Monday, July 21, 2008

Leading Indicators: Slow-ride, Take it Easy

Daily Forex Fundamentals | Written by Wachovia Corporation | Jul 21 08 14:47 GMT |

The index of Leading Economic Indicators (LEI) slipped 0.1% in June as a contraction in the money supply and losses in equity markets overcame positive contributions from the interest rate spread and an upswing in building permits. The message from LEI is essentially unchanged for the last four months: expect painfully slow growth.

LEI Weak in June, But it Could Have Been Worse

The LEI was off 0.1 percent in June; the index has not moved more than 0.2 percent in any direction since January.
The largest positive contributor in June came from a surprise increase in building permits - a one-time pop having to do with a change in the NYC building code. We do not expect building permits to be a bright spot again anytime soon.

Coincident Index has Stalled, Slow Money Growth

The coincident index has been virtually flat every month since February. In June, the coincident index was helped by industrial production, but weighed down by employment.
As the Federal Reserve has left interest rates unchanged, and as banks have implemented tougher lending standards, we are in a period of slow money growth.

Wachovia Corporation
http://www.wachovia.com

Disclaimer: The information and opinions herein are for general information use only. Wachovia Corporation and its affiliates, including Wachovia Bank, N.A., do not guarantee their accuracy or completeness, nor does Wachovia Corporation or any of its affiliates, including Wachovia Bank, N.A., assume any liability for any loss that may result from the reliance by any person upon any such information or opinions. Such information and opinions are subject to change without notice, are for general information only and are not intended as an offer or solicitation with respect to the purchase or sales of any security or any foreign exchange transaction, or as personalized investment advice. Securities and foreign exchange transactions are not FDIC-insured, are not bank-guaranteed, and may lose value.

Not Much of Moving Fundamentals

Daily Forex Fundamentals | Written by Crown Forex | Jul 21 08 14:31 GMT |

With little moving fundamentals on the economic scene majors trading was rather tight and confined with no major abrupt movements altering the ongoing short-term wave.

The euro started the new week on a positively favored technical pattern as still the base is seen solid at 1.5830-20 offering more tendencies to take the euro into a new upside wave as the sideways trade seen has helped the euro ease some of the buying orders saturation and acquiring momentum to set higher; with low volume the euro failed to breach into 1.59 successfully as trading remained below breaching that levels set the 1.5940s as the major resistance level that if breached might provide stronger upside momentum for the pair to attempt new record highs above 1.60 mark.

Sterling was once more saved by the solid 1.99 support level as again it proved to be capable to denounce the currency of the downside wave and offer more demand on the pair which is with the help of the solid 1.9970-80 resistance are forcing the pair into a sideways wave to adjust momentum and thereby then breaching each of the levels will clarify the extent of the coming wave, though heavy fundamentals are waited from the UK economy this week and surely will have the saying in defining the coming wave.

The USDJPY lack enough momentum to continue the upside as after the pair failed to trade below 106.30 levels the pair attempted the 107 levels once more especially with the lack of moving fundamentals which influenced the pair's ability to tilt more to the upside as the risk appetite is supporting the move further as US stocks escaped the bearish market which supports the positive sentiment.

Crown Forex

disclaimer:The above may contain information for investors/traders and is not a recommendation to buy or sell currencies, gold, silver & energies, nor an offer to buy or sell currencies, gold, silver & energies. The information provided is obtained from sources deemed reliable but is not guaranteed as to accuracy or completeness. I am not liable for any losses or damages, monetary or otherwise that result. I recommend that anyone trading currencies, gold, silver & energies should do so with caution and consult with a broker before doing so. Prior performance may not be indicative of future performance. Currencies, gold, silver &energies presented should be considered speculative with a high degree of volatility and risk.

Mid-Day Report: Yen Weakness Continues, EUR/JPY at New Record High

Market Overview | Written by ActionForex.com | Jul 21 08 14:02 GMT |

After consolidating for most of the day, the Japanese dives lower in early US session as the US stock markets opens higher, boosted by better than expected earnings of Bank of America. EUR/JPY made new record high at 169.91 but is so far still limited by 170 psychological resistance. GBP/JPY is also back pressing 213.91 resistance. After all, as mentioned before, the technical picture in most yen pairs suggests that the overall decline in yen is still in progress and, that will very much depends on the development in the equity markets.

Earlier today, Sterling was broadly softer on dovish comments from BoE Blanchflower that UK is entering a recession that may last more than a year. Blanchflower said that BoE should act right now and he'd like to see interest rates 'well below' their current level. Sterling is additional pressured after Rightmove house prices index showed deeper drop by -1.8% mom, -2.0% yoy in Jul. Though, firstly, Blanchflower is already a known dove so his comments are not much of a surprise. Secondly, Sterling's near term rise against dollar and yen are still intact technically speaking. Thirdly, it's a big week in the UK with BoE minutes, retail sales and Q2 GDP featured. Sterling regained grounds against Euro and yen later today.

Aussie, on the other hand, shrugs off softer than expected PPI report and is the better performer today. Q2 PPI softened from 1.9% qoq to 1.0% qoq and from 4.8% yoy to 4.7% yoy. Markets expected a 5.3% yoy jump in PPI. Analysts are quick to point out the weak correlation between Australia's PPI and CPI data and are still awaiting a strong CPI report to be released on Wednesday.

Swiss combined PPI climbed 0.6% mom, 4.5% yoy in Jun, up from prior 1.2% mom and 3.9% yoy and beat expectation of 0.4% mom, 4.3% yoy. US leading indicators dropped -0.1% in Jun, inline with expectation.

EUR/JPY Mid-Day Outlook

Daily Pivots: (S1) 168.63; (P) 169.06; (R1) 169.89; More.

EUR/JPY's rise from 165.32 extends further today and makes new record high at 169.91. Outlook remains unchanged. Rise from 158.60 is still in progress and will take on 170 psychological resistance. Break will encourage further rise to 61.8% projection of 130.60 to 168.93 from 151.71 at 175.40. On the downside, below 168.23 will turn intraday outlook neutral first.

In the bigger picture, EUR/JPY's break of 168.93 key medium term resistance indicates multi month consolidation that started at 168.93 should have completed. Rise from 151.71 is still in progress as long as 165.50 cluster support (23.6% retracement of 151.71 to 169.66 at 165.42, 38.2% retracement of 158.60 to 169.66 at 165.43) holds. Further rally should be seen to 61.8% projection of 130.60 to 168.93 from 151.71 at 175.40 after taking out 170 psychological resistance. However, note bearish divergence conditions remains in daily MACD, arguing that upside momentum is still not convincing. Decisive break of 165.50 cluster support will argue that EUR/JPY has failed 170 psychological resistance and made a short term top and deeper decline may follow.

EUR/JPY 4 Hours Chart - Forex Newsletters, Forex Outlook, Forex Review, Forex Signal

Economic Indicators Update

GMT	Ccy	Events	Actual	Consensus	Previous
23:01	GBP	U.K. Rightmove hse prices M/M Jul	-1.80%	N/A	-1.20%
23:01	GBP	U.K. Rightmove hse prices Y/Y Jul	-2.00%	N/A	-0.10%
01:30	AUD	Australia PPI Q/Q Q2	1.00%	1.60%	1.90%
01:30	AUD	Australia PPI Y/Y Q2	4.70%	5.30%	4.80%
07:15	CHF	Swiss Combined PPI M/M Jun	0.60%	0.40%	1.20%
07:15	CHF	Swiss Combined PPI Y/Y Jun	4.50%	4.30%	3.90%
14:00	USD	U.S. Leading indicators Jun	-0.10%	-0.10%	0.10%
		Japan Market holiday

Forex Brokers Canadian Dollar up on Quiet Day

Market Updates | Written by CEP News | Jul 21 08 14:26 GMT |

(CEP News) - The Canadian dollar was making broad-based gains, except against the Australian dollar, to start the week on a high note on Monday.

The Canadian dollar was down 0.0039 to 1.0210 against the Australian dollar, but up 0.138 points to 106.4850 against the yen. The euro was down 0.0017 to 1.5922 against the Canadian dollar while the pound sterling was down 0.0070 to 2.0034 against the Canadian dollar.

RBC Capital Markets global head of FX strategy Adam Cole referenced the general strength of the Australian currency in its own broad-based gains this morning.

