Last Market news @ Empire Global FX broker

[EmpireGlobalfx]

Swiss franc jumps as SNB absent from market

(Reuters) - The Swiss franc leaped against the euro and the dollar on Wednesday as the absence of new measures to contain the currency's strength from the Swiss National Bank and euro zone debt worries spurred a relief rally.

Demand for the safe-haven Swiss franc returned with the SNB conspicuous by its absence from the currency forwards market since last week. The SNB announced no new measures after making an announcement on three of the four Wednesdays in August.

The euro was last down 1.9 percent to 1.1620 francs, while the dollar slumped 1.9 percent to 0.8048 franc, retreating from a recent high of 0.8239 struck on Monday. Traders cited Swiss franc buying by U.S. and Swiss investors.

Switzerland's economy minister said the currency is "massively overvalued.

Mounting concerns about European sovereign debt and the prospect of additional U.S. Federal Reserve stimulus drove investors back into the safety of the Swiss franc, according to Omer Esiner, chief market analyst at Commonwealth Foreign Exchange in Washington.

"While the threat of SNB intervention may slow the franc's rise, it is unlikely to meaningfully deter investors from the safe harbor offered by the franc."

The SNB's intervention in the swap market and moves to flood the Swiss banking system with francs and cut interest rates to near zero has toppled the Swiss franc from record highs hit earlier this month.

Investors took profits after the euro failed to break through 1.2000 francs earlier this week, analysts said, while the Swiss franc looked oversold on daily charts, having hit its lowest level since early July on Monday.

In the United States, data showed the pace of U.S. private sector job growth slowed in August for the second month in a row.

The ADP data precedes Friday's key U.S. Labor Department report on August's unemployment and payrolls.

The labor market is key to U.S. Federal Reserve monetary policy and continued weakness could increase the likelihood of another round of bond buying by the Fed.

A German cabinet decision that set policymakers on course for parliamentary ratification of changes to the euro zone's bailout fund helped push the single currency briefly to a session high of $1.4470 versus the dollar.

But it was last down 0.2 percent at $1.4412. Traders said month-end demand for dollars from investors rebalancing their stock and bonds portfolio was weighing on the euro.

"The difficulty the market has at the moment is finding a reason to buy any currency. The euro zone has got a peripheral problem, the U.S. has got a potential QE problem," said Daragh Maher, deputy head of FX research at Credit Agricole.

"The Swiss franc remains a safe play. If numbers do not improve, people remain nervous and the euro zone situation remains grim, we can expect to see the franc strengthen again."

Minutes from the Fed's August 9 meeting showed policymakers discussed a range of unusual tools they could use to help the economy, adding to expectations the Fed may flag a third round of quantitative easing at its two-day meeting in September.

The dollar was up 0.1 percent at 76.74 yen.

With the yen hovering near a record high against the dollar of 75.941 hit earlier in August on trading platform EBS, market players remain wary of the potential for Japanese authorities to intervene to sell the yen.

 

[EmpireGlobalfx]

Asia stocks rise, helped by consumer, tech


(Reuters) - Asian stocks rose on Thursday following gains on Wall Street, with technology and consumer shares outperforming, and credit spreads tightened on optimism central banks around the world will have to do more to support industrial activity.

Slumping exports slowed factory activity in some of Asia's biggest economies in August, although China managed modest improvement thanks to solid domestic demand, a series of surveys released on Thursday showed.

Brazil shocked investors by slashing its key interest rate to 12 percent from 12.5 percent on Wednesday citing concern over the mounting global slowdown as well as weaker growth in Latin America's largest economy.

But investors cautioned that gains would likely be limited ahead of key U.S. manufacturing and jobs data due later this week. Signs of a weakening economy have led to speculation the Fed will step in with a new round of monetary expansion.

"The China PMI data gave some immediate relief to the market, but the U.S. data, particularly the employment numbers, are still to come," said Yutaka Shiraki, senior equity strategist at Mitsubishi UFJ Morgan Stanley Securities.

The MSCI Asia Pacific ex-Japan index .MIAPJ0000PUS rose 1.4 percent, having fallen 9 percent in August when global markets were roiled by a sovereign downgrade in the United States, persistent debt problems in the euro zone and downward revisions in growth expectations.

In Japan, the Nikkei .N225 gained 1.4 percent to clear the key 9,000 level for the first time in two weeks, while South Korea's KOSPI .KS11 added 2.2 percent despite economic data showing the country's manufacturing sector shrank in August for the first time in 10 months.

Credit spreads on Asia ex-Japan iTraxx investment grade index have tightened in early deals to 143.5/144 basis points compared with Wednesday's close of 147.86 bps, after recording their worst monthly performance of 2011 in August, IFR reported.

CHINA REASSURES

China's official PMI offered some reassurance about the pace of growth, rising on Thursday to 50.9 in August from a 28-month low of 50.7 in July and signaling some stabilization in the manufacturing sector on solid domestic demand.

However, the result was just below expectations and the sub-index for new export orders dipped to 48.3 from 50.4, suggesting that exports may weaken in the future.

In Australia, signs of a recovery in retail sales lifted retail stocks, with department store Myer (MYR.AX) adding more than 4 percent.

U.S. economic data overnight showed the economy continues to struggle, and the U.S. Institute for Supply Management's national manufacturing index is due at 8:30 a.m. EDT, followed by the U.S. Labour Department's employment report on Friday.

Fears that the ISM index may fall below 50 have been eased by a brighter than expected reading of manufacturing activity in the Chicago area released on Wednesday.

Among currencies, the Swiss franc held on to gains made the previous day after a top government official said Switzerland would have to live with a strong currency, while commodity currencies steadied after an initial dip on Brazil's rate cut.

The Australian dollar was at $1.0697, below from a one-month high of $1.0722 hit on Wednesday.

The euro eased slightly to $1.4370, slipping further from a two-month high at $1.4550 hit at the start of the week, though traders say the currency is essentially playing in a range.

In commodity markets, spot gold held steady to be little changed at 1,824.54 an ounce, to be up 29 percent this year.

U.S. crude oil futures were steady after a slight decline the previous day on the back of a larger-than-expected build in U.S. crude inventories.

 

[EmpireGlobalfx]

Euro suffers after weak PMI, risk more selling

(Reuters) - The euro fell broadly on Thursday, hammered by a fall in manufacturing across the euro zone and at risk of more losses if U.S. figures later in the day offer a similar picture.

Weak readings from the purchasing managers surveys highlighted economic weakness, boosting the Swiss franc against the euro and the dollar as investors looked to test the resolve of the Swiss National Bank to stem the safe haven currency's strength.

The euro fell around 0.8 percent on the day to a session low around $1.4260.

Ahead of U.S. ISM manufacturing PMI at 1400 GMT and key jobs data on Friday, the single currency is seen as having the most to lose from signs of weakness both in the European and global economy, given that the region remains far from a solution to its debt crisis.

Data showing contractions in the manufacturing sectors of most euro zone countries was the driver of broad euro selling, analysts said. This weakness extended to Germany, the euro zone's biggest economy, where manufacturing barely expanded in August and weakened from July.

Confidence about the euro zone's stability has been shaken by signs that officials are dragging their feet on steps to ease debt problems in Greece and other countries, creating tensions in funding markets and raised worries about the health of financial institutions in the region.

