GREECE – Factors to Watch on July 13

July 14, 2010 By Leave a Comment

July 13 (Reuters) – Here are news stories, press reports and events which may affect Greek financial markets on Tuesday:

GREECE TO AUCTION 1.25 BLN EURO OF T-BILLS

Greece will auction 1.25 billion euro of 26-week T-bills to roll over maturing paper. It will be the country’s first return to market borrowing since securing a 110 billion euro emergency funding deal with the IMF and its euro zone partners in May.

EURO ZONE LAUDS GREEK EFFORT TO CUT BUDGET DEFICIT

Greece’s fiscal consolidation programme is on track and should allow the country to obtain a second tranche of international aid in September, euro zone finance ministers said on Monday. [ID:nLDE66B23X]

GREEK FIRST-HALF BUDGET DEFICIT DOWN 46 PCT Y/Y

Greece almost halved its central government budget deficit in the first six months of the year as drastic spending cuts outweighed weaker-than-expected tax revenues, the finance ministry said on Monday. [ID:nLDE66B1L0]

ECB GIVES BACKING TO GREEK BANK FUND PLANS

The European Central Bank gave its backing on Monday to Greek plans for a 10 billion euro aid package to support the country’s banks. [ID:nLDE66B15J]

GREECE’S NBG SAYS NOT LOOKING TO SELL UNITS

Greece’s largest lender National Bank (NBGr.AT) (NBG.N) said on Monday it was not looking to sell stakes in subsidiaries or raise its share capital, dismissing a press report to that effect. [ID:nLDE66B0Q8]

GREECE’S TT TO CLEAR STRESS TEST- VICE CHAIRMAN

State-controlled Hellenic Postbank (TT) (GPSr.AT), one of six Greek lenders to be stress-tested as part of Europe-wide checks, expects the simulation will show it has enough capital, its vice chairman said on Monday. [ID:nLDE66B1NX]

GREEK STRIKE TO GROUND FLIGHTS ON JULY 15

Flights to and from Greece will be halted for four hours on Thursday when air traffic controllers walk off the job to join a public sector walkout against labour reforms. [ID:nLDE66B157]

MORE THAN 1,400 ATHENS MANUFACTURERS CLOSED DOWN IN H1

More than 1,400 small scale manufacturing businesses closed down in Athens in the first half of the year, while only 800 new ones started operating, according to data by the Athens Chamber of Small and Medium-sized Industries, financial daily Imerisia reported.

www.imerisia.gr

EUROPEAN FACTORS-SHARES SET TO GAIN FOR 6TH SESSION

European shares were set to edge up on Tuesday, extending their rally into a sixth straight session, as better-than-expected quarterly earnings from U.S. firm Alcoa (AA.N) boosted investor confidence that the latest round of earnings from across the Atlantic could exceed estimates. [ID:nLDE66C03F]

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Euribor market rates push higher after ECB super-payback

July 6, 2010 By Leave a Comment

July 5 (Reuters) – Key euro-priced bank-to-bank lending rates hit their highest levels in 10 months on Monday, days after banks paid back 442 billion euros to the European Central Bank.

The three-month Euribor rate EURIBOR3MD= — traditionally the main gauge of interbank euro lending and a mix of interest rate expectations and banks’ appetite for lending — climbed to 0.793 percent from 0.790 percent the previous day, the highest level since early September.

Shorter-term one-week rates EURIBORSWD= hit 0.456 percent from 0.452 percent, the highest level this year, while six-month rates EURIBOR6MD= and one-year rates EURIBOR1YD= remained at 1.060 percent and 1.329 percent respectively.

Banks paid back 442 billion euros worth of one-year loans to the ECB on Thursday and reborrowed just over half in shorter-term maturities, reducing the overall amount of liquidity in the system.

Euribor rates are fixed daily by the Banking Federation of the European Union (FBE) shortly after 0900 GMT.

