Overnight Markets-Leading News-Update 5

Euro Area Is Running Significant Risk of Breakup, Rehn Says

The 17-nation euro area is in real danger of disintegrating unless policy makers revamp the bloc’s fiscal and economic ties, Economic and Monetary Commissioner Olli Rehn said.

“The way things are going and under the current structures, the euro area has a significant risk of breaking up,” Rehn said in a speech at a European Commission event in Helsinki. “We’re either headed for a deterioration of the euro area or a gradual strengthening of the European Union.”

A divergence in the sovereign yields of euro countries shows bets against the integrity of the 17-member currency bloc are growing. German two-year yields fell below zero for the first time this week while the yield on similar-maturity Spanish notes rose 11.8 basis points to 5.11 percent today.

A yield below zero means investors will receive less in repayments through maturity than the amount they paid to buy the debt.

Spain’s 10-year yield exceeded 6.5 percent for a third day, approaching levels at which Greece, Ireland and Portugal sought bailouts after being shut out from market funding. The euro has dropped 7.3 percent against the dollar over the past two months, nearing a two-year low this week, as investors grow more concerned Europe’s currency area will fracture.

The monetary union “has extremely tough decisions ahead and it’s important to face the truth,” Rehn said. “We must continue measures to balance public finances at the same time as we need structural reforms and actions that boost growth.”

Unpopular Measures

Austerity measures are proving unpopular and choking growth in countries working to reduce deficits, including Greece, Spain and Portugal. The monetary union’s economy will shrink 0.3 percent this year before returning to 1 percent growth in 2013, the European Commission said last month.

Euro-area unemployment reached 11 percent in April and March, the highest on record, the European Union’s statistics office in Luxembourg said today. Spain, whose government is struggling to contain a banking crisis, had the bloc’s highest unemployment rate at 24.3 percent, up from 24.1 percent in March, today’s report showed.

European Central Bank President Mario Draghi said yesterday that the euro is “unsustainable unless further steps are being undertaken.”

June Summit

EU leaders will next consider how to manage the currency zone and assess the situation in Greece at a Brussels summit starting on June 28. Greek voters return to the polls on June 17 after the May 6 election left the country without a government.

Of the euro area’s members, Finland, Germany, Luxembourg and the Netherlands have the AAA credit rating. The other countries in the monetary union are Austria, Belgium, Cyprus, Estonia, France, Greece, Ireland, Italy, Malta, Portugal, Slovakia, Slovenia and Spain.

Spain’s actions on balancing its public finances have been “significant” and the country may get a one-year extension on bringing its budget deficit in line with the EU’s 3 percent of gross domestic product rule, Rehn said today, reiterating comments he made yesterday.

“If Spain is able to fix the finances of its autonomous areas, we’re ready to propose a one-year extension” of the deadline for correcting the excessive deficit, he said.

A divergence in the sovereign yields of euro countries shows bets against the integrity of the 17-member currency bloc are growing. German two-year yields fell below zero for the first time this week while the yield on similar-maturity Spanish notes rose 11.8 basis points to 5.11 percent today.

A yield below zero means investors will receive less in repayments through maturity than the amount they paid to buy the debt.

Spain’s 10-year yield exceeded 6.5 percent for a third day, approaching levels at which Greece, Ireland and Portugal sought bailouts after being shut out from market funding. The euro has dropped 7.3 percent against the dollar over the past two months, nearing a two-year low this week, as investors grow more concerned Europe’s currency area will fracture.

The monetary union “has extremely tough decisions ahead and it’s important to face the truth,” Rehn said. “We must continue measures to balance public finances at the same time as we need structural reforms and actions that boost growth.”

Unpopular Measures

Austerity measures are proving unpopular and choking growth in countries working to reduce deficits, including Greece, Spain and Portugal. The monetary union’s economy will shrink 0.3 percent this year before returning to 1 percent growth in 2013, the European Commission said last month.

Euro-area unemployment reached 11 percent in April and March, the highest on record, the European Union’s statistics office in Luxembourg said today. Spain, whose government is struggling to contain a banking crisis, had the bloc’s highest unemployment rate at 24.3 percent, up from 24.1 percent in March, today’s report showed.

European Central Bank President Mario Draghi said yesterday that the euro is “unsustainable unless further steps are being undertaken.”