"Concerns about Greece's debt burden in general is the main factor weighing on the euro, and complicating that today has been the euro zone economic data flow," said Stephen Gallo, head of markets analysis at Schneider FX.

Not helping the euro's cause was sluggish demand at a Spanish bond auction, days after a weak response to an Italian sale, highlighting increased investor wariness about two of the euro zone's biggest countries.

The euro broke below technical support in the $1.4320-1.4365 range, where many of the single currency's moving averages were clustered.

It sank below trendline support at $1.4280 -- drawn from lows hit in July and August -- and a slight recovery from the day's low was capped by offers from a U.S. investment bank around that level.

The franc rallied across the board, up roughly 1.5 percent lower to 1.1377 francs.

The euro's tumble from a session high around 1.1615 gained traction after stop-loss sell orders were triggered below 1.1500 francs and 1.1450, with traders citing selling by Swiss names and macro funds.

Broad franc strength pushed the dollar 1 percent lower to 0.7958 francs, just above bids seen at 0.7950 francs.

The yen stayed under pressure on dollar buying by Japanese accounts, lifting the U.S. currency to around 77 yen and soothing jitters that another round of intervention by Tokyo authorities may be on the way.

WEAK ISM EXPECTED

The U.S. ISM manufacturing index is due later in the session and analysts expect a reading of 48.5 in August versus 50.9 in July, indicating a contraction of the sector.

"There is a risk of a sub-50 reading in the U.S. ISM manufacturing index. If that happens, cyclical and commodity linked currencies will underperform," said Audrey Childe-Freeman, EMEA head of currency strategy at JP Morgan Private Bank.

"The global economy is clearly going through a marked slow-down in economic activity, and the market is trying to assess whether this will be just a soft patch or whether we are heading toward a recession."

Such concerns are driving more investors into the perceived relative safety of currencies such as the Swiss franc and the yen.

The franc extended gains following a rally on Wednesday, after a top government official said Switzerland would have to live with a strong currency and there was little sign of action from the Swiss central bank.

The SNB has been quiet since mid-August, when it flooded the market with francs, cut rates to near zero and intervened in the swap market to bring the franc down from record highs.

Traders cited chatter that the SNB was checking rates in the Swiss franc forward market, although it was not seen actively intervening to drive down forward rates. Analysts said some traders considered its absence in the forwards market as a green light to push the franc higher.

"The SNB's sight deposit target of 200 billion francs has likely been reached by now and, given the silence from the SNB, investors might now try to test the SNB's resolve," said Chris Walker, currency strategist at UBS.

 

[EmpireGlobalfx]

China bought back a lot of BofA assets: report

(Reuters) - A consortium that included the Chinese government was the biggest buyer of a 5 percent stake in China Construction Bank Corp sold last month by Bank of America, the Financial Times reported on Sunday.

The State Administration of Foreign Exchange, the National Social Security Fund and Citic Securities bought the CCB shares, the FT said, citing unnamed sources.

The Chinese government role has been a closely guarded secret as it comes amid fears that Chinese bank stocks will raise additional capital and dilute the stakes of current investors, the FT said. There has been concern that loans and other assets held by CCB and other Chinese banks are vulnerable to losses in a possible slowdown of the Chinese economy.

CCB has been the world's second-largest bank by market value.

Bank of America agreed to sell 13.1 billion CCB shares -- half of its stake -- because of its own drive to raise capital to make up for losses from mortgage loans made during the U.S. housing boom. Bank of America, the biggest U.S. bank by assets, will get $8.3 billion cash from the sale.

Trading volume in CCB shares surged after the sale, suggesting to some in the market that about one-third of the shares sold by Bank of America went to hedge funds and other institutional investors.

Temasek Holdings, a Singapore state investor, and Seatown, a related investment firm, were among previously reported buyers of the CCB shares.

 

[EmpireGlobalfx]

Europe faces week of challenges in debt crisis

(Reuters) - Europe faces a string of political and legal tests this week that could hurt efforts to resolve its sovereign debt crisis and increase pressure for governments to try more radical solutions.

A court ruling may reduce the freedom of the German government, the biggest contributor to the euro zone's bailout fund, to finance rescues of crisis-hit countries such as Greece.

The European Central Bank, internally split over its bond market intervention to protect Italy, is expected to review the program. And Greece will find out how successful it has been in persuading private investors to take part in a bond swap designed to cut its 340 billion euro debt mountain.

None of these challenges looks likely to doom policymakers' frantic attempts to keep indebted euro zone countries afloat while they try to regain the confidence of financial markets.

But this week's events may underline how vulnerable those attempts are to worsening political currents in the euro zone, and how far the 17-nation bloc remains from finding a lasting solution to the debt crisis.

COURT RULING

On Wednesday morning, Germany's Federal Constitutional Court will deliver its ruling -- awaited for over a year -- on suits claiming Berlin is breaking German law and European treaties by contributing to multi-billion euro bailouts of Greece, Ireland and Portugal.

Legal experts think the court is highly unlikely to block the contributions altogether. But it is expected to give the German parliament a bigger say in approving them.

With German public opinion turning against providing more aid to Europe -- a survey published last week suggested two-thirds of Germans think parliament should not ratify more money for the bailout fund -- that could be a dangerous concession. At the very least, it might further slow and complicate Berlin's responses to the debt crisis.

It could also encourage parliamentary opposition to bailouts in other disillusioned euro zone states. In Slovakia on Sunday the head of a junior party in the ruling coalition said the Slovak parliament would not vote on expanding the powers of the regional bailout fund, the European Financial Stability Facility, before December at the earliest.

Euro zone officials have been hoping national parliaments around the bloc will finish approving the EFSF reforms by early October. The threatened delay in tiny Slovakia may not be disastrous -- diplomatic pressure may be put on Bratislava to speed up approval, or a legal subterfuge found for the EFSF to use its new powers pending Slovak approval -- but it underlines how the bloc's crisis plans rest on shaky political ground.

Politics have also turned ugly in some of the euro zone countries which need aid. The ECB's monthly policy meeting will grapple with this on Thursday as it debates how to handle Italy.

Early last month, the ECB's 23-member Governing Council decided to begin buying Italian government bonds to prevent a disastrous jump of their yields, overriding the opposition of a small minority of council members who felt this compromised the central bank's monetary policy.

The ECB's intervention was launched on the understanding that Italy would rush through an austerity plan to regain market confidence. But efforts by Prime Minister Silvio Berlusconi's embattled government to do this have been plagued by disputed figures, policy U-turns and cabinet rows.

Now the ECB will have to decide whether to continue its bond-buying -- or whether the purchases are actually worsening the situation by reducing pressure on Italy to reform its finances. Italian bond yields have started rising back in the past week; some traders think the ECB may deliberately be permitting this in an attempt to obtain leverage over Rome.

The ECB is widely expected to maintain a substantial level of bond-buying in coming weeks because an Italian yield surge could destabilize the whole region. But it may not purchase enough to keep yields at comfortable levels for Italy, especially if the strengthening of the EFSF is delayed and the fund is not able to take over buying in October as hoped.

Meanwhile, Greece has set a deadline of Friday afternoon for European banks to express their interest in its bond swap; the banks will be required to commit by mid-October.

