feb and posted a 3rd straight gain, as shipments abroad gained 45.7% (exp : 38.3%) in Feb from a year before after a 21% advance in Jan. http://www.ft.com/cms/s/0/bb2dc98c-2bff-11df-8033-00144feabdc0.html
Singapore's economy may grow faster this year than initially predicted, boosted by manufacturing, construction and private consumption, a central bank survey showed. GDP may expand 6.5% in 2010, compared with the previous forecast of 5.5%. Gdp will probably grow 9.5% this quarter from a year earlier, the survey showed.
Philippine exports surged 42.5% in Jan from a year earlier, marking the 2nd month of strong double-digit growth and the highest jump since 1995.
Events (London Time)
| DEU |
07:00 |
HICP |
(Feb F) |
0.2%(0.3%) |
| DEU |
07:00 |
Current Account |
(Jan) |
|
| DEU |
07:00 |
Trade balance |
(Jan) |
|
| FRA |
07:45 |
Industrial production |
(Jan) |
0.4%(1.9%) |
| FRA |
07:45 |
Manufacturing production |
(Jan) |
0.2%(3.4%) |
| ESP |
08:00 |
Retail sales |
(Jan) |
(-3.0%) |
| ESP |
08:00 |
Adjusted real retail sales |
(Jan) |
|
| SWE |
08:30 |
Activity index level |
(Jan) |
|
| DNK |
08:30 |
HICP |
(Feb) |
|
| SWE |
08:30 |
Industrial orders |
(Jan) |
|
| SWE |
08:30 |
Industrial production |
(Jan) |
|
| SWE |
09:00 |
AMV unemployment rate |
(Feb) |
|
| NOR |
09:00 |
CPI |
(Feb) |
|
| NOR |
09:00 |
CPI underlying |
(Feb) |
|
| ITA |
09:00 |
Industrial production |
(Jan) |
0.6% |
| NOR |
09:00 |
Producer prices incl oil |
(Feb) |
|
| GBR |
09:30 |
Industrial production |
(Jan) |
0.3%(-0.7%) |
| GBR |
09:30 |
Manufacturing production |
(Jan) |
0.3%(1.5%) |
| ITA |
10:00 |
GDP |
Q4 F) |
|
| USA |
12:00 |
MBA mortgage applications |
|
|
| BEL |
15:00 |
GDP |
(Q4 F) |
|
| USA |
15:00 |
Wholesale inventories |
(Jan) |
-0.5% |
| USA |
19:00 |
Monthly budget statement |
(Feb) |
|
| NZL |
20:00 |
RBNZ official cash rate |
|
2.5% |
| NZL |
21:30 |
Business NZ PMI |
(Feb) |
|
| NZL |
22:45 |
Food prices |
(Feb) |
|
| JPN |
23:50 |
Annualized GDP |
(Q4 F) |
3.6% |
| JPN |
23:50 |
GDP deflator |
(Q4 F) |
|
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Tags: Update, News, Daily, Headlines, Events, March, 20...
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Global Currency Update
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G10 Currencies
EUR-USD:
It hardly matters any longer whether good or bad US data is being published. Greece remains the dominant driver for EUR-USD. Hopes that the ADP index or the ISM index for the service sector might put any serious pressure on the dollar therefore seem unjustified, even should they disappoint. We expect the ADP index to record 40k jobs to have been cut in February, considerably more than markets expect (-20k). The cold winter in the US is likely to have taken its toll. The ISM index for the service sector on the other hand is likely to have risen further in February.
There is the possibility of positive news from Greece supporting the euro today. According to media reports the Greek government is going to present a new packet of savings measures worth approx. EUR 4bn. Moreover Greece is apparently going to issue a 10 year bond soon, which is hoped to produce a cash flow of EUR 3 to 5bn. It is beginning to get tight for Greece. The auction which had been planned for February was postponed after rating agencies had downgraded Greece's four major banks and market participants have been waiting in vain for a new date to be announced. On Friday the Greek Prime Minister Papandreou is travelling to Berlin to meet Chancellor Merkel. Nonetheless: until the litmus test in the form of the auction of Greek bonds has been completed and while market uncertainty surrounding Greece remains high, the first choice in EUR-USD remains to sell on rallys, in particular before the outcome of the US labour market is known. It is likely to get difficult for the euro above 1.36 and the area around 1.3680-1.3720 is likely to be of great interest for investors with a short horizon. But we also recommend attaching stops to such positions, preferably in the range of 1.3750 to 1.3780. Why? Good news out of Greece could lead to sharp corrections- due to the stretched EUR-short positions of price-elastic market participants.
