20120911 0930 Global Markets Related News.

Asia FX By Cornelius Luca - Mon 10 Sep 2012 17:04:08 CT (Source:CME/www.lucafxta.com)
The appetite for risk disappeared on Monday on profit taking after three days of gains ahead of the Federal Reserve's decision and a German constitutional court ruling on whether Germany may contribute to the Eurozone's rescue fund. This pullback should be temporary and could resume as early as Tuesday in the US. Most of the European and commodity currencies edged lower after surging on Friday. The US stock markets, gold and oil ended lower. The short-term outlook for the European and commodity currencies is sideways. The medium-term outlook for most of the foreign currencies is slightly bullish. The LGR short-term model is long on all foreign currencies. Good luck!

Overnight
US: The consumer credit came in at -$3.28 billion in July, down from $6.46 billion in June.

Today's economic calendar
Japan:  BSI large manufacturing for the third quarter
Japan:  Machine tool orders for August
UK: RICS housing price balance for August
Australia: National Australia Bank's business conditions for August

Asia Stocks Fall as Greece Debt Overshadows Stimulus Bets (Bloomberg)
Asian stocks fell before a court ruling on German participation in Europe’s permanent bailout fund as investors wait to see if the Federal Reserve will boost stimulus this week. Camera maker Canon Inc. (7751), which gets 31 percent of its revenue in Europe, slid 0.5 percent. Australia & New Zealand Banking Group Ltd. (ANZ), Australia’s third-largest lender, dropped 0.5 percent. Shares of China Petroleum and Chemical Corp. may be active as China increases gasoline and diesel prices. The MSCI Asia Pacific Index declined 0.5 percent to 118.61 as of 9:27 a.m. in Tokyo, with the regional benchmark index headed for the first drop in four days. Markets are yet to open in Hong Kong and China. Almost six stocks dropped for each that rose on the measure.
“There’s still a lot of uncertainty around the implementation of policy in Europe,” said Stephen Halmarick, Sydney-based head of investment markets research at Colonial First State Global Asset Management, which oversees about $150 billion. “The German constitutional court ruling on ESM is obviously a key risk over the next few days and there’s talk about Greece struggling to come out with budget cuts,” he said, referring to the European Stabilization Mechanism that is designed to rescue indebted nations in the euro zone. The MSCI Asia Pacific Index gained 1.7 percent this quarter through yesterday as expectations of further stimulus measures overshadowed signs of a global economic slowdown. The Asian benchmark traded at 12.4 times estimated earnings, compared with 13.8 times for the Standard & Poor’s 500 Index (SPXL1) and 12 times for the Stoxx Europe 600 Index.

Japanese Stocks Decline on Mounting Greece Aid Concern (Bloomberg)
Japanese stocks dropped as Greece’s struggle to qualify for aid heightened concern about the euro- area debt-crisis, overshadowing speculation central banks will take action to boost economic growth. Nippon Sheet Glass Ltd., which gets 41 percent of sales in Europe, slid 3.5 percent. Panasonic Corp. retreated 2.2 percent as Moody’s Investors Service cut its long-term credit rating. Toyota Motor Corp. led declines among automakers after car sales in China missed estimates. The Nikkei 225 Stock Average (NKY) slid 0.7 percent to 8,811.33 as of 9:01 a.m. in Tokyo. The broader Topix Index declined 0.8 percent to 731.74, with three shares falling for each that rose. Shares fell amid opposition to the European Stabilization Mechanism, a bailout fund for the euro region.
“There’s still a lot of uncertainty around the implementation of policy in Europe,” said Stephen Halmarick, Sydney-based head of investment markets research at Colonial First State Global Asset Management, which oversees about $150 billion. “The German constitutional court ruling on ESM is obviously a key risk over the next few days and there’s talk about Greece struggling to come out with budget cuts.”

