By Ambrose Evans-Pritchard 8:56PM BST 24 Sep 2012 “The IMF is evolving from a liquidity mechanism into a bank. This is neither in keeping with the legal and institutional role of the IMF or with its ability to handle risks,” said the Bundesbank in its monthly report. The bank said the Fund was right to help rescue Greece, Ireland and Portugal but said monitoring levels were slipping and there had been a “watering down” of standards. The scale of loans risks “overwhelming the IMF’s institutional structure”. The unprecedented attack came as the IMF’s chief, Christine Lagarde, called for urgent measures across the world to head off a fresh global slump. While praising the latest emergency measures of central banks in the US, Europe and Japan, she said this was not enough to secure recovery. The Europeans must activate their new machinery, while the US must prevent a “dramatic tightening” of fiscal policy later this year. Failure to act “would effectively plunge the country off a 'fiscal cliff'", cutting US growth by up to 2pc. She said this would pose a “serious threat for the global economy”. Ms Lagarde also said emerging economies need to bolster their defences against “potential spill-overs”, if necessary by injecting “additional stimulus”. The Bundesbank’s broadside against the Fund caused consternation in Washington, where Asian and Latin American members of the Board think the IMF has been doing Germany’s work for it, shouldering too much of the risk trying to hold the eurozone together. There is irritation in IMF circles over the way the Fund has been dragged into badly-constructed rescue packages. The Fund has refused to lend any more money to Greece, saying the country cannot regain economic viability unless EU bodies take losses. Ms Lagarde’s Keynesian team is deeply at odds with Germany’s hard-money hawks. A leaked memo from Germany’s finance ministry previously called the IMF the “Inflation Maximizing Fund” after it suggested that a burst of inflation might lift the world off the reefs. Germany has weathered the slump so far but there are signs that extreme austerity and deepening slump across southern Europe has begun to engulf the country. Germany’s IFO business confidence index has fallen for the past five months, sinking this month to its lowest since mid-2009. Capital Economics said the crash in the manufacturing expectations index points to a 10pc fall in industrial output. “It is only a matter of time before the economy starts to contract," it said. The OECD expects a “light recession” in Germany, with grave knock-on effects for struggling EMU states relying on the German locomotive to pull them along. Separately, EU diplomats said a taskforce is working on plans to boost the European Stability Mechanism (ESM) or bail-out fund from €500bn to €2 trillion by offering guarantees to private creditors to co-invest. The package should be ready by early November. While it has support from Germany’s government, it may face trouble in the Bundestag and Finland’s parliament since it exposes taxpayers to bigger losses in any default. “We always find a solution in the end,” said one official.

Fasten Your Seatbelts, FX Investors

By: Kelley Holland The forex markets will soon be littered with event risk, this strategist says. Enjoying the dog days of August? You'd better because we're in for a bumpy ride. The slow times are about to end, says Camilla Sutton, chief currency strategist at Scotiabank. "September is littered with event risk," she wrote in a note to clients, with key events likely to sway both the euro and the dollar at different times. The fun actually starts at the tail end of August. That's when China will release its latest PMI report - oh, and Federal Reserve Chairman Ben Bernanke is scheduled to give a little speech in Jackson Hole. European Central Bank President Mario Draghi will speak a day later, and then on September 6, "we expect the ECB to clarify the details of its bond buying program" at its monthly meeting, Sutton says. A week later, Germany's top court is due to issue its ruling on the constitutionality of providing aid to troubled euro zone countries, and on September 13 the Fed could announce another round of quantitative easing, which would probably push the dollar[.DXY 81.34 -0.32 (-0.39%) ] lower. On top of all that, it's unclear when or whether Spain will request aid, Sutton says. "Delaying a request for aid threatens rising yields and ultimately another weight on EUR." And while "commentary following the meetings between Chancellor Merkel, President Hollande and Prime Minister Samaras appear to support the view that Greece will receive its next tranche of €31bn," she says, "a negative report would push Grexit back into the headlines and limit any EUR gains."