CAD:
All quiet on the western front – well mostly. The BoC left key rates unchanged at 0.25% and repeated its conditional commitment to keep them on a low level until the end of Q2. According to the BoC the continued strength of the CAD and the low level of US demand are dampening growth so that the risks for the inflation outlook are balanced. These statements did not contain any news. There are however two smaller comments that we should examine more carefully. First of all that growth will be slightly stronger than projected in January's monetary policy report. In view of the good Q4 GDP result (annualised +5.0%) published earlier in the week, this is not really surprising. Moreover the comment that the BoC retains considerable flexibility in the conduct of monetary policy was omitted in the statement. This could be interpreted as the first, minute step towards a normalisation of monetary policy or as the fact that intervention against an excessively strong CAD will be less likely if not completely excluded. We assume that the BoC is unlikely to react before the Fed and therefore expect to see the first rate step in the last quarter. CAD is likely to continue to do well against the US dollar and a test of the low at 1.02 is quite possible. During the course of the week Thursday's Ivey PMI in particular might provide support for the loonie. The Canadian labour market report for February is only due Friday week.
CHF: The SNB continues to keep a close eye on the CHF exchange rate. Following the good Q4 GDP yesterday, which came in well above expectations at 0.7% qoq, EUR-CHF came under slight pressure approaching 1.4625. Reason enough for the SNB to intervene and demonstrate to the markets once again that it will not tolerate an excessive appreciation of the franc. We expect the threshold to remain at 1.46, so that a breach of this level does not seem imminent.
Emerging Market Currencies
PLN:
Adam Glapinski, member of the new Polish MPC, considers it to be increasingly likely that the council will be unable to wait until the end of the year to raise rates and will have to take action before than. That is a real surprise as Glapinski had always been considered to be a dove. This allows two interpretations: (a) If even the doves want to raise rates earlier than previously planned then it will definitely happen. (b) Perhaps Glapinski is not such a dove after all. Whichever interpretation is the correct once, the announcement is good news for the zloty. Even if we do not consider the current EUR-PLN levels to be justifiable from a fundamental point of view, in view of news of this nature there is little reason for a trend reversal.
UAH:
Prime Minister Yulia Tymoshenko's cabinet is likely to be forced out of office by a vote of no confidence today, which means that the end of the political stalemate is in sight. Nonetheless CDS are still pricing in a default probability of 44%. No wonder as the vice chief of staff of the new president is openly talking about the possibility of no longer servicing bonds in local currency. And an end to the political stalemate is not yet certain either. It is far from certain yet whether parliament will be able to agree on a new government, which means that early elections might have to be held. But even if all goes well and the negotiations with the IMF can be resumed soon: it is questionable whether it would be possible to string along the Washington emissaries again or whether they might want to enforce the liberalisation of the UAH exchange rate. So far too early to sound the all clear for the hryvnia.
BRL:
Rising commodity prices and optimistic market sentiment have supported the real over the past few days. Having come under considerable pressure at the start of the year the currency pair USD-BRL was able to breach the 1.80 mark to the downside at the start of the week. From a fundamental point of view a stronger real seems quite justifiable. The rate level is attractive and the economic recovery is continuing at quite a pace. The Brazilian central bank is likely to start raising rates as early as Q2, so that the rate advantage continues to support the real. The data on industrial production due for publication today is likely to confirm the impression of a robust recovery, supporting the real. Following the rally of the past few days we see a risk of some profit taking though. Should market sentiment turn, the real would come under pressure again quite quickly.
