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• More Constancio…ECB expects Spain to apply for aid and trigger OMT
• BIS seen selling USD/JPY
• ECB’s Constancio: Euro nations must fix their own imbalances
• Italy Nov consumer confidence 84.8
• Spain’s ruling party “satisfied” with Catalonian vote – Spokesman
• Downside pressure building on the USD/JPY
• ECB Nowotny: Must Avoid Vicious Cycle of Budget Cutting
• France To Isolate Risky Bank Activities From Customers: Press
• Spain To Seek About E42.5 Billion For Bank Bailout: Press
• ECB’s Nowotny: Growth based on credit inflows is unsustainable
• EUR/USD rallying back
• AUD/USD holding firm into European opening
• Japan Vice FinMin Takemasa: Wants Bank of Japan to pursue bold monetary policy
• Today’s orderboard
• Deal or no deal?
• REPEAT: Independence Parties Win Majority In Spain’s Catalonia
• Update: BOJ Shirakawa: Concerned Over Yen Impact on Japan
• Hi-tech expansion drives China’s second boom in the hinterland
• Today’s option expiries
• European stocks seen opening marginally lower

More Constancio…ECB expects Spain to apply for aid and trigger OMT Posted: 26 Nov 2012 02:00 AM PST Base scenario is that Spain applies for aid, but it’s up to Spain to decide Expects Eurogroup deal on Greece today, so next tranche of aid can be paid out It has been clearly stated in talks with Greece that a haircut is not on the table

BIS seen selling USD/JPY Posted: 26 Nov 2012 01:45 AM PST Not sure of exact levels. Best guess circa 82.10. We’re not much lower, presently at 82.05. Stops remain through 81.90.

ECB’s Constancio: Euro nations must fix their own imbalances Posted: 26 Nov 2012 01:12 AM PST Economic growth is subdued ‘to say the least’ Inflation risks are well contained, sees no significant risks OMT annoucement helped lower yields, spreads OMT comes with strict conditionality OMT totally legitimate and legal All euro nations should stay in currency bloc Latest developments suggest no nation will exit Sees synergies between central banking, supervision Need to separate monetary policy from supervision If and when conditions change , we will change policy ECB never pre-commits on monetary policy, policy already very accommodative Bloomberg headlines

Italy Nov consumer confidence 84.8 Posted: 26 Nov 2012 01:03 AM PST Down from 86.2 in October and demonstrably weaker than Reuter’s median forecast of 86.5. It’s a record low!! EUR/USD back down at 1.2953 having bumped up against expected sell orders clustered 1.2980/00 earlier.

Spain’s ruling party “satisfied” with Catalonian vote – Spokesman Posted: 26 Nov 2012 12:45 AM PST Willing to discuss Catalan tax worries

Downside pressure building on the USD/JPY Posted: 26 Nov 2012 12:39 AM PST The stops down through 81.90 are now coming into focus after a recent low of 81.98, but there’s talk of some reasonable eastern european demand around 82.00 which is so far spoiling the  real money induced sell off. There are further bids sitting below in the 81.65/75 zone  ( Asia lows of last Wed) and 81.50 ( approx 61.8% fibo retracement of the March/Sept fall which was breached last week) USD/JPY’s sitting around 82.07

ECB Nowotny: Must Avoid Vicious Cycle of Budget Cutting Posted: 26 Nov 2012 12:30 AM PST HELSINKI (MNI) – Europe must avoid a vicious circle of deficit-cutting measures undermining the economic recovery, European Central Bank Governing Council member Ewald Nowotny said Monday at a conference on European Economic Integration. “The reduction in both public and private sector indebtedness is necessary for regaining the trust of international investors,” Nowotny said. “But at the same time a vicious circle of consolidation measures which could erode domestic demand and therefore delay the recovery is to be avoided,” he said. Nowotny, the head of the Austrian National Bank, noted that the “crisis has taught us that the economic difficulties of many countries in Europe reflect long-term problems inherent in economic and political institutions” for which there are “no quick fixes.” Nevertheless, the right steps have to be taken now to ensure sustainable growth ahead, Nowotny argued. In doing so, policymakers must “avoid a renewed build-up of unsustainable economic positions.” –Frankfurt newsroom +49 69 72 01 42; e-mail: jtreeck@mni-news.com [TOPICS: M$X$$$,MGX$$$,M$G$$$]