U.S. Stocks Advance on Europe as Earnings Beat Estimates

U.S. Stocks Advance on Europe as Earnings Beat Estimates By Rita Nazareth - Aug 7, 2012 4:48 AM GMT+0800 U.S. stocks rose, sending the Standard & Poor’s 500 Index to a three-month high, as German Chancellor Angela Merkel’s government backed the European Central Bank’s bond-buying plan and earnings beat forecasts. Hewlett-Packard Co. (HPQ), Bank of America Corp. (BAC) and Caterpillar Inc. (CAT) increased at least 1.5 percent. Cognizant Technology Solutions Corp. (CTSH), a provider of consulting and outsourcing services, climbed 11 percent after raising its forecast. Best Buy Co. surged 13 percent after founder Richard Schulze offered to take the electronics retailer private at $24 to $26 a share. Knight Capital Group Inc., the firm driven to the brink of bankruptcy by trading losses last week, tumbled 24 percent. About five stocks advanced for every three that fell on U.S. exchanges at 4 p.m. in New York. The S&P 500 (SPX) rose 0.2 percent to 1,394.23, gaining 2.1 percent in two days. The Dow Jones Industrial Average added 21.34 points, or 0.2 percent, to 13,117.51. Volume for exchange-listed stocks in the U.S. was 5.7 billion shares, or 15 percent below the three-month average. “The earnings season has surprised because expectations were so low given the economic soft patch which hit the second quarter,” said James Paulsen, the chief investment strategist at Minneapolis-based Wells Capital Management. His firm oversees about $320 billion. The prospect for bond purchases by the ECB “has also boosted bullish attitudes among investors.” U.S. stocks followed European shares higher as Merkel’s government backed the ECB’s bond-buying plan announced last week, her deputy spokesman Georg Streiter said today. About 73 percent of the S&P 500 companies which reported second-quarter results have beaten earnings estimates even as 59 percent missed sales projections, data compiled by Bloomberg show. Biggest Gains Seven out of 10 groups in the S&P 500 rose today as commodity and technology shares had the biggest gains. Hewlett- Packard, the world’s largest maker of personal computers, added 2.4 percent to $18.69. Bank of America gained 2.8 percent to $7.64. Caterpillar, the largest maker of construction and mining equipment, climbed 1.6 percent to $86.35. Cognizant surged 11 percent to $64.21. The company is gaining revenue as its clients seek savings by outsourcing tasks to India and other lower-cost nations amid a slowing global economy, Chief Financial Officer Karen McLoughlin said. The company has also been building an emerging-technologies business focused on data analysis and mobile solutions. Best Buy jumped 13 percent to $19.99. Credit Suisse Group AG, Schulze’s financial adviser, is confident it can obtain financing for an offer, according to a letter sent to the board today. The offer is at least 36 percent more than Best Buy’s closing price Aug. 3, and the midpoint of the range gives the company an equity value of $8.5 billion. Job Cuts Navistar International Corp. (NAV) advanced 10 percent to $24.62. The maker of International brand trucks jumped after Crain’s Chicago Business reported that the company has told employees it’s considering options for the business including job cuts. ViroPharma Inc. (VPHM) gained 14 percent to $22.66 after it won U.S. regulatory approval to expand manufacturing of Cinryze, the company’s drug to treat hereditary angioedema, an inherited disease in which patients have attacks of inflammation of the face and throat, which can be fatal. NII Holdings Inc. (NIHD) climbed 19 percent to $8.08. The wireless carrier that operates the Nextel brand in Latin America rose after Wells Fargo & Co. predicted its second-quarter results would top the average analyst estimates. Zimmer Holdings Inc. (ZMH) added 1.3 percent to $59.78. The company and Seikagaku Corp. won a U.S. patent-infringement trial brought by Sanofi’s Genzyme over a treatment for arthritis in the knee. Bankruptcy Risk Investors also watched the latest developments with Knight (KCG) Capital, which received a $400 million cash infusion after a deal reached yesterday. The company faced too much bankruptcy risk to make its share price