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Tags: Currency, World, Global, Exchange, News, Finance
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Finance and Market News
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JAPAN
Tomorrow ard 04.00 gmt BOJ policy meeting outcome
FX –talk larger 89.90 & 92.00 vanillas exp this Thursday & decent 90.00's during the week - USD/JPY traded within 89.90-95 to 90.15-20 o/n, chatter of larger US bond redemptions/coupon payments shifted due to US holiday (worth ard $84bln) & exporter supply pressured despite good cross yen demand from 90.05-10 to 89.70-75 in Asia, while below 90.45 risk to 89.55-30 or 88.80-50 only back above could challenge 90.65-91.10 or 91.25-50, support 89.55/89.30 & 88.80 res 90.45/90.65 & 91.10– EURYEN topped out ard 122.70-75 while pullback held ard 122.25-30 o/n, small risk on activity & fixing buying lifted it from 122.30-35 to 122.75-80 before stalling aided by late weakness in Nikkei in Asia, a break past 123.10 needed to challenge 123.85-124.35 or 124.60-125.00, failure risking setback to 122.05-121.35 or 120.70-00, support 122.05/121.35 & 120.70 res 123.10/123.85 & 124.35– JPY/CHF traded within 1.1940-50 to 1.1980-90 o/n, it traded within 1.1940-50 to 1.1980-90 in Asia, while below 1.2050 risk to break below 1.19 for test of 1.1810-1.1760, only back above could challenge 1.2080-1.2150, support 1.1900/1.1810 & 1.1760, res 1.2050/1.2080 & 1.2150
EUROPE/US
Ireland auctions eur 1-1.5bln of 2014/2020 Bond 08.00 gmt Spain industrial orders & turnover 08.30 gmt ECOFIN meeting (day 2) 10.00 gmt German ZEW current condition/economic expectation we exp -53/40 (last -56.6/47.2) 13.30 gmt US empire state FED mfg survey we exp 18 (last 15.92) 14.00 gmt US TIC capital flow data (last net flow $26.6bln) 17.00 gmt US FED Hoenig speech on knocking on central banks door 17.30 gmt US FED Lockhart speech on education 17.45 gmt US FED Kocherlakota speech on eco outlook 18.00 gmt US NAHB housing index (last 15, cons 16)
FX –talk larger but currently far off 1.4040 vanilla exp this Thursday - EUR/USD was stuck within 1.3580-85 to 1.3630-35 in holiday thinned session & settled ard 1.3595-00 o/n, it briefly touched 1.3585-90 lows before steadily seeing short covering, aided by commodities /local stocks (Japan/S. Korea/Australia) and Eurogroup Juncker proposals for Greece that lifted small hopes for solution to debt crisis in a very short euro mkt, taking it to 1.3650-55 in Asia, offers said ard 1.3660-80 while stops above 1.3700, a break past 1.3685-1.3700 needed to challenge 1.3745-1.3805 or 1.3850 failure risking setback to 1.3605-1.3575 or 1.3530-1.3480, support 1.3605/1.3575 & 1.3530, res 1.3685/1.3700 & 1.3745
News Flash - Portugal's Constancio is to be proposed as the next ECB vice president. The FT reported the Fed has incurred a paper loss on the real estate assets it picked up as part of the Bear Stearns failure. In the main those losses relate to debt expense on Hilton Hotels. French president Sarkozy has set a deadline of September to present Parliament with a set of harsh welfare state and pension reforms. Among the measures, he wants to raise the retirement age from 60 in order to try and fund the pension system. The pension deficit is expected to be EUR11 bln this year. (UBS FI Strategy)
EMU finance ministers met Monday and the message afterwards was pretty forceful - Greece is not doing enough to bring its budget back in order and that further measures must be proposed before March 16th when the country presents its next budget report to the EU. Spokesman Juncker said Greece needed to focus on spending cuts, but must also raise VAT and excise duties. The comments from finance ministers were as interesting for what they didn't include - not a word on the possibility or mechanics of a rescue deal. In other words the onus is all on Greece to sort itself out. BoE MPC member Posen weighed in on the debate, noting that the costs of bailing out Greece weren't that great. He said while it's politically sensitive, the cost of assistance was limited by comparison to the economic benefits of keeping Greece upright.
UBS FI update - March Bunds are seen opening 10 ticks higher at 123.47. The US March 10-year was last 118-02, up 1/32 from its early close Monday. US 2/10 govies out 1bp to 287bp today (8bp wider in the last week). The US market has very much relaxed its inflation view in the last week, with the par 5-year/5-year breakeven down to 2.33% from 2.62% a month ago.