* For a table of the latest Euribor fixings for terms of one week to one year, double click on EURIBOR=

* For a table of the previous day’s fixings of EONIA swap rates, which show market expectations for future overnight lending rates, double click on EONIAINDEX

* For graphs of historic Euribor and EONIA swap rates, right click on the links in angle brackets below, and select ‘Related Graph’ 1 week EURIBORSWD= EONIAINDEXSW= 2 week EURIBOR2WD= EONIAINDEX2W= 3 week EURIBOR3WD= EONIAINDEX3W= 1 month EURIBOR1MD= EONIAINDEX1M= 2 month EURIBOR2MD= EONIAINDEX2M= 3 month EURIBOR3MD= EONIAINDEX3M= 4 month EURIBOR4MD= EONIAINDEX4M= 5 month EURIBOR5MD= EONIAINDEX5M= 6 month EURIBOR6MD= EONIAINDEX6M= 7 month EURIBOR7MD= EONIAINDEX7M= 8 month EURIBORS8M= EONIAINDEX8M= 9 month EURIBOR9MD= EONIAINDEX9M= 10 month EURIBOR10MD= EONIAINDEX10M= 11 month EURIBOR11MD= EONIAINDEX11M= 1 year EURIBOR1YD= EONIAINDEX1Y= (Reporting by Frankfurt newsroom)

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End of ECB funding programme will be fine -Noyer

July 1, 2010 By Leave a Comment

June 29 (Reuters) – The European Central Bank will do everything necessary to make sure that the expiry of a 442 billion euro funding programme this week passes without problem, ECB Governing Council member Christian Noyer said on Tuesday.

“The ECB and Eurosystem will do what is necessary to make sure the liquidity is there,” Noyer told Europe 1 radio.

He said French banks should not face problems repaying loans, but added that some other banks might “suffer”.

“We will make sure that there are no problems and everything goes OK,” he added. (Reporting by Crispian Balmer; editing by James Mackenzie)

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ECB’s Trichet says susterity plans don’t risk stagnation

June 25, 2010 By Leave a Comment

(Reuters) – Budget austerity plans will not drag the euro zone economy into stagnation, European Central Bank President Jean-Claude Trichet was quoted on Thursday as saying.

In an interview with Italy’s La Repubblica newspaper, he urged governments to push ahead with necessary budget and structural reforms, repeating calls for more fiscal discipline in the 16-nation bloc.

“As regards the economy, the idea that austerity measures could trigger stagnation is incorrect,” Trichet said, according to an English-language transcript published on the ECB’s Internet site.

“I firmly believe that in the current circumstances, confidence-inspiring policies will foster and not hamper economic recovery, because confidence is the key factor today.”

Trichet said Germany was showing the right commitment to tackle budget problems with its plans for 80 billion euros ($98 billion) in budget cuts over the next four years, and said Italy was on the right track.

The ECB has urged a system of sanctions and incentives, including a separate budget watchdog, as part of an overhaul of EU fiscal rules.

The Stability and Growth Pact “should be the equivalent of a federal budget in terms of ensuring sound policies. This is why we want the Stability and Growth Pact to be strong, solid and fully respected,” Trichet told the paper.

DENIES DEFLATION RISKS

In a letter to G20 leaders last week, President Barack Obama warned against the premature withdrawal of stimulus policies and urged flexibility in implementing fiscal policy to safeguard and strengthen the recovery.

Billionaire investor George Soros said on Wednesday Germany’s budget savings policy risked destroying the European project, pushing weaker euro zone members into a cycle of deflation. [ID:nLDE65M0TD]

Asked about the risk of deflation, Trichet said: “I don’t think that such risks could materialize,” adding that inflation expectations were well anchored.

Trichet said the euro, which has recently recovered from four-year lows, was a very credible currency because it had safeguarded price stability and was therefore a “major asset” to investors.

Asked if he expected concrete results from the upcoming Group of 20 meeting in Toronto, Trichet said he was confident important decisions would be taken by the end of the year.

A bank tax, banks’ capital and rating agencies were all important elements, he said. “I am confident that we are on the right track, knowing that a number of important decisions are to be taken at the G20 meeting in November this year.”

He declined to comment on Bundesbank President Axel Weber’s criticism of the ECB’s decision to buy government bonds, and on the profile of his successor. Weber and Italy’s central bank governor Mario Draghi are seen as the frontrunners to replace Trichet in November 2011.

“I have a very heavy responsibility, with all my colleagues of the Executive Board and of the Governing Council. And my mandate expires in one year and four months. That is a long and demanding period of time. It is premature for me to comment on my possible successor,” he said.

(Reporting by Krista Hughes; Editing by Jan Dahinten)

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UPDATE 1-ECB’s Trichet: austerity plans don’t risk stagnation

June 25, 2010 By Leave a Comment

FRANKFURT, June 24 (Reuters) – Budget austerity plans will not drag the euro zone economy into stagnation, European Central Bank President Jean-Claude Trichet was quoted on Thursday as saying.

In an interview with Italy’s La Repubblica newspaper, he urged governments to push ahead with necessary budget and structural reforms, repeating calls for more fiscal discipline in the 16-nation bloc.