Athens wants 135 billion euros of outstanding bonds to be swapped or rolled over, which translates to a high take-up rate of 90 percent. It has warned that the whole scheme, and conceivably even its plan to receive a second international bailout, could be threatened if that target is not hit.

Greece appears likely to come close enough to the 90 percent threshold to declare the operation a success; the chief executive of Intesa Sanpaolo, Italy's biggest retail bank, said on Saturday he was hearing positive indications from the Institute of International Finance banking lobby group.

But even if the debt swap is fully taken up, analysts think that combined with other planned measures, it will only produce a drop in the ratio of Greece's debt to its gross domestic product to around 120 or 130 percent over the next few years, from above 150 percent now. So another, more painful Greek debt restructuring may be inevitable down the road.

RADICAL STEPS

This helps to explain why markets are unlikely to react with much optimism even if events this week turn out positively -- and why a growing number of past and present policymakers are advocating more radical crisis steps.

European Commission President Jose Manuel Barroso insisted euro zone policymakers were doing everything possible to resolve the crisis.

"I want to be clear here. The European Union and the euro are strong and resilient. We are doing all it takes," he said on Monday in Australia after talks with Prime Minister Julia Gillard.

Still, Italian Economy Minister Giulio Tremonti repeated his call on Sunday for euro zone governments to issue bonds jointly, saying the measure was vital to resolve the crisis. Germany has strongly resisted the idea on the grounds that it would penalize financially responsible countries.

Former German chancellor Gerhard Schroeder on Sunday called for the creation of a "United States of Europe," saying the bloc needed a common government with a unified budget policy to avoid future economic crises.

Schroeder, a Social Democrat who ran Germany from 1998 to 2005, said European Union member states would have to return to the negotiating table and hammer out a new treaty covering the bloc's institutional framework.

Steen Jakobsen, chief economist at investment bank Saxo Bank, said governments had great political will to protect the euro zone, and were likely to take drastic action eventually to head off disasters such as an Italian exit from the zone.

But for this to happen, he said, "Germany needs to step up to the plate in a way it has not done so far."

 

[EmpireGlobalfx]

Empire Global FX: Gold edges lower; growth worry supports

(Reuters) - Spot gold edged lower on Monday, retaining most of its gains from the previous session, as a dismal growth outlook after the U.S. jobs data supported safe-haven interest in bullion.

U.S. employment growth ground to a halt in August, reviving recession fears and piling pressure on both President Barack Obama and the Federal Reserve to provide more stimulus to aid the frail economy.

The bleak outlook of the world's largest economy sent anxious investors to safe haven assets including bullion.

"Even if you take out the effect from the Verizon strike, it is still a lousy number and people are concerned that growth is not there any more," said Dominic Schnider, head of commodity research of UBS Wealth Management in Singapore.

He expected the recession fear to send gold to test its record high above $1,911 hit in late August, and to $2,200 in the next three months.

Technical analysis echoed Schnider's expectations. Spot gold may rise toward the record of $1,911.46 later in the day, as it has resumed its long-term uptrend, said Reuters market analyst Wang Tao.

Spot gold edged down 0.3 percent to $1,877.45 an ounce by 0327 GMT, after surging 3.2 percent in the previous session. U.S. gold inched up 0.2 percent to $1,880.50.

Amid concerns about the resurgent debt crisis in Europe, European Commission President Jose Manuel Barroso on Monday said he still expected modest growth in Europe and did not anticipate a recession in Europe.

"The market has been a bit choppy -- some sold to book profit earlier and many are waiting for cues for further stimulus from the Fed," said a Hong Kong-based dealer.

Market participants will also closely watch President Barack Obama's speech on Sept 7 to unveil new economic proposals to Congress.

Money managers cut their net long positions in U.S. gold futures and options for a fourth week in a row in the week ended August 30, as bullion prices pulled off an all-time high set a week earlier, data showed on Friday.

Spot platinum hit a two-week high of $1,885.50, before easing to $1,869.99.

The platinum-gold spread dipped into negative territory on Friday and remained at a small discount of $7, which may have spurred investors to buy platinum.

Precious metals prices 0327 GMT

Metal Last Change Pct chg YTD pct chg Volume

Spot Gold 1877.45 -6.35 -0.34 32.27

Spot Silver 43.03 -0.16 -0.37 39.44

Spot Platinum 1869.99 -7.81 -0.42 5.80

Spot Palladium 775.00 -10.78 -1.37 -3.06

TOCOM Gold 4639.00 113.00 +2.50 24.40 93290
TOCOM Platinum 4654.00 59.00 +1.28 -0.89 10464

TOCOM Silver 105.50 2.90 +2.83 30.25 1307

TOCOM Palladium 1933.00 -13.00 -0.67 -7.82 253

COMEX GOLD DEC1 1880.50 3.60 +0.19 32.30 16838

COMEX SILVER DEC1 43.12 0.05 +0.11 39.35 1554

Euro/Dollar 1.4168

Dollar/Yen 76.73

TOCOM prices in yen per gram. Spot prices in $ per ounce.

COMEX gold and silver contracts show the most active months

 

[EmpireGlobalfx]

EmpireGlobalfx: European shares lower on recession concerns

(Reuters) - European shares fell on Monday, extending its previous session slide on concerns that the United States could be heading towards recession following Friday's weaker than expected U.S. nonfarm payroll data.

Banking stocks featured heavily among the worst performers on the growth outlook concerns, with the STOXX Europe 600 Banks index .SX7P down 2.6 percent.

"Sentiment seems to be playing a big move in these market swings, nothing happened over the weekend to install investor confidence," Mark Priest, senior equities trader at ETX Capital, said.

"There are concerns that growth is not what it is expected to be."

By 8:14 a.m., the pan-European FTSEurofirst 300 .FTEU3 index of top shares was down 2 percent at 929.41 points after dropping 2.5 percent on Friday after the economy failed to create any new jobs on a net basis for the first time in nearly a year.

 

[EmpireGlobalfx]

Asian shares fall amid euro zone, banking worries

(Reuters) - Asian shares fell and the euro slipped on Tuesday amid fears that Europe's sovereign debt troubles are worsening and could trigger a second full-blown banking crisis.

European stocks tumbled 4 percent on Monday, with financial shares falling to their lowest in more than two years. Wall Street was closed on Monday for a holiday, but S&P 500 futures traded in Asia were down 2.3 percent.

"It's the European disease that is infecting markets all around the world at the moment," said Michael Heffernan, senior client adviser and strategist at Austock Group in Australia.

Adding to the gloom are worries that the United States may be sliding back into recession, a concern heightened by a slew of downbeat data, most recently employment figures that showed the world's top economy failed to create any jobs last month.

Gold, traditionally seen as a safe asset in times of uncertainty, sat just short of $1,900 an ounce, not far off its record high, while the yield on 10-year Japanese government bonds(JGBs), another safe haven, fell below 1 percent.

Tokyo's Nikkei fell 1.2 percent, while MSCI's broadest measure of Asia Pacific shares outside Japan was off 1.1 percent, putting the index more than 18 percent down from its April high.

Hardest hit sectors in the MSCI index were materials and financials. Banks with heavy exposure to Europe were sold, including HSBC, whose Hong Kong listed shares dropped 2.8 percent.

