Thursday, September 13, 2012

20120913 1024 Global Markets Related News.

Asia FX By Cornelius Luca - Wed 12 Sep 2012 15:46:37 CT (Source:CME/
The financial markets were in risk-on mode after Germany's Constitutional Court has ruled that Germany can ratify the new permanent European Bailout Fund. The markets are now waiting a policy review by the Federal Reserve ending on Thursday. The European and commodity currencies marched higher on Wednesday after advancing across the board after on Tuesday. This strength should pause at least briefly today. The US stock markets advanced. Gold, oil and silver ended up as well. The short-term outlook for the foreign currencies is sideways with downside bias. 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!

US: Wholesale inventories rose 0.7% in July from the 0.2% drop in June inventories.

Today's economic calendar
Australia: Consumer inflation expectations for September

Most Asian Stocks Fall as Investors Await Fed Stimulus Decision (Bloomberg)
Most Asian stocks fell as investors awaited the Federal Reserve’s announcement today and after a Chinese newspaper commentary said massive stimulus measures would be “detrimental” to the nation’s sustainable growth. Toyota Motor Corp. (7203), a carmaker that gets 25 percent of its sales in North America, fell 0.8 percent in Tokyo. Samsung Electronics Co. (005930), which relies on China for 28 percent of revenue, slid 0.2 percent in Seoul. Itochu Corp. (8001) rose 0.5 percent in Tokyo after a report said the trading firm is in talks to buy Dole Food Co.’s packaged-foods business and a unit in Asia. The MSCI Asia Pacific Index fell 0.1 percent to 120.61 as of 9:26 a.m. in Tokyo, with about twice as many shares falling as rising. Markets in Hong Kong and China are yet to open.
“Looks like people are expecting some form of easing, and the market will wait for that uncertainty to be cleared,” said Matt Riordan, a portfolio manager who helps manage about $6.5 billion in Sydney at Paradice Investment Management Pty. “Ultimately they will do something, but it’s an issue of timing whether they will do it now or they will wait toward the end of the year.” The MSCI Asia Pacific Index gained 3 percent this quarter through yesterday as stimulus expectations outweighed signs of a global economic slowdown. The Asian benchmark traded at 12.5 times estimated earnings, compared with 13.9 for the Standard & Poor’s 500 Index (SPXL1) and 12.1 for the Stoxx Europe 600 Index.

China’s Stocks Decline, Led by Material, Industrial Companies(Bloomberg)
China’s stocks fell after the official Xinhua News Agency said massive stimulus measures would be “detrimental” to the nation’s sustainable growth. The Shanghai Composite Index (SHCOMP) slipped 0.3 percent to 2,120.49 at 9:34 a.m. local time, while the CSI 300 Index (SHSZ300) lost 0.4 percent to 2,311.76, led by material and industrial companies. The Hang Seng China Enterprises Index (HSCEI) of Chinese companies traded in Hong Kong slid ed 0.1 percent. The Bloomberg China-US 55 Index (CH55BN), the measure of the most-traded U.S.-listed Chinese companies, added 0.6 percent in New York. The Shanghai Composite had fallen 3.5 percent this year on concern the government isn’t loosening monetary policy or introducing stimulus policies fast enough to counter the slowdown in the economy. Massive stimulus measures would be “detrimental” to China’s sustainable economic growth, Xinhua wrote in a commentary yesterday.
“Many have expected the government to announce an aggressive plan, similar to the 4-trillion-yuan ($632 billion) stimulus package issued in 2008, to keep the economy from stalling for a second time,” Xinhua writer Liu Jie wrote in the commentary. “However, a massive stimulus plan is not only unlikely, but would be detrimental to the country’s sustainable growth.”