“As regards the economy, the idea that austerity measures could trigger stagnation is incorrect,” Trichet said, according to an English-language transcript published on the ECB’s Internet site.

“I firmly believe that in the current circumstances, confidence-inspiring policies will foster and not hamper economic recovery, because confidence is the key factor today.”

Trichet said Germany was showing the right commitment to tackle budget problems with its plans for 80 billion euros ($98 billion) in budget cuts over the next four years, and said Italy was on the right track.

The ECB has urged a system of sanctions and incentives, including a separate budget watchdog, as part of an overhaul of EU fiscal rules.

The Stability and Growth Pact “should be the equivalent of a federal budget in terms of ensuring sound policies. This is why we want the Stability and Growth Pact to be strong, solid and fully respected,” Trichet told the paper.

DENIES DEFLATION RISKS

In a letter to G20 leaders last week, President Barack Obama warned against the premature withdrawal of stimulus policies and urged flexibility in implementing fiscal policy to safeguard and strengthen the recovery.

Billionaire investor George Soros said on Wednesday Germany’s budget savings policy risked destroying the European project, pushing weaker euro zone members into a cycle of deflation. [ID:nLDE65M0TD]

Asked about the risk of deflation, Trichet said: “I don’t think that such risks could materialise”, adding that inflation expectations were well anchored.

Trichet said the euro, which has recently recovered from four-year lows EUR=, was a very credible currency because it had safeguarded price stability and was therefore a “major asset” to investors.

Asked if he expected concrete results from the upcoming Group of 20 meeting in Toronto, Trichet said he was confident important decisions would be taken by the end of the year.

A bank tax, banks’ capital and rating agencies were all important elements, he said. “I am confident that we are on the right track, knowing that a number of important decisions are to be taken at the G20 meeting in November this year.”

He declined to comment on Bundesbank President Axel Weber’s criticism of the ECB’s decision to buy government bonds, and on the profile of his successor. Weber and Italy’s central bank governor Mario Draghi are seen as the frontrunners to replace Trichet in November 2011.

“I have a very heavy responsibility, with all my colleagues of the Executive Board and of the Governing Council. And my mandate expires in one year and four months. That is a long and demanding period of time. It is premature for me to comment on my possible successor,” he said. (Reporting by Krista Hughes; Editing by Jan Dahinten)

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ECB’s Trichet sees no deflation risks emerging in euro zone

June 25, 2010 By Leave a Comment

June 24 (Reuters) – European Central Bank President Jean-Claude Trichet was quoted on Thursday as saying he does not see deflation risks materialising in the euro zone.

Bonds

In an interview with Italy’s La Repubblica newspaper, he also denied that budget cuts would drag on growth in the 16-nation region.

Aasked about the risk of deflation, he said: “I don’t think that such risks could materialise”, adding that inflation expectstions were well anchored.

“As regards the economy, the idea that austerity measures could trigger stagnation is incorrect,” Trichet said, according to am English-language transcript published on the ECB’s Web site. (Reporting by Krista Hughes)

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UPDATE 1-ECB to keep buying govt bonds- Gonzalez-Paramo

June 18, 2010 By Leave a Comment

FRANKFURT, June 17 (Reuters) – The European Central Bank will continue to buy government bonds until markets have sufficiently stabilised, ECB executive board member Jose Manuel Gonzalez-Paramo told a German newspaper.

“So far the programme is going very well,” he said in an interview published in Financial Times Deutschland on Thursday.

The ECB started buying sovereign bonds last month in a controversial decision aimed at supporting bond markets rattled by concerns over the ability of some government to rein in debt and budget deficits.

Gonzalez-Paramo told the newspaper that liquidity had returned to markets at levels above those seen in early May.

“But the situation is not yet entirely normal,” he said.

Nonetheless, while investors remain cautious, he said it was “not correct, at least not entirely correct” to assume that the ECB is currently the only buyer of government bonds.

Gonzalez-Paramo said it was very frustrating that rating agencies were still acting in a pro-cyclical way, but was critical of the idea that the ECB could act as a rating agency.

“It is not the job of a central bank to offer ratings or publish its internal evaluations,” he said.

The Greek crisis, which investors fear could spread to other weak euro zone states, has highlighted problems in the system under which the ECB accepts bonds as security for loans based on the judgment of major ratings agencies such as Standard & Poor’s, Moody’s and Fitch.

“We will do everything to be less dependent on rating agencies,” Gonzalez-Paramo said.

Greece, Spain and Portugal have all seen their credit ratings cut in recent months as worries intensified about their heavy public debt.