June Summit

EU leaders will next consider how to manage the currency zone and assess the situation in Greece at a Brussels summit starting on June 28. Greek voters return to the polls on June 17 after the May 6 election left the country without a government.

Of the euro area’s members, Finland, Germany, Luxembourg and the Netherlands have the AAA credit rating. The other countries in the monetary union are Austria, Belgium, Cyprus, Estonia, France, Greece, Ireland, Italy, Malta, Portugal, Slovakia, Slovenia and Spain.

Spain’s actions on balancing its public finances have been “significant” and the country may get a one-year extension on bringing its budget deficit in line with the EU’s 3 percent of gross domestic product rule, Rehn said today, reiterating comments he made yesterday.

“If Spain is able to fix the finances of its autonomous areas, we’re ready to propose a one-year extension” of the deadline for correcting the excessive deficit, he said.

http://www.bloomberg.com/news/2012-06-01/euro-area-is-running-significant-risk-of-breakup-rehn-says-2-.html

Russia Stocks Plunge 3rd Day on Oil Drop; TNK-BP Falls to Record

http://www.bloomberg.com/news/2012-06-01/russia-stocks-slide-3rd-day-on-oil-drop-tnk-bp-falls-to-record.html

Global Growth Heads for Lull as Europe Output Shrinks

The world economy is heading for its third straight mid-year lull after manufacturing output shrank in Europe and slowed in China, leaving the U.S. under pressure to drive global growth.

A gauge of manufacturing in the 17-nation euro zone fell to a three-year low of 45.1 in May, indicating a 10th month of contraction, while unemployment reached 11 percent, the highest on record. China’s Purchasing Managers’ Index dropped to 50.4 from 53.3, the weakest production growth since December.

Signs of a renewed international slowdown are mounting as Europe’s two-year debt crisis threatens to engulf Spain and spread abroad by undermining demand and investor confidence. With China’s economy also decelerating, economists are looking to the U.S. for growth. Data today is forecast to show hiring picked up in May.

“Things are turning down again and the underlying state of every economy is pretty ropey,” said Rob Carnell, chief international economist at ING Bank NV in London. “The world may avoid recession, but large chunks of it will remain in it.”

U.S. Treasuries advanced, extending their biggest weekly gain this year, while the euro fell to a 23-month low of $1.2313. European stocks declined, with the Stoxx Europe 600 (SXXP) down 1.2 percent at 236.79 at noon in Frankfurt, its lowest in 2012..

http://www.bloomberg.com/news/2012-06-01/global-growth-heads-for-lull-as-europe-output-shrinks.html

German Exports to Southern Europe Plunged in First Quarter

Maybe the Germans will do something now!

http://www.bloomberg.com/news/2012-06-01/german-exports-to-southern-europe-plunged-in-first-quarter.html

Merkel Tells Putin Germany Doing Everything to End Euro Crisis

Chancellor Angela Merkel told Russian President Vladimir Putin that Germany is “doing everything” to ensure that the euro remains a stable currency and that the debt crisis ends “as quickly as possible.”

Merkel, hosting Putin on his first foreign trip since he returned to the presidency last month, sought to reassure the Russian leader over the financial turmoil in Europe that has driven the euro to a two-year low against the dollar and prompted investors to pay for the security of benchmark German bonds. German two-year yields fell below zero today.

Russia does more than 50 percent of its trade with European Union countries, so “of course we are very much interested in the euro zone becoming stable,” Putin told reporters at a joint press conference with Merkel in Berlin today. Russia has “an interest in the normal functioning of the European economy.”

Russia holds about 40 percent of its reserves in euros, Putin said. “A significant part of them, and I mentioned this to Chancellor Merkel today, are in German state bonds,” Putin said. “It’s true that they don’t yield much, but we see them as stable.”

Putin, who will travel on to Paris for talks with French President Francois Hollande later today, declined to endorse euro bonds, saying only that he could imagine them being used at some point in the future “after stability and order is fully guaranteed in the economy.”