Japan Stocks Little Changed on Fed Reserve, China Policy(Bloomberg)
Japanese stocks were little changed as investors awaited the end of a U.S. Federal Reserve policy meeting and after an official commentary said massive stimulus would be “detrimental” for China’s economy. Toyota Motor Corp. (7203), a carmaker that gets 25 percent of its sales in North America, fell 0.3 percent. Hitachi Construction Machinery Co. (6305), which gets 17 percent of sales in China, fell 0.2 percent after the official Xinhua News Agency said broad-based easing will hurt the nation’s prospects for long-term growth. Itochu Corp. (8001) rose 0.6 percent after a report that the trading company is in talks to buy Dole Food Co.’s packaged-foods business and a unit in Asia. The Nikkei 225 Stock Average (NKY) was little changed at 8,959.67 as of 10:01 a.m. in Tokyo, with trading volume 16 percent below the 30-day average as investors wait signs of a third round of asset purchases from the Fed. The broader Topix Index (TPX) rose 0.1 percent to 742.42.
“Markets are slightly nervous in anticipation of quantitative easing,” Lim Say Boon, chief investment officer at DBS Private Bank, said on Bloomberg Television in Singapore. “If we get QE3 then the markets, beyond this period of nervousness, are likely to rally even further.”

U.S. Stocks Rise Amid German Bailout Ruling, Fed Bets(Bloomberg)
U.S. stocks rose, with benchmark indexes trading near four-year highs, as a German court cleared the way for Europe’s bailout fund and investors weighed prospects for stimulus measures from the Federal Reserve. Apple Inc. (AAPL) rallied 1.4 percent, reversing an earlier decline, after introducing the iPhone 5. General Electric Co. and JPMorgan Chase & Co. (JPM) added at least 0.8 percent, pacing gains among the biggest companies. PulteGroup Inc. (PHM) advanced 6 percent as homebuilders rallied. Facebook Inc. (FB) climbed 7.7 percent after Chief Executive Officer Mark Zuckerberg said he’s addressing missteps that made it hard to reap the benefits of mobile advertising. The Standard & Poor’s 500 Index added 0.2 percent to 1,436.56 at 4 p.m. in New York, near a four-year high set last week. The Dow Jones Industrial Average rose 9.99 points, or 0.1 percent, to 13,333.35 today. About 6.2 billion changed hands on U.S. exchanges today, 2.5 percent above the three-month average.
“All eyes are expecting some sort of quantitative easing,” Joseph Tanious, a New York-based strategist at JPMorgan Funds, which oversees $394 billion, said in a telephone interview. “Central bank accommodation has been what’s helped propel this market higher.” He said, “The tail risk is being eliminated in Europe. Getting the ruling from the German Constitutional Court reinforces that we’re stepping in the right direction.” The Fed began a two-day meeting today amid speculation policy makers will provide more stimulus. The central bank will probably announce a third round of bond purchases tomorrow, according to almost two-thirds of economists in a Bloomberg survey. The central bank will also likely commit to hold interest rates close to zero into 2015, the survey showed.

European Stocks Rise to 14-Month High After German Ruling(Bloomberg)
European stocks advanced to a 14- month high after Germany’s top constitutional court cleared the way for the ratification of the euro area’s permanent bailout fund. BAE Systems jumped the most in nine years after the company began talks with European Aeronautic, Defence & Space Co., for a possible combination. Barratt Developments (BDEV) Plc lost 6.4 percent after the housebuilder said it won’t pay an annual dividend. The Stoxx Europe 600 Index (SXXP) rose 0.1 percent to 272.91 in London, the highest close since July 8 last year. The Stoxx 600 has advanced 17 percent from its 2012 low on June 4, boosted by speculation central banks will do more to stimulate growth.
“There were no nasty surprises to come out of the German ratification, so the market got the outcome that it wanted,” said James Buckley, a London-based fund manager at Baring Asset Management Ltd. which oversees about $49 billion. “There are still various hurdles to be jumped, but in the near term, the rotation that we are seeing into financials may still have further to go,” he said in a phone interview. The Stoxx 600 last week surged the most since June as European Central Bank policy makers agreed to an unlimited bond- buying plan to help lower borrowing costs in the region.