France To Isolate Risky Bank Activities From Customers: Press Posted: 26 Nov 2012 12:30 AM PST PARIS (MNI) – The French government’s overhaul of the banking system, to be submitted to the cabinet next month, foresees a separation of speculative operations from retail activity and far-reaching supervisory powers to wind down insolvent institutions, the French business daily Les Echos reported Monday. By next July, banks will have to offload to branches all operations implying uncovered placement risks in hedge funds or capital investment institutes, the newspaper said, citing a preliminary draft of the bill. Exceptions are foreseen for market maintenance operations, clients’ activities and own investment and cashflow. High-frequency trading and speculation on agricultural products would be prohibited. In the case of the resolution of a bank, the prudential control authority ACP would have the power to dismiss directors, appoint a temporary supervisor and terminate certain branch activities. Interviewed by Les Echos, the president of the federation of French banks (FBF), Jean-Paul Chifflet, warned against the unlimited collective liability banks would carry for a bank undergoing resolution. “It’s a terrible Damocles sword!” he said, demanding a ceiling for collectivized risks. For Chifflet, the reform would only add to the financial burden of banks at a time when they must shoulder higher taxes and fulfill Basel III liquidity requirements. Under such conditions, “it will become difficult for French banks to do their job of financing the economy,” he predicted. –Paris newsroom +331 4271 5540; e-mail: ssandelius@marketnews.com [TOPICS: M$F$$$,M$X$$$,MGX$$$]

Spain To Seek About E42.5 Billion For Bank Bailout: Press Posted: 26 Nov 2012 12:10 AM PST PARIS (MNI) – Spain will seek about E42.5 billion from Brussels for its bank bailout, the Spanish daily El Pais reported on Monday. Madrid will seek E37 billion for recapitalizations of four nationalized banks: Bankia, Novagalicia, CatalunyaCaixa and Banco de Valencia, the paper reported, citing unnamed European sources. Another E2.5 billion will be injected into the so-called “bad bank” that is expected to absorb up to E90 billion in toxic loans from Spanish banks. Another E2 billion to E3 billion will be for banks that are not being nationalized but still need to raise capital, the paper said. Spain signed a memorandum of understanding in the summer for a bank bailout of up to E100 billion, but stress tests showed that the banks needed only around E60 billion. Spanish officials said at the time that because some of the banks could raise funds on their own, the aid request to Brussels would be more on the order of E40 billion. –Paris newsroom, +33142715540; jduffy@marketnews.com [TOPICS: M$$CR$,M$X$$$,M$S$$$,MGX$$$]

ECB’s Nowotny: Growth based on credit inflows is unsustainable Posted: 26 Nov 2012 12:07 AM PST East Europe crisis showed that model is unsustainable, needs to find a new growth model Bloomberg reporting

EUR/USD rallying back Posted: 25 Nov 2012 11:33 PM PST Decent buying reported from Eastern European names and we’re up at 1.2977. As aforementioned sell orders clustered 1.2980/00, ‘decent’ up at 1.2990/00. Will Perfect Pete get another poll right? He came within 9 pips Friday of reaching his 1.3000 goal. That would have been two correct poll choices in one day. Man’s a legend!!!

AUD/USD holding firm into European opening Posted: 25 Nov 2012 11:26 PM PST Friday’s rally from the 1.0420 area has been maintained in Asia, with the market  shrugging off Moody’s cutting Queensland ‘s outlook to negative from stable. AUD’s sitting around 1.0458, just below Friday’s  NY highs of 1.0471, but the trend remains intact with large bids now building down at 1.0400/10. There are bids in front at the 1.0440/50 level with some small sell stops just below, and through 1.0425 but the larger stops don’t come in until a break of 1.0400. Talk of buy stops above through 1.0480 ahead of strong offers in the 1.0500/20 zone and rising trend channel resistance up at 1.0545/50.