Putin said the matter was not discussed in detail. “But according to the logic of what Germany continues to do, I would say that the German leadership doesn’t want problems in the euro zone to keep coming back and back.”

http://www.bloomberg.com/news/2012-06-01/merkel-tells-putin-germany-doing-everything-to-end-euro-crisis.html

Euro Zone Unemployment Rises to a Record 11%

http://www.nytimes.com/2012/06/02/business/global/daily-euro-zone-watch.html?ref=business

Tsipras Vows to Cancel Bailout as Make-or-Break Greek Vote Looms

http://www.bloomberg.com/news/2012-06-01/tsipras-vows-to-cancel-bailout-as-make-or-break-greek-vote-looms.html

Merkel’s Isolation Deepens as Draghi Criticizes Strategy

http://www.bloomberg.com/news/2012-05-31/merkel-s-isolation-deepens-as-draghi-criticzes-strategy.html

Spain Threatens Germans

MADRID (AP) — Yields on Spanish bonds are going up again and the country’s economy minister says the future of the euro depends on Spain and Italy and will be determined over the next few weeks.

The interest rate on 10-year Spanish bonds stood at 6.53 percent shortly after the start of trading, up 8 basis points from Thursday’s close. The spread with the German bund was above 530 points.

Economy Minister Luis de Guindos said in a speech Thursday evening that he did not know if Spain was “on the edge of a cliff” but in any case Spain is in a very difficult position.

http://finance.yahoo.com/news/spain-bond-yields-again-minister-073153727.html

He said Europe needs new mechanisms including one to allow bailout capital to be injected directly into troubled banks rather than go through governments first.

Romania’s Chitoiu Sees Gold Mine Start in 2012, Mediafax Reports

http://www.bloomberg.com/news/2012-06-01/romania-s-chitoiu-sees-gold-mine-start-in-2012-mediafax-reports.html

Finland to Discuss Tax on Miners, Haekaemies Tells Talouselaemae

http://www.bloomberg.com/news/2012-06-01/finland-to-discuss-tax-on-miners-haekaemies-tells-talouselaemae.html

China Home Prices Fall in More Than Half Cities Tracked

http://www.bloomberg.com/news/2012-06-01/china-home-prices-fall-in-more-than-half-cities-tracked.html

Spain’s Guindos Says Future of Euro at Stake in Spain

Spanish Economy Minister Luis de Guindos said the euro’s future will be played out in the coming weeks in Italy and Spain, as data showed record levels of capital leaving his country.

“I don’t know if we’re on the edge of the precipice, but we’re in a very, very, very difficult situation,” he told a conference in Sitges, Spain, yesterday. Spain and Italy are where the “battle for the euro” is being fought, he said.

The International Monetary Fund denied that it was preparing financial aid for Spain, as data yesterday showed that 66.2 billion euros ($81.8 billion) of net capital flows left the country in March.

Spain is at the crux of the debt crisis now in its third year as Prime Minister Mariano Rajoy’s government tries to shore up the country’s banks amid a recession and the highest unemployment in Europe. The crisis has exposed the disparities in the 17-nation euro region’s economy, with Spain’s extra borrowing costs over Germany’s rising to the highest in the euro’s history this week.

The yield on Spain’s 10-year government bond was at 6.54 percent at 9:33 a.m. in Madrid versus a euro-era record of 6.78 percent on Nov. 17. German benchmark 10-year yields were at 1.189 percent, while two-year note yields fell below zero for the first time amid demand for the safest assets…

http://www.bloomberg.com/news/2012-05-31/spain-s-guindos-says-future-of-euro-at-stake-in-spain.html

Berlusconi Says ECB Must Print Euros or Italy May Say ‘Ciao’

Former Premier Silvio Berlusconi said Italy should say “ciao, euro” if the European Central Bank doesn’t start printing money to tackle the debt crisis and Germany should quit the single currency if it won’t back a bolder role for ECB.

“The economic crisis can’t be solved” in Italy, Berlusconi said in comments posted on his party’s website today. He called on Prime Minister Mario Monti to “change his political line” and lobby European leaders to back a money- printing campaign by the Frankfurt-based ECB. If the central bank doesn’t become a “lender of last resort,” Italy should say “ciao, euro,” the former premier said.

The media tycoon-turned-politician became the latest European leaders to step up pressure on German Chancellor Angela Merkel and the ECB to permit a more aggressive response to the region’s debt crisis. Monti yesterday called on Merkel to drop her opposition to allowing the euro region’s rescue mechanism to lend directly to banks.

The 17-nation euro area “has a significant risk of breaking up” unless policy makers revamp the bloc’s fiscal and economic ties, Economic and Monetary Commissioner Olli Rehn said today in a speech in Helsinki. “We’re either headed for a deterioration of the euro area or a gradual strengthening of the European Union.”