Swiss
The SNB added liquidity in 1 week at 0.05% Repo rate - The 3 mth Libor fixed at 0.24833%
FX –-USD/CHF was influenced by wider $ volatility, trading within 1.0755-60 to 1.0800-05 range o/n, light risk on mood in Asia pressured it from 1.0785-90 to 1.0735-40 in Asia, it must hold above 1.0710 to challenge 1.0825-85 or 1.0925 failure risking setback to 1.0680-30 or 1.0605, support 1.0710/1.0680 & 1.0630 res 1.0825/1.0865 & 1.0885- EURCHF caged in tight range within 1.4650-55 to 1.4670-75 range o/n, it traded within 1.4650-55 to 1.4665-70 in Asia, it must hold above 1.4650-35 & recover past 1.4685-00 to test 1.4745-70 or 1.4810 failure risking setback to 1.4575-1.4550 or 1.4500, support 1.4635/1.4575 & 1.4550 res 1.4685/1.47000 & 1.4745
UK
09.30 gmt UK DCLG house price index (last 0.60, cons 1.2%) 09.30 gmt UK CPI & RPI we exp -0.2/3.4% and 0.2/4.00% (last 0.6/2.9 and 0.6/2.4%)
FX-GBP/USD traded from 1.5610-15 to 1.5720-25 as US investment & East European buyers squeezed out Asian shorts before natural sellers returned & it settled ard 1.5655-60 o/n, a light risk on mood dominated Asia session aided by better local stock performance/thin mkt conditions & hope of solution to Greek debt crisis after early day EU Juncker comments, taking it to highs ard 1.5705-10 in Asia, a break past 1.5730 needed to challenge 1.5740-75 or 1.5800-50 failure risking setback to 1.5610-1.5580 or 1.5560-10, support 1.5610/1.5580 & 1.5560 res 1.5730/1.5740 & 1.5775-EUR/GBP chopped within 0.8700-05 to 0.8670-75 o/n, it traded within 0.8675-80 to 0.8690-95 in Asia, it needs to hold above 0.8675-50 & recover past 0.8725 to test 0.8745-70 or 0.8820-40 failure risking setback to 0.8630-00 or 0.8570-25, support 0.8650/0.8630 & 0.8600 res 0.8725/0.8745 & 0.8770-GBP/CHF traded within 1.6850-60 to 1.6900-10 o/n, it traded within 1.6890-00 to 1.6860-70 in Asia, it needs to hold above 1.6780-1.6800 & recover past 1.6950 to test 1.7030-1.7120 or 1.7145-90 failure risking setback to 1.6720-1.6680 or 1.6590, support 1.6780/1.6720 & 1.6680 res 1.6950/1.7030 & 1.7120-GBP/JPY traded within 140.70-80 to 141.30-40 o/n, it traded within 140.90-00 to 141.20-30 in Asia, a recovery past 141.40 needed to challenge 142.00-60 or 143.10-144.00 failure risking setback to 140.30-139.60 or 138.80-30, support 140.30/139.60 & 138.80 res 142.00/142.60 & 143.10
NORDICS
08.30 gmt Sweden industrial inventories & capacity utilization
AUD/NZD/CAD/EM/GOLD/OIL
Mkt holiday in Bolivia, Brazil, China, Singapore, HK, Lithuania, Taiwan, Venezuela & Vietnam S. Africa President Zuma replies to national assembly chamber of the nation debate Peru GDP & unemployment (last 4.2/7.9%) 08.00 gmt Slovenia job data 08.00 gmt Turkey consumer confidence (last 78.8) 10.30 gmt Iranian President news conference 13.00 gmt Poland average gross wages (last 7.3/6.5%) & employment (last -0.2/-1.8%) 13.30 gmt Canada mfg sales we exp 0.7% (last 0.10%) Ard 17.00 gmt Turkey CB meeting – we & cons exp unchanged rates at 6.50% 21.00 gmt Colombia trade balance 23.30 gmt Australia Westpac-Melbourne Inst indexes of economic activity (last 0.5/7.6%)
Australia –January NAB business conditions +3, vs +10 previously; business confidence +15 vs +8 previously. (UBS Research) – RBA minutes were no real surprises as policy statement had been quite clear about reasons for pause. Key question was guidance. Said Feb decision was "finely-balanced" (just as it was in Dec) but concluded that "on balance, the stronger case was to leave the cash rate unchanged for the time being". So no further clarity on their intentions, but nothing in there either to rule out a March 2 hike. A few bp fell out of the OIS curve. Market now pricing in +7.5bp on March 2, versus +9.5bp immediately before minutes. Our economists still calling for +25bp. (UBS FX Strategy) – RBA watcher Maiden in the SMH (not an RBA-favoured journo) gave his view in article headlines: don’t bank on RBA march move http://www.smh.com.au/business/dont-bank-on-an-rba-march-move-20100216-o5tq.html- AUD/USD traded within 0.8845-50 to 0.8905-10 & settled ard 0.8875-80 o/n, it remained firm in holiday thinned Asia session & despite somewhat dovish RBA minutes with good fund support & aided by slightly lower $ as well as positive stocks in Japan, S. Korea & Australia, lifting it briefly to highs ard 0.8940-45 in Asia, a break past 0.8965 now needed for 0.9005-60 or 0.9090, failure risking fresh setback to 0.8875-45 or 0.8810-0.8785, support 0.8875/0.8845 & 0.8810, res 0.8965/0.9005 & 0.9060