U.S. Stocks Retreat as Greece Overshadows Stimulus Bets (Bloomberg)
U.S. stocks fell, after the Standard & Poor’s 500 Index rose to the highest level since 2008, as concern over Greece’s debt crisis overshadowed speculation central banks will take action to spur the economy. Intel Corp. (INTC) lost 3.8 percent after Morgan Stanley cut its earnings forecasts and Nomura Holdings Inc. said estimates for the largest chipmaker’s profit next year may fall further. Apple Inc. (AAPL) dropped 2.6 percent as technology shares tumbled 1.3 percent, the most among 10 S&P 500 groups. International Paper Co. (IP) slid 4.2 percent after Deutsche Bank AG cut its rating.
The S&P 500 fell 0.6 percent to 1,429.08 at 4 p.m. in New York. The Dow Jones Industrial Average slid 52.35 points, or 0.4 percent, to 13,254.29. The Nasdaq Composite Index lost 1 percent to 3,104.02. About 5.6 billion shares traded hands on U.S. exchanges, 7.3 percent below the three-month average, while the Chicago Board Options Exchange Volatility Index, known as the VIX, rose 13 percent, the biggest jump in seven weeks, to 16.28. “Europe will continue kicking the can down the road and there’s no quick solution,” Walter “Bucky” Hellwig, who helps manage $17 billion at BB&T Wealth Management in Birmingham, Alabama, said in a telephone interview. “Macro numbers have been very unimpressive, but there’s this aspect of expansionary monetary policy decisions that have been driving prices higher.” He said, “The market will turn on what the Federal Reserve does this week.”
The S&P 500 climbed last week to a four-year high after the European Central Bank approved a bond-buying plan and investors bet Fed Chairman Ben S. Bernanke will continue to support economic growth. The equities index is 20 percent above its level on Sept. 15, 2008, the first trading day after Lehman Brothers Holdings Inc. filed the world’s biggest bankruptcy and prompted a 46 percent drop through March 9, 2009. The gauge is less than 10 percent from its record closing high after rising 14 percent this year.

U.K. Stocks Halt Two-Day Rally After Data; AB Foods Drops (Bloomberg)
U.K. stocks halted a two-day rally as reports showed that China’s imports slid and a gauge of confidence among Britain’s executives fell to a record low. Kazakhmys (KAZ) Plc led metal producers higher as Chinese import data fueled speculation the country will opt for further economic stimulus. Xstrata Plc (XTA) rose 1.2 percent as Glencore International Plc (GLEN) said its revised takeover offer for the Swiss mining company is final. Associated British Foods Plc slid 2 percent, leading so-called defensive companies lower. The FTSE 100 (UKX) Index slid 1.6 points, or less than 0.1 percent, to 5,793.2 at the close in London, after retreating as much as 0.3 percent and advancing as much as 0.2 percent. The gauge climbed 1.5 percent last week after European Central Bank policy makers approved an unlimited bond-purchase program. The broader FTSE All-Share Index was also little changed, while Ireland’s ISEQ Index fell 0.1 percent.
“A lot of those hopes for central-bank intervention are going to help sentiment, but I think there will be a lot of volatility near term,” Yogi Dewan, chief executive officer at Hassium Asset Management LLP, said in a phone interview. “With so much uncertainty, we are really quite guarded. We would still sit on the sidelines.” China’s imports unexpectedly declined, signaling more stimulus may be needed after the government last week said it approved road and subway projects across the country.

Emerging Stocks Rise to Two-Week High on Stimulus Bets (Bloomberg)
Emerging-market stocks rose, sending the benchmark index to a two-week high, as signs of weak economic growth from China to the U.S. spurred speculation that policy makers will take more steps to counter the slowdown.
The MSCI Emerging Markets Index (MXEF) advanced 0.1 percent to 969.97 at 5:01 p.m. in New York, climbing for a third day. Brazilian steelmaker Cia. Siderurgica Nacional SA posted its biggest three-day gain since January 2009 and AU Optronics Corp. (2409) surged 7 percent, the most in three years, after a report that Taiwan will ease curbs on Chinese investments. Zoomlion Heavy Industry Science & Technology Co. (1157), a Chinese construction- equipment maker, rose to a three-week high.
Chinese President Hu Jintao urged governments in Asia to speed up infrastructure development in a Sept. 8 speech, while South Korea announced $5.2 billion of economic support measures today. Reports showed China’s imports fell in August while industrial output rose the least in three years. The Federal Reserve meets this week to discuss potential asset purchases after the U.S. added fewer-than-estimated jobs last month.
“The fiscal stimulus in China is meaningful and could help turn things around,” Greg Lesko, who helps manage over $700 million at Deltec Asset Management in New York, said in a phone interview. “Over the short-term, I’d like to see the data improve some, which is what we really need to see a sustained rally.”