Japan Vice FinMin Takemasa: Wants Bank of Japan to pursue bold monetary policy Posted: 25 Nov 2012 11:22 PM PST Govt, BOJ have sufficient shared understanding Yada, yada, yada……. This ongoing flood of rhetoric regarding bold monetary easing is beginning to get on my tits……(that’s nerves to you lot out there)

Today’s orderboard Posted: 25 Nov 2012 11:07 PM PST EUR/USD:  Bids 1.2900/20, (1.2901- 50% of Oct17- Nov 13 fall, 1.2915- 55 day MA), sell stops below, more bids 1.2850/60, sell stops through 1.2840 ahead of more bids 1.2800/10 (200 day MA 1.2802). Offers from 1.2980 up to 1.3000 (barrier), buy stops above ahead of tech res 1.3020/25 (31/25 Oct highs). GBP/USD:   Bids 1.6000/10 ( kijun line  1.6002) and 1.5940/60 (daily cloud base 1.5944) 1.5920/30 and  1.5880/sell stops below ahead of tech supp 200 day MA at 1.5857. Offers 16040/50, likely buy stops above ahead of offers 1.6090/10 (cloud top1.6109) . EUR/GBP:  Strong offers 0.8100/10, buy stops above ahead of larger offers 0.8145/60 with likely large buy stops above 0.8165. Bids /tech supp/options at 0.8065/75 (200 day MA 0.8072 now supportive), more bids 0.8040/50 and 0.8000/10, sell stops below. USD/JPY:  Bids 82.00/20 sell stops below and larger down through 81.90 just below ahead of more bids 81.65/75. Offers 82.50/60 and 82.75/85 from exporters / option protection and larger ahead of 83.00 barrier, large buy stops just above. EUR/JPY:  Offers 106.65/75  larger up at 107.00./10 buy stops above through 107.15. Bids 106.00/10 sell stops just below, ahead of bids 105.75/85, sell stops through 105.70 ahead of bids 105.50/60 and 105.00/10 AUD/JPY:  Bids 85.40/60, likely sell stops through 85.35 (85.36 Fri low) and tech supp 85.10/20, sell stops below through 85.00. Offers/tech res 86.40/50 (o/n high 86.44 and Apr 2 high 86.50), likely buy stops above. AUD/USD: Bids 1.0440/50 and 1.0400/10. Sell stops through 1.0400,  tech supp/bids 1.0370/80 (100 day MA 1.0378), Offers 1.0460/80 (Nov 7 hi 1.0480), likely buy stops above ahead of offers 1.0500/20 (Sep 21 high 1.5019) EUR/AUD: Bids 1.2380/90 and 1.2360/70 and larger  down at 1.2290/10 (tenkan line 1.2290), Offers 1.2400/20/ buy stops  above( kijun line 1.2412, 200 day MA at 1.2413, 31.8% fibo of Oct-Nov fall around 1.2415) ahead of offers 1.2490/00 (50% fibo of  same fall around 1.2492) NZD/USD: Bids 0.8200/10 (cloud top 0.8201, 55 day MA 0.8208, sell stops below ahead of bids 0.8160/70. Strong offers 0.8240/50 (Fri high 0.8250) and 0.8290/0.8310 (Nov 7 high 0.8309)

Deal or no deal? Posted: 25 Nov 2012 10:43 PM PST I really really don’t like that programme. Anyways that’s besides the point. Will we get a Greek aid agreement today?  From all that I’ve read it’s a crap-shoot and everything seemingly hangs in the balance. As you all know I’m a consummate optimist, so I’ll go for the officials cobbling something together.  Am I confident……..not really. EUR/USD has drifted a little lower in Asia, presently at 1.2945. Buy orders seen clustered 1.2900/20, sell stops below. Topside, sell orders clustered 1.2980/00 ahead of well-documented 1.3000 barrier option interest.