New Zealand –-PPI output -0.4% and input up 0.3% (versus both 0.1% forecast) - NZD/USD traded within 0.6985-90 to 0.6950-55 & settled ard 0.6965-70 o/n, after static trading pairing edged higher ard Tokyo fixing, touching briefly highs ard 0.7045-50 in Asia, it needs to hold above 0.6950 & recover past 0.7050 to test 0.7085-0.7125 or 0.7150-70 failure risking fresh setback to 0.6900-0.6870 or 0.6805, support 0.6950/0.6900 & 0.6870 res 0.7050/0.7085 & 0.7125
Canada –USD/CAD bounced from 1.0460-65 to 1.0530-35 before stalling o/n, it traded within 1.0465-70 to 1.0495-00 in Asia, a recovery past 1.0530-60 needed to challenge 1.0580-1.0630 or 1.0705 failure risking setback to 1.0460-35 or 1.0410-1.0350, support 1.0460/1.0435 & 1.0410 res 1.0530/1.0560 & 1.0580
Gold – bounced from lows ard 1092/93 to 1102/03 before settling ard 1100/01 in NY, it traded firmer in holiday thinned Asia session amid CTA type buying & slightly lower $ to 1107/08, while above 1090 mkt targets 1115-20 & 1025-30 failure risking setback to 1085-80 or 1078-74, support 1090/1085 & 1080, res 1115/1120 & 1125
Oil- NYMEX March crude future briefly touched 73.71 before bouncing to 74.43 amid broadly lower $/higher commodities in quiet Asia session, it needs to hold above 73.20 & recover past 75.15 to challenge 75.70-76.10 or 77.20 failure risking setback to 72.60-00 or 71.30-70.75, support 73.20/72.60 & 72.00, res 75.15/75.70 & 76.10
UBS Investment Bank TRADERS SENTIMENT
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EUR/USD - TRADERS favour buy dip 1.3580-90 target 1.3700 stop below 1.3540 USD/CHF - TRADERS favour sell rally 1.0785-90 target 1.0700 stop above 1.0850 EUR/CHF - TRADERS favour buy dip 1.4650 target 1.4700 stop below 1.4620 GBP/USD – TRADERS favour sell rally 1.5730-50 target 1.5550 stop above 1.5770 USD/YEN - TRADERS favour sell rally 90.00-20 target 89.20 stop above 90.30 EUR/YEN – TRADERS favour sell rally 122.80-123.00 target 122.00 stop above 123.10 XAU/USD - TRADERS favour buy dip 1100 target 1114-15 stop below 1095 XAG/USD – ZRADERS favour buy dip 15.65 target 15.95 stop below 15.55
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Tags: Finance, Update, Global
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Lack of buy-to-let finance constricting market
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Reason
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Half of buy-to-let landlords want to buy more residential property to rent out privately, but are being constrained by the lack of available mortgage finance.
A survey conducted by LSL Property Services, which owns the UK's largest lettings agent network, including national chains Your Move and Reeds Rains, revealed that 49% believe the conditions are currently right for them to expand their property portfolios.
However, only 27% said they will be able to access mortgage funds in the next year, because the supply of deals is so restricted and criteria are so stringent.
In the past, buy-to-let investors could get a mortgage from one of dozens of lenders with a deposit of 15%, and interest rates were very competitive.
Today only a handful of lenders are operating in this sector, most demand a 35% deposit and the interest rates on offer are relatively high.
David Brown, commercial director of LSL Property Services, said:
“2009 saw the buy-to-let market return as a viable investment. Landlords recognise this, despite the rough ride they have had to endure over the last couple of years.