Aussie, Kiwi Stay Lower as China Concern Saps Risk Demand (Bloomberg)
The Australian and New Zealand dollars remained lower as concern deepened that China’s growth is slowing, hurting demand for commodity-related currencies. The so-called Aussie maintained its sharpest slide in a week as investors await results of a private survey on business confidence amid speculation the Reserve Bank of Australia may resume interest-rate cuts to shield its economy from a global slowdown. Demand for the South Pacific nations’ currencies was supported by bets the Federal Reserve will announce a new round of asset purchases known as quantitative easing this week. “While the economy may be bottoming out, it has yet to show signs of an imminent recovery,” Mary Nicola, a New York- based currency strategist at BNP Paribas SA, wrote in a note to clients today, referring to China. “The AUD remains vulnerable to further downside as weak China data augment market expectations for a rate cut from the RBA.”
The Aussie was little changed at $1.0334 as of 10:01 a.m. in Sydney from yesterday, when it declined 0.5 percent, the biggest drop since Sept. 3. It fetched 80.87 yen from 80.91. The New Zealand dollar bought 80.89 U.S. cents from 80.88, after falling 0.5 percent yesterday. The currency was at 63.28 yen, 0.1 percent lower than the close yesterday. Australian government bonds were little changed, with the yield on 10-year notes adding one basis point, or 0.01 percentage point, to 3.14 percent.

Big Banks Hide Risk Transforming Collateral for Traders (Bloomberg)
JPMorgan Chase & Co. (JPM) and Bank of America Corp. are helping clients find an extra $2.6 trillion to back derivatives trades amid signs that a shortage of quality collateral will erode efforts to safeguard the financial system. Starting next year, new rules designed to prevent another meltdown will force traders to post U.S. Treasury bonds or other top-rated holdings to guarantee more of their bets. The change takes effect as the $10.8 trillion market for Treasuries is already stretched thin by banks rebuilding balance sheets and investors seeking safety, leaving fewer bonds available to backstop the $648 trillion derivatives market. The solution: At least seven banks plan to let customers swap lower-rated securities that don’t meet standards in return for a loan of Treasuries or similar holdings that do qualify, a process dubbed “collateral transformation.” That’s raising concerns among investors, bank executives and academics that measures intended to avert risk are hiding it instead.
“The dealers look after their own interests, and they won’t necessarily look after the systemic risks that are associated with this,” said Darrell Duffie, a finance professor at Stanford University who has studied the derivatives and securities-lending markets. “Regulators are probably going to become aware of it once the practice gets big enough.” Adding to the concern is the reaction of central clearinghouses, which collect from losers on derivatives trades and pay off winners. Some have responded to the collateral shortage by lowering standards, with the Chicago Mercantile Exchange accepting bonds rated four levels above junk.