Emerging Stocks Rise to One-Month High on Stimulus Bets(Bloomberg)
Emerging-market stocks rose to a one-month high after Chinese Premier Wen Jiabao said the nation has room to boost stimulus and a German court paved the way for a permanent rescue fund to combat Europe’s debt crisis. The MSCI Emerging Markets Index (MXEF) increased 0.6 percent to 978.48 at 5:04 p.m. in New York, climbing for a fifth day. Brazil’s Bovespa Index added 0.8 percent as steelmaker Usinas Siderurgicas de Minas Gerais SA climbed to a four-month high. Taiwan’s TPK Holding Co. (3673) gained the most in three months. Equity gauges in South Korea, South Africa (JALSH) and the Czech Republic increased.
China still has “ample strength” to use monetary or fiscal policy to boost growth in the biggest emerging economy, Wen said yesterday. Germany’s top constitutional court rejected bids to halt the nation’s ratification of the 500 billion-euro ($644 billion) rescue fund today. The U.S. Federal Reserve begins a two-day policy meeting today amid speculation policy makers will announce a third round of asset purchases to boost the economy. “Wen Jiabao’s comments together with last week’s infrastructure announcements have been very good for investor sentiment toward emerging markets,” Mark Luschini, chief investment strategist for Philadelphia-based Janney Montgomery Scott LLC, which manages about $54 billion, said in a phone interview. “The major central banks have been worried that the slowing has been more than anticipated, so they’re stepping up efforts to resuscitate economic activity before they lose the ability to do so in a swift manner.”

Dollar Near 4-Month Low Versus Euro Before Fed Decision(Bloomberg)
The dollar traded 0.2 percent from a four-month low against the euro amid speculation the Federal Reserve will announce it will buy bonds under a program of quantitative easing that tends to debase the currency. Gains in the euro were limited after Greek Prime Minister Antonis Samaras received the second refusal in four days from coalition partners over plans to reduce spending that’s key to receiving international aid. The New Zealand dollar traded near the strongest in more than four months after the nation’s central bank left interest rates unchanged at 2.5 percent. “The prevailing views are that the Fed will conduct another round of quantitative easing,” weighing on the dollar, said Marito Ueda, senior managing director in Tokyo at FX Prime Corp. (8711), a currency-margin company. “Considering the Greek situation, I still see about a 70 percent chance the nation will leave the euro bloc.”
The dollar slid 0.1 percent to $1.2912 per euro as of 9:35 a.m. in Tokyo from yesterday, when it touched $1.2937, the weakest since May 11. It fell 0.1 percent to 77.76 yen after reaching 77.70 on Sept. 11, the weakest since June 1. The euro bought 100.41 yen after gaining 0.5 percent to 100.42. The New Zealand dollar traded at 82.05 U.S. cents from 82.08 yesterday, when it advanced as much as 0.8 percent to 82.38, the highest since April 30.

FOREX-Euro rallies after German court verdict
LONDON, Sept 12 (Reuters) - The euro rose, hitting a four-month high against the dollar, after Germany's top court gave its approval to the euro zone's new rescue fund, allowing its ratification under certain conditions.
"This result from the German Constitutional Court is the best we could look for," a London based currency trader said.