In the latest move, Moody’s cut Greece’s rating to junk status on Monday, highlighting persistent doubts over the country’s ability to exit a severe debt crisis. [ID:nN14207740] (Reporting by Maria Sheahan; Editing by Neil Fullick)

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ECB will continue buying government bonds – Paramo

June 18, 2010 By Leave a Comment

June 17 (Reuters) – The European Central Bank will continue buying government bonds until markets have sufficiently stabilised, ECB executive board member Jose Manuel Gonzalez-Paramo told a German newspaper.

Bonds | Global Markets

“So far the programme is going very well,” he said in an interview published in Financial Times Deutschland on Thursday.

The ECB started buying sovereign bonds last month in a controversial decision aimed at supporting bond markets, which have been rattled by a loss of investor confidence in some governments’ ability to rein in debt and deficits.

Gonzalez-Paramo told the paper that liquidity has returned to markets at levels above those seen in early May.

“But the situation is not yet entirely normal,” he said. (Reporting by Maria Sheahan; Editing by Kim Coghill)

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Bini Smaghi says ECB not out to rescue govts

June 16, 2010 By Leave a Comment

June 15 (Reuters) – The European Central Bank’s purchasing of government bonds is not directed at bailing out governments, ECB Executive Board Member Lorenzo Bini Smaghi said late on Monday.

“(The ECB’s Securities Markets Programme) is meant to repair the integrity of the transmission mechanism, not to finance public debt,” Bini Smaghi said in a speech at a conference in New Yerk, published on the ECB’s web site.

“(Central banks) cannot be asked to rescue insolvent issuers – whether private or public institutions,” he added.

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EURO GOVT-Bunds open higher after Greek downgrade

June 16, 2010 By Leave a Comment

June 15 (Reuters) – German government bonds opened higher on Tuesday after Moody’s investors service cut Greece’s credit rating to junk late the previous day, refocusing market attention on Europe’s debt problems. Moody’s downgraded Greece four notches to Ba1, citing risks in the euro zone/IMF rescue package for the debt-stricken country. It was the second agency to strip Athens of its investment grade rating after Standard and Poor’s made a similar move in April.

The downgrade was expected to prompt equity investors to book profits after a brisk four-session winning run, sending regional shares lower.

“This puts the focus back on the periphery. There are going to be people who are forced sellers now with two junk ratings,” said a trader.

“The ECB are the only bidder so we would expect them to be quite active today, but the worry now is the contagion into other peripherals and the question being asked is who will be next to be downgraded.”

At 0604 GMT, September Bund futures FGBLU0 were at 128.95, 42 ticks higher from Monday’s settlement, although little changed from levels seen in after-hours trading. Two-year bond yields DE2YT=TWEB were 1.2 basis points lower at 0.488 percent, with 10-year yields DE10YT=TWEB almost 3 basis points lower at 2.60 percent.

With peripheral bonds likely to be under pressure, Ireland will auction up to 1.5 billion euros of 2016 and 2018 government bonds.

Ahead of that, the German ZEW sentiment indicator for June, released at 0900 GMT, is seen slipping to 42.0 versus 45.8 previously.

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ECB’s Orphanides: Inflation not a concern -press

June 14, 2010 By Leave a Comment

June 13 (Reuters) – Inflation in the euro zone is not a worry despite the slightly higher forecasts in the recent European Central Bank staff projections, Governing Council member Athanasios Orphanides was quoted as saying on Sunday.

Orphanides also told the Dow Jones news agency that once the European Union’s facility to help troubled members is in place, the need for the ECB to buy bonds might end as those market segments would probably improve.

“The upward revision in the inflation forecast is primarily driven by energy and other commodity price increases. It does not reflect an underlying inflation concern,” Orphanides said in an interview with Dow Jones.

“Indeed, core inflation in the euro area has been trending down. In light of these developments, I do not view high inflation as a concern.”

Inflation expectations also remained well anchored, he said.

Orphanides also commented on the ECB’s Securities Markets Programme, through which it is buying bonds in segments hit particularly hard, indicating the ECB could end this soon, if the European Union rescue package calms markets.

“I could envision that, when the European Financial Stability Facility is fully operational, there will be improvements in the market segments that have not been functioning well over the past several weeks,” he said.

“Clearly, once these improvements are in place, there would no longer be a need to continue with a specific program. (Reporting by Sakari Suoninen; Editing by Louise Heavens)

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UPDATE 1-ECB’s Wellink: EU should have helped Greece earlier

June 12, 2010 By Leave a Comment

June 11 (Reuters) – The European Union should have stepped in earlier than it did with a rescue package for Greece, European Central Bank board member Nout Wellink said on Friday.