Consumer Credit in U.S. Unexpectedly Falls $3.28 Billion (Bloomberg)
Consumer borrowing in the U.S. unexpectedly decreased in July for the first time in almost a year, restrained by a second straight decline in credit-card debt. The $3.28 billion drop followed a revised $9.8 billion jump the previous month that was bigger than first estimated, the Federal Reserve said today in Washington. Economists projected a $9.2 billion rise, according to the median forecast in a Bloomberg survey. Revolving credit, which includes credit card spending, decreased $4.82 billion, the most since April 2011. The drop in credit-card borrowing coincides with a slowdown in hiring this year and a rise in consumer pessimism that indicate households are wary of taking on debt. Employers added fewer workers to payrolls than forecast in August, while a gain in average hourly earnings from a year earlier matched the smallest increase since records began in 2007.
“Households are definitely still in deleveraging mode, they’re hesitant to take on new debt,” said Ryan Wang, an economist at HSBC Securities USA Inc. in New York. “I think credit card debt is going to be flat to up slightly, and mortgage balances are still falling.” Estimates in the Bloomberg survey of 37 economists ranged from gains of $5 billion to $15 billion after a previously reported June increase of $6.46 billion.

Stagnant Incomes Signal Curbs on U.S. Consumer Spending: Economy (Bloomberg)
Wages are stagnating as the job market cools, restraining the consumer spending that is needed to sustain the U.S. economic recovery. Average hourly earnings were little changed in August from the prior month and up 1.7 percent from a year earlier, matching the smallest gain since records began in 2007, the Labor Department reported last week. Payroll growth slowed to 96,000 last month, while the unemployment rate fell as more people left the labor force. Limited employment and wage prospects together with the highest gasoline prices in four months are straining household budgets after the weakest quarter for spending in a year. With little else to spur the expansion, Federal Reserve policy makers meeting this week are set to consider further easing to shore up the world’s largest economy.
“Real wages are going nowhere -- something between nowhere and down -- depending on what occupation you are in,” Alan Blinder, a Princeton University economist and former Fed vice chairman, said in a Sept. 7 interview on Bloomberg Radio’s “Surveillance” with Tom Keene. “With a weak labor market -- and we have had a very weak labor market for four years -- there is not a lot of prospect for a turnaround in that.” The so-called fiscal cliff of U.S. tax increases and government spending cuts that take effect at the end of 2012 unless Congress acts represent hurdles for companies considering whether to take on more staff.

Retail Sales Probably Rose in August: Economy Preview (Bloomberg)
Retail sales probably improved for a second month in August as consumers overcame a lack of jobs and stagnant wages, economists said before reports this week. A 0.7 percent increase in purchases would follow a 0.8 percent July advance, according to the median forecast of 66 economists surveyed by Bloomberg News ahead of Commerce Department figures on Sept. 14. Other reports may show inflation accelerated and manufacturing stagnated. Rising food and fuel prices and disappointing gains in payrolls may further damage household finances, making it a challenge for retailers such as Gap Inc. (GPS) and Macy’s Inc. (M) to keep luring customers in the second half of 2012. Widespread labor- market weakness bolsters the case for Federal Reserve policy makers to take additional action to spur growth when they gather this week.
“It’s going to be difficult,” said Gus Faucher, a senior economist at PNC Financial Services Group Inc. in Pittsburgh, whose retail sales forecast matched the median estimate. “Income is basically flat, and at the same time people are spending more for food and energy. If job growth remains flat like this, we are going to see weak growth in consumer spending.” The economy added 96,000 workers last month, less than the 130,000 projected by the median forecast of economists surveyed by Bloomberg, figures from the Labor Department showed last week. The unemployment rate fell to 8.1 percent after 368,000 Americans left the workforce. More than 12.5 million Americans remain unemployed.

FedEx, UPS Win Approval in China to Add Courier Service (Bloomberg)
FedEx Corp. (FDX) and United Parcel Service Inc. won licenses to start domestic courier businesses in some Chinese cities, as they push to expand in the world’s most populous nation. FedEx, the world’s biggest cargo airline, can begin service in eight cities, while Atlanta-based UPS’s license is for five, according to the companies. The businesses don’t include letter delivery. They will compete in a local courier business dominated by state-owned China Postal Express & Logistics Co., which has about 30 percent of the market. The licenses will help Memphis, Tennessee-based FedEx and UPS benefit from rising demand driven by online shopping. The approval “sets the platform for eventual consolidation and market-share gain opportunity,” said Nate Brochmann, an analyst at William Blair & Co. “We’re still in the very early innings in terms of the domestic Chinese opportunity. For the most part it doesn’t change the competitive landscape there.”
The licenses let both companies serve Shanghai, Guangzhou, Shenzhen and Tianjin, according to spokesmen for FedEx and UPS. (UPS) In addition, FedEx was approved for Hangzhou, Dalian, Zhengzhou and Chengdu, while UPS can also operate in Xian. The approval is a starting point for long-term growth in China and will help the companies improve network efficiency, said Brochmann, who is based in Chicago and rates the shares of FedEx and UPS outperform. UPS and FedEx will be able to handle deliveries under the licenses “from end to end” instead of using a local partner, he said.