EURO CRISIS

The latest focus of Europe's slow motion crisis is Italy, whose bonds were sold off on Monday on worries that Rome is not doing enough to bring its debt under control. Italian 10-year yields rose near 5.6 percent, their highest since early August.

While European leaders have been able to put together bailout packages for Greece, Ireland and Portugal, investors fear the consequences of a similar crisis engulfing a bigger economy such as Italy or Spain.

The chief executive of Deutsche Bank said on Monday that the euro zone sovereign debt crisis would stunt bank profits for years and could cause the collapse of weaker lenders.

The euro traded around $1.4070, having fallen as low as $1.4060. That helped the dollar index climb above 75.200, its highest in nearly a month.

The European Central Bank, the only major Western central bank to raise interest rates since the 2008/09 financial crisis, meets on Thursday but is expected to leave borrowing costs unchanged at 1.5 percent, which could put the single currency under further pressure.

"Without the support of a more hawkish central bank, the euro will look very vulnerable," Societe Generale strategists Kit Juckes and Sebastien Galy wrote in a note.

JGBs were in demand, as investors retreated from riskier assets, with September 10-year futures up 0.12 point at 142.91, after hitting a 10-month high, while the benchmark 10-year yield fell 1.5 basis points to 0.995 percent.

Brent crude oil rose 0.7 percent $110.82 a barrel, but U.S. crude, whose volume was trimmed by Monday's holiday was down nearly 3 percent, at just below $84.

 

[EmpireGlobalfx]

Swiss franc plunges 10 percent vs euro on SNB shocker

(Reuters) - The Swiss franc plunged nearly 10 percent against the euro on Tuesday, posting its worst day ever, after Switzerland's central bank jolted markets by setting a limit on how much the franc can gain.

The euro surged after the Swiss National Bank said it would enforce a limit of 1.20 francs to the euro by buying foreign currencies in unlimited quantities. The dollar also rose sharply, gaining 9.6 percent against the franc.

Investors have poured money into the franc, which they see as one of the few safe places for assets amid global financial turmoil. The franc's rise sparked worries among Swiss officials that its export-driven economy will be damaged by the currency's strength.

"When a central bank communicates that it doesn't want its currency to strengthen, it's generally a bad idea to go against that central bank. Today is a reminder why," said Jonathan Lewis, founding principal at Samson Capital Advisors, with assets under management of $7 billion.

The euro rose as high as 1.22 francs on trading platform EBS, ending four days of losses.

The SNB's latest move comes after it cut its already low interest rate target to nil on August 3. It also flooded the banking system with francs, effectively driving money market and forward rates deep into negative territory and making holding Swiss francs a costly proposition for investors.

The SNB had made repeated warnings that it wouldn't tolerate a strong currency.

Many analysts believed the SNB may have finally instilled fear in investors still trying to seek shelter in the franc away from the euro zone's sovereign debt crisis. The SNB's ability, however, to hold the floor at 1.20 francs to the euro will very much depend on developments in the euro area.

"An intensification of the euro zone crisis is a reasonable prospect and such an event could yet result in a significant step up in demand for the Swiss franc," said Jane Foley, senior currency strategist at Rabobank in London.

However, since there is zero inflation in Switzerland, the SNB could potentially just print francs and sell them on an unlimited basis to counter the surge in currency inflows. For this reason, Foley believes the 1.20 cap on the euro/Swiss franc could hold in the near term.

In late trading, the euro was up 8.7 percent at 1.20550 francs, rising a low of 1.10200 and a closing level at 1.11000 on Monday,

The Swiss franc has dropped roughly 20 percent versus the euro in the past month as the single currency has soared from a lifetime low of 1.00750 hit on August 9 on EBS.

As a result, fund managers who took bets that the franc would fall around that time were sitting on hefty gains.

The U.S. dollar rose as high as 0.86250 franc on EBS and was last up 9.4 percent at 0.86150 franc, snapping a four-day drop against the franc.

FLOWS INTO NORWAY

The Swiss central bank action also funneled some safe-haven flows into the Norwegian crown, a currency with robust fundamentals -- an oil exporter and a country with a current account surplus. The euro fell 1.2 percent against Norway's crown to 7.5772.

One-month implied volatility on the euro/Norwegian crown pair, a measure of the market's expectations of future movements in either direction, jumped to 9.7 percent from 8.4 percent late on Monday, suggesting more trading action seen on this cross.

Despite the euro's steep gains against the Swiss franc, the single currency fell against the dollar, down 0.7 percent on the day at $1.39910. It fell to a low of $1.39720, trading below its 200-day moving average around $1.40150 for the first time since July 12.

Market players said the key risk for the euro this week was that the European Central Bank would signal a pause in its rate tightening cycle.

Concerns that the next tranche of bailout funds for Greece may be delayed, worries about European bank funding and rising Italian government bond yields on speculation Rome may struggle to implement new austerity measures kept the euro under pressure.

The dollar rose against the yen on EBS on speculation the SNB's measures could encourage Japanese authorities to intervene in coming days. The dollar was up 1.0 percent at 77.690, well off a record low of 75.941 struck on Aug 19.

 

[EmpireGlobalfx]

Asian stocks run out of steam, euro vulnerable

(Reuters) - A rebound in Asian stocks ran out of steam on Thursday, as worries over the widening impact of the euro zone crisis and the faltering U.S. economy gnawed at investor confidence.

The euro edged down, and remained vulnerable to concerns that European efforts to contain a two-year-old sovereign debt crisis are flagging.

"Volatility still persists and the market is likely to continue to dance to the tune of policy risks involving the U.S. and European economies," said Kim Hyung-ryol, a market analyst at Kyobo Securities in Seoul.

Global equities suffered their worst correction since 2008 in August, on fears of renewed recession in the United States and worries about Europe's widening crisis, and the MSCI All-Country World index .MIWD00000PUS remains 16 percent below its 2011 high, reached in May.

Japan's Nikkei .N225 rose 0.5 percent, paring earlier gains, while MSCI's broadest index of Asia Pacific shares outside Japan .MIAPJ0000PUS fell 0.2 percent.

Germany's top court on Wednesday rejected lawsuits aimed at blocking Berlin's participation in bailout packages for Greece and other heavily indebted euro zone countries, offering some temporary relief to global markets.

European stocks rose 3.1 percent markets/index?symbol=gb%21FTPP">.FTEU3 and on Wall Street the S&P 500 rose 2.9 percent .SPX.

The euro, after jumping on the German court decision, eased on Thursday to around $1.4060, as traders awaited a European Central Bank rate-setting meeting later.

CHANGE OF TACK

The ECB is the only major Western central bank to have raised rates since the global financial crisis, but is expected to signal a change in policy tack and halt its tightening cycle in response the sovereign debt crisis.

Market players will also be closely watching for any comment from ECB President Jean-Claude Trichet on the central bank's buying of Italian and Spanish bonds to force down yields, a policy that has deeply divided its governing council.

"If Trichet makes cautious remarks on bond buying, Italian and Spanish spreads could rise again and hurt investor sentiment," said Junya Tanase, chief strategist at JPMorgan Chase.