"AUD shrugged off the weaker than expected Q2 PPI of 1.0%q/q, 4.7%y/y [cons: 1.6%q/q, 5.3%y/y] and was dragged high by demand for AUD/NZD. Domestically generated PPI was up a firm 1.4%q/q, 6.0%y/y," he wrote. "Today's report highlights why the [Reserve Bank of Australia] has not shown much discomfort with the current strength of the AUD."

The Canadian dollar was up 0.0017 to 0.9960 against the U.S. dollar after U.S. leading indicators deteriorated 0.1% in June, as expected. In April, the index posted a 0.1% gain. The loonie ticked up 0.0004 to 0.9960 following the release before retracing the slight gains.

TD Securities currency strategist Jacqui Douglas did not foresee a change to the USD/CAD's range-bound nature coming in the immediate future.

"USD/CAD continues to be range-bound, moving largely in response to the USD. It looks like it's going to take something big to knock it out of its range, which we're unlikely to get this week, at least from the Canadian data," she wrote in a research note to clients.

"The focus is going to be on [Canadian] CPI for June on Wednesday, where TD is looking for a below-consensus outcome, largely due to seasonal factors. However, a lower than expected number may not have the same effect this month as it typically would, since even TD's below-consensus call is for headline inflation to increase from 2.2% to 2.7%, which is an unusually large jump," she concluded.

CAD/USD up 0.0017 to 0.9960.

EUR/CAD down 0.0017 to 1.5922.

CAD/JPY up 0.14 points to 106.49.

GBP/CAD down 0.0070 to 2.0034.

CAD/AUD down 0.0039 to 1.0210.

All data taken at 9:16 a.m. EDT

By Ryan Szporer, rszporer@economicnews.ca, edited by Nancy Girgis, ngirgis@economicnews.ca

The Copying, Broadcast, Republication or Redistribution of CEP News Content is Expressly Prohibited Without the Prior Written Consent of CEP News.

A copy of CEP News disclaimer can be found at http://www.economicnews.ca/cepnews/wire/disclaimer.

Jul 21 14:55 GMT Sponsor Forex Brokers Overnight News Recap: Bundesbank Sees Slower Q2, UK House Prices Decline

News Recap | Written by CEP News | Jul 21 08 10:34 GMT |

(CEP News) - The Bundesbank said it expects slower growth in the second quarter due to a "technical correction" and Rightmove reported ongoing declines in housing prices in the UK as Europe saw a relatively peaceful session this morning. In Australia, markets received slower-than-expected PPI while Japanese markets were closed for holiday.

In its monthly report published on Monday, the Bundesbank said that the German economy slowed in the second quarter of 2008 as construction production deteriorated and rising inflation limited consumption. After a mild winter boosted construction output and helped push economic growth to a surprisingly strong 1.5% in the first quarter, the Bundesbank stressed that the weakness in Q2 would be due to a "technical" correction. Second-quarter GDP data is expected to be released on Aug. 14.

According to the Rightmove house price index, the average asking price for homes in the UK fell by 1.8% to £235,219 on a monthly basis in July, reflecting a decrease of £4,345. Compared to the same month in 2007, July's average asking price declined 2.0%, down from the 0.1% annualized gain recorded in June 2008.

According to data released by the Swiss Federal Statistics Office, producer and import prices rose 0.6% month-over-month in June, up from the 0.5% growth rate expected. Producer and import prices had increased 1.2% in May. Year-over-year, producer and import price inflation reached 4.5%. The consensus had called for a 4.4% growth rate following May's 3.9% jump.

The Swiss Federal Statistics Office also reported that M3 money supply in Switzerland grew 1.5% in June 2008 compared to the same month one year ago. May had recorded a 2.9% money supply growth rate, revised up from 2.6%.

Slovenian producer prices rose 1.2% month-over-month in June, up significantly from May's 0.6% increase, according to a press release from the Statistical Office of the Republic of Slovenia. "The price increase was the result of higher prices of export products (by 1.8%) and the prices of manufactured goods on the domestic market (by 0.5%)," the press release elaborated.

According to the Financial Times, French President Nicolas Sarkozy is developing plans to hold the European Central Bank increasingly accountable to governments within the euro area. Sarkozy is also suggesting that the finance ministers set up a permanent secretariat to better co-ordinate policy and strengthen contact with the ECB.

Producer prices in Australia advanced 1.0% q/q in the second quarter of 2008, according to the Australian Bureau of Statistics on Monday. The result was below forecasts for a 1.6% increase and the previous quarter's 1.9% rise. On an annual basis, PPI moved up 4.7%, also short of forecasts for a 5.2% rise and the previous quarter's 4.8% gain.

The ABS also said new motor vehicle sales in Australia expanded by 1.0% month-over-month in June compared to an upwardly revised 1.5% decline, while annual sales rose 1.4% compared to a 2.4% increase in May.

GB Rightmove House Prices (M/M) July -1.8% vs. Prior: -1.2%

GB Rightmove House Prices (Y/Y) July -2.0% vs. Prior: +0.1%

AU Producer Price Index (Q/Q) Q2 +1.0% vs. Exp: +1.6% Prior: +1.9%

AU Producer Price Index (Y/Y) Q2 +4.7% vs. Exp: +5.3% Prior: +4.8%

AU New Motor Vehicle Sales (M/M) June +1.0% vs. Revised: -1.5% Prior: -1.6%

AU New Motor Vehicle Sales (Y/Y) June +1.4% vs. Revised: +2.4% Prior: +2.6%

By Erik Kevin Franco, efranco@economicnews.ca and Todd Wailoo, twailoo@economicnews.ca, edited by Nancy Girgis, ngirgis@economicnews.ca

The Copying, Broadcast, Republication or Redistribution of CEP News Content is Expressly Prohibited Without the Prior Written Consent of CEP News.

A copy of CEP News disclaimer can be found at http://www.economicnews.ca/cepnews/wire/disclaimer.

FX Thoughts for the Day

Daily Forex Technicals | Written by Kshitij Consultancy Services | Jul 21 08 12:28 GMT |

USD-CHF @ 1.0223/27.... Could dip again.

R: 1.0250-60 / 1.0300 / 1.0350
S: 1.0170 / 1.0150 / 1.0110 / 1.0060

There has not been a huge move in the day so far, neither is one expected in the day ahead. Japan celebrated Marine Day and no US releases later in the day, keep the market calm for now.

A dip to 1.0185 was witnessed after a rise to 1.0238 faced Resistance at the 21-day SMA at 1.0244. For now, the pair trades close to the Resistance at 1.0240-45, on the trendline joining the highs of 1.0356 (9-Jul), 1.0340 (10-Jul) and 1.0250 (18-Jul) on the 4-hourly chart. Also at 1.0245 is the 21-day SMA. A rise beyond this could target 1.0300. However, the more likely scenario is that the resistance holds in the day leading to another test of 1.0170 if not 1.0150.

To see the chart click on:

http://kshitij.com/graphgallery/chfcandle.shtml

http://kshitij.com/graphgallery/chfma.shtml

GBP-USD @ 1.9964/68... Direction remains unclear.

R: 1.9980 / 2.0000 / 2.0050
S: 1.9900 / 1.9870-50 / 1.9800

A dip to 1.9907 has once again attracted buying interest and resulted in a rise from there to 1.9980. However, strong Resistance near 1.9980 has resulted in a small dip there after.

For now expect a rise to test 1.9980-2.00 in the day once again. A rise beyond may target 2.0034, the Max High of the day. If however, 1.9980 continues to hold, expect a dip to 1.9900-9850 in the US session. To see the chart click on http://kshitij.com/graphgallery/gbpcandle.shtml

AUD-USD @ 0.9753/57... Overall bullish

R: 0.9800-25 / 0.9850-67 / 0.9900
S: 0.9740 / 0.9700 / 0.9660 / 0.9600

The rally in the pair faced strong Resistance at 0.9772 twice over in the day. However, it continues to trade above 0.9750-30 Support. While it trades above this Support region expect the possibility of a further rise towards 0.9850 and 0.9900 over the week.

For the day a rise beyond 0.9810 might not be on the cards. A break below 0.9730 is not likely either, but if seen could result in a dip towards stronger Support at 0.9680. This however, is not expected to change the overall bullish outlook, which targets 0.9900 over the week, unless a close below 0.9680 is seen today.