White House Pushes Refinancing Expansion Before Election (Bloomberg)
The White House is urging the U.S. Senate to vote as soon as this week on an expansion of a government mortgage-refinancing program, a move that could showcase President Barack Obama’s support for policies aiding homeowners before the Nov. 6 presidential election. Democratic leaders are considering adding the measure expanding the Home Affordable Refinancing Program to their agenda for the two-week Senate session that begins today, according to Senator Barbara Boxer of California and Senator Robert Menendez of New Jersey, who wrote the bill. “We are talking about a situation where we have historically low rates, we don’t know what the future holds, and we can’t afford to waste a lot of time,” Boxer said today during a conference call with reporters. Boxer and Menendez today introduced a revised version of the measure with changes designed to draw the support of Republicans and the industry.
Win or lose, a vote on the bill could help the president. If enough Republicans sign on, the vote could show momentum for his efforts to help the 11.3 million borrowers who owe more than their homes are worth. If Republicans vote against the measure, Democrats can paint them as unsympathetic to homeowners, said Jaret Seiberg, senior policy analyst at Guggenheim Securities’ Washington Research Group.

Bernanke Options to Boost Growth Include Open-Ended QE (Bloomberg)
Federal Reserve Chairman Ben S. Bernanke, who last month defended his unorthodox monetary policies, has a new tool at hand should he seek one to a revive a flagging economy and labor market: open-ended bond buying. Barclays Plc forecasts the Federal Open Market Committee this week will announce monthly purchases of $50 billion to cut the jobless rate while holding inflation at 2 percent. Economists at Goldman Sachs Group Inc. (GS) and BNP Paribas, responding to last week’s report of slowing job growth, also say they expect an announcement of an open-ended plan on Sept. 13 after a two-day FOMC meeting. The Fed’s practice of specifying an amount and an end-date for purchases has resulted in abrupt withdrawals of stimulus that later was renewed after the central bank failed to reach its goals. By contrast, an open-ended program would tie purchases to a sustained improvement in the economy, said Michael Gapen, senior U.S. economist at Barclays and a former member of the Fed Board’s Division of Monetary Affairs.
“As a Fed chairman, 2 percent growth isn’t doing it for you, 8 percent unemployment isn’t doing it for you -- they need a faster acceleration,” said Gapen, who is based in New York. “So, the decision is, ‘OK, let’s hit the pedal.”’ Three Fed presidents have voiced support for an open-ended approach: San Francisco’s John Williams, Boston’s Eric Rosengren and Chicago’s Charles Evans. James Bullard of St. Louis said that while he backs the strategy, he wants to see more economic data before taking action.

U.S. job growth cools, posing challenge for Obama, Fed (Reuters)
U.S. jobs growth slowed sharply in August, dealing a blow to President Barack Obama as he seeks re-election and setting the stage for the Federal Reserve to pump additional money into the sluggish economy next week.