Australian Dollar Trades Near 3-Week High Ahead of Fed Decision(Bloomberg)
The Australian dollar traded 0.4 percent from the highest level in three weeks as speculation the Federal Reserve may signal further stimulus supported demand for riskier assets. The so-called Aussie and New Zealand’s dollar maintained two days of gains after Germany’s top constitutional court cleared the way for the ratification of the euro area’s permanent bailout fund yesterday. New Zealand’s currency, known as the kiwi, was close to a more than four-month high after the Reserve Bank kept its benchmark interest rate unchanged today. “The markets are seeing a good chance that the Fed will announce QE3 today,” Daisaku Ueno, a senior foreign-exchange and fixed-income strategist at Mitsubishi UFJ Morgan Stanley Securities Co. in Tokyo, a unit of Japan’s biggest listed bank, said, referring to a third round of asset purchases known as quantitative easing. “That’s lending support to risk currencies like the Aussie and kiwi.”
The Australian dollar was little changed at $1.0467 as of 9:40 a.m. in Sydney from the close yesterday, when it touched $1.0506, the strongest since Aug. 23. It fetched 81.49 yen from 81.48. New Zealand’s dollar traded at 82.09 U.S. cents from 82.08, after yesterday rising as much as 0.8 percent to 82.38, the highest since April 30. Australian government bonds declined for a second day, with the yield on 10-year notes rising four basis points, or 0.04 percentage point, to 3.21 percent. The rate earlier touched 3.22 percent, the most since Aug. 28. The MSCI World Index (MXWO) of shares advanced 0.4 percent yesterday.

Treasuries Snap Loss as Fed May Highlight Growth Weakness(Bloomberg)
Treasuries snapped a loss as economists predicted a Federal Reserve statement today will show U.S. growth is weak enough to justify a fresh round of stimulus from the central bank. The Fed will probably implement a third series of bond purchases known as quantitative easing and extend its zero- interest-rate policy into 2015, according to almost two-thirds of economists in a Bloomberg survey. Benchmark 10-year rates are 37 basis points from the record low, reflecting demand for the relative safety of Treasuries as global growth slows. The so- called fiscal cliff, a series of spending and tax cuts scheduled for January, is an added threat to U.S. expansion. “I’m not sure the numbers on the U.S. economy will be good,” said Youngsung Kim, head of fixed income in Seoul at Samsung Asset Management Co., South Korea’s largest private bond investor. “The fiscal cliff will impact U.S. Treasury yields” and help keep them from rising.
Ten-year yields were little changed at 1.75 percent as of 10:06 a.m. in Tokyo, according to Bloomberg Bond Trader data. The price of the 1.625 percent security due in August 2022 was 98 7/8. The rate compares with the record low of 1.38 percent set July 25 and the average of 3.72 percent for the past decade.

Fed Seen Starting QE3 While Extending Rate Pledge to 2015(Bloomberg)
The Federal Reserve is likely to announce a third round of bond purchases tomorrow, according to almost two-thirds of economists in a Bloomberg survey, while also extending the duration of its zero-interest-rate policy into 2015. Chairman Ben S. Bernanke and his colleagues on the Federal Open Market Committee will once again roll out unconventional policies to bolster economic growth of less than 2 percent in the second quarter and bring down unemployment stuck above 8 percent for 43 straight months, the survey showed. “The Fed clearly wants to do more,” said Nick Sargen, a former San Francisco Fed economist who oversees $40 billion as chief investment officer at Fort Washington Investment Advisors in Cincinnati. “The economy is looking lackluster, and the Fed has said all along that they feel it’s almost immoral that the unemployment rate is as high as it is.”
Two rounds of bond purchases totaling $2.3 trillion have failed to breathe life into the labor market, which Bernanke said last month is a “grave concern.” That means policy makers will probably announce a new open-ended plan tied to a sustained improvement in the economy rather than specify an amount of purchases and an end-date, according to 32 of the 73 economists in the survey. Twenty-two expect a fixed duration and amount. The FOMC plans to release a statement tomorrow at about 12:30 p.m. after a two-day meeting. At 2 p.m. the Fed will release policy makers’ forecasts for unemployment, inflation and the expected path of the federal funds rate over the next several years. Bernanke plans to hold a press conference at about 2:15 p.m.