‘Our Currency’

Berlusconi, 75, who resigned as premier in November as Italian borrowing costs surged amid a worsening debt crisis, said Italy should remain in the European Union even if it exits the euro. He added that another of his proposals was that the “Bank of Italy prints euros or our own currency.”

“It’s a crazy idea of mine,” he said, without specifying if he meant reviving the lira.

On May 25 Berlusconi, who heads the party with the most seats in the Rome-based parliament and whose support is crucial for Monti’s government, called for an overhaul of the country’s constitution to strengthen the powers of the president. He also said he would seek the office if his party requested him to.

http://www.bloomberg.com/news/2012-06-01/berlusconi-says-ecb-must-print-euros-or-italy-may-say-ciao-1-.html

Rockefeller Winning- Japan Moves Closer to Restart of Nuclear Plant

http://www.nytimes.com/2012/06/01/world/asia/japan-moves-closer-to-restart-of-nuclear-plant.html?src=recg

China Back to Currency Rigging Job Stealing Ways

http://www.nytimes.com/2012/06/01/business/global/china-lets-its-currency-slip-raising-trade-tension.html?_r=2&ref=business

Berlusconi Says ECB Must Print Euros or Italy May Say ‘Ciao’

http://www.bloomberg.com/news/2012-06-01/berlusconi-says-ecb-must-print-euros-or-italy-may-say-ciao-1-.html

Bilderberg 2012 Agenda

http://www.guardian.co.uk/world/2012/may/30/bilderberg-2012-technocrats-are-rising

China Manufacturing Slowdown Boosts Chances of Stimulus

China’s manufacturing grew at the weakest pace since December, increasing the odds the government will boost stimulus to counter a deceleration in the world’s second-biggest economy.

The Purchasing Managers’ Index fell to 50.4 in May from 53.3 in April, China’s statistics bureau and logistics federation said today in Beijing. That compared with the 52 median estimate in a Bloomberg News survey of economists. A separate gauge from HSBC Holdings Plc and Markit Economics showed a seventh straight contraction, the longest since the global financial crisis.

http://www.bloomberg.com/news/2012-06-01/china-manufacturing-grows-at-weakest-pace-since-december.html

 

Top Egyptian presidential candidate doubts al Qaeda role in 9/11

Another truther emerges!!

http://www.washingtontimes.com/news/2012/may/31/egyptian-candidate-doubts-al-qaeda-role-9-11/

ECB, EU officials warn euro’s survival at risk

BRUSSELS | Thu May 31, 2012 11:27pm EDT

(Reuters) – The European Central Bank stepped up pressure on Thursday for a joint guarantee on bank deposits across the euro zone, saying Europe needed new tools to fight bank runs as the bloc’s debt crisis drives investors to flee risk.

The European Commission’s top economic official, Olli Rehn, warned that the single currency area could disintegrate without stronger crisis-fighting mechanisms and tough fiscal discipline.

The twin warnings came as worries about Spain’s banks and Greece’s survival in the euro area pushed the euro to a two-year low against the dollar and hastened a rush into safe-haven assets such as Austrian and French bonds, whose 10-year yields hit a euro-era low.

Spaniards alarmed by the dire state of their banks moved money abroad in March at a faster rate than at any time since records began in 1990, official figures showed.

The 66.2 billion euros ($82.0 billion) net capital flight occurred before the nationalization of Spain’s fourth biggest lender, Bankia, in May due to massive losses from a burst property bubble.

The head of the International Monetary Fund met Spain’s deputy prime minister on Thursday and later denied a media report that the IMF was considering contingency plans for a Spanish bailout.

“There is no such plan. We have not received any request to that effect and we are not doing any work in relation to any financial support,” IMF Managing Director Christine Lagarde said in a statement after the talks.

Irish voters seemed set to approve in a referendum a European budget discipline treaty vital to continue receiving EU aid. But the outcome of a second Greek general election on June 17, seen as crucial for Athens’ future in the currency zone, is too close to call…

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One Response to Overnight Markets-Leading News-Update 5

  1. vino says:

    yeah but the german unemployment rate fell below 7%…. the prospect of $1.25 euro and the shrieks about a euro at par are only enhancing the might of the german juggernaut….bloomberg and business week are having a hissy fit about the german employment numbers… why cause it is likely the germans are lying to the high side of the unemployment total so as to fend off the spite of its rabid dog english and dead beat
    latin friends

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