“The average landlord made losses in 2007-8, but 2009 marked a return to form for property investment.
“But the availability – or lack of - of mortgage finance is holding the sector back. Even experienced landlords who are keen to take advantage of lucrative returns and improving market conditions can’t get access to the cash they need.”
Just 11% of landlords plan to sell one or more of their properties this year – a figure that includes investors planning to quit the sector for lifestyle or retirement reasons.
Landlords’ considerable confidence in the market is a result of low interest rates offering the opportunity for very attractive returns on investment, particularly compared to other types of investment. In 2009, a typical landlord made a total return of 7.6%.
Tags: Finance, Mortgage, Restrictions, Property, Landlo...
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SriLankan Depositors Should Seek Quick Liquidation
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Reason
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July 16, 2009 (LBO) - Depositors of a collapsed Sri Lankan financial firm should seek its liquidation under civil law to realize assets while criminal proceedings may put pressure on directors surrender other assets, a senior lawyer has said.
"If you try to use the criminal process as the primary means, then you are going to lose focus on realizing as much as possible from the assets of the company," says Naomal Goonewardene, a senior partner at Nithya Partners, a corporate law firm.
"I think the civil process has not been utilized to the extent to which it should have been utilized."
Gunewardene is advising clients who put money in Golden Key Credit Card Company, a member of Sri Lanka's Ceylinco group that collapsed late last year, triggering a run on other companies in the group.
Quick Action
Administrators, liquidators and receivers can be appointed under the islands revamped company law to deal with situations when firms don't have assets to settle all their liabilities.
Depositors of some Ceylinco group firms have filed criminal changes to recover capital and interest and also petitioned the Supreme Court but none have sought the firm's liquidation.
"The criminal process is about putting pressure for people to bring back money voluntarily and to maybe give up personal assets voluntarily to increase the pool of assets," says Goonewardene.
"But in my view there is a limit to what could be realized and in my view that's not going to be a substantial realization."
While Golden Key Credit Card Company owes 26 billion rupees, two other troubled Ceylinco firms the F&G group - which includes a licensed finance company - and Ceylinco Shriram are also struggling to repay depositors.
Analysts estimate deposits at these firms to top 40 billion rupees.
"If there is a liquidation process then there is a responsibility to court of that liquidator carrying out asset realizations in a proper manner," says Goonewardene.
"Secondly somebody responsible is in charge."
Gunewardene was also appointed to the board of Ceylinco controlled Seylan Bank to stabilize its operations after the Golden Key triggered a run.
"What has happened is the directors have resigned or are unavailable or in prison. So there is no direction in any of those companies in terms of the realization at all," he says.
Directors of top Ceylinco firms, including chairman Lalith Kotelawala, are now in remand custody.
The Supreme Court has asked the Central bank to help recover Golden Key assets.
As part of the process on July 10, the Central Bank asked directors of troubled Ceylinco firms to refrain from mortgaging assets or transferring private assets to others.
Goonewardene says a straight jacket approach to troubled firm asset disposals isn't the way forward.
Time Value
He says collections on financial assets like loans and credit card receivables outstanding have to be maintained at high levels.
"You can actually sell these portfolios and recover money and a profit up-front because they would have been granted at higher interest rates."
Property and long term investments like schools and a hospital, he says, can be liquidated over time.
The group also has service firms with distributorships, which have to be managed well up to the sale.
"So I think different types of assets need different approaches. Property is the one on which you have the most leeway," says Goonewardene, who is also a qualified accountant and financial analyst.
"Immediate action is needed on other assets, if not a lot of value will be lost quite fast."
He points out; there is an obligation on directors to settle all unsecured creditors equally and fairly in a civil law case filed under the island's company law.
If depositors get even a part of their money back quickly they can re-invest their assets elsewhere and get a return. Delays will simply increase losses.
Tags: Sri Lanka, Liquidation, Dipositors, Financial, Fi...
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Backdated Tax Law Hits 2000 Freelancers
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Reason
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The government's decision to retrospectively close a loophole in the UK Isle of Man double taxation treaty is threatening the livelihoods of more than 2,000 freelancers.
The impact of backdated legislation in the Finance Bill 2008, to deal with affected schemes, has been so “severe” that all other retrospective provisions should be diverted.