Wholesale Inventories in U.S. Climb 0.7%, More Than Forecast(Bloomberg)
Inventories at U.S. wholesalers rose in July by the most in five months as sales fell, indicating production may cool. The 0.7 percent increase in stockpiles followed a 0.2 percent drop in the prior month, Commerce Department data showed today in Washington. The median forecast in a Bloomberg survey called for a 0.3 percent July gain. Sales declined 0.1 percent, the third straight decrease. At the current pace of sales, wholesalers had enough goods on hand to last 1.21 months, the most since November 2009, the report showed. A global slowdown and looming U.S. tax and government spending changes may prompt companies to temper orders to factories as they work off any unintended build-up of stockpiles. “Companies will want to stay lean because of the outlook,” Millan Mulraine, a senior U.S. strategist at TD Securities in New York, said before the report. “The uncertainty is a constraint on demand.”
The median forecast for wholesale inventories was based on a Bloomberg survey of 29 economists. Estimates ranged from no change to an increase of 0.8 percent. Businesses trying to keep stockpiles in line with demand include Deere & Co. (DE), the world’s largest maker of agricultural equipment, which in August cut its full-year profit forecast as sales slowed. “The sales shortfall is reflected in higher inventories in the third quarter and at year-end,” James Field, president of the Moline, Illinois-based company’s agriculture and turf unit, said on an Aug. 15 teleconference. “Actions have been taken to manage the inventories.”

Wen Says China’s Policy Strength to Secure Growth Targets(Bloomberg)
Chinese Premier Wen Jiabao said the nation has room for fiscal and monetary measures to support growth and will meet this year’s economic goals, triggering gains in Asian stocks. “Be it monetary or fiscal, we still have ample strength,” Wen said at the World Economic Forum in Tianjin yesterday. A fiscal stabilization fund of 100 billion yuan ($16 billion) is available for “preemptive” measures, he said. Morgan Stanley today became at least the fifth bank to estimate that China’s economic growth this year will be 7.5 percent, the same as Wen’s target and the weakest pace in 22 years, after imports slid in August and industrial production cooled. While the premier’s comments encouraged investors, the government may limit stimulus to restrain inflation and bad loans and avoid undoing a campaign to cool the housing market.
“The government has fiscal and monetary war chests to revive growth but there does not seem to be much appetite to roll out a large-scale stimulus package,” said Wang Qinwei, a London-based economist with Capital Economics Ltd. who previously worked at the People’s Bank of China. The MSCI Asia Pacific Index rose 1.3 percent as of 7:23 p.m. in Tokyo, extending the rally over the past five days to more than 4 percent.

Big Stimulus Would Harm China Long-Term Growth: Xinhua(Bloomberg)
Massive stimulus measures would be “detrimental” to China’s sustainable economic growth, the official Xinhua News Agency wrote in a commentary. “Many have expected the government to announce an aggressive plan, similar to the 4-trillion-yuan ($632 billion) stimulus package issued in 2008, to keep the economy from stalling for a second time,” Xinhua writer Liu Jie wrote in the commentary yesterday. “However, a massive stimulus plan is not only unlikely, but would be detrimental to the country’s sustainable growth.” The 2008 stimulus led to large local-government debt and bad-loan risks, and left questions regarding the rebalancing of the economy unanswered, the Xinhua commentary said. This time steps are focused on invigorating the private sector and market through measures including tax cuts, according to the agency.
The world’s second-largest economy expanded 7.6 percent in the second quarter from a year earlier, the slowest pace in three years, after the government moved to counter inflation and surging property prices in the wake of the 2008 stimulus. China may limit stimulus to restrain inflation and bad loans and avoid undoing a campaign to cool the housing market. Morgan Stanley, UBS AG, ING Groep NV, Barclays Plc and Royal Bank of Scotland Plc have cut growth estimates to 7.5 percent. There’s a 20 percent chance growth will be 7.3 percent and a 20 percent probability of 7.7 percent, Morgan Stanley economists led by Helen Qiao said in a report.

