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• Is this rally losing steam..
• Italian PM Monti; Financial crisis is causing fragmentation of EMU
• USD/JPY gets a lift from macro buyers
• Asian sellers capping the cable
• ECB Update: Waiting For Spain, Talking About Greece
• Italian and Spanish 10 yr yields fall back
• Nearly there….
• Analysis: Portugal Praised Even As Economy Slips, Debt Grows
• Greek PM: We Are Not Asking For A New Debt Haircut
• European bourses bounce back…
• Swiss September producer/import prices rise 0.3% m/m and 0.3% y/y
• Talks with troika go down to the wire
• Today’s orderboard
• European stocks look set to open marginally lower
• Finnish September CPI rises 0.4% m/m and 2.7% y/y
• Euroland’s debt strategy is an economic and moral disgrace…
• ECB’s Knot: Severe consequences if the euro falls apart
• Today’s option expiries
• EUR/USD starts the week on the back foot
• Japan’s August revised Final Industrial production -1.6 % m/m,

Is this rally losing steam.. Posted: 15 Oct 2012 02:08 AM PDT Hope not but have an uneasy feeling it might be . All looks rather ‘uphill’ in the EUR/USD in the 1.2960′s and kinda brings  to mind  a childhood memory  of one of my first memorable films  Have now  now heard a German corporate was a buyer up through 1.2950 earlier which triggered a few buy stops but… Just have that sinking feeling for some reason that i won’t get to see the 1.3000 level just yet… Mr Market please prove me wrong! EUR’s back around 1.2958 after highs of  1.2970 ( And no… before any of you ask, i don’t have the film in my collection…. any more! )

Italian PM Monti; Financial crisis is causing fragmentation of EMU Posted: 15 Oct 2012 01:58 AM PDT Single market could face risk of disintegration (NSS) Need to move forward with integration of Economic monetary Union Need to consolidate June decisions on debt markets

USD/JPY gets a lift from macro buyers Posted: 15 Oct 2012 01:09 AM PDT They were behind the move up to recent highs of  78.66 (just short of the daily cloud base at 78.67),  and  the pair remains  on a bid footing as EUR/JPY lurks just below its 200 day MA (101.82). USD/JPY also has the 100 dayMA just above current levels at 78.75  with further offers just ahead of 79.00 Still no news as yet on any vanilla expiries for today, but i’ve just been told there are some very large option strikes at 79.00 rolling off on Wednesday USD/JPY eased to 78.57 with the cross around 101.75

Asian sellers capping the cable Posted: 15 Oct 2012 01:02 AM PDT Just heard they were sitting up around the 1.6055 level, (where i earlier mentioned in the orderboard that there were also orders from the likes of UK clearers and hedge funds) Cable’s back off a touch around 1.6050