Ministers should submit them for scrutiny by the Parliamentary Joint Committee on Human Rights, which issued these calls in a critical report on the retrospective effect of Section 58.
Clauses 66-67 effectively get round 1987 legislation, which dictated a double taxation treaty does not affect UK residents’ liability to UK tax on their share of income or gains from a foreign partnership.
While the government says that is still true, its bill means that UK scheme users “remain liable to UK tax”, and have done since 1987, “despite the elaborate, artificial structure designed to exempt them.”
As the signatories of a No 10 petition against Section 58 have stressed, the committee said such structures have been in existence for a number of years, “with HMRC's knowledge.
But, it added, “HMRC had not sought to close them down until the 2008 Finance Bill.”
Nigel Jagger, a former IT freelancer who used the scheme, said: “ In the case of the double taxation scheme, HMRC had known about the scheme since 2001, and it was fully disclosed on tax returns, but they waited seven long years before taking any action.
“The use of retrospective legislation should be a concern to all taxpayers, not just freelancers. Once the precedent is set that HMRC can go back in time and change the law to suit their own devices, then there is no telling where this could lead.”
His concerns seem to be shared by the committee, which said scheme provider NT Advisors had alerted it that Clauses 66 and 67 seemed to breach human rights.
The firm blasted the provisions as retrospective in effect, unwarranted and inappropriate.
Seeming to agree, the committee said that, based on evidence it had seen of hardship among affected freelancers, the provisions were “at least an arguable breach” of Article 1 Protocol of the human rights act.
As a result, the committee has written to Stephen Timms, the financial secretary to the Treasury, asking for the “government's detailed justification” for the retrospective effect of the provisions, which were introduced by Alistair Darling, the chancellor.
According to the committee's evidence, almost 60 freelancers said they were unable to meet the tax demand as a result of the law changing, almost 30 would have to sell their home and a number would go bankrupt.
Of the more than 2,000 taxpayers affected, some reported that financial worry from the 'clarification' of the bill had caused them mental health problems and marriage breakdown.
Mr Jagger reflected: “If HMRC don’t like an arrangement they should either close it as soon as they become aware of it or pursue it vigorously through the courts.
“Given that they have now committed 25% of their £4billion annual budget to fighting tax avoidance, there can be no excuse for resorting to retrospective legislation.”
Tags: Tax, Law, Backdate, Finance, Freelancers, Isle of...
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Progress in battle over EU hedge fund law
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Reason
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 Britain was "gaining traction" in persuading its EU partners to rein in a draft law regulating hedge funds but the industry should also get its customers out on the campaign trail, a government minister said on Tuesday.
The European Union's executive European Commission has proposed a law to force managers of hedge funds, private equity groups and other alternative funds to register and disclose information to regulators, such as levels of leverage.
It is part of wider, global efforts to shine a spotlight on all parts of the financial market to improve transparency and spot risks more quickly.
Although Britain thinks parts of the draft law go beyond what is required to make the sector safer, other EU heavyweights like France want it toughened up.
Treasury Minister Paul Myners said the draft law offered many benefits, such as creating a single market in alternative investments that Britain could exploit as the bloc's biggest financial centre.
Hedge funds posed potential risks to the wider financial system that also needed monitoring, he added.
But parts of the draft law were too simplistic, ill thought out with elements such as a cap on leverage a step too far and would push the industry outside the EU to Geneva, Singapore or the Middle East if unchanged, Myners added.
"It would drive hedge funds out of Europe," Paul Myners, told a House of Lords committee.
Disclosure requirements on private equity were overly burdensome and demands on non-EU based hedge fund managers could be considered "protectionist".
"I am confident that the directive will be significantly improved. The arguments we are putting forward are being taken into account in Brussels. We are gaining traction," Myners said.
UK finance ministry officials were visiting 12 EU capitals to end "prejudices" against the industry and win support for key changes.
"Hedge funds and private equity groups should be working hard in getting their customers lobbying Europe on the value they get out of alternative investing," Myners said.
The draft law is one of many legislative measures the EU is adopting as a response to the financial crisis.
It will need approval from the European Parliament and EU governments to come into force and Britain faces a stiff challenge to win over key heavyweight EU states.
Parties on the left in the EU assembly are already saying the draft law has more holes than a "Swiss cheese" and needs beefing up to regulate the hedge funds themselves, most of which are based in the Cayman Islands.
Tags: Hedge, Fund, Law
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