Bank of Korea Unexpectedly Holds Rates After Stimulus(Bloomberg)
The Bank of Korea unexpectedly held borrowing costs, opting to preserve policy room in the event of a deeper global slowdown after the government boosted support measures with spending and tax cuts. Governor Kim Choong Soo and his board kept the benchmark seven-day repurchase rate at 3 percent after a surprise cut in July, the central bank said in a statement in Seoul today. One of 16 economists surveyed by Bloomberg News predicted the move while the rest forecast a 25 basis point reduction. Asian policy makers face pressure to add to global stimulus as Europe’s protracted debt crisis curbs exports and weighs on confidence. South Korea’s finance ministry announced 5.9 trillion won ($5.2 billion) of spending and tax relief this week while also emphasizing it intended to work within the budget and preserve fiscal firepower.
“The Bank of Korea needs to preserve its policy power because Europe’s fiscal crisis is a long-term fight,” Kwon Young Sun, a Hong Kong-based economist at Nomura International Ltd., said before the decision. “It also has to manage expectations for the rest of the year and an interval of three months is more appropriate than two months after a cut in July.” The won fell 0.1 percent to 1,127.35 per dollar as of 9:42 a.m. in Seoul, according to data compiled by Bloomberg. The Kospi index of stocks declined 0.1 percent.

North Korea Investment Zone Promoted to Chinese as Next Shenzhen(Bloomberg)
North Korean economic zones run jointly with the nation’s main ally, China, are wooing investors by promising low taxes and high returns as the totalitarian North seeks to salvage an impoverished economy. An area at Rason city will become “North Korea’s Shenzhen,” Li Zichen, a deputy director of a zone management committee, told hundreds of people at an investment fair in Xiamen, China, on Sept. 9. Shenzhen led China’s rise to becoming the world’s biggest exporter. A second zone on the Yalu river is a “blessed land for investors to get rich,” said Zhang Zhiqian, also a deputy director. The enthusiasm contrasts with frustrations highlighted last month when Chinese mineral company Xiyang Group said an iron-ore venture collapsed after North Korea violated a contract. Success in expanding the zones would help Kim Jong Un develop a nation that struggles to feed a population of 24 million amid international isolation stemming from its nuclear program.
“Any reasonable Chinese investor will think twice before putting money down,” said Da Zhigang, director of the Institute of Northeast Asian Studies at the Heilongjiang Academy of Social Sciences in the northeastern city of Harbin. “There are many stories on Chinese websites about losing money.” North Korea and China operate two joint economic zones near their shared border, one at Rason and the other on the islands of Hwanggumphyong and Wihwa on the Yalu river. Rason was founded in the 1990s and the island zone was set up in June. Li and Zhang made their presentations at a conference organized by China’s Ministry of Commerce.

Russia to Refrain From Rate Increase on Growth Concerns(Bloomberg)
Russia’s central bank will probably refrain from raising interest rates to contain surging consumer prices as economic expansion comes under pressure from deteriorating global demand. Monetary-policy makers will hold the refinancing rate at 8 percent, a quarter-point above the record low, at a meeting tomorrow, according to 12 of 15 economists in a Bloomberg survey. Three forecast a quarter-point increase. The overnight auction-based repurchase rate and deposit rate will also be left unchanged, two separate surveys showed. Growth in the world’s largest energy exporter slowed to 4 percent from a year earlier in the second quarter as China’s cooling expansion and Europe’s debt crisis sapped demand for Russian commodities exports. Inflation accelerated in August as droughts in the U.S. and Russia stoked food prices, threatening to push price growth beyond the central bank’s 6 percent target.
“Inflation is rising purely because of non-monetary factors,” said Ivan Tchakarov, chief economist at Moscow-based Renaissance Capital. “Raising rates in such an environment would take some heroic reasoning to justify.” Forward-rate agreements used to bet on borrowing costs in the next three months show the three-month MosPrime interbank rate may rise 14 basis points, or 0.14 percentage point, to 7.25 percent, according to data compiled by Bloomberg. The cost to fix floating interest payments in rubles for a year fell to 7.51 percent today, the lowest since June 11, from 7.72 percent at the start of the month.