ECB Update: Waiting For Spain, Talking About Greece Posted: 15 Oct 2012 01:00 AM PDT TOKYO (MNI) – European Central Bank policymakers attending the International Monetary Fund and World Bank meetings in Tokyo signalled that the ECB is waiting to see if Spain seeks a bailout from the European Stability Mechanism (ESM) and will not cut interest rates or undertake new “non-standard” measures before then. The central bank also floated a new idea to help Greece reduce its debt burden via a voluntary debt buy-back scheme, while continuing to reject any calls that it could contribute to relieving Greece of its debt mountain. A number of ECB officials, including Vice-President Vitor Constancio, noted that interest rates are appropriate at the moment. Governing Council member Christian Noyer argued that a rate cut might be wasted as long as the monetary transmission mechanism remains impaired. “The precise point of the policy rate at the moment is less important than the transmission of our policy. For us the major problem is, first, fix the transmission problem,” Noyer said. At the same time, ECB Executive Board member Joerg Asmussen reiterated that the central bank will not activate its OMT bond purchases – the tool with which it aims to restore the transmission mechanism – for Portugal, Ireland or Greece any time soon. “The OMT decision, to quote this fully, says countries can qualify when they are regaining full bond market access and the word ‘bond’ is there on purpose,” Asmussen said. Neither Portugal nor Ireland qualify, he suggested. Asmussen and his fellow Executive Board member Benoit Coeure said involvement of the International Monetary Fund was a pre-condition for activating the OMT program. When announcing the new bond-purchase program on September 6, the ECB said that “the involvement of the IMF shall be sought.” Queried at the time about that phrasing, ECB President Mario Draghi said the ECB wanted the IMF to help design the conditions that would be attached to ESM programs, which are a pre-condition to any ECB bond buying under the new plan. “But we cannot dictate what [the IMF] should do,” he said. Coeure told Germany’s Die Welt that, “for me personally it’s clear that without a certain involvement of the IMF, we should not buy any sovereign bonds.” While the IMF does not necessarily have to contribute financially, it must help design and supervise reform programs, he said. As the ECB waits for governments to take the steps that will allow it to unleash possibly unlimited bond market interventions, the central bank’s steady hand appears to apply not only to interest rates but also to other non-standard measures. Governing Council member Josef Bonnici said that provision of extra liquidy is currently not being actively discussed. Debates about how to help Greece stay in the Eurozone, however, appear to be all the more active. Asmussen floated a new idea foe helping Greece reduce its debt burden. “At the moment it looks like Greece’s debt level will rise to well above the target of 120% of GDP by 2020,” Asmussen said in an interview with German Sueddeutsche Zeitung. “Thus, one has to consider elements that could make it possible to achieve that goal. One possibility would be buying back debt.” Asmussen offered no details on where Greece might obtain the funds to undertake such a buy-back, the newspaper reported. But “it is quite clear that the ECB could not enact such a bond buy back,” he stressed. Germany’s Frankfurter Allgemeine Zeitung cited German “government sources” who described the idea as unrealistic. German Finance Minister Wolfgang Schaeuble noted that on first glance, “I would have some questions about this proposal for which I do not see any answers.” –Frankfurt newsroom +49 69 72 01 42; e-mail: jtreeck@mni-news.com [TOPICS: MT$$$$,M$$EC$,M$X$$$,M$$CR$,MGX$$$]

Italian and Spanish 10 yr yields fall back Posted: 15 Oct 2012 12:49 AM PDT Italian 10 yr yields dropped 3 bps last at 4.95% ,and Spanish 10 yr has erased it’s earlier decline now back at 5.62%

Nearly there…. Posted: 15 Oct 2012 12:43 AM PDT Well the EUR/USD rally has just stalled around 1.2950 and just short of the o/n highs around 1.2961.  Still somewhat bemused as to what’s behind this  but EUR/JPY looks a likely culprit and eurostoxx are up around 0.8% last time i looked. EUR/JPY has just broken  up through the Asian highs of around 101.66  to 101.82 before stalling  (which not altogether surprisingly coincides with the 200 day MA) and i’d guess earlier reported sellers in Asia back- tracked as well through 101.50. Either way it’s a pleasure to see some sort of a move on a Monday morning…