Federal Reserve Chairman Ben Bernanke is due to speak later on Thursday, at 1730 GMT, and President Barack Obama will outline to Congress his plans for reviving the faltering economy at 2300 GMT. With unemployment stuck above 9 percent, Obama will lay out a plan to spur job creation.

Many analysts expect Bernanke to hint at further easing steps to try to stimulate the economy, which could put downward pressure on the dollar.

The U.S. currency was a little firmer against the yen at around 77.40, while the dollar index .DXY, which measures its performance against a basket of major currencies, edged up around 0.2 percent.

Gold rebounded 1 percent to trade around $1,835 an ounce, after tumbling 3 percent in the previous session.

The precious metal has hit a succession of records, most recently at $1,920.30 on Tuesday, driven by its appeal as both a safe haven in times of economic uncertainty and as a hedge against inflation, which some fear will be the eventual consequence of the ultra-loose monetary policies being pursued in much of the developed world.

"Concerns about economic growth in the United States and euro zone will keep supporting gold prices. Even though we may see liquidation repeatedly along the way, gold will rise toward $2,000," said a dealer at a Tokyo-based bullion house.

Oil was little changed, with U.S. crude flat at $89.33 a barrel and Brent crude down 0.2 percent at $115.60.

 

[EmpireGlobalfx]

Euro off 2-month low but vulnerable after ECB


(Reuters) - The euro bounced off a two-month low against the dollar on Friday but the risk of a break below its July trough is seen rising after a deepening debt crisis forced the European Central Bank to drop its tightening policy bias, a key driver in the euro's rally this year.

The market showed a mostly muted response to U.S. President Barack Obama's $447 billion package on jobs that is made up largely of tax cuts for workers and business, amid doubts over whether he can push it through a divided Congress.

"The euro now doesn't have the support of expectations for rising interest rates, which clearly points to the higher possibility that the euro will fall below (its July low near) $1.38. In addition, strains on European banks' funding are rising. Given all this, the euro looks likely to fall further," said Minori Uchida, senior analyst at the Bank of Tokyo-Mitsubishi UFJ.

For now though, sizable buying in the euro against the yen, thought to be from Japanese investors, lifted the euro 0.4 percent against the dollar and the yen in Asia.

The euro rose to $1.3933, after dropping to $1.3873 on Thursday, its lowest in two months. The common currency also gained to 108.00 yen, about a half-yen above its six-month low of 107.54 yen hit on Thursday.

Traders expect the currency to head toward the July low of $1.38376, a break of which could send a strongly bearish signal, with $1.35 cited as its next possible target.

"The euro is unequivocally bearish. It broke through its long-term support and is likely to go significantly lower," said David Scutt, a trader at Arab Bank Australia.

The European Central Bank held rates steady at its policy meeting on Thursday, saying inflation risks are no longer skewed to the upside and that economic growth in the region will be slow at best, prompting money markets to fully price in a rate cut by the year-end.

Dollar funding strains for European banks showed no sign of abating with the euro/dollar basis swap spread on Thursday hitting its highest since last 2008.

POTENTIAL PITFALL

Another potential pitfall for the euro is uncertainty over Greece's debt swap plan as Friday is the deadline Athens has given investors in Greek bonds to say whether they intend to take part in its debt exchange offer, a key part of a second 109 billion euro bailout package it clinched on July 21 to avoid bankruptcy.

Greece had threatened to cancel the deal unless it got 90 percent participation, a stance some banks think may just be tactics by Athens to get most bondholders on board. Still, a low participation rate in Greece's debt swap could mean reluctant euro zone partners will have to cough up more cash for the overall package to work.

But the dollar also lacked traction after Obama's long-awaited job proposals failed to boost hopes of a U.S. recovery. U.S. jobless claims unexpectedly rose last week, highlighting the fragile state of the U.S. job market.

"To some extent, this was largely in line with the chatter we heard before it's release. It may even be a bit smaller than needed given the gravity of the problem. That could prevent markets from reacting too positively," said Omer Esiner, senior market analyst at Commonwealth Foreign Exchange in Washington.

"And at the end of the day, it depends on what the finished product will be. A lot of this will be chopped up before it is passed. We've seen a lot of political paralysis in Washington."

Federal Reserve Chairman Ben Bernanke offered little new insight as to what the central bank will do at its policy meeting on Sept 20-21 in his speech on Thursday, though most players remain convinced that the bank will start buying longer-dated bonds in a bid to try to lower longer bond yields.

The dollar index slipped to 76.09, having surged to two-month highs of 76.319 on Thursday. Against the yen, the dollar stood flat at 77.48 yen.

The Australian dollar gained 0.3 percent to $1.0620, but lacked the energy to tackle a resistance-packed zone from $1.0630, its 55-day moving average, through $1.0648, the 100-day average, to $1.6057, a 61.8 percent retracement of its decline earlier this month.

 

[EmpireGlobalfx]

Brent oil steady near $115 on storms, U.S. jobs package

(Reuters) - Brent crude edged up toward $115 a barrel on Friday, after falling more than a dollar in the previous session, supported by storm threats and uncertainty about President Barack Obama's latest plan to revive the world's largest economy.

Brent for October delivery was on track for a weekly gain of more than 2 percent, trading up 10 cents at $114.65 a barrel by 0627 GMT.

U.S. crude oil fell seven cents to $88.98 a barrel and was set for a gain of more than 3 percent this week.

Concerns over economic growth and tepid demand for oil remain the main pressure points for the oil markets, blunting bullish sentiment from Libya's civil war, hurricanes and a battered U.S. dollar.

"The question for the oil market is demand destruction and how confident the consumer is, both of which are very uncertain," said Jeremy Friesen, commodity strategist at Societe Generale in Hong Kong.

"If European and U.S. policymakers can find some compromise and willingness to work together before economics force their hand, then that is bullish for oil. But I think we will probably see the market grind sideways," he added.

JOBLESS PROBLEM

Obama unveiled a $447-billion package of tax cuts and new spending to revive a stalled job market but he faces an uphill fight with Republicans.

Federal Reserve Chairman Ben Bernanke also highlighted the elevated jobless rate and sluggish underlying growth at a speech on Thursday, but disappointed investors by stopping short of laying out a plan for action at the central bank's policy-setting meeting this month.

The U.S. dollar index .DXY barely reacted to Obama's job package, trading down 0.4 percent to 76.214.

Oil continued to find support from the busy 2011 hurricane season in the Atlantic and supply outages in OPEC member Libya.

Tropical Storm Nate, the 14th named storm, was gaining strength and could become a hurricane on Friday or Saturday, the U.S. National Hurricane Center said. The tropical storm has prompted producers in the Gulf of Mexico to begin another round of evacuations of nonessential workers.

The U.S. Energy Information Administration said commercial oil inventories fell nearly 4 million barrels last week, far deeper than the forecast for a 1.9 million barrel drawdown.

Inventories dropped as imports slid more than 1 million barrels per day with offloading hampered by Hurricane Irene's passage through the East Coast that also compelled refineries to cut utilization rates by more than a quarter.

In Libya, the man tasked with running the country, interim Prime Minister Mahmoud Jibril, reminded his forces that the war was not over yet as the latest deadline for the surrender of pro-Muammar Gaddafi towns loomed and fighters massed on both sides.