REPEAT: Independence Parties Win Majority In Spain’s Catalonia Posted: 25 Nov 2012 10:40 PM PST –But Party Of Catalan Leader Artur Mas Suffers Setback PARIS (MNI) – Parties favoring independence for Spain’s wealthy region of Catalonia won a convincing majority Sunday in a regional parliamentary election seen as the first step to a possible referendum on separation from Madrid, according to Spanish newspaper reports. The pro-independence parties won 87 seats in the 135 Catalonian parliament, known as the Generalitat, although the Convergencia i Unio (CiU) party of Catalan leader Artur Mas suffered a significant setback, winning only 50 seats compared with 62 in the pre-election parliament. While that still makes CiU the largest party in the Generalitat, it might now be more difficult for Mas to govern smoothly, which could impede his drive for a referendum on Catalonian independence despite the parliamentary majority of parties that favor it. Some leaders on the left were already calling for Mas to step down and for a new Catalonian government to be formed. However, even after the election results were known Sunday evening, Mas reaffirmed his intention to organize the referendum on Catalonian separation from Spain. Esquerra Republicana (Republican Left), a more radical separatist party, was the night’s big winner, surging from 10 seats to 21, to become the second biggest party in the new parliament. The Catalonian Greens, also pro-independence, took 13 seats. CuP, a smaller pro-separatist group, took three seats. Among the anti-independence parties, the Socialists lost 8 seats, slipping from 28 to 20, while the Catalonian branch of the conservative Partido Popular, the party of Spain’s Prime Minister Mariano Rajoy, took 19 seats – a gain of one. Ciutadans, a small anti-separatist party, tripled its representation in parliament from 3 to 9 seats. Spanish media speculated Sunday that the long-ruling CiU led by Mas, only a recent convert to the separatist cause, would have a hard time pushing the separatist agenda with such a fractious majority. But that is not likely to offer much comfort to financial markets. The overall rise of the pro-independence parties in Catalonia, and the anticipation of a referendum on splitting from Spain, is likely to intensify the friction with Madrid and increase the pressure on Rajoy, who is trying to decide whether to seek an aid package from the European Stability Mechanism in order to activate bond buying by the European Central Bank that could reduce Spanish borrowing costs. The mere thought that Spain could lose its wealthiest region at a time when it is already reeling from a recession and 25% unemployment is hardly comforting for Rajoy – or for potential investors. Sunday’s election could also fortify the notion that Rajoy is unable to control Spain’s autonomous regions, which account for about a third of the country’s public sector spending and are a major reason for Madrid’s inability to meet its deficit targets. With the country’s debt ratio rising sharply and ratings agencies watching closely, that can hardly be welcome news. –Paris Newsroom, +331-42-71-55-40; bwolfson@mni-news.com [TOPICS: M$X$$$,M$S$$$,M$$EC$,MGX$$$,M$$CR$,MT$$$$] –MNI Paris Bureau; tel: +33 6-16-01-00-35; email: bwolfson@mni-news.com [TOPICS: M$F$$$,M$S$$$,MT$$$$,MFF$$$]