To see the chart click on:

http://kshitij.com/graphgallery/audcandle.shtml

To follow economic releases like the AU PPI QoQ click on:

http://kshitij.com/fundamentals/calendar/calendar.shtml

The thin liquidity and no big directional moves keep us out of trading for a while.

Kshitij Consultancy Service
http://www.fxthoughts.com

Legal disclaimer and risk disclosure

These views/ forecasts/ suggestions, though proferred with the best of intentions, are based on our reading of the market at the time of writing. They are subject to change without notice.Though the information sources are believed to be reliable, the information is not guaranteed for accuracy. Those acting in the market on the basis of these are themselves responsibly for any profits or losses that might occur, without recourse to us. World financial markets, and especially the Foreign Exchange markets, are inherently risky and it is assumed that those who trade these markets are fully aware of the risk of real loss involved.

Greenback Falling Ahead of Week's Fundamentals

Daily Forex Fundamentals | Written by Crown Forex | Jul 21 08 11:40 GMT |

Today the U.S lacks major fundamentals but still the greenback is under pressure on anticipations that this week's data of durable goods orders and the U.S house sales will continue to fall farther weighing down the economy. As before the Feds were hinting for a rate hike as they expected risks to growth were diminished now as there are downside risks to growth and financial market turmoil ongoing is causing the Feds to hold off their decision at the current state the U.S is in.

The EU Zone is fundamental free today as the single currency tries to breach the resistance of 1.5900 as it gaining versus the depreciating US dollar. The EUR/USD is currently trading at 1.5886 while recording a low of 1.5839 and a high of 1.5907 so far.

The UK released their house prices for the month of July coming in at -1.8% worse than the prior reading of -1.2% according to Rightmove. As for the year ending in July also for the house prices coming in showing a decline to -2.0% from the prior reading of 0.1%. The news added more woes to the UK economy as they are already suffer from slowing growth and spiking inflation of 3.8%, this caused sterling to deteriorate while losses were limited due the weak greenback. The GBP/USD is currently trading above the strong support of 1.9905 at 1.9965 while recording a high of 1.9965 and a low of 1.9906.

Currently in the markets there is a slight case of carry trades as investors are selling low yielding currencies like the yen and buy the high yielding currencies especially the British pound and the euro. The USD/JPY is currently trading at 106.64 while recording a high of 106.96 and a low of 106.36.

Crown Forex

Suez Environnement CEO sees listing price at 14 to 20 euros per share

07.21.08, 7:29 AM ET

PARIS (Thomson Financial) - The initial listing price of Suez Environnement shares will be between 14 and 20 euros, Jean-Louis Chaussade, chief executive of the water and waste disposal business, told journalists at the presentation of the company's new logo.

Shareholders of the existing Suez conglomerate will receive 65 percent of the 490 million Suez Environnement shares to be issued when the division is spun off in conjunction with the merger, effective tomorrow, of Suez and Gaz de France.

Andrew Newby; Andrew.Newby@thomsonreuters.com

an/am

COPYRIGHT

Copyright Thomson Financial News Limited 2008. All rights reserved.

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FTSE falls early on weak oils and HBOS; miners rise

Mon Jul 21, 2008 3:40am EDT

* FTSE 100 falls 0.6 pct

* HBOS slips after announcing rights issue results

* Oils the standout losers as crude trades well off highs

* Miners track firmer metal prices

By Dominic Lau

LONDON, July 21 (Reuters) - Britain's top share index fell early on Monday, giving up some of the previous session's sharp gains, after a disappointing take-up of HBOS's rights issue and as oil shares weighed with crude trading well off record highs.

By 0724 GMT, the FTSE 100 .FTSE was down 32.9 points, or 0.6 percent, at 5,343.5, after closing up 1.7 percent on Friday, marking its first weekly increase in nine weeks and the end of the longest losing stretch since late May 2002.

"There is a realisation that people behaving like ostriches are going to have to take their heads out of the sand. We've got an issue here -- it is called falling growth and is called heading towards recession...That's the sentiment play," said David Buik, strategist at BGC Partners.
"The HBOS thing is ... tragic and very unlucky. You cannot have a two-month gap before announcing the rights and implementing it, especially when the market is very, very brittle and extremely volatile."

HBOS fell 3.2 percent after the mortgage lender said shareholders subscribed to buy just 8.3 percent of shares in its 4 billion pound ($8 billion) rights issue, leaving its underwriters to try to sell almost 3.8 billion pounds of shares.
HSBC , however, advanced 0.8 percent after the Sunday Telegraph said the global banking group had held talks with China's sovereign wealth fund over a potential investment in HSBC.

Within the banking sector, Barclays , Lloyds TSB and Standard Chartered shed 0.4 to 1.3 percent.

The British economy is heading into recession and interest rates should fall to "well below" their current 5 percent, Bank of England policymaker David Blanchflower was quoted as saying in a newspaper interview.
A survey by property website Rightmove showed asking prices for homes in England and Wales fell two percent year-on-year in July, the first annual fall since the series began six years ago.

Retailers and property stocks were down, with Marks & Spencer , Land Securities , British Land , Next , Sainsbury , Tesco and Kingfisher dropping 1.7 to 3.7 percent.

Investors will shift their attention to results from Bank of America , Apple and Merck & Co later in the day for further market direction.

Oil shares slipped after crude prices CLc1 traded well off their record highs. BP , Royal Dutch Shell , gas producer BG Group and Cairn Energy lost 0.2 to 1.2 percent.

Miners tracked higher metal prices, with BHP Billiton , Rio Tinto , Anglo American , Xstrata , Vedanta Resources, Eurasian Natural Resources , Lonmin and Antofagasta adding between 0.5 and 2.6 percent. (Editing by David Cowell)

Read more...

European shares jump on Bank of America results

Mon Jul 21, 2008 7:11am EDT

LONDON, July 21 (Reuters) - European shares extended gains to hit their day's highs on Monday after results from Bank of America (BAC.N: Quote, Profile, Research, Stock Buzz).

The pan-European FTSEurofirst 300 index of top European shares was up 1.1 percent at 1,177.42 points, having hit a day high of 1,178.77 after the Bank of America results.

(Reporting by Sitaraman Shankar)

Read more...

REFILE-HK shares close at 1-mth high, led by HSBC

Mon Jul 21, 2008 4:43am EDT

(Refiles to fix spelling of Citigroup)

* Hang Seng Index posts biggest single day gain since April

* HSBC leads on CIC investment report, Citi earnings

* Chinese financials, local developers join rally (Updates to close)

By Parvathy Ullatil

HONG KONG, July 21 (Reuters) - Hong Kong shares rose 3 percent on Monday, their biggest single-day gain since early April, led by financial stocks after Citigroup calmed credit market worries with a smaller-than-expected loss for the first half.

Europe's largest bank, HSBC Holdings , jumped the most since end-March, rising 4.1 percent, boosted by a Sunday Telegraph report that said the lender had held talks with China's main sovereign investment fund over a potential investment. The stock has gained 11.5 percent in the past three sessions.

Some analysts were sceptical aboout CIC's reported interest in HSBC . They attributed the rally in HSBC to short covering after the fell to a five-month low last week, as investors prepared for further bad news from U.S. mortgage lenders and small banks.

"It doesn't make sense for CIC to invest in overseas financial institutions when nobody knows where the bottom of the credit crisis could be," said an analyst at Haitong Securities in Shanghai.
"Chinese regulators have repeatedly warned Chinese financial firms to pay extreme attention to the uncertainties of the risks of overseas markets."

The Hang Seng Index .HSI closed up 658.71 points at 22,532.90, its higest closing level since June 25.

The HSI, at 22,537, broke above the top of a downtrend channel from early May and appears to have triggered a double bottom formed by its July lows.

Mainboard turnover rose to HK$69.6 billion ($8.9 billion) from HK$59.6 on Friday.

"If the oil prices hold steady and Bank of America, which is due to announce results tonight, does not disappoint we will see this rally extending into at least another session," said Philip Chan, head of research with CAF Securities.

Asia's top refiner, Sinopec Corp , shot up 3.3 percent as oil prices held under $130 per barrel, after recording their biggest weekly decline since December 2004 last week.

Also helped by retreating oil prices, Air China , the nation's biggest international airline, climbed 2.8 percent.