"The consensus is that with the Libyan civil war essentially over, market pressures are easing, but the reality is that we are at the peak point of Libyan stress -- without crude production, but with high imports to meet internal fuel needs," analysts at J.P. Morgan said in a research note.

 

[EmpireGlobalfx]

Euro seen under pressure on lack of G7 support

(Reuters) - The euro and growth-linked currencies may fall on Monday, hit by a lack of concrete measures from Group of Seven finance chiefs to address either faltering growth, the escalating euro zone debt crisis, or exchange rate volatility.

The dollar, yen and, to a lesser extent, Swiss franc are set to advance with more investors seeking safe-haven currencies on the back of rising financial market stress.

That will raise the risk of more solo intervention from Japanese and Swiss authorities.

The flight to safety should drive core government bonds like German Bunds and British gilts higher, leading to wider spreads over euro zone peripheral debt, while European banking shares may ease on mounting worries about contagion engulfing bigger economies like Italy and Spain.

Finance ministers and central bankers from the Group of Seven industrialised nations pledged to respond in a concerted matter to a global slowdown. However, they offered no specific steps and differed in emphasis on Europe's debt crisis.

That will likely offer little solace to investors who had expected some sort of coordinated policy response from G7 policymakers at a time when stock markets have been falling and global growth in showing increasing signs of stalling.

"As this falls short of any commitment to undertake co-ordinated action in currency markets, investors are likely to react with disappointment when trading resumes on Monday," said Mansoor Mohi-uddin, head of foreign exchange strategy at UBS.

He expected Japan to stay on intervention watch.

Japan's finance minister, Jun Azumi, said he met with little resistance to further intervention at the G7 meeting. Japan last intervened in the currency market on August 4 to topple the yen from a record high against the dollar.

"We expect Japan's authorities will act again unilaterally if dollar/yen tests its post-war lows of 75.95 yen. As a result we think investors should instead keep favouring the dollar now when they seek safe-haven currencies," UBS's Mohi-uddin said.

The dollar index .DXY, which measures its performance against a basket of six currencies which includes the euro, yen and sterling, rose to its highest in six months at 77.276 on Friday.

In a bullish signal, it closed above its 55-week moving average at 77.01. Resistance was seen at the base of the weekly Ichimoku cloud around 78.05, while strong resistance was at the 38.2 percent retracement of the index's fall from a high of 88.71 on June 7, 2010 to a low of 72.696 on May 4, 2011 which comes in at 78.80.

The dollar is set to make strong gains against the euro, which last week fell to its lowest in six months, at around $1.3627. The euro posted its biggest weekly fall since mid-August last year, with many looking for it to test $1.35 in the near term.

EURO ON THE WAY DOWN

The euro also fell sharply against the safe-haven Japanese yen on Friday, dropping to its lowest in nearly a decade. It ended the week at 105.85 yen, and a break below the psychologically key 105.00 level could see it drop towards 100 yen in coming weeks, analysts said.

Howard Wheeldon, a strategist at BCG Capital Partners, said the weekend's developments provided little confidence to investors in the euro zone, and the coming week will see increased volatility in stock markets.

That could hurt the euro more in coming days.

The euro was sold off last week after European Central Bank President Jean-Claude Trichet shifted the monetary stance from a hawkish bias to a more neutral one.

The shock resignation of ECB board member Juergen Stark, which highlighted sharp divisions within the central bank over purchases of government bonds in the secondary market and concerns that Greece may not secure its latest aid tranche from the IMF/European Union, also added to the euro's woes.

Investors will also likely be unsettled by a weekend report from Der Speigel magazine that the German finance ministry was looking at scenarios that included Greece abandoning the euro.

Indeed, latest data from the Commodity Futures Trading Commission showed speculators added to their bearish bets against the euro in the week to September 6.

"With $1.40 going last week, I think the euro could fall to $1.35 in the next few days," said Michael Derks, chief strategist at FXPRO. "The dollar be will the currency that will gain from safe-haven inflows given the risk of intervention in the yen and the line in the sand that has been drawn on the Swiss franc by the Swiss National Bank."

On the charts, near term support was seen at $1.3426, a low hit on February 14 and from where the euro started its move to a 17-month high at $1.4939 struck on May 4.

 

[EmpireGlobalfx]

Asian stock fall, dollar firm on Europe woes

(Reuters) - Asian stocks fell and the euro remained under pressure on Monday after the resignation of a top German European Central Bank board member cast further doubt on Europe's ability to tackle its worsening sovereign debt crisis.

Oil prices slipped and the dollar gained broadly as the worries about euro zone's woes combined with fears about flagging world growth to ensure no let up in the gloom that has gripped global markets for much of the past six weeks.

"People are quite nervous about Greece and other countries in the European area, so that is why investors are escaping to the dollar," said Tetsu Emori, a fund manager at Tokyo-based Astmax Co Ltd. "It's risk aversion."

Juergen Stark's plan to resign from the ECB's board underscored the internal divisions over its bond-buying program -- one of the central bank's main weapons in fighting the debt crisis by forcing down yields of country's under pressure from the bond markets.

Japan's Nikkei .N225 fell 2.2 percent, while the MSCI's broadest index of Asia Pacific shares outside Japan fell around 1 percent.

Data from Lipper showed a brief flirtation with stocks at the end of August has waned, with less than a net $600 million flowing into U.S. equity funds in the ended September 7, compared with a net inflow of $6.3 billion in the previous week.

MSCI's All-Country World index is now 19 percent below its 2011 high set in May, not far from the 20 percent decline that is the rule-of-thumb definition of a bear market.

The euro was struggling at around $1.36, after a sharp slide at the end of last week, while the dollar index .DXY, which tracks the greenback against a basket of major currencies, firmed around 0.3 percent.

U.S. crude slid by 87 cents on Monday to $86.37 a barrel and Brent crude eased as much as 97 cents to $111.80.

Gold, a traditional safe haven at times of market volatility, was steady around $1,856 an ounce.

 

[EmpireGlobalfx]

Global stocks hit hard by Greek worries

(Reuters) - World shares tumbled nearly 2 percent on Monday with European equities at 26-month lows, down more than 20 percent this year, as investors worried Greece would default amid signs of rifts among euro zone policymakers.

Japan's Nikkei closed at a 2-1/2 year low.

Yields on long-term core euro zone debt, home to safety plays during times of strife, fell sharply and the euro slumped against the dollar and yen.

The cost of insuring peripheral euro zone debt against default rose, to record levels for Greece and Portugal.

Markets were partly reacting to the failure over the weekend of the Group of Seven industrialized nations' finance ministers to come up with more than a stated commitment to help turn the world economy around.

But they were mainly focused on the euro zone debt crisis.

"Europe is not just lurching from one crisis to another. It is lurching into a new one before the previous one is solved," said Makoto Noji, senior strategist at SMBC Nikko Securities.

The pan-European FTSEurofirst was down 2.6 percent.

German policymaker Juergen Stark's resignation from the European Central Bank's board on Friday underscored internal divisions over its bond-buying program -- one of the bank's main weapons in fighting the debt crisis, by forcing down yields on debt of countries under pressure from the bond markets.

At the same time, worries bubbled up again over Greece's ability to meet commitments to qualify for more bailout money.