China Fuel Prices Rise Second Time in Month as Oil Gains (Bloomberg)
China, the world’s second-biggest oil consumer, increased gasoline and diesel prices for the second time in about a month as rising crude costs threaten to curb profits at the nation’s largest oil refiners. The maximum at which gasoline can be sold to motorists rose by 550 yuan ($87) a metric ton and diesel by 540 yuan today, the National Development and Reform Commission said in a statement on its website yesterday. The pump price of 90-RON, China III gasoline in Beijing will increase 5.8 percent to 10,040 yuan a ton, or $4.53 a U.S. gallon, according to Bloomberg calculations from NDRC data. The China III specification is similar to the Euro III fuel standard.
The increase may help boost profits margins at China Petroleum & Chemical Corp. (600028) and PetroChina Co. (857), the nation’s biggest oil processors. Sinopec, as China Petroleum is known, posted its lowest half-yearly profit since 2008 amid losses at its refining unit because of state-controlled fuel prices. PetroChina’s net income in the period slid 6 percent decline even as its average crude selling price increased 6.3 percent. “The fuel prices are adjusted according to the latest developments in the international oil market,” the NDRC said in the statement yesterday. “Crude prices gained in the past month due to better U.S. economic indicators, continuing uncertainty in the Middle East and expectation on more stimulus policies from the U.S. and Europe.”

Weak China trade data raises Beijing spending stakes (Reuters)
Weak Chinese trade data on Monday underlined the likelihood of more Beijing-backed spending to deal with the damage done to the domestic economy by firms cutting production, inventories and imports in the face of anaemic global demand.

Japan Cost-Cutting Leaves Compensation Nearing Crisis Low (Bloomberg)
Cost-cutting by Japanese companies is dragging on wages, resulting in weaker consumer demand and a stronger case for monetary easing to counter deflation. Nationwide compensation fell to 243.5 trillion yen ($3.1 trillion) in the second quarter, according to a government report in Tokyo yesterday. The number, which is seasonally adjusted, was only 0.7 percent above the level in the final quarter of 2009, which was the lowest since 1991. Japanese companies targeting cost reductions span Tokyo Electric Power Co. (9501), the operator of the nuclear plant at the center of last year’s disaster, and exporters Panasonic Corp. and Sharp Corp. The risk for the economy is a prolonging of the deflation that has plagued the nation since an asset bubble burst in the 1990s, and weakness in consumption that may be exacerbated by a sales-tax increase in April 2014.
“As long as wage deflation continues, there will be no doubt that the Bank of Japan will have to continue monetary easing,” said Hiroaki Muto, a senior economist at Sumitomo Mitsui Asset Management Co. in Tokyo. “There won’t be an end.” Second-quarter economic growth was yesterday revised down to an annualized 0.7 percent from 1.4 percent, fueling concern a contraction is possible in the three months ending September. The Nikkei 225 Stock Average (NKY) was little changed after surging 2.2 percent the previous trading day on the outlook for European Central Bank bond purchases and global stimulus.

Euro Crisis Faces Tests in German Court, Greek Infighting (Bloomberg)
A German high court decision on bailout funding and Greek coalition infighting this week threaten to derail the European Central Bank’s bid to wrest control over the euro area’s three-year-old crisis. Germany’s Federal Constitutional Court in Karlsruhe will decide whether to suspend the 500 billion-euro ($639 billion) European Stability Mechanism on Sept. 12. In Athens, Prime Minister Antonis Samaras’s governing partners balked at budget cuts demanded by the country’s so-called troika of creditors. In a week of activity that may determine the course of the crisis, the court’s decision comes on the same day as Dutch voters decide whether to back parties questioning an expansion of European powers and as the European Commission issues a proposal for an integrated banking system.
“The ECB is saying I’m here to support you but I can only build a bridge for you,” Mohamed El-Erian, chief executive officer and co-chief investment officer of Pacific Investment Management Co., said in a Sept. 7 Bloomberg Television interview. “You have to do your job as well.” ECB President Mario Draghi’s bond-purchase plan sent Spanish 10-year yields down the most in a week since the euro’s inception and prompted a euro rally of almost 2 percent to the highest level since May. Spain’s 10-year yield extended its slide, dropping 5 basis points to 5.58 percent as of 11:55 a.m. in Madrid. The euro slipped 0.3 percent to $1.2780.