Analysis: Portugal Praised Even As Economy Slips, Debt Grows Posted: 15 Oct 2012 12:40 AM PDT By Jack Duffy PARIS (MNI) – Portugal, which unveils its 2013 budget today, has emerged alongside Ireland as an example of the success of European austerity, a country that has followed the rules and which is now reaping the benefits of rising exports and declining deficits. Portugal’s current-account deficit is expected to be just 3% of GDP this year, down from nearly 10% two years ago. Overall exports are rising at an annual rate of around 10%, and sales to non-EU countries like Brazil are surging by around 25% compared with a year ago. Unit labor costs are expected to fall by 3.75% this year. “The adjustment is actually taking place faster than expected,” European Central Bank President Mario Draghi told a European Parliament committee last week. “The sense is that the government is well poised to regain market access,” Draghi said. But at the same time Portugal is being praised, it is also giving off what some economists says are warning signals that it is slipping into the same vicious cycle of recession, debt and austerity that has swallowed up the Greek economy for the past five years. Most ominously, tax revenue is falling despite higher tax rates. Government receipts fell 2.4% through August as the effects of tax increases were more than offset by a weaker economy. International creditors recently raised Portugal’s 2012 deficit target to 5% of GDP from 4.5%, but a report issued last week said Lisbon was in danger of missing the new target as well. And Prime Minister Pedro Passos Coelho is expected to deliver a 2013 budget today that will pile even more taxes on the economy. The austerity measures have faced increasingly strong, though still peaceful, popular resistance. But imitating protests in Spain and in Greece, demonstrators today plan to encircle the Parliament building for the budget announcement, according to local media reports. And Portugal’s powerful trade unions have called for a general strike on November 14. Even Portugal’s president Anibal Cavaco Silva has protested the government’s tax-hike plans. Writing on his Facebook page, Cavaco Silva said that “in the present circumstances, it is not correct to require a country to be subject to an adjustment process that meets at all costs a public deficit goal fixed in nominal terms.” As outlined recently by Finance Minister Vitor Gaspar, the budget will raise the average income tax rate to 11.8% from 9.8%, and add an extraordinary 4% tax surcharge for 2013. A range of other levies will also be applied, including a 2.5% “solidarity” tax for high earners, bringing the average income tax rate to 13.2%. Economists say that while higher taxes will help reduce Portugal’s bloated household debt by suppressing consumption, the pace at which it is all happening may be causing long-term damage to economic activity. “The speed of the deleveraging process is killing the economy,” said Filipe Garcia, president of the consulting firm IMF – Informacao de Mercados Financeiros – in Porto. “If you don’t grow, you can’t collect enough taxes to control your debt, and that debt at some point becomes unsustainable,” Garcia said. Portugal’s economy is expected to shrink by 3% this year and a further 1% next year as its overall debt grows to nearly 124% of GDP. Economists say if growth does not resume in 2014, debt will move into the danger zone where markets don’t believe it is sustainable. “Our problem is the same as Greece, although at the moment the intensity is not the same,” said Garcia. “But if you keep seeing the economy melt away the problem will be exactly the same.” To be sure, markets are currently betting on a positive outcome. Yields on 10-year Portuguese government bonds have fallen to 8% from a January peak of more than 17%. Portugal CDS now imply less than a 50% chance that Lisbon will default, down from 75% earlier this year. But economists warn that it is still too early to declare victory on Portugal’s E78 billion bailout, as EU policymakers seem anxious to do. Ricardo Santos, an economist at BNP Paribas, noted that Portugal’s labor costs have increased by 20% relative to Germany since the start of the single currency, and only around 6% of that has been corrected in the current austerity drive. That correction has largely come from wage cuts in the public sector, which amounts to just 12% of the work force. Private-sector labor costs are down by 1% or less, he said. “They have started with some positive steps but there is still a long way to go,” Santos said. Portugal has enacted reforms to make its labor markets more flexible and to unclog a legal system that is among the slowest and most inefficient in Europe. But with the country undergoing the worst recession since the 1970s and unemployment above 15%, analysts said it is unclear if the positive effects of reforms will arrive quickly enough to offset the negative effects of austerity. “They are doing a list of everything that is required by the Troika,” said Antonio Barroso, an analyst at Eurasia Group, referring to the official creditors’ group comprised of officials from the European Commission, the IMF and the ECB. “Certainly there is a positive story going on now, but the jury is still out on the ending.” –Paris newsroom, +33142715540; jduffy@marketnews.com [TOPICS: M$$CR$,M$X$$$,MGX$$$,M$P$$$,M$$EC$]