Update: BOJ Shirakawa: Concerned Over Yen Impact on Japan Posted: 25 Nov 2012 10:30 PM PST – Adds Comments From Briefing, Background in Paragraphs 5-7, 19-22 NAGOYA, Japan (MNI) – Bank of Japan Governor Masaaki Shirakawa said on Monday that the BOJ is fully aware of the potentially debilitating impact that the yen’s rise could have on a sustained domestic economic recovery. “The BOJ is concerned that the appreciation of the yen could have adverse effects on Japan’s economy — mainly through a decrease in exports and corporate profits as well as deterioration in business sentiment — in the current phase, in which there is high uncertainty regarding the outlook for overseas economies,” he told business leaders. Some business executives in this central Japanese city voiced concern over the drag from the strong yen during the question and answer session with the governor. Shirakawa also said, “Large swings in the exchange rate have significant effects on corporate performances, and I do acknowledge that achieving a stable exchange rate is highly desirable in authorities’ policy conduct.” Later Shirakawa told a news conference that since the BOJ has been conducting various measures to make the financial condition very stimulative, those measures should also have corresponding effects on the currency market. “We have conducted powerful easing led by practically zero interest rates and the asset-buying program, and as we’ve said, we will continue to do so,” he said. “This policy has had proportionate effects on foreign exchange rates and will continue to have such effects accordingly.” He added that the BOJ will fulfill its mission by steadily increasing the balance of asset-buying fund in a continuous manner, as already decided, but didn’t say how much more the bank would add to its temporary fund to buy Japanese government bonds and other financial assets from the markets. “The BOJ’s aggressive monetary easing, which consists of its virtually zero interest rate policy and its purchase of financial assets through the (Asset-Buying) Program, coupled with measures including the government’s intervention in the foreign exchange markets, has fended off the yen’s appreciation to some extent.” “The government has carried out foreign exchange interventions as necessary in line with the understanding — shared against at the last G-20 meeting – that reads disorderly movements in exchange rates have adverse implications for economic and financial stability,” Shirakawa said, repeating this earlier remarks. In response to questions, he said, “As for the yen’s rise in itself, the government is responsible for currency intervention.” The governor also repeated that the BOJ has influenced foreign exchange rates through a series of monetary easing it has been conducting in the past few years. “Our concern over downward pressures on the economy from the strong yen was behind the monetary easing (conducted in September and October),” Shirakawa said. Last month the BOJ decided to boost the scale of its asset-buying fund to Y91 trillion from Y80 after raising it from Y70 trillion in September in the face of growing downside risks to a recovery in growth and prices. After its latest meeting on Nov. 19-20, the BOJ’s policy board voted unanimously, as expected, to maintain practically zero short-term interest rates and left the scale of its financial asset-buying fund at Y91 trillion. “I am well aware that corporate managers here in Nagoya, where export-driven manufacturers play a significant role, have been feeling that they continue to face a severe situation as the value of the yen has remained at a high level following its rapid appreciation since the Lehman shock,” Shirakawa said. Repeating the BOJ’s statement issued last week, he said Japan’s economy “is expected to remain relatively weak for the time being. Thereafter, however, it will return to a moderate recovery path as overseas economies gradually emerge from the deceleration phase.” Japan’s consumer prices will rise gradually as the supply and demand balance improves in accordance with a pick-up in economic activity, he said. In fiscal 2014, the CPI is likely to move steadily closer toward the BOJ’s interim price stability goal of achieving 1% in the longer term, he added. Shirakawa told reporters, “Japan’s CPI is likely to move toward a 1% rise (on year) steadily in fiscal 2014 but the prospects for achieving the 1% price goal have not emerged yet.” He declined direct comment on whether the BOJ should intensify its easing policy commitment in its statement but repeated that the BOJ board will review its interim price goal once a year. The minutes of the Oct. 30 BOJ policy meeting released Monday showed that board member Takehiro Sato proposed changing the bank’s statement that it “will continue with this powerful easing until it judges the 1% goal to be in sight” to an expression that the BOJ “will continue with this powerful easing until it judges that the 1% has been steadily maintained.” His proposal, backed by board member Takahide Kiuchi, was defeated by a majority vote. Both members were private-sector economists before joining the board in July. In the past they have urged the BOJ to do more to help the economy overcome deflation. Shirakawa also repeated his mantra that Japan should increase its economic growth potential to overcome years of deflation. “In an economy where a rise in income is hardly expected to occur in the near future, expenditure keeps declining and thus prices are unlikely to rise,” he said. In response to questions, he said, “When the economy improves, prices will also rise. Improving the economy should come first, followed by price rises.” “It is in this context that the BOJ notes the importance of efforts to strengthen the economy’s growth potential and support from the financial side in order for Japan’s economy to overcome deflation as early as possible and return to the sustainable growth path with price stability,” he said. Shirakawa repeated his recent remarks, saying, “It is also important for the government to continue making efforts to ensure fiscal consolidation.” “Interest rate risk stemming from fluctuation in market rates is heightening. Therefore, it is also extremely important from the viewpoint of financial institutions — which support the growth of business firms through lending activities — that the government makes every effort to ensure fiscal consolidation.” The risk of the European debt crisis has subsided since last year, thanks to progress with reinforcing the safety net including such moves as the European Central Bank’s decision to launch a new government bond purchasing program and the inauguration of the European Stability Mechanism, said Shirakawa. –MNI Tokyo Bureau; tel: +81 90-2175-0040; email: hinoue@mni-news.com –MNI Tokyo Bureau; tel: +81 90-4670-5309; email: msato@mni-news.com [TOPICS: MMJBJ$,M$A$$$,M$J$$$,MGJ$$$]

Hi-tech expansion drives China’s second boom in the hinterland Posted: 25 Nov 2012 10:02 PM PST Nice to see Ambrose in optimistic mood.

Today’s option expiries Posted: 25 Nov 2012 10:02 PM PST For the 26 Nov 2012 @ 1000 NY/1500 GMT cut: EUR/USD: 1.2900, 1.2925 GBP/USD 1.5885 USD/JPY: 82.00, 82.50, 82.75 AUD/USD: 1.0300, 1.0400 NZD/USD: 0.8175

European stocks seen opening marginally lower Posted: 25 Nov 2012 09:59 PM PST Financial bookies see FTSE opening down around -0.2%, DAX down around -0.3% and CAC 40 down around -0.4%.

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