“They should have stepped in earlier. Let me also say, they should have stepped in years ago. Greece ran a budget deficit for years,” Wellink told reporters.

“There should have been peer pressure on Greece years ago… The whole country lived beyond its means and the public sector lived beyond its means,” Wellink said.

But Wellink, who is also governor of the Dutch central bank, said it was too early to talk about further expansion of the European Union’s massive package to aid countries unable to cope with ballooning debt.

“It seems to me a little bit early to talk about further expansion,” Wellink said.

He said the most important part of the package is that “the Germans decided to really support the euro. Otherwise they wouldn’t have been prepared to take part in this huge programme”.

Current market uncertainty was reflected in increased use of the ECB’s deposit facility, but inflation expectations in the euro zone were better anchored than in the United States, he also said.

“For a fair assessment you have to consider that inflation expectations are anchored more solidly in Europe than in the U.S.,” Wellink said. (Reporting by Boris Groendahl, editing by John Stonestreet)

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Euro here to stay, ECB independent – ECB’s Draghi

June 12, 2010 By Leave a Comment

June 11 (Reuters) – There is no possibility of turning back from the euro currency and the independence of the European Central Bank cannot be doubted, ECB governing council member Mario Draghi said on Friday. “People have to understand that the euro is (here) to stay … there is no turning back,” Draghi told reporters on the sidelines of a seminar in Helsinki, reiterating comments he made in a keynote speech in Rome at the end of May.

Draghi, who is governor of the Bank of Italy, also dismissed suggestions the ECB’s independence had been undermined by its recent decision to buy euro zone government bonds.

“The ECB’s independence has never been in question,” he said.

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Key Euribor rates edge higher amid euro stresses

June 12, 2010 By Leave a Comment

June 11 (Reuters) – Key euro-priced bank-to-bank lending rates continued to edge higher on Friday despite the European Central Bank’s promise of extra liquidity to keep supplies flush until the end of the year.

The three-month Euribor rate EURIBOR3MD=, traditionally the main gauge of interbank euro lending and a mix of interest rate expectations and banks’ appetite for lending, inched up to 0.719 percent from 0.718 percent, the highest level since mid-December.

Six-month rates EURIBOR6MD= rose to 1.003 percent from 1.001 percent, having broken through the ECB’s benchmark interest rate level of 1.0 percent on Thursday for the first time since last November.

One-year rates EURIBOR1YD= also edged up marginally to a new nine-month high of 1.271 percent from 1.270 percent.

On the other hand shorter-term one-week rates EURIBORSWD= eased a tad to 0.367 percent from 0.368 percent.

The debt troubles hitting Greece and other financially strained euro zone countries, have reignited fears about region’s banks and forced the ECB to reintroduce extra lending operations and abandon a long-held resistance to buying government bonds.

Markets are also bracing themselves for July 1 when banks have to pay back 442 billion euros worth of one-year loans borrowed from the ECB last year, although the transition will be smoothed after the ECB announced three extra batches of unlimited three-month funds on Thursday. [ID:nLDE6590CW]

Euribor rates are fixed daily by the Banking Federation of the European Union (FBE) shortly after 0900 GMT.

* For a table of the latest Euribor fixings for terms of one week to one year, double click on EURIBOR=

* For a table of the previous day’s fixings of EONIA swap rates, which show market expectations for future overnight lending rates, double click on EONIAINDEX

* For graphs of historic Euribor and EONIA swap rates, right click on the links in angle brackets below, and select ‘Related Graph’ 1 week EURIBORSWD= EONIAINDEXSW= 2 week EURIBOR2WD= EONIAINDEX2W= 3 week EURIBOR3WD= EONIAINDEX3W= 1 month EURIBOR1MD= EONIAINDEX1M= 2 month EURIBOR2MD= EONIAINDEX2M= 3 month EURIBOR3MD= EONIAINDEX3M= 4 month EURIBOR4MD= EONIAINDEX4M= 5 month EURIBOR5MD= EONIAINDEX5M= 6 month EURIBOR6MD= EONIAINDEX6M= 7 month EURIBOR7MD= EONIAINDEX7M= 8 month EURIBORS8M= EONIAINDEX8M= 9 month EURIBOR9MD= EONIAINDEX9M= 10 month EURIBOR10MD= EONIAINDEX10M= 11 month EURIBOR11MD= EONIAINDEX11M= 1 year EURIBOR1YD= EONIAINDEX1Y= (Reporting by Frankfurt newsroom)

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Reuters Insider – ECB Chief Economist Jürgen Stark on the Euro

June 12, 2010 By Leave a Comment

Reuters Insider is holding a live panel debate at 0915 GMT examining the debt crisis in Europe and the future of the euro with insight from the ECB’s Chief Economist Jürgen Stark, Deutsche Bank Chief Economist Thomas Mayer and Goethe University Professor Volker Wieland.