Greek PM: We Are Not Asking For A New Debt Haircut Posted: 15 Oct 2012 12:40 AM PDT — OSI Haircut “A Trap” —Loan Tranche Delay “Extremely Dangerous” ATHENS (MNI) – A delay in disbursing the E31.5 billion bailout loan tranche due to Greece or releasing it in increments would be “extremely dangerous,” Greek Prime Minister Antonis Samaras said Sunday in a newspaper interview. Samaras told Greek daily Kathimerini that disbursement of the loan installment in November was a “realistic” scenario. “If we don’t get [the tranche] the consequences will be dramatic,” he warned. Officials in Athens have said they would run out of money by the end of November. The prime minister rejected calls for another restructuring of Greek debt on top of the private sector debt reduction deal (PSI) that was completed in March. The International Monetary Fund is pushing for debt forgiveness by Greece’s official sector creditors, according to numerous media reports. “This is a trap that we could have fallen in ourselves – to ask for an [official sector] haircut from parties that have already loaned us twice,” Samaras said. “This would have boomeranged. We did not fall in this trap. We made it clear to all sides that we are not asking for a new haircut, or for more money,” he added. “All we ask is to be given the chance to combat the ongoing recession, to return to sustainable growth.” Samaras noted that there are disagreements among the different members of the Troika – the European Commission, European Central Bank and IMF – over how to address the issue of Greek debt sustainability. “Their differences are obvious,” he said, adding that he hoped the disagreements would be overcome by the time EU leaders convene for their summit meeting in Brussels, which starts on Thursday. “After that, it is a matter of days to pass the new program in Parliament and receive the tranche immediately afterwards,” Samaras said. The Greek leader appeared confident that his government would successfully conclude negotiations with the Troika over E13.5 billion worth of new deficit cuts in time for the summit. The talks have been hung up over disagreement on certain proposed measures. As MNI reported on Friday, a senior Greece Finance Ministry official said the difference between the two sides is still more than E1 billion, “and it is quite possible that the negotiations will not be concluded by the EU summit.” Samaras reiterated that he is committed to implementing all measures and structural reforms no matter how tough. Last week, the Eurogroup of Eurozone finance ministers gave Greece a two-week deadline to finish all necessary negotiations implement 89 measures it had committed to last spring. “That is feasible, and it is the right thing to do,” Samaras said. “There are certain structural reforms that should have been implemented years ago and without anyone asking us,” he added. “The country is facing its final hurdle. We changed Greece’s image and this has been recognized by everyone,” the prime minister said. He pointed to last week’s visit of German Chancellor Angela Merkel to Athens as evidence of this. Samaras insisted that his government would not flinch at implementing tough structural reforms, including the suspension of 15,000 civil service employees. And he vowed to take on vested interests, heralding a crackdown on companies that engage in market manipulation. “Whoever has created cartels should know that these practices are finished,” Samaras said. He said his principle goal remains to bring liquidity into the market and fight a deepening recession. –Athens Bureau; apapamiltiadou@marketnews.com [TOPICS: M$Y$$$,MGX$$$,M$X$$$,M$$CR$,MT$$$$]

European bourses bounce back… Posted: 15 Oct 2012 12:23 AM PDT …..There all posting small gains between around 0.1-0.3% with the CAC 40 leading the way. Still scouting about for some indication behind this EUR/USD move , but would suspect some sovereign interest just under 1.2900 and with the equities move  i’d hazard a guess we’re going to get mired into a another tight European range barring any groundbreaking news…. EUR/USD’s up around session highs of 1.2937 Offers 1.2930/50 possible buy stops through 1.2960 ahead of res/offers 1.2980/00

Swiss September producer/import prices rise 0.3% m/m and 0.3% y/y Posted: 15 Oct 2012 12:16 AM PDT After a 0.5% m/m rise, -0.1% y/y fall in August. Core inflation pruducer prices unchanged at 0.1% y/y, import prices -2.2% y/y  from -2.4% in August

Talks with troika go down to the wire Posted: 14 Oct 2012 11:53 PM PDT  As if we didn’t expect them to ….. (ekathimerini)