French Sentiment, Factory Output Rise, Point to Rebound: Economy (Bloomberg)
French business confidence climbed for the first time this year last month and factory output unexpectedly increased in July, suggesting the euro region’s second-largest economy may regain some strength. Sentiment among manufacturing executives rose to 93 from 90 in July, the Bank of France said today. Industrial production increased 0.2 percent in July from the previous month, when it stalled, a separate release showed. Economists in a Bloomberg News forecast had forecast a decline of 0.5 percent, according to the median of 23 estimates. The increases are among the first signs of a possible recovery in France, where President Francois Hollande said late yesterday that growth will almost grind to a halt this year and be less than 1 percent in 2013. With unemployment at a 13-year high, Hollande said he wants to accelerate labor market reform such by cutting payroll taxes while giving himself two years to fix the nation’s economy.
“The numbers are going in the right direction but their absolute level remains very low,” said Dominique Barbet, an economist at BNP Paribas SA in Paris. “There’s no recession but no growth either.” The Stoxx Europe 600 Index (SXXP) fell 0.2 percent at 12:57 p.m. in Paris, following its biggest weekly gain in three months. Futures on the Standard & Poor’s 500 Index lost 0.2 percent. The euro traded at $1.2784, down 0.3 percent on the day.

Central Bankers Meet in Basel as King Leads Libor Talks (Bloomberg)
Bank of England Governor Mervyn King said global central bankers agreed to set up an inquiry into Libor after confidence collapsed in the benchmark rate for more than $500 trillion of securities. The announcement follows a meeting yesterday of central bank governors led by King in his role as chairman of the Economic Consultative Committee at the BIS in Basel, Switzerland. The inquiry will be led by “senior officials,” and comes as Financial Services Authority Managing Director Martin Wheatley conducts a separate investigation into how the London interbank offered rate is set. The probe will “consult with the market in order to provide input into the wider official debate coordinated by the Financial Stability Board,” King said in an e-mailed statement today. “The BIS governors look forward with great interest to the recommendations of the Wheatley Libor review, and to the reports of other official groups examining reference rates used in financial markets.”
King put Libor on the agenda after Barclays Plc (BARC) was fined 290 million pounds ($464 million) for its role in manipulating the rate, which triggered the resignations of its chairman, chief executive officer and chief operating officer. The Bank of England became embroiled in the scandal, and lawmakers criticized it last month for “naivety” in its handling of questions about the rate as far back as 2007. “The central banks have somehow got to get moral integrity back in the financial system, and King will feel this himself,” said Marcus Miller, a professor of economics at the University of Warwick, England. “If you can’t trust London to fix the rate, what’s the banking system all about?”

Euro Holds Drops on Crisis Concern Before French Payrolls (Bloomberg)
The euro maintained losses versus the dollar from yesterday amid concern the sovereign debt crisis is constraining growth in the region. The shared currency remained weaker against the yen before reports this week forecast to show French payrolls declined and European industrial production contracted. Greek politicians will meet for a second time tomorrow amid an impasse on spending cuts required to receive the next tranche of bailout funds. Demand for the dollar was limited before the policy setting Federal Open Market Committee starts its two-day meeting tomorrow. “We’re bearish on the euro” in the six-month period, said Imre Speizer, a strategist in Auckland at Westpac Banking Corp. (WBC), Australia’s second-largest lender. “We see the risks to the euro-zone economies to the downside.”
The 17-nation euro traded at $1.2764 as of 8:32 a.m. in Tokyo from yesterday when it declined 0.5 percent to $1.2758. It was little changed at 99.86 yen from yesterday, when it fell 0.4 percent. The dollar slid 0.1 percent to 78.24 yen. A final reading on French non-farm payrolls will probably confirm a 0.1 percent decline in the second-quarter from the previous three-month period, according to the median estimate of economists surveyed by Bloomberg News before the national statistics office Insee releases its figures today. Economists in a separate Bloomberg poll estimate euro-area industrial production declined 3.3 percent in July from a year earlier. The European Union’s statistic office in Luxembourg will report data tomorrow.