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Spanish bond auction and the ECB meeting are the main eye-catchers...

Thursday, October 4, 2012 3:41 AM GMT

     Good Morning ,

 

-   Today, the Spanish bond auction and the ECB meeting are the main eye-catchers, which can spark volatility but are unlikely to change things in a profound way.

 

Asian markets with Japan's Nikkei Stock Average higher by +0.88%, Hong Kong's Hang Seng gaining +0.02% and Australia's S&P/ASX 200 up by +0.31%. On the other side is South Korea's Kospi shedding -0.17% and Mainland China's Shanghai Composite still closed for holidays.

 

-  With regard to the discussions between the Troika and the Greek government, it now seems that the Troika demands Greece to frontload another €1.4B in spending cuts to next year (€9.2B instead of €7.8B). 

 

-  Greece’s hopes of striking a deal with its lenders before EMU FM’s meet next

week dimmed further yesterday. After weeks of talks, Athens is still struggling

to clinch an agreement and the gap is still large, Greek FM Stournaras said.

 

- On Wednesday, investors still stayed largely sideways, waiting on some new developments, be it in the US (payrolls report) or in EMU (Spain, Greece, euro group). The public holiday in Germany only thinned activity further. Eco data had only a very temporary effect and “events” were no big factor either. 

 

-   Today, the focus will be on the ECB meeting, while also the Bank of England will hold its monetary policy meeting. No change in policy is expected as the BoE will probably wait until the November meeting, when a new inflation report is available, to thoroughly discuss an extension of its gilt buying programme. In the US, the jobless claims and factory orders are scheduled for release and the FOMC minutes will be published. Spain and France will tap the market and the US will announce Notes.

 

-  Yesterday, Portugal returned to the bond market for the first time since they received an EU/IMF bailout package. In similar fashion to Ireland earlier this year, they swapped short bonds to longer-dated ones in a €3.76B transaction. 
The debt agency sold 3.35% October 2015 bonds, exchanging them for 5.45% September 2013 bonds. This way, the outstanding demand of the Sep2013 bond, the next big redemption, dropped to just below €6B.

 

-  Germany Fin Min Schaeuble reiterates Spain unlikely to need a bailout, though Germany could be open to supporting an aid program if necessary

 

-  Regarding the ECB, no new decisions are expected, but the attention will go to the press conference where Mr. Draghi will have to bring a delicate balancing act. Why no new decisions? The ECB announced its far-reaching OMT (bond buying programme) only last month and the programme is not yet at work, as Spain drags its feet in requesting an ESM bailout programme, a condition for ECB buying.

 

-   The world economic will take at least 10 years to emerge from the financial

crisis that started in 2008, IMF Chief Economist Blanchard said in an interview

yesterday. Blanchard added that the adjustment in EMU required a decrease in

prices in the Southern countries and a rise in core countries.

 

-   Brent crude oil prices dropped sharply lower on Wednesday, despite an

unexpected drop in inventory levels. Crude oil prices lost more than $3/barrel in

one day to close the session at its lowest level in two weeks

 

-  Today, A two-day BOJ policy meeting started. After last month’s easing, the

Bank is expected to stay on hold. However, the pressure is building for the BOJ

to take additional steps at the Oct 30 meeting. Of late, BOJ policy action most of

failed to have a sustained impact on the yen

 

-  Japan Fin Min Jojima: See potential for achieving a budget compromise; Open to talks on midyear revisions to FY12/13 budget 

 

New Zealand Fin Min: QE in Europe, US and Japan increasing difficulty for exporters; Govt is focusing on ways to help exporters become more competitive

 

 

 Have a nice day !

 

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