Fears about a Greek default rose last week after senior politicians in German Chancellor Angela Merkel's center-right coalition started talking openly about it. Greece, meanwhile, confirmed on Monday that the country has cash for only a few more weeks.

International lenders threatened last week to withhold the sixth bailout payment of about 8 billion euros ($11 billion) because of the country's repeated fiscal slippage.

The Greek government announced on Sunday a new property tax to make sure it would meet its budget targets and qualify for the tranche.

"The Greek situation is dominant, chances of some sort of default have increased -- the Germans seem to be hinting at that," one bond trader in Europe said.

EURO SINKS

The euro dived to a seven-month low against the U.S. dollar and a 10-year trough versus the yen.

"The outlook for Greece is almost completely unknown. Support for the country appears to be shaking. The market is starting to think the worst could happen," said Katsunori Kitakura, chief dealer at Chuo Mitsui Trust and Banking.

"It's as if policymakers are starting to prepare for that," Kitakura said.

The euro fell as low as $1.34949, its lowest since February.

On bond markets, Italian and Spanish government bond yields rose, feeling the pressure of upcoming debt supply and the rising concern over Greece.

 

[EmpireGlobalfx]

Global stocks, euro recover after slide; outlook wary

(Reuters) - Asian stocks rose and the euro edged off a seven-month low on Tuesday after a report that Italy may get financial support from China sparked a bout of short-covering but did nothing to ease fears that Europe is sliding into another banking crisis.

Growing expectations of a Greek debt default, sharp drops in European shares -- especially French banks due to their sovereign exposure -- and a surge in Italian bond yields meant sentiment remained fragile and any rally was likely to be short lived.

"There are still enormous challenges facing the European system at this point and fears around a default in Greece are very high and it's hard to see that changing any time soon," said Greg Gibbs, a strategist at RBS in Sydney.

The dollar eased broadly, helping lift dollar-denominated commodities such as gold, copper and crude oil.

Japan's Nikkei share average .N225 rose 1 percent and Australia's benchmark index .AXJO gained 0.9 percent, while MSCI's broadest index of Asia Pacific shares outside Japan .MIAPJ0000PUS edged up 0.2 percent. .T .AX

The MSCI index is nearly 20 percent below its 2011 high reached in April. A fall of 20 percent or more is the generally accepted definition of a bear market.

U.S. stocks bounced back late in Monday's session after a report that Italy could get financial support from China tempered investors' worst fears over the euro zone debt crisis. .N

S&P 500 index futures rose 0.3 percent in Asia on Tuesday.

Market sell-offs like those of the last six weeks -- driven by the euro zone crisis and fears of renewed recession in the United States -- are often punctuated by "short-covering" rallies, when traders buy to realize profits on bets that an asset would fall in price.

EURO CRISIS

The Financial Times reported that Italy had asked China to make "significant" purchases of Italian debt. Italy has seen its borrowing costs spike in recent weeks on doubts about the political will in Rome to tackle its swollen debt.

Greece warned on Monday it would run out of cash next month without the next tranche, around 8 billion euros, of a bailout loan. Euro zone policymakers have threatened to withhold the money as patience with Athens' repeated fiscal slippages wears thin.

A growing number of policymakers, as well as market economists, are convinced it is only a matter of time before Greece, which keeps falling behind on its fiscal targets after two EU/IMF bailouts, will have to default.

"The contagion impact of a default will be severe, because next in the firing line will be Italy, Spain and it will take in the whole of the European banking sector too," Suki Mann, a strategist at Societe Generale, wrote in a note.

In currency markets, the euro climbed to around $1.3685 against the dollar after falling to a seven-month low of $1.3495 in the previous session, though weak demand at an Italian bond auction later in the day may see the single currency fall back again.

"All eyes are squarely on that seven-month low around $1.35 hit overnight," said Koji ***aya, director of global foreign exchange research at Credit Suisse Securities in Tokyo.

"The downtrend in the euro will surely continue, but my sense is that unless the Italian bond auction goes extremely badly, this level may hold today."

The dollar index .DXY, which tracks the U.S. currency against a basket of major peers, fell 0.7 percent.

The weaker greenback made dollar-denominated assets cheaper for holders of other currencies.

Copper rose 1 percent to $8,840 a tonne and oil also gained, with U.S. crude up 0.9 percent at $89 a barrel and Brent crude rising 0.6 percent to $112.90, although traders remained wary.

"This is a shallow bounce because of Wall Street ending higher, so there is some confidence returning, but I don't think anybody would be putting any big positions given the global situation," said Victor Say, an analyst at Informa Global Markets in Singapore.

Gold bounced about 1 percent to around $1,831 an ounce, after dropping by more than 2.5 percent in the previous session, also supported by the safe-haven appeal that drove it to a record high of $1,920.30 last week.

"There is a slow-motion train wreck going on in Europe at the moment, which is going to be relatively supportive of gold," said Nick Trevethan, senior commodities strategist at ANZ.

"All the factors that have been supporting gold for the past few months are still there. Nothing has changed."

 

[EmpireGlobalfx]

Gold edges up on euro zone crisis; technicals cap gains


(Reuters) - Spot gold edged higher on Wednesday, supported by worries about a worsening debt crisis in euro zone, while short-term bearish technicals are likely to cap gains.

FUNDAMENTALS

* Spot gold inched up 0.2 percent to $1,837.44 an ounce by 0026 GMT. U.S. gold rose 0.6 percent to $1,841.80.

* Technical analysis suggested that U.S. gold could move sideways in the next few weeks, while commodities as a whole may correct moderately by the end of the year, said Reuters market analyst Wang Tao.

* Fears over the euro zone's debt crisis hit new heights on Tuesday, with U.S. President Barack Obama pressing the bloc's big countries to show leadership as talk of a Greek default escalated and markets heaped pressure on Italy.

* Holdings of the world's largest gold-backed exchange-traded fund, SPDR Gold Trust, edged lower to 1,241.311 tones by September 13 from a 2-1/2-week high of 1,241.917 tones on September 9.

* Barrick Gold, the world's largest gold producer, plans to invest $550 million in Peru by 2013, the head of Barrick Misquichilca, the company's Peruvian subsidiary, said on Tuesday.

MARKET NEWS

* U.S. stocks gained on Tuesday as investors bought shares beaten down in recent weeks and bet European leaders would take action soon to ease the Greek debt crisis. .N

* The euro held onto modest gains against the greenback in Asia on Wednesday, as bears trimmed short positions just in case EU leaders surprised by making progress on Greece in a conference call later in the day.

 

[EmpireGlobalfx]

Asian stocks, euro edge up on Europe debt hopes

(Reuters) - Asian stocks bounced on Thursday yet investors remained wary that obstacles which policymakers face in Europe could weigh on the euro and Asian currencies in the medium term.

The early gains in Asia, tracking the rise in global markets, came one day after the MSCI Asia ex-Japan index .MIAPJ0000PUS hit a 14-month low.

On Thursday, that index was up 1.2 percent. Japan's Nikkei markets/index?symbol=jp%21n225">.N225 was up 1.7 percent with chipmaker Elpida (6665.T) up 6.1 percent.

The euro rebounded to $1.3750, easing back from a high above $1.3800 reached after Germany and France voiced their commitment to keeping Greece in the euro zone, giving traders a chance to find better levels to short the common currency.