Today’s orderboard Posted: 14 Oct 2012 11:30 PM PDT EUR/USD:   Bids 1.2880/00 , sell stops below ahead of more bids 1.2840/60 with more sell stops below ahead of tech supp below at 1.2825/30 (200 day MA 1.2826) sell stops below. Offers 1.2930/50 likely buy stops through 1.2960 ahead of  larger offers up at 1.2980/00 GBP/USD:   Bids 1.6020/30, 1.6000/10 (Corporates , sovereigns), sell stops below ahead of more bids 1.5975/85 likely large sell stops  belowon abreak . Offers 1.6050/60 (UK Clearers, US hedge funds) and 1.6090/00 EUR/GBP:  Bids 0.8025/35 and 0.8000/10. Offers 0.8055/65 and 0.8090/00 (0.8100 barrier), buy stops just above ahead of 200 day MA at 0.8119 USD/JPY: Offers 78.65/75 (78.67 cloud base, 78.75- 100 day MA), buy stops above ahead of more offers 78.90/00 and further buy stops above. Tech res 79.35/40 (200 day MA at 79.38).Bids from 78.30 trail down to 78.00 from usual Japanese names (importers) and possible semi-officials. Major sell stops reported down through 77.90 EUR/JPY:  Offers from 101.50 layered up to 102.00 (101.68 kijun line, 101.82- 200 day MA). Bids 101.00/10, sell stops just below ahead of more bids 100.50/60 and larger from 100.20 down to 100.00 AUD/JPY: Bids 79.95/05 sell stops below ahead of strong bids/tech supp 79.35/50, offers 80.40/50 and more offers /tech res 80.75/85 (80.85- 100 day MA) AUD/USD:  Bids 1.0200/10 and 1.0180/90, sell stops below ahead of stronger supp/bids 1.0150/60 (1.0150 barrier with sell stops below). Offers 1.0240/50 and from 1.0265/75 (1.0271 -100 day MA) EUR/AUD: Bids 1.2600/20 (Us funds, European banks), 1.2575/85 (1.2577- 50% fibo Sept 27-Oct 7 rally) and tech supp 1.2650/55 ahead of 1.2510/20 (61.8% fibo 1.2518). Offers 1.2635/45 and more offers/ tech res 1.2680/00(last week's high 1.2694)

European stocks look set to open marginally lower Posted: 14 Oct 2012 11:08 PM PDT Futures are pointing to  STOXX down around 0.3%, DAX down 0.1% and CAC around flat Japan’s Nikkei closes up 0.51% at 8.577.93

Finnish September CPI rises 0.4% m/m and 2.7% y/y Posted: 14 Oct 2012 11:03 PM PDT Up from 0.2% m/m and unchanged y/y from August ( if anyone’s interested)

Euroland’s debt strategy is an economic and moral disgrace… Posted: 14 Oct 2012 10:39 PM PDT “The IMF has demolished the intellectual foundations of Europe’s debt crisis strategy” “If the Troika were a doctor, it would face manslaughter charges”……..says AEP in the Telegraph

ECB’s Knot: Severe consequences if the euro falls apart Posted: 14 Oct 2012 10:30 PM PDT Bond program has helped governments, ECB actions  to be more aligned OMT ensures government won’t slow down their efforts Speaking in HK… (Bloomberg headlines)

Today’s option expiries Posted: 14 Oct 2012 10:17 PM PDT For the 1000 NY/1400 GMT cut: EUR/USD: 1.2895, 1.2900, 1.2925, 1.2970 (L), 1.3000, 1.3050, 1.3100 GBP/USD: 1.6150 (L) EUR/JPY: 101.00 AUD/USD: 1.0100, 1.0200, 1.0250 USD/CHF:  0.9525 NZD/USD: 0.8200   Haven’t found any for USD/JPY at the moment but will let you know if i do…

EUR/USD starts the week on the back foot Posted: 14 Oct 2012 10:01 PM PDT Sitting unchanged around 1.2906 when i sat down about an hour ago, but the stronger Chinese export data appears to be offset by renewed EU concerns , i.e. Portugal who are now voicing their opinions publicly. A strong bought of EUR/JPY selling down from 101.40 to 101.04 from a US name didn’t help matters either, but this now appears to have been fairly well absorbed just ahead of 101.00 where a break will trigger a round of sell stops. Offers start from 101.50/60 There’s talk of sovereign bids sitting in the EUR/USD just under 1.2900 down to 1.2880 with sell stops below.  Offers start from 1.2930/50 with likely buy stops above 1.2960, ahead of larger offers up at  1.2980/00 There’s not a heck of a lot on the data front this morning to move the market, so eyes will be on comments from the ASEM Fin Min meeting and comments later today from a raft of Fed speakers after midday from the likes of  Bullard, Lacker, Dudley and Williams Gerry’s off today, but the ‘likable old rogue’ will be back tomorrow i’m sure/hope….

Japan’s August revised Final Industrial production -1.6 % m/m, Posted: 14 Oct 2012 09:31 PM PDT From -1.3% m/m, -5.3% y/y August capacity utilization  falls  to -2.6 % m/m from +0.5%  in July

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