Morning Briefing

Morning Briefing for Tuesday, 10 Jul 2012 (Updated 09:12:25 CET)No major news from the Eurogroup meeting on Monday

MORNING BRIEFING: No major news from the Eurogroup meeting on Monday

What’s new:

Asia: Stocks closed in negative after weak Chinese trade data from June
Spain: Will receive €30 bln by the end of the month through the EFSF
Forex: Most currencies back on last Friday’s level ahead of the Fed’s FOMC meeting minutes to be released tomorrow

Rates in Asia and Indices:

EUR/USD: 1.2282 - 1.2321.
USD/CHF: 0.9747 - 0.9778.
GBP/USD: 1.5498 - 1.5534.
EUR/JPY: 97.64 - 98.05.
USD/JPY: 79.47 - 79.59.
DowJones: 12'736.29 -0.28%
NASDAQ: 2’931.77  -0.19%
S & P 500: 1'352.42  -0.16%
Nikkei: 8'875.87  -0.24%
Shanghai: 2'161.59 -0.42%
Gold: $ 1'586.10
Crude Oil: $ 98.50

Comments:
Asian market closed in the red after Chinese Import growth slowed in June, fuelling concerns over a weakening global economy. Indeed, China’s Import y/y came out at 6.3%, compared to expectations for 12.7%, mainly due to the fact that the US hasn’t fully recovered from the credit crunch.

A quick look on the bond market shows us that Spanish 10-year notes are above 7%, implying that Euro zone Finance Ministers meeting didn’t result in any decisive actions. In fact, they only agreed on giving €30 bln to bailout Spain banking system at the end of June, but Spain will have to reduce its public deficit below 3% of its GDP by 2014 instead of 2013 due to the recession hitting the country. It seems that Greece and Cyprus issues will be discussed in the next Eurogroup meeting on July 20th.

So far, after a series of negative US economic data, the Fed has lowered its forecasts of economic growth and extended by 6-months “Operation Twist”, which is aimed at decreasing interest rates by selling short term securities and buying long term notes. It seems that this latest action isn’t enough to bring the US economy back on the growth track. Indeed, US Non-Farm payrolls in June showed that the labor market is struggling to absorb new entrants, and the unemployment rate should remain above 8% until the end of the year. Based on all these facts, three-top Federal Reserve policy makers stated on Monday that the Fed should go for another round of Quantitative Easing to boost and shield the US economy from the euro-area debt crisis.

Ahead of us today, the economic docket will shed some light on the UK, Canada and US economies. This morning, we expect the UK Trade Balance, Manufacturing Output m/m and Industrial Output m/m for May; followed by housing data from Canada for June around 14:15 CET and the US IDB Consumer Sentiment for July. Most market players will likely focus on the minutes from the last Fed FOMC meeting which will be released tomorrow, trying to guess if there will be QE3 or not?

Have a good day,