Optimism over tentative steps to resolve Europe's debt crisis trumped weaker-than-expected retail sales data in the U.S., helping the S&P 500 finance/markets/index?symbol=us%21spx">.SPX close up over a percent.

Some traders attributed the gains on Wall Street to short-covering ahead of inflation numbers in the U.S. with Europe still the clear focus.

European finance ministers have been warned confidentially of the danger of a renewed credit crunch as a "systemic" crisis in euro zone sovereign debt spills over to banks, according to documents obtained by Reuters on Wednesday.

The gains in Asian stocks put safe-haven bets like U.S. Treasuries and gold on the backfoot.

Spot gold steadied around the $1,820 an ounce level after having fallen nearly one percent in the previous session. It hit a lifetime high of around $1,920 an ounce last week.

Yields on ten-year U.S. notes held at 1.99 percent, not far away from its lowest levels in at least 60 years of around 1.91 percent tested last Friday.

Brent crude for October delivery settled at $112.40 a barrel on Wednesday, gaining 51 cents, snapping four days of losses while U.S. October crude held below the $89 per barrel line.

 

[EmpireGlobalfx]

Investors peer through the gloom


(Reuters) - Even after a rare four-day rally in world stocks, investors are unlikely to let their guard down in a week filled with heavy U.S. and euro zone policy risks that could potentially disappoint again and trigger a sell-off.

There is no doubt gloom is widespread. However, investors are also beginning to realize that betting too strongly on a collapse of financial markets with policymakers poised for action to combat global crisis may be unwise.

Thursday's coordinated action by five major central banks to add liquidity to a European banking system struggling with its dollar funding needs has lifted world stocks, measured by MSCI .MIWD00000PUS, from a one-year low.

Focus in the coming week will be on a policy meeting of the U.S. Federal Reserve. The Fed is posed to increase downward pressure on long-term interest rates to spur the recovery, reviving "Operation Twist," first undertaken in the 1960s.

Despite the rally in the past week, the MSCI index is still down more than 9 percent since January and the third quarter performance looks set to be the worst since the June-September period in 2010.

Furthermore, against conventional wisdom, total returns on a 10-year rolling basis on government bonds are higher than on equities. This is providing much food for thought for long-term investors.

"In a very short term, positive news may come out and policymakers will announce something. Economic data is not as bad as falls in the market would've suggested. So over the next 4-6 weeks we could get slightly higher," said Jeremy Beckwith, chief investment officer at wealth manager Kleinwort Benson.

"Everyone is hoping policymakers are coming up with good ideas, although it's hard to see what good ideas are... The euro zone is such a huge issue and one day you could wake up and find out Greece has defaulted and get caught out. So our position is to underweight risk."

The euro rose more than 1 percent against the dollar last week, its biggest weekly gain since July. But analysts expect the single currency to come under pressure again in the coming week as EU finance ministers again failed to eliminate fears of Greek sovereign default at their weekend meeting.

EU finance ministers broke no new ground in dealing with the euro zone debt crisis and made no decision on whether to give more firepower to the 440-billion euro bailout fund, suggested by U.S. Treasury Secretary Timothy Geithner.

"The euro zone's medium term structural issues of excessive sovereign debt and banks' exposure remains unresolved," UBS said in a note to clients.

"Thus investors will continue to worry about the risk of Greece defaulting on its bonds over the next couple of quarters as well as the efforts of Spain, Portugal and Italy to tackle their own public finances. This will also keep investors fearful over the solvency - not just liquidity - of euro zone banks."

The coming week promises a heavy dose of policy actions.

Finance ministers of the BRIC emerging countries -- Brazil, Russia, India and China -- meet in Washington on Thursday, on the sidelines of the International Monetary Fund meeting, to discuss steps to offer support to the euro area.

If they buy euro-denominated bonds -- as suggested in preliminary talks -- this may help turn around sentiment, after the European Central Bank's 70 billion euro operation failed to stop the crisis from spreading to Spain and Italy.

Investors will also keep a close eye on U.S. President Barack Obama who is presenting a deficit-reduction plan on Monday that will cover the cost of his recent jobs bill.

POLICY EASING

There are signs monetary policy is shifting from withdrawing stimulus toward further easing at a global level -- which would also be supportive for asset markets in the long term.

The Fed has already pledged to keep its policy rate at record lows until at least mid-2013 and, in Operation Twist, may introduce a program involving buying long-dated Treasuries to lower mortgage rates and other long-term borrowing costs.

The Bank of Japan eased policy in August by boosting asset purchases and the ECB has signaled that it had halted a cycle of interest rate rises begun just five months ago.

Even in emerging markets, the tightening cycle seems to be nearly over. Brazil and Turkey have cut interest rates, Mexico and Chile's central banks have left the door open for easing, Israel and South Africa are expected to cut rates.

"Risk markets will rebound when everyone is short risk, the worst is priced in, data stop surprising on the downside and policymakers take decisive counter action," JPMorgan said in a note to clients.

"Our perception is that most investors are sitting on the fence and that there is no surplus of risk underweight positions... Policymakers across the world will likely try their best to prevent another contraction, and it is here that upside surprises could come from."

 

[EmpireGlobalfx]

Greek cabinet meets to decide more austerity steps

(Reuters) - Greek Prime Minister George Papandreou chairs a cabinet meeting on Sunday to decide on more austerity measures to secure continued funding under an international bailout.

EU and IMF inspectors are holding a conference call with Finance Minister Evangelos Venizelos on Monday to hear what measures Greece will take to plug this year's shortfall in the budget before they release an 8 billion euro ($11 billion) loan tranche it needs by October before it runs out of money.

Papandreou canceled a planned visit to the United States on Saturday to deal with the deepening crisis at home as euro zone partners made clear further funding for the debt-ridden country would hinge on adhering to agreed fiscal targets.

"The meeting is set to examine measures from public sector layoffs to more pension cuts," said a government official on condition of anonymity.

Last week, the government blamed the shortfall on a deeper-than-expected recession and decided to put a new tax on real estate in the hope of collecting about 2 billion euros annually.

But international inspectors, known as the troika, expressed doubts this one-off tax measure would work and demanded more details on how the government hoped to catch up this year and the next.

"The troika thinks the recently announced property levy will not suffice to plug the budget hole and is pressing for measures on the spending side -- cuts in public sector wages and employment," said a second government official who asked not to be named.

The conservative New Democracy opposition has criticized the government for overtaxing the economy and driving it into a tail spin.

Its leader, Antonis Samaras, called for snap elections on Saturday saying the policy mix was wrong and was not yielding any results despite peoples' sacrifices.

"A renegotiation with our lenders to restart the economy is a condition to get out of this crisis," Samaras told a news conference on Sunday.

International lenders are also concerned with the lack of political consensus in Greece on the measures needed to emerge from the crisis.

The conservatives have been buoyed by growing public discontent after two years of austerity measures and are proposing tax cuts and growth boosting measures instead.

Papandreou's socialists have a majority in parliament but political analysts say internal dissent and public unrest, such as strikes and violent protests, may force snap elections.

Lenders have long warned against one-off measures and more taxes as a way out of the crisis shaking the euro.

They have asked for urgent reforms and privatizations to make the economy more competitive and a reduction in the bloated public sector.