Market Review - 25/10/2014 00:47GMT
Euro rises on short-covering ahead of European bank stress test report
Despite euro's brief drop to 1.2635 in European morning, the single currency jumped to 1.2696 in New York morning on active short-covering ahead of a report of European banks stress tests that will be released on Sunday 26 October.
A spokesman for the ECB said earlier that the test results had not yet been finalised. Market talked that a group 25 banks have failed European stress tests, while up to 10 of those continue to have a capital shortfall and indicated that banks in countries including Greece, Cyprus, Slovenia and Portugal had fallen short of a minimum capital benchmark at the end of last year and that up to 10 remained in difficulty now. Banks in Spain and France had fared, by and large, better than expected.
Those banks with shortfalls will now have two weeks to submit a plan to bolster their capital to the European Central Bank, which will decide whether or not it gets the green light.
Germany Chancellor Angela Merkel said 'ECB's Draghi made clear to EU leaders that structural reforms and improving investment climate was key for euro economy; believe closer economic coordination in euro zone important, Draghi agreed with this; Draghi made clear that monetary policy can only do so much, fiscal policy must react at same time; UK's Cameron did not say he would not pay additional EU bill, just questioned the deadline for payment; could imagine moving forward review of medium-term EU budget plan to see how to better use EU funds to boost investment; does not envision using ESM funds to boost investments in EU; very much appreciates Mario Draghi's work in the euro zone, wants good cooperation with ECB; does not want to call into question free movement of people principle within the EU, but that does not mean there are no problems.'
In other news, German Chancellor Merkel urged Russia's Putin in phone call to agree quick solution on Ukraine-Russia gas dispute, as winter approaching, her office said in a statement'
Although the British pound briefly dropped to 1.6018 in European morning, cable rebounded on short-covering after the release of UK preliminary GDP data which came in as expected at 0.7% q/q and 3.0% y/y. The British pound later rose to 1.6099 in New York morning due to another round of short-covernig. UK PM David Cameron said 'slow growth in Europe poses threat to British economy; Britain will not pay completely unacceptable and unjustified EU bill.'
The greenback retreated briefly from Thursday's high of 108.39 to 107.87 in Asia on Friday and then 107.79 in New York morning, however, buying interest quickly emerged due to the rise in U.S. equities. U.S. dollar rebounded to 108.18 before easing.
Japanese Finance Minister Taro Aso told reportes on Fri the government should stick with its plan to raise the sales tax to 10% next year to maintain trust in the government debt market. Asa said that when the government compiles the next fiscal year's budget in Dec, it will take appropriate measures to make sure it can carry out the sales tax hike next year.
This week will see the release of German Ifo business climate, U.K. CBI distributive trades, U.S. Markit services PMI flash, pending sales change and revised building permits change on Monday.
Japan's retail sales, German import index, U.S. durable goods, Redbook, CaseShiller house price, consumer confidence on Tuesday.
Japan's industrial output, New Zealand ANZ bussiness outlook, U.K. mortgage approval and mortgage lending, Canada's producer prices, FOMC rate decision and Fed's monetary policy statement on Wednesday.
RBNZ rate decision, Australia's HIA new home sales, import and export prices, U.K. Nationwide house prices, Swiss KOF indicator, German unemployment rate, EU business climate, economic sentiment and final consumer confidence, U.S. jobless claims, GDP in Q3 and core PCE, German CPI and HICP on Thursday.
Japan's all household spending, CPI and unemployment, GfK consumer confidence, Australia's PPI, Bank of Japan monetary statement, construction orders, housing starts, BOJ press conference, BOJ outlook report, EU inflation and unemployment, U.S. PCE price index, personal real consumption and income, core PCE price index, Canada's GDP and U.S. University of Michigan sentiment on Friday.
Euro rises on short-covering ahead of European bank stress test report
Despite euro's brief drop to 1.2635 in European morning, the single currency jumped to 1.2696 in New York morning on active short-covering ahead of a report of European banks stress tests that will be released on Sunday 26 October.
A spokesman for the ECB said earlier that the test results had not yet been finalised. Market talked that a group 25 banks have failed European stress tests, while up to 10 of those continue to have a capital shortfall and indicated that banks in countries including Greece, Cyprus, Slovenia and Portugal had fallen short of a minimum capital benchmark at the end of last year and that up to 10 remained in difficulty now. Banks in Spain and France had fared, by and large, better than expected.
Those banks with shortfalls will now have two weeks to submit a plan to bolster their capital to the European Central Bank, which will decide whether or not it gets the green light.
Germany Chancellor Angela Merkel said 'ECB's Draghi made clear to EU leaders that structural reforms and improving investment climate was key for euro economy; believe closer economic coordination in euro zone important, Draghi agreed with this; Draghi made clear that monetary policy can only do so much, fiscal policy must react at same time; UK's Cameron did not say he would not pay additional EU bill, just questioned the deadline for payment; could imagine moving forward review of medium-term EU budget plan to see how to better use EU funds to boost investment; does not envision using ESM funds to boost investments in EU; very much appreciates Mario Draghi's work in the euro zone, wants good cooperation with ECB; does not want to call into question free movement of people principle within the EU, but that does not mean there are no problems.'
In other news, German Chancellor Merkel urged Russia's Putin in phone call to agree quick solution on Ukraine-Russia gas dispute, as winter approaching, her office said in a statement'
Although the British pound briefly dropped to 1.6018 in European morning, cable rebounded on short-covering after the release of UK preliminary GDP data which came in as expected at 0.7% q/q and 3.0% y/y. The British pound later rose to 1.6099 in New York morning due to another round of short-covernig. UK PM David Cameron said 'slow growth in Europe poses threat to British economy; Britain will not pay completely unacceptable and unjustified EU bill.'
The greenback retreated briefly from Thursday's high of 108.39 to 107.87 in Asia on Friday and then 107.79 in New York morning, however, buying interest quickly emerged due to the rise in U.S. equities. U.S. dollar rebounded to 108.18 before easing.
Japanese Finance Minister Taro Aso told reportes on Fri the government should stick with its plan to raise the sales tax to 10% next year to maintain trust in the government debt market. Asa said that when the government compiles the next fiscal year's budget in Dec, it will take appropriate measures to make sure it can carry out the sales tax hike next year.
This week will see the release of German Ifo business climate, U.K. CBI distributive trades, U.S. Markit services PMI flash, pending sales change and revised building permits change on Monday.
Japan's retail sales, German import index, U.S. durable goods, Redbook, CaseShiller house price, consumer confidence on Tuesday.
Japan's industrial output, New Zealand ANZ bussiness outlook, U.K. mortgage approval and mortgage lending, Canada's producer prices, FOMC rate decision and Fed's monetary policy statement on Wednesday.
RBNZ rate decision, Australia's HIA new home sales, import and export prices, U.K. Nationwide house prices, Swiss KOF indicator, German unemployment rate, EU business climate, economic sentiment and final consumer confidence, U.S. jobless claims, GDP in Q3 and core PCE, German CPI and HICP on Thursday.
Japan's all household spending, CPI and unemployment, GfK consumer confidence, Australia's PPI, Bank of Japan monetary statement, construction orders, housing starts, BOJ press conference, BOJ outlook report, EU inflation and unemployment, U.S. PCE price index, personal real consumption and income, core PCE price index, Canada's GDP and U.S. University of Michigan sentiment on Friday.
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