Sun Hung Kai Properties , Hong Kong's leading property developer, rose to its highest level in more than four weeks on reports that the supply of residential apartments fell sharply in the second quarter. The stock gained 5.9 percent as analysts said its was recently oversold.

Hang Lung Properties joined in the rally with a 3 percent jump, while Li Ka-shing property flagship Cheung Kong Holdings rose 3.6 percent.

The China Enterprises Index .HSCE of top locally listed Chinese firms jumped 2.8 percent, in line with a 3 percent gain on the Shanghai bourse.

Mainland banks also surged, with ICBC gaining 2.3 percent and China Construction Bank jumping 2.6 percent. Bank of Communications advanced 2.7 percent and Bank of China climbed 1.8 percent.

"These stocks have been punished too much for most of last week on talk of their exposure to the troubled U.S. mortgage lenders, Freddie & Fannie," said Paul Lee, analyst with Tai Fook Securities.

The Hang Seng financial sub-index .HSNF climbed 3.6 percent.

Other index heavyweights also chipped in with hefty gains. Asia's largest wireless carrier, China Mobile jumped 2.2 percent and the mainland's top insurer, China Life , climbed 5.4 percent. Bourse operator Hong Kong Exchanges & Clearing (HKEx) rallied 4.6 percent.

Bucking the winning trend among Chinese stocks, Anhui Conch slid 6 percent after an investment bank downgraded the firm on fears that soaring energy prices would squeeze margins for the building materials sector.

On Monday, Goldman Sachs cut Anhui Conch and rival China National Building Materials to sell from neutral, citing potential difficulties in passing on climbing coal and power prices.

CNBM slipped 2.9 percent. (Reporting by Parvathy Ullatil; Editing by Anne Marie Roantree)

Read more...

European Market Update

Daily Forex Fundamentals | Written by Trade The News | Jul 21 08 09:58 GMT |

The Lull Before the Storm

ECONOMIC DATA

SZ June M3 Money Supply: 1.5% v 2.9% prior || Prior revised from 2.6% to 2.9%
SZ Q2 Real Estate Index Family Houses: 346.5 v 340.4 prior
SZ June Producer & Import Prices: M/M 0.6% v 0.5%e || Y/Y 4.5% v 4.4%e

SPEAKERS/FIXED INCOME/FX/COMMODITIES/ERRATUM

In equity news overnight an analyst at Lehman overnight cut his outlook for the FTSE world index to 362 from 415. The index averaged 439.4 over the past year, and opened around 394.5 today. HBOS [HBOS.UK] confirmed the results of its rights issue noting the receipt of 8.29% of acceptances. The company's underwriters, Dresdner and Morgan Stanley, will seek to sell the remaining 1.38B shares until tomorrow evening. Wolters Kluwer [WKL.NV] reduced its FY08 organic revenue growth outlook to 3% from 4%, citing recent market conditions in non-subscription product lines. Inmarsat [ISAT.UK] announced that talks with Harbinger Capital have ended. The board concluded that there is no merit in continuing discussions at this time. Roche [ROG.SZ] offered to buy the rest of Genentech (DNA) at $89/share in cash, in a deal valued at $43.7B. Roche acquired a majority in Genentech in 1990 and currently owns 55.9% of all outstanding shares. The transaction will have no impact on Roche's sales and Core EPS targets for 2008, as communicated earlier in the year. Roche also remains committed to increasing its dividend payout ratio for the next three years as previously announced.

In the newspapers, according to the Telegraph British Petroleum [BP.UK] blocked a $1.8B dividend payment from its Russian joint venture in an effort to pressure its billionaire partners The article said that BP made the move at a TKN-BP [TNBP.RU] board meeting in Cyprus earlier this month. The Financial Mail wrote overnight that Centrica [CAN.UK] and British Gas [BG.UK] plan to raise gas bills by more than 30% this year. La Repubblica reported overnight that DZ Bank may place a bid for Banca Italease [BIL.IT] in the early part of September. Recall that there was some speculation about this in May. The Observer wrote overnight that there are concerns that Anglo Irish [AGLD.UK] may have to sharply increase its loan loss provisions due to the conditions of the UK and Irish property markets. An analyst at RBC believes that Anglo Irish is one of the most susceptible to a decline in the UK's commercial real estate market. The Mail on Sunday wrote overnight that GKN is expected to sign an agreement to buy Airbus' [EAD.FR] Filton plant.

In fixed income related news the Financial Times noted that credit default swaps for Greece, Italy, Spain, Ireland and Portugal have all risen sharply in July, perhaps indicating that they have the weakest economies in the EU.

The USD was softer against the major currency pairs as the week began. Higher commodity prices were the catalyst for the USD's soft tone. Dealers noted that geopolitical concerns remained on the back burner following the weekend's six-party talks with Iran. An Iranian nuclear delegate noted that 'there is no chance' that Iran will suspend its uranium enrichment program. Thus the net result of the talks was a 2-week deadline for Iran to curb its program otherwise it will face increased sanctions. The EUR/USD tested its recent resistance level above the 1.59 handle. The USD/CHF was hovering around the 1.02 handle.

On the speaker front the Bank of England's Blanchflower said overnight that we are going into recession and we are probably in one now, adding that he would like to see rates 'well below' their current level. Blanchflower asserted that the BOE needs to act now to prevent a recession, noting that the UK will probably have 3 or 4 quarters of contraction and risks are to the downside. Blanchflower added that monetary policy has been far too tight for too long. In an interview with Welt am Sonntag German Finance Minister Steinbrueck said that 2008 GDP growth could be slightly above 1.7%, noting that there is no reason to fear a recession.

NOTES

Most of the focus overnight seemed to rest upon comments made by the Fed's Stern on Friday afternoon after the European close. Markets digested Stern's hawkish tone, which seemed to highlight that the Fed is simply confused. Comments from Bank of England dove Blanchflower were also noted by many market participants overnight as they indicated that the BOE may have to make a prompt, sharp cut to interest rates in order to avoid a deep recession. In fixed income bond yields were in focus as the recent (small) decline seemingly disappeared at the long end of the curve over the past two sessions. Some dealers noted that the 2-year note/schatz spread is back on the approach of, and just a stone throw away from the 200bps level. Others took note of the 10-year bund/OLO spread, which remains at its widest level since the end of March due to political instability in Belgium. Even further, some attention was paid to the Financial Times article that pointed out the rise in credit default swaps in some of the EU countries; certainly a reminder that there is a grim cloud of uncertainty hovering over the European economy. Economic data will remain light for the earlier part of the week, but is set to pick up later on with particular focus on Thursday's release of July IFO data in Germany, as well as June retail sales in the UK. Earnings season is in full swing this week with a seemingly countless number of earnings reports expected on Thursday. Before we make it to Thursday we will encounter many notables including the release of results from Dow components Bank of America (BAC), and Merck (MRK) this morning.

“There are some men who lift the age they inhabit, till all men walk on higher ground in that lifetime.” - Maxwell Anderson

Trade The News Staff
Trade The News, Inc.

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U.K. July Rightmove House Prices: Summary (Table)

By Mark Evans

July 21 (Bloomberg) -- Following is a summary of the July rightmove house price report from rightmove.co.uk in London:

===============================================================================
                 July    June     May   April   March    Feb.    Jan.    Dec.
                 2008    2008    2008    2008    2008    2008    2008    2007
===============================================================================
             -------------- Average Property Asking Price (GBP) --------------
[bn:WBTKR=UKRMNAP:IND] U.K. Price []     235,219 239,564 242,500 239,521 239,655 237,856 230,428 232,396
[bn:WBTKR=RMREGL:IND] London Price []  400,258 399,010 404,541 403,545 407,383 402,233 398,476 384,632
             ------------------------------ MoM ------------------------------
[bn:WBTKR=UKRMNAPM:IND] U.K. MoM []         -1.8%   -1.2%    1.2%   -0.1%    0.8%    3.2%   -0.8%   -3.2%
[bn:WBTKR=RMREGLMM:IND] London MoM []       0.3%   -1.4%    0.2%   -0.9%    1.3%    0.9%    3.6%   -6.8%
             ------------------------------ YoY ------------------------------
[bn:WBTKR=UKRMNAPY:IND] U.K. YoY []         -2.0%    0.1%    2.2%    1.3%    5.0%    5.8%    3.4%    4.8%
[bn:WBTKR=RMREGLYY:IND] London YoY []       1.4%    2.9%    5.0%    6.2%   11.2%   11.7%   11.9%    8.3%
             --------------------- Index (Jan 2002=100) ----------------------
[bn:WBTKR=UKRMNAPI:IND] U.K. Index []       191.4   194.9   197.3   194.9   195.0   193.5   187.5   189.1
===============================================================================
NOTE: Average property asking price in GBP.
     Prices compiled from asking prices of properties as they come on
     the market via Rightmove's member estate agents over the previous
     month, covering half the market.  Not seasonally adjusted.