To watch live, go to insider.thomsonreuters.com and log in, or register for an account.

The show will also be available live and on demand on 3000 Xtra. Click on:

link.reuters.com/ran39k

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FOREX-Euro up on Spain auction; caution before ECB

June 11, 2010 By Leave a Comment

LONDON, June 10 (Reuters) – The euro rose on Thursday as strong demand at a Spanish debt auction eased concerns about how the country will fund its large debt, but caution before a European Central Bank policy decision capped gains.

Peripheral euro zone government bond yield spreads over German benchmarks narrowed after the auction of new three-year bonds. [ID:nLDE6590T9] [ID:nLDE6590U7] Widening spreads in recent days have weighed on the single currency.

But traders said market players were wary of taking on long euro positions ahead of the ECB decision, with option expiries at $1.20 and $1.21 later in the day also helping to confine the single currency within a $1.20-$1.21 range.

Technical analysts said the euro’s downward trend would remain intact barring a move above $1.2135, the 50 percent retracement of the 2000-2008 euro rally.

The ECB is expected to hold rates at 1.00 percent. It could offer extra funds to banks to ease strains from the euro zone debt crisis, and bank chief Jean-Claude Trichet will be pressed for details of its bond-buying programme. [ID:nLDE6560K2]

“The ECB decision is all about event risk,” said Gavin Friend, currency strategist at nabCapital. “It is difficult to see anything positive coming out of it, although the mood is likely to be set by the broader market backdrop.”

“The Spanish auction has cemented euro support a little. It adds to the story that the euro may be due a bit of a bounce as it has come a long way down in a relatively short space of time,” he said.

At 1005 GMT, the euro was up 0.6 percent against the dollar EUR= at $1.2052, above Monday’s four-year low of $1.1876. Traders said investors were tending to sell on rallies towards $1.21, but a break above $1.21 could see the euro extend gains.

Severe debt problems in a number of euro zone countries, coupled with concerns about the future of the euro have caused the currency to fall around 16 percent against the dollar since the start of the year.

Against the yen, the euro rose 0.1 percent to 109.50 yen EURJPY=R. The dollar was down 0.2 percent at 91.04 yen JPY=, staying above its 200-day moving average at 90.90 yen.

ECB AWAITED

The ECB’s decision is scheduled for 1145 GMT, with Trichet’s accompanying news conference at 1230 GMT.

“If they continue to buy bonds that may be seen as positive, but on the other hand they haven’t succeeded so far in stabilising yields,” said Antje Praefcke, currency strategist at Commerzbank in Frankfurt.

The Bank of England announces its policy decision at 1100 GMT with no change to interest rates expected. [BOE/INT]

Earlier, Dai Xianglong, chairman of $114 billion China’s National Social Security Fund, said the euro would gradually stabilise and the U.S. fiscal deficit remained a big concern, which helped lift the euro back above $1.20.

The comments came as a relief as some in the market have said the euro zone debt crisis could prompt central banks, including China’s, to cut their euro reserves.

The euro was also helped by China confirming exports jumped 48.5 percent in May from a year earlier, which buoyed shares and riskier currencies. [ID:nTOE65605K]

The Australian dollar rose 1.7 percent against the U.S. dollar AUD=D4, buoyed by strong Australian jobs data, while a rate rise in New Zealand dollar lifted the Kiwi 1.6 percent versus the U.S. dollar NZD=D4.

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European shares pare losses on German data

June 8, 2010 By Leave a Comment

LONDON, June 7 (Reuters) – European shares were lower around midday on Monday, as Hungary’s debt crisis added to existing worries about the euro zone, though losses were pared after the release of better-than-expected German manufacturing data.

At 1106 GMT, the pan-European FTSEurofirst 300 .FTEU3 index of top shares was down 0.2 percent at 996.50 points, off the day’s low of 982.19 but still down over 10 percent from a mid-April peak on concern about the euro zone debt crisis.

“All the problems with sovereign debt are resurfacing,” said Philippe Gijsels, head of research at BNP Paribas Fortis Global Markets in Brussels.