New Zealand Keeps Record-Low Rate as Bollard Term Nears End(Bloomberg)
New Zealand signaled an 18-month pause in record-low interest rates may last through mid-2013 to help bolster an economy buffeted by weaker global growth and strained by one of the developed world’s strongest currencies. “New Zealand’s trading partner outlook remains weak,” Reserve Bank Governor Alan Bollard told reporters in Wellington after leaving the official cash rate at 2.5 percent. “We have got a forecast that short-term interest rates are going to stay roughly where they are for another year, so that’s quite a stable sort of outlook.” The decision was Bollard’s last in a 10-year tenure before he steps down later this month, succeeded by former World Bank co-managing director Graeme Wheeler. While the central bank signaled little need to raise borrowing costs until the second half of 2013 because of risks from Europe’s fiscal crisis and the outlook for New Zealand’s trading partners including China, economists are waiting to gauge Wheeler’s interpretation of conditions before agreeing.
“The forward guidance given in today’s statement has a fairly limited shelf life,” said Dominick Stephens, chief New Zealand economist at Westpac Banking Corp. in Auckland. “We will reserve any judgment on changing our monetary policy forecast until we have a better understanding of Graeme Wheeler’s style.”

German Court’s Backing Bailout Fund to Test EU Resolve on Crisis(Bloomberg)
German backing for Europe’s bailout fund quickened the bargaining over a bond-buying program for Spain, testing the resolve of government leaders and the European Central Bank to conquer the debt crisis. Spain is pressing for an ECB intervention with no strings attached, while creditors led by German Chancellor Angela Merkel are reluctant to lend more money. Mario Draghi’s central bank is waiting for the two sides to commit before it wades back into the bond market. After yesterday’s “Super Wednesday” in crisis politics marked by relief over the German supreme court’s endorsement of the 500 billion-euro ($645 billion) rescue fund, the question of a credit line or full loan program for Spain is set to dominate a two-day meeting of finance ministers starting tomorrow in Nicosia, Cyprus.
“Now we can say that Europe has in place a powerful backstop in terms of financial support,” Organization for Economic Cooperation and Development Chief Economist Pier Carlo Padoan told Bloomberg Radio’s Ken Prewitt yesterday. “It does not fix finally the problem but certainly it is very important progress.” Discussions at the finance meeting will also touch on Greece’s bid for easier aid terms and Cyprus’s efforts to escape a bailout, with no decisions until at least October, a European official told reporters in Brussels on Sept. 10.

German court backs euro rescue fund with conditions(Reuters)
Germany's Constitutional Court gave a green light for the country to ratify the euro zone's new rescue fund and budget pact but gave parliament veto powers over any future increases in the size of the fund.

French Yields Ignore Hollande Economy to Touch Lows: Euro Credit(Bloomberg)
French President Francois Hollande never misses an opportunity to boast about his country’s record- low bond yields. Trouble is, they may have little to do with him or his policies. Euro-area worries -- from Greece’s budget woes and a German court ruling on the region’s bailout fund to anti-austerity candidates gaining support ahead of today’s Dutch vote -- have sent investors scurrying to the relative safety of French debt. Investors drove yields below zero at a French bills sale last week and pushed 10-year borrowing costs to 2.21 percent, the lowest at an auction since at least 1999.
“What’s keeping French yields low is event risks ahead: Greece is still an issue; the German Constitutional Court’s decision is a risk; and we have an election in the Netherlands,” said Michael Leister, a strategist at Commerzbank AG in London. “France still offers safety in this environment. Hollande is working on reforms and that’s important, but it’s the situation in the euro region more than anything French specific that gets French yields to these levels.” Hollande faces an economy that hasn’t grown in three quarters and joblessness is at a 13-year high. The French president is also struggling to plug a budget hole of more than 30 billion euros ($37 billion) for next year. “The state borrows on the market at rates that are historically low,” he said in an interview on TF1 Television on Sept. 9. “But can we be sure it will last? I’m proud that France is among countries that has the capacity to borrow at such low rates, but we can’t just bank on this situation.”

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