SOURCE: rightmove.co.uk

To contact the reporter on this story: Mark Evans in London at mevans8@bloomberg.net

Dollar ended last week higher after smaller-than-expected loss from Citigroup

Forex Market Issues and Risks

Daily Forex Fundamentals | Written by AC-Markets | Jul 21 08 09:37 GMT |

News and Events:

The Dollar rose on Friday, heading for its largest weekly gain versus the Euro in a month, after a smaller-than-expected quarterly loss from Citigroup eased worries about the US financial sector. Citi's results added to positive earnings news this week from Wells Fargo and JPMorgan Chase. That allowed the Dollar to regain some strength after slumping to a record low against the Euro on Tuesday. EurUsd rose only 0.18% to 1.5853, well off its record high of 1.6039 set on Tuesday.

UsdJpy was up 1.08% at 106.24. UsdChf rose 0.25% at 1.0225. GbpUsd rose 0.05% at 1.9983 after hitting 1.9907 low.

The Euro was capped by European Central Bank President Jean-Claude Trichet's comments published on Friday that euro-zone growth is likely to be weak in the second and third quarters before staging a recovery. Risks to growth were on the downside, Trichet said in a joint interview with four European newspapers. For the week, EurUsd has lost 0.71%, while the GbpUsd rose 0.37% edging down from previous days on speculation the UK government would increase borrowing. Analysts said despite the Dollar's recovery on Friday, sentiment on the currency was still shaky.

Advanced Currency Markets - Forex Issues and Risks

Today Key Issues:

00:00 JPY Oceans Day holiday in Japan
07:15 CHF June Producer/Import Price 0.6% vs 1.2% (MoM)
07:15 CHF June Producer/Import Price 4.5% vs 3.9% (YoY)
14:00 USD June Lead indicators -0.1% vs 0.1%

The Risk Today:

EurUsd Market hit 1.6039 high last week. This marks initial resistance over 1.6000 Pivot point resistance. A break there would open the way to key resistance 1.6200. On the downtrend, return below 1.5800 will undermine the recent uptrend. Any weakness may bring back 1.5400 - 1.5800 consolidation range. Below, strong support holds 1.5304 13th June low.

GbpUsd Cable is again in 1.9400 - 2.0000 trading range. It hit 2.0158 high last week. Key level holds again 2.0100. On the downside, only a return below 1.9649 might bring again focus on 1.9337 January low and 1.9105 (50% retracement of 1.7049 - 2.1162 advance). Initial support holds 1.9649 July 7th low. Strong support holds 1.9363 20th February and 14th May low.

UsdJpy Last week profit taking pushed the market back into 100 - 104 consolidation trading range and put 100 level on sight. Friday strong Dollar rebound put focus over 105 and mid-June 108.59 resistance and 110.10 strong resistance (Trendline). Further advance would open the way toward 111.92 early January high.

UsdChf Market hit 1.0013 last week. Further weakness below 1.0000 may open the way toward 0.9637 17th March low. Renewed strength over 1.0200 would reopen the 1.0200 - 1.0600 consolidation range. Initial resistance holds 1.0353 9th July high.

EURUSD		GBPUSD		USDJPY		USDCHF
1.6200	T	2.1162	S	111.92	K	1.1191	K
1.6039	M	2.0158	M	110.10	T	1.0625	T
1.6000	K	2.0100	K	105.66	M	1.0353	S
1.5865		1.9915		106.65		1.0220
1.5800	M	2.0000	S	103.92	M	1.0013	M
1.5304	S	1.9649	S	102.73	S	1.0000	P
1.5000	K	1.9337	T	100.00	P	0.9637	K
S: Strong, M: Minor, T: Trendline, K: Keylevel, P: Pivot

ACM FOREX

Disclaimer: This report has been prepared by AC Markets (thereof ACM) and is solely been published for informational purposes and is not to be construed as a solicitation or an offer to buy or sell any currency or any other financial instrument. Views expressed in this report may be subject to change without prior notice and may differ or be contrary to opinions expressed by Salesperson or Traders of ACM at any given time. ACM is under no obligation to update or keep current the information herein, the report should not be regarded by recipients as a substitute for the exercise of their own judgment.

U.S. Companies to Raise Prices Amid Soaring Costs, Survey Says

By Timothy R. Homan

July 21 (Bloomberg) -- More companies in the U.S. plan to boost prices and limit hiring as the surge in raw-material costs hurts profits, a private survey found.

Almost four times as many businesses plan to charge their customers more next quarter than expect to reduce prices, according to the National Association for Business Economics. A net 9 percent of employers said they would increase payrolls over the next six months, the fewest in five years.

The report reinforces concern that rising expenses will contribute to a further pickup in inflation and a weakening in the labor market. A net 71 percent of firms said costs rose last quarter, up from 65 percent in the previous three months and the most since records began in 1994, the poll showed.

``The rising costs of materials and other non-labor inputs are a big concern and a big drag on profitability,'' Ken Simonson, chief economist for the Associated General Contractors of America in Alexandria, Virginia, and board member of the business group, said in an interview.

The number of respondents saying profit margins declined last quarter exceeded those registering gains by 13 percent, the biggest differential since the 2001 recession.

Soaring expenses for raw materials forced businesses to pass on higher costs to consumers last quarter, the survey showed. A net 28 percent, the highest since the first quarter of 2007, said they increased prices from April through June.

The survey showed fewer firms were pessimistic about their outlook for 2008 compared with the first quarter.

Fannie, Freddie

The poll was taken between June 19 and July 10, raising the possibility that most respondents hadn't had a chance to take into account the latest turmoil in financial markets following concerns about the viability of Fannie Mae and Freddie Mac. The report included responses from 101 members of the business economists group.

On July 13, Treasury Secretary Henry Paulson sought blanket authority from Congress to buy equity stakes in, and lend to, Fannie Mae and Freddie Mac, aiming to stem the collapse of confidence in the largest sources of U.S. mortgage financing.

Federal Reserve Chairman Ben S. Bernanke last week abandoned his June assessment that the threat of an economic downturn had diminished. During testimony before U.S. lawmakers in Washington, he said there are ``significant downside risks to the outlook for growth.''

Fewer companies boosted wages, the survey also showed. A net 20 percent said salaries have increased, the lowest level since the end of 2003, and down from 31 percent in the group's previous survey in April.

Wages, Inflation

The Labor Department's report on consumer prices last week showed wages, adjusted for inflation, fell 2.4 percent in the 12 months ended in June. Employers have cut jobs each month in 2008, according to government figures.

Declines in hiring and the failure of wages to keep pace with inflation are among the reasons economist forecast consumer spending, the biggest part of the economy, will slow later this year.

Business investment plans were also soft last quarter after slumping in the first three months of the year, the NABE survey showed. On net, 27 percent of the firms said they would increase spending on new buildings and equipment over the next 12 months compared with 28 percent in the first quarter. At the end of 2007, that reading was 40 percent.

To contact the report on this story: Timothy R. Homan in Washington at thoman1@bloomberg.net

Read more...

British M&A Will Fall for a Further 15 Months, Report Predicts

By Ambereen Choudhury

July 21 (Bloomberg) -- Mergers and acquisitions among U.K. companies will go on declining for the next 12 to 15 months as the credit crunch slows Britain's economy, advisory firm Grant Thornton LLP said.

``If present economic conditions continue, it could take some years to climb back to the M&A peaks we saw midway through last year,'' said London-based David Brooks, head of M&A at Grant Thornton, in an e-mailed statement today. Deal values and volumes will fall for another five quarters, the report predicted.