Markets tumbled on Friday after Hungary said it could suffer a Greece-style debt crisis, although the chairman of the Eurogroup of euro zone finance ministers, Jean-Claude Juncker, on Sunday dismissed those concerns and said the current level of the euro did not worry him. [ID:nLDE65602W]

“In Hungary it’s an example of political manoeuvring, with the new government blaming the old one, but that’s a dangerous game, if you imply you can’t repay debt,” added Gijsels.

“More and more countries are joining the club. There’s too much debt, and no credible way of getting rid of it. Sometimes it seems there’s a solution, and markets rally, but then you realise there’s no solution, and they go back down. And there’s no unity in the ECB,” he said.

Analysts also pointed to worries about the strength of the recovery in the United States, following disappointing labour market data on Friday, which saw Wall Street drop to its lowest close since February.

In Europe, telecoms were lower. Greek telecom group OTE (OTEr.AT) fell 8.6 percent after saying in a bourse filing on Monday it would propose a dividend per share of 0.19 euros to the annual shareholders meeting on June 16, down from an initial proposal of 0.50 euros set on Feb. 25.

Vodafone (VOD.L), one of the few shares to rise on Friday, fell 1.4 percent.

But most banking stocks were higher, having earlier extended Friday’s losses.

Banco Santander (SAN.MC), HSBC (HSBA.L), Societe Generale (SOGN.PA) and UniCredit (CRDI.MI) all rose between 0.7 and 1.5 percent.

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For a graphic of European banks’ exposure to Hungary click

here

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Across Europe, the FTSE 100 .FTSE index was down 0.3 percent, Germany’s DAX .GDAXI slipped 0.1 percent and France’s CAC 40 .FCHI was down 0.3 percent.

Spain’s IBEX .IBEX and Italy’s benchmark were flat; Portugal’s PSI 20 .PSI20 was up 0.1 percent.

GERMAN MACRO BOOST

Shares in the FTSEurofirst 300 recovered from early morning lows after data showed German manufacturing orders rose 2.8 percent on the month in April, beating forecasts and adding to signs Europe’s largest economy is on the path to durable growth. Among individual shares, index heavyweight BP (BP.L) gained 2.6 percent after saying it expected a second oil containment system would allow it to increase the amount of oil being captured from its Gulf of Mexico spill. [ID:nN07147206]

Also on the upside, Adidas (ADSG.DE) gained 2.7 percent after Deutsche Bank upgraded the sporting goods maker to “buy” from “hold”, saying it would benefit from the weaker euro.

The single currency picked up only slightly from a four-year low against the dollar on Monday.

Spain’s Grifols (GRLS.MC) fell 5.3 percent after saying it would buy U.S.-based Talecris Biotherapeutics (TLCR.O), which makes plasma-based protein therapies, for $3.4 billion in a bold move to expand its business in blood products. [ID:nLDE6560AA]

(Graphics by Scott Barber; editing by Simon Jessop)

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ECB says had no bids in 7-day dollar tender

June 3, 2010 By Leave a Comment

June 2 (Reuters) – The European Central Bank received no bids for its latest offer of seven-day U.S. dollar funds on Wednesday.

The ECB reintroduced dollar lending last month as part of its response to the widening debt crisis, but banks have shown little appetite for funds.

For details, please see Reuters information page ECB27. (Reporting by Sakari Suoninen)

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ECB calls for bids for 35 bln eur bond sterilisation

June 2, 2010 By Leave a Comment

June 1 (Reuters) – The European Central Bank called for bids to absorb 35 billion euros in one-week funds from euro-zone money markets on Tuesday, to neutralise the monetary impact of its recent government bond buying activities.

The operation is a variable rate tender offering banks up to 1.0 percent on funds they deposit. Bids are due at 1005 GMT. (Click ECB 17 for full details)

The ECB is conducting the operations to counterbalance the cash it injects into the financial system when it buys government bonds, a tactic it turned to last month in a bid to calm the euro zone debt crisis.

The deposits can be used as collateral in the ECB’s lending operations. The ECB has said it plans to hold a repeat operation next week.

(Reporting by Marc Jones)

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ECB warns of more bank loan losses

June 1, 2010 By Leave a Comment

(Reuters) – The European Central Bank warned on Monday that euro zone banks face up to 195 billion euros in a “second wave” of potential loan losses over the next 18 months due to the financial crisis, and disclosed it had increased purchases of euro zone government bonds.

As the euro recouped losses but remained on the back foot after a cut in Spain’s credit rating and China warned that the global economy remained vulnerable to sovereign debt risks, Spain assured investors it would reform its rigid labor market even if employers and trade unions cannot agree.

The ECB said euro zone banks would need to make provisions for further losses this year of 90 billion euros, and 105 billion in 2011, on top of some 238 billion euros in bad debts written off by the end of 2009. That was the first time it has given an estimate for next year.

Although total write-downs from bad loans and securities between 2007 and the end of 2010 were likely to be lower than previously expected, the ECB said in its latest Financial Stability Report, write-downs this year and next year would be still larger if heightened sovereign debt risk and the impact of government belt-tightening dragged down economic growth.

The ECB began buying up mostly Greek, Portuguese and Spanish bonds on May 3 in a contentious move to calm debt markets and support an $1 trillion stabilization package for the euro agreed by the European Union and the International Monetary Fund.

The central bank said in a statement it had settled 35 billion euros in bond purchases by May 28, up from 26.5 billion a week earlier. It did not detail the nationality of the debt but ECB officials have said it is mostly from south European countries hardest hit by financial market turmoil.

The ECB acknowledged in its report that euro zone debt tensions may force it to delay a phasing-out of cheap lending operations designed to help banks through the financial crisis.

After Lehman Brothers collapsed in September 2008, the ECB began offering euro zone banks unlimited, flat-rate loans in a bid to revive inter-bank lending and keep credit flowing to the real economy.

ECB governing council member Axel Weber, president of Germany’s powerful Bundesbank, urged a tight cap on the bond buying program and said the extraordinary steps taken to ease the euro zone debt crisis posed a risk to price stability.

“The purchases of government bonds in the secondary market should not overshoot a tightly-capped limit,” Weber said in a speech prepared for delivery in Mainz, Germany. He did not suggest a figure.

Spain, the fourth-largest euro zone economy, saw its credit rating downgraded a notch by Fitch Ratings agency from the maximum AAA to AA+ late on Friday after a 15 billion euro austerity program squeaked through parliament by a single vote.

Market reaction to the downgrade was limited, partly because U.S. and British markets were closed for holidays on Monday.

The euro recouped losses incurred after the Spanish debt downgrade to trade at around $1.23 but remained on the back foot as the downgrade highlighted ongoing structural weaknesses in the euro zone. The 10-year Spanish-German bond spread widened only slightly but Spanish stocks fell 0.7 percent while the index of leading European shares gained 0.4 percent.

Labor Reform

Spanish Economy Minister Elena Salgado told a conference in Madrid that the government aimed to pass a much anticipated labor market reform by the end of June with or without consensus with the unions and business representatives.

The minority Socialist administration extended the deadline for an agreement by one week from Monday but officials have said the social partners are still far apart.

The left-leaning daily El Pais said the government planned to allow companies to make greater use of cheap work contracts for a broader range of employees, reducing redundancy payments and making it easier to fire workers.

Trade unions have threatened to strike if the government imposes the reform by royal decree, a move that would set the ruling Socialists on a collision course with their traditional allies in organized labor.

In a sign of continued international concern about the impact of Europe’s problems, China warned that Europe’s struggle to contain ballooning debt posed a risk to global economic growth, raising the specter of a double-dip recession.

Premier Wen Jiabao, addressing business leaders during an official visit to Japan, issued his warnings a day after France admitted it would struggle to keep its top credit rating.

“Some countries have experienced sovereign debt crises, for example Greece. Is this kind of phenomenon over? Now it seems that it’s not so simple,” Wen said. “The sovereign debt crisis in some European countries may drag down Europe’s economic recovery.

He added it was too early to wind down stimulus deployed during the 2007-2009 financial crisis.

Governments around the world ran up record debts during the $5 trillion effort to pull the economy out of its deepest slump since the Great Depression and now face a tough balancing act: how to reduce debt without choking off growth.

ECB Governing Council Member Mario Draghi warned that austerity programs by European governments could snuff out a fragile recovery unless they were coordinated internationally.

Economic sentiment in the euro zone fell in May, defying analysts expectations of a slight improvement, in part due to the wave of austerity announcements.

However, ECB President Jean-Claude Trichet said the economy may expand more than expected in the second quarter.

The fact that not just fiscally weak southern European countries, but also nations such as France and Germany at the euro zone’s core are under pressure to cut debt and deficits amassed during the financial crisis, is adding to concerns.

(Additional reporting by Sarah Morris in Madrid, Martin Santa and Sakari Suoninen in Vienna, Marc Jones in Frankfurt; Writing by Paul Taylor; Editing by Ron Askew and Susan Fenton)

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