The British pound has dropped 12.5 percent in the past 12 months on a trade-weighted basis, as the run on Northern Rock Plc and a housing-market slump eroded confidence in Europe's second- largest economy. British M&A has almost halved to $372 billion this year after a record 2007, according to data compiled by Bloomberg.

Emerging market countries and foreign acquirers may continue to cushion the fall, as they snap up assets in the U.K., Brooks said. ``The developing world is cash-rich and looking to spend, and the U.K. is putting a `For sale' sign up in the window.''

Banco Santander SA, Spain's biggest bank, agreed to acquire Alliance & Leicester Plc for 1.26 billion pounds ($2.6 billion) on July 14, less than half the U.K. mortgage lender's market value at the end of last year.

To contact the reporters on this story: Ambereen Choudhury in London at achoudhury@bloomberg.net

Read more...

Hong Kong Inflation Accelerates to 6.1% on Food Costs

By Nipa Piboontanasawat

July 21 (Bloomberg) -- Hong Kong's inflation accelerated in June to the fastest pace in four months as food and energy costs climbed.

Consumer prices rose 6.1 percent from a year earlier, the government said today on its Web site, after gaining 5.7 percent in May. That compared with the 5.8 percent median estimate of 15 economists surveyed by Bloomberg News.

The yuan's 6.9 percent gain against the Hong Kong dollar this year has added to rising costs for food imported from mainland China. Chief Executive Donald Tsang last week proposed HK$11 billion ($1.4 billion) of inflation relief, including electricity subsidies and a food allowance for the poor, saying that ``extreme times'' call for ``extreme measures.''

``The package is meant to relieve the pain,'' said Kevin Lai, senior economist at Daiwa Institute of Research in Hong Kong. ``There will only be additional pressure for prices to rise as the government spending translates into higher demand.''

Food prices rose 11.3 percent in June from a year earlier and utility costs increased 7.4 percent, the government said. Rents climbed 6.3 percent.

Truck and minibus drivers parked their vehicles to block roads in the Central district on June 10 to protest fuel prices. Transport workers for Watsons Water, a subsidiary of Hutchison Whampoa Ltd., started a strike today, demanding higher wages because of inflation, Radio Television Hong Kong reported.

Property Rates

The government has waived property rates for the second and third quarters of 2007, the whole of 2008 and the first quarter of 2009. Last week's proposals include wiping two more months' rent for public-housing tenants. The government had already foregone one month's rent this year.

Hong Kong's economy expanded 7.1 percent in the first quarter, the fastest pace in two years. For the six months through June, consumer prices climbed 5.1 percent from a year earlier. February's 6.3 percent inflation was the fastest in more than a decade.

Central banks across Asia are grappling with rising inflation and the prospect of weaker export demand as global growth slows.

India's inflation is the fastest in more than 13 years and China's consumer prices rose by the most since 1996 in the first six months. Malaysia's rate may have reached a 26-year high after the government raised fuel prices, according to comments by a government minister today.

Purchasing Power

Hong Kong's monetary-policy options are limited because its currency is linked to the U.S. dollar and the city's base lending rate to banks tracks interest-rate moves by the U.S. Federal Reserve. Unemployment is also at a decade low, pushing wages higher.

``Fast-rising prices have eroded purchasing power and weighed on consumer spending,'' said Wang Qian, an economist at JPMorgan Chase & Co. in Hong Kong. ``This has intensified concerns about the growth outlook against the backdrop of a further downshift in global demand.''

In China, wholesale prices of agricultural goods rose 9.1 percent in June. Hong Kong imports most of its food from the mainland.

``Food costs have gone up quite dramatically and it doesn't seem like the situation is going to get better anytime soon,'' Mark Howard, the manager of the Post 97 restaurant in Central, said today. The restaurant last month raised the price of its Lavish Lunch Buffet to HK$145 from HK$135.

Hong Kong & China Gas Co., also known as Towngas, will raise its basic gas tariff by 1.4 percent from Oct. 1, the company said this month.

To contact the reporter on this story: Nipa Piboontanasawat in Hong Kong at npiboontanas@bloomberg.net

Read more...

WTO Talks Must Not Become `Tug of War,' Rachid Says

By Jennifer M. Freedman

July 21 (Bloomberg) -- Wealthy nations must resist allowing make-or-break talks at the World Trade Organization this week from becoming a ``tug of war'' between the demands of domestic pressure groups and the needs of poor countries, Egypt's trade chief said.

Trade ministers from about three dozen key governments including the U.S., China, the European Union and Brazil kicked off talks in Geneva today, seeking to clinch a deal to break down market barriers in agriculture, manufactured goods and commercial services.

The U.S., the EU and Japan are seeking wider markets for their manufactured goods, saying developing countries such as India and Brazil must cut tariffs on industrial goods or risk destroying almost seven years of global trade talks. Developing nations are determined to pry open the rich world's markets for exports of commodities such as rice, beef and wheat.

``As the end of trade talks approaches and the `lobbying' begins in earnest, it is vital for developed countries not to leave it to others to fight the development corner,'' Egyptian Trade Minister Rachid Mohamed Rachid said in a statement as the talks began. ``Members must resist the temptation to use the week's negotiations as a tug of war between what they want and what they are prepared to concede.''

`Real Value'

EU Trade Commissioner Peter Mandelson and U.S. Trade Representative Susan Schwab say emerging nations will be on the spot this week to open their markets or risk scuttling the talks -- the last chance to strike a deal before the U.S. presidential election. The discussions will focus on potential tariff and subsidy cuts on agricultural and industrial goods.

Speaking today at the opening session of the talks, Mandelson said he believed an agreement would be fair to emerging economies.

``There will be an unprecedented development outcome in farm reform, and the new goods trade flowing from the package should also bring real value for developing countries,'' he said. ``But we will also not allow explicit development questions such as preference erosion, cotton, aid for trade or a crucial global extension of duty-free quota-free market access to slip off the agenda.''

For the summit to be a success, the WTO's 152 members will have to agree on so-called modalities -- the key percentages for tariff cuts that would form the basis for any comprehensive deal.

Fuel, Food Prices

Slowing growth in advanced economies and high food prices that threaten increased starvation in the southern hemisphere give added urgency to the talks, which have been dogged by tensions between rich and poor since they began in Doha, Qatar, in 2001.

``Soaring fuel and food prices are a stark reminder of the continuing inequalities of global agricultural trade,'' Rachid said. ``Developed countries are today responsible for the greatest distortions in the global trading system.''

Repeated appeals by political leaders worldwide have failed to lock up a deal. In the latest declaration, heads of the Group of Eight industrial powers earlier this month pressed for an ``ambitious, balanced and comprehensive'' accord.

A breakthrough in WTO talks ``would infuse confidence in a world economy buffeted by high food and energy prices as well as financial strains,'' World Bank President Robert Zoellick said yesterday.

When the talks started, the World Bank estimated that a deal would inject as much as $850 billion annually into the global economy. The refusal of trading powers in the northern and southern hemisphere to make significant concessions has whittled that figure down to $50 billion to $100 billion, WTO Director-General Pascal Lamy said last week.

To contact the reporter on this story: Jennifer M. Freedman in Geneva at jfreedman@bloomberg.net

Read more...

Malaysia Inflation Rate May Have Reached 26-Year High

By Ranjeetha Pakiam

July 21 (Bloomberg) -- Malaysia's inflation rate may have reached a 26-year high after the government raised fuel prices, adding pressure on the nation's central bank to raise interest rates this week.

Consumer prices may climb 7 percent ``or even higher'' this month after a similar gain in June, Second Finance Minister Nor Mohamed Yakcop said today in Kuala Lumpur. That would be the fastest pace since January 1982, according to Malaysia's statistics department.

Neighboring Thailand and Indonesia have raised borrowing costs to offset the effect of soaring oil and food prices. A 41 percent increase in gasoline prices in June has kick-started price gains in Malaysia, where the central bank has kept its key interest rate unchanged since April 2006 to boost growth.

A ``monetary policy response will be needed to set inflation expectations on the right course,'' said Irvin Seah, an economist at DBS Bank Ltd. in Singapore. The situation is ``clearly beyond the comfort zone of the central bank.''

Bank Negara Malaysia is due to announce its monetary policy decision in Kuala Lumpur on July 25. The overnight policy rate is currently 3.5 percent.

Still, price increases for this month and in June may be ``one-off'' gains, Nor told reporters. Inflation for the year won't be more than 5 percent, he said.

``There's no reason to believe it will be repeated in following years,'' Nor said.

The minister said Malaysia's economic growth for 2008 should be about 5 percent, at the lower end of a 5 percent-to-6 percent range given by the central bank in March.

To contact the reporter on this story: Ranjeetha Pakiam in Kuala Lumpur at rpakiam@bloomberg.net

Read more...

Euro At 1.5900 As Oil Up, Stocks Down - Another Run At 1.60?

Daily Forex Fundamentals | Written by DailyFX | Jul 21 08 09:18 GMT |

Talking Points

Japanese Yen: holiday in Japan but weak equities help firm up the yen
Australian Dollar; PPI misses but anti dollar flows help
Euro: Oil rebounds and helps euro crawl towards 1.5900
British Pound: Rightmove and dovish Blanchflower drag on sterling
US Dollar: LEI and BOA earnings on tap

The very familiar 'macro merry go around' of higher oil, lower equities and higher euro continued to play out as a new week of trading commenced in the currency markets. The failure to make progress on the Geneva nuclear talks with Iran over the week-end provoked fears of fresh sanctions against the Islamic regime and helped push oil higher, stocks lower and rallied the EURUSD in the process. The pair hit 1.5900 in early European trade as once again currency traders flocked to the euro on safe haven concerns.

If macro themes continue to dominate trade this week the EURUSD could make another run at the key 1.60 barrier, but as the calendar unfolds the unit could become progressively more vulnerable to micro factors, most notably the IFO report due Thursday night. As we stated in our weekly, 'If the IFO reading prints … below the psychologically key 100 level the sell of in EURUSD could accelerate as the focus will shift away from the unit status as the pre-eminent anti-dollar instrument back to concerns over its yield.'

Adding further obstacles to any meaningful EURUSD rally was a report today in FT which described plans by French President Nicolas Sarkozy to boost political accountability of the ECB. Specifically Mr. Sarkozy wanted the ECB to publish the minutes of it meeting – a measure that could derail its independence by making national representatives who sit on the board of the central bank vulnerable to political pressure.

While Mr. Sarkozy's proposals have virtually no chance of being enacted any time soon, his rhetoric reflects the growing unease amongst Eurozone fiscal authorities with ECB's uber hawkish monetary policy as the overall economy begins to show signs of serious deceleration in growth. Therefore the conflict within the 15 member union may keep the ECB stationary for the rest of the year, even if inflationary pressures do not abate. This scenario is will become even more likely if the labor markets in the region which have been surprisingly resilient begin to contract.

In short another run at 1.60 is quite possible but we doubt the EURUSD may muster much momentum beyond that point unless systemic risk in the US continues to escalate. To that end today's Bank of America earnings will be of key interest to currency traders as they remain focused on the state of the US financial sector. Friday's better than expected results from Citibank helped the buck to move away from the 1.6000 figure, but if BOA news is negative it may return there once again

DailyFX

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U.S. Leading Economic Indicators Index Probably Fell in June

By Courtney Schlisserman

July 21 (Bloomberg) -- The index of U.S. leading economic indicators may have fallen in June for the first time in four months, economists said before a private report today.

The Conference Board's gauge dropped 0.1 percent after increasing by the same amount in May, according to the median of 50 forecasts in a Bloomberg News survey. The measure points to the direction of the economy over the next three to six months.

The housing slump, now in its third year, higher food and energy prices and an increase in firings are likely to hurt growth. A slump in consumer spending in the second half of the year, as the boost from the government's tax rebates fades, threatens to bring the expansion to an end.

``It may very well be that GDP turns negative in the fourth quarter because of all the headwinds facing consumers that have been masked by the tax rebates,'' said Dana Saporta, an economist at Dresdner Kleinwort in New York. Gross domestic product is the value of all goods and services produced.

The Conference Board, a New York-based research group, is scheduled to issue its report at 10 a.m. Survey estimates ranged from a drop of 0.4 percent to a 0.3 percent gain.

Seven of the 10 indicators that make up the leading index are known ahead of time: stock prices, jobless claims, building permits, consumer expectations, the yield curve, supplier delivery times and factory hours. The Conference Board estimates the remaining three: new orders for consumer groups, bookings for capital equipment and the money supply.

Components Down

A rise in claims and declines in consumer expectations and stock prices were among the measures that dragged down the reading. Initial applications for jobless benefits averaged 390,500 a week, up from 368,800 in May.

The University of Michigan's consumer expectations index fell to 49.2 in June. A preliminary report on July 11 showed the measure dropped to a 28-year low of 48.3 this month. The Standard & Poor's 500 Index averaged 1341.25 in June, down from 1403.22 the prior month.

An unexpected jump in building permits prevented the leading index from falling even more. Applications, a sign of future construction, rose 12 percent in June as developers in New York City rushed to apply for, and start, new projects ahead of a change in building and tax codes.

The surge is likely to reverse this month. Excluding multi- family applications in the Northeast, permits would have risen just 0.7 percent, according to the Commerce Department.

Builder Confidence

Confidence among U.S. homebuilders dropped to a record low this month, a report from the National Association of Homebuilders/Wells Fargo last week showed. Readings on buyer traffic, current sales and projected sales six months from now also were at all-time lows.

Federal Reserve Chairman Ben S. Bernanke last week abandoned his June assessment that the threat of an economic downturn had diminished. During testimony before U.S. lawmakers in Washington, he said there are ``significant downside risks to the outlook for growth'' and ``upside risks to the inflation outlook have intensified.''

Bernanke cited higher energy prices, reduced access to credit and a further deepening in the housing recession as dangers to growth.

The government is scheduled to release its advance estimate on second-quarter GDP on July 31. Economists surveyed by Bloomberg News earlier this month projected the economy grew at a 1.5 percent annual rate from April through June as the rebate checks lifted consumer spending. Economists projected growth would slow to a 0.5 percent pace by the end of the year.

Rebates Fade

A Commerce Department report on July 15 indicated the effect of the tax rebates is already fading. Retail sales rose a less-than-forecast 0.1 percent in June, the report showed. The government distributed $91.8 billion in stimulus checks through July 11, out of a total plan of about $110 billion.

``We expect U.S. economic conditions and ongoing consumer concerns to continue to create challenges at least through the end of the year,'' Harley-Davidson Inc. Chief Executive Officer Jim Ziemer said in a statement July 17.

Harley-Davidson, the biggest U.S. motorcycle maker, said second-quarter profit fell 23 percent and sales in the U.S. declined 8.7 percent.

                        Bloomberg Survey

=====================================
                              LEI

                             MOM%
=====================================

Date of Release              07/21
Observation Period            June
-------------------------------------
Median                       -0.1%
Average                      -0.1%
High Forecast                 0.3%
Low Forecast                 -0.4%
Number of Participants          50
Previous                      0.1%
-------------------------------------
4CAST Ltd.                   -0.4%
Action Economics             -0.1%
Argus Research Corp.          0.0%
Banc of America Securitie    -0.2%
Bank of Tokyo- Mitsubishi    -0.2%
Bantleon Bank AG             -0.2%
BBVA                          0.1%
BMO Capital Markets          -0.1%
BNP Paribas                  -0.1%
Briefing.com                 -0.3%
Citi                          0.0%
Commerzbank AG               -0.2%
Credit Suisse                -0.2%
Daiwa Securities America     -0.2%
DekaBank                     -0.1%
Desjardins Group             -0.1%
Deutsche Bank Securities      0.1%
Deutsche Postbank AG         -0.2%
Dresdner Kleinwort           -0.2%
DZ Bank                      -0.1%
First Trust Advisors          0.0%
Helaba                        0.0%
IDEAglobal                    0.1%
Informa Global Markets       -0.1%
ING Financial Markets        -0.1%
Janney Montgomery Scott L    -0.2%
JPMorgan Private Client       0.0%
Landesbank Berlin            -0.1%
Landesbank BW                -0.1%
Lehman Brothers              -0.1%
Merk Investments             -0.1%
Merrill Lynch                -0.1%
Moody's Economy.com           0.1%
Morgan Stanley & Co.         -0.1%
National City Corporation     0.3%
Newedge                      -0.2%
Nomura Securities Intl.      -0.2%
Nord/LB                      -0.2%
PNC Bank                     -0.1%
RBS Greenwich Capital        -0.1%
Standard Chartered           -0.1%
Stone & McCarthy Research    -0.4%
TD Securities                -0.2%
Thomson Financial/IFR         0.1%
Unicredit MIB                -0.4%
University of Maryland        0.0%
Wachovia Corp.               -0.1%
Wells Fargo & Co.            -0.1%
WestLB AG                    -0.1%
Westpac Banking Co.          -0.2%
=====================================

To contact the reporter on this story: Courtney Schlisserman in Washington cschlisserma@bloomberg.net

All Calm Right Now

Daily Forex Fundamentals | Written by AC-Markets | Jul 21 08 08:20 GMT |

Market Brief

Usd was stable in Asian session as the lack of new data and non-data events gave speculators nothing new to trade on. EurUsd stayed well within Fridays range, trading from 1.5830 - 1.5874 while UsdJpy trended slightly lower from 106.98 to 106.71. AudUsd broke out of Fridays doldrums, trading back up to 0.9767. Asian Equity markets are in the green while European index futures are pointing to a negative open. Commodities are higher with wti crude trading at $129.88bbl and gold up .66% to 961.37. Bonds continue to decline across the treasury curve, as risk appetite is slowly returning to the market. FX 1-month implied vols are coming off last weeks highs, helping to support renewed risk appetite.

In the UK Rightmove House Price indices showed another decline in prices m/m 1.8% ( y/y 2.0%). In addition, the report also warned that unsold homes (per agency) have hit a record high. While the market was silent to the news, with deteriorating domestic conditions and the housing correction still well entrenched, the BoE will be increasingly pushed into a difficult dilemma (especially considering the UK will skid dangerously close to a recession).

In Australia , PPI came in lower for q2 rising to 1.0% q/q well below the expected 1.6% q/q, however the data does show an acceleration of inflation pressures. While PPI is not directly correlated with CPI it illustrates that inflation is still a concern and gave the Aud a slight boost in early trading.

No major events or data scheduled for release in the UK or Eurozone.

ACM FOREX

Disclaimer: This report has been prepared by AC Markets (thereof ACM) and is solely been published for informational purposes and is not to be construed as a solicitation or an offer to buy or sell any currency or any other financial instrument. Views expressed in this report may be subject to change without prior notice and may differ or be contrary to opinions expressed by Salesperson or Traders of ACM at any given time. ACM is under no obligation to update or keep current the information herein, the report should not be regarded by recipients as a substitute for the exercise of their own judgment.

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Bernanke, Paulson Pressed to Seek Big-Government Bank Bailout

By Rich Miller

July 21 (Bloomberg) -- Ben S. Bernanke and Henry Paulson are under pressure to embrace the big-government policies of America in the 1930s, or Sweden in the 1990s, to contain the conflagration engulfing the U.S. housing and financial markets.

Among the ideas: Using taxpayer money to shore up the capital of loss-ridden Fannie Mae and Freddie Mac, setting up new agencies to buy and refinance mortgages in default, even taking over failing financial institutions.

The government's current ``fire-brigade approach to dealing with the fallout from the extremely weak domestic economy is eroding general confidence in the U.S. financial system,'' says Brian Bethune, chief U.S. financial economist at Lexington, Massachusetts-based Global Insight. ``Bold, creative, aggressive policy action is needed.''

Trying to envision what steps Washington might have to take, economists hearken back to the last time the country faced a nationwide decline in house prices, during the Great Depression. In response to those travails -- which were far worse than today's -- President Franklin D. Roosevelt adopted a radical, multipronged approach with a much bigger government role than anyone is proposing now.

``You need a change in mindset,'' says Mohamed El-Erian, co-chief executive officer of Pacific Investment Management Co.

``So far, the hope has been the private sector would provide'' the money, says El-Erian, whose Newport Beach, California-based firm manages about $800 billion for investors. ``Now the focus is on Washington.''

Taxpayer Money

Treasury Secretary Paulson took a step toward committing taxpayer money when he asked Congress last week to give Treasury the power to invest in Fannie Mae and Freddie Mac if necessary to keep the largest U.S. mortgage-finance companies operating.

Like Federal Reserve Chairman Bernanke's rescue of Bear Stearns Cos. in March, Paulson's plan hasn't convinced investors that other institutions won't fail. Nor have recession alarms been silenced by the Fed's interest-rate cuts or President George W. Bush's $168-billion stimulus package.

Some experts say the government needs to set up new agencies to foster a recovery in the housing industry, the financial markets and the economy.

Alan Blinder, a former Fed vice chairman who is now a professor at Princeton University in New Jersey, calls for the return of what he's dubbed ``The Incredible HOLC'' -- the Home Owners Loan Corp. Set up in 1933, the HOLC acquired defaulted residential mortgages from lenders and investors and then refinanced the loans on more favorable terms for the borrowers.

Treasury's Investment

The Treasury invested $200 million in HOLC stock, the equivalent of about $20 billion today after taking account of the growth of the economy, according to Alex Pollock of the American Enterprise Institute in Washington. The company then was able to borrow an additional $2 billion through bond issues.

The HOLC made more than a million loans and by 1937 owned about 14 percent of outstanding mortgages. That's equivalent to about 10 million loans worth some $1.4 trillion now, or approximately the total of subprime mortgages, Pollock reckons. The company was liquidated in 1951 after returning an accumulated surplus of $14 million to the Treasury.

The current Congress borrowed some of the principles that governed the HOLC for its proposed expansion of the Federal Housing Administration's role in mortgage finance, though on a much smaller scale. Under legislation the lawmakers are considering, the FHA would gain the ability to refinance up to $300 billion worth of loans at an estimated cost to the government of $3 billion.

Expanded Program

Blinder says he expects the program to pass this year and predicts it ``will be expanded in 2009.''

The former Fed policy maker also suggests the formation of a public-private partnership that would buy up mortgage-backed securities and other collateralized debt obligations at bargain- basement prices. The aim would be to get illiquid fixed-income markets working again.

Some experts have touted another Depression-era agency for revival: the Reconstruction Finance Corp.

Joseph Mason, a former bank regulator who's now a professor at Louisiana State University in Baton Rouge, says the RFC took a three-step approach to tackling the financial crisis: It closed the weakest banks, recapitalized the others through investment in preferred stock and then tried to return them quickly to health by throwing out management and halting dividend payments.

Swedish Model

Sweden followed some of the same principles in dealing with its banking crisis in the early 1990s. The government was forced to take over several failing financial institutions and ended up owning about 22 percent of the country's banking-system assets.

The cost to taxpayers was close to 4 percent of Sweden's gross domestic product, according to Nicola Mai of JPMorgan Chase & Co. in London. In the U.S., that would be equivalent to more than $400 billion today.

Hans Soderstrom, a professor at the Stockholm School of Economics, isn't convinced the U.S. needs to go that far. ``Our whole banking system was collapsing,'' he says. ``I don't think the U.S. banking system is. It's best, then, to let the private sector take the losses.''

U.S. policy makers have shied away from dramatic actions in hopes that the housing market and the financial-services industry would right themselves and the economy would recover. Those hopes have so far proven misplaced.

Credibility Undermined

``Their repeated attempts to talk up the market during a fundamental crisis have undermined their credibility with legislators, business people and the public,'' Mason says.

Confidence among homebuilders has fallen to record lows as prices and sales continue to decline. The Standard & Poor's 500 Banks Index of 22 stocks is down 39 percent this year, even after a rally at the end of last week. And economists such as Morgan Stanley's Richard Berner see the economy slipping into a recession in the fourth quarter.

Tom Gallagher, a managing director in Washington for money- management and research firm ISI Group, says significant government action to shore up the housing market and the financial-services industry may have to wait until next year, after a new president takes office.

``Every time something happens, they plug a hole and two new holes open up,'' says Nouriel Roubini, a former Treasury official who is chairman of Roubini Global Economics in New York. ``What they need is a systematic plan on how to approach this mess.''

To contact the reporter on this story: Rich Miller in Washington at rmiller28@bloomberg.net.

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Monday, July 21, 2008

EUR/JPY Mid-Day Outlook

Economic Indicators Update

USD-CHF @ 1.0223/27.... Could dip again.

GBP-USD @ 1.9964/68... Direction remains unclear.

AUD-USD @ 0.9753/57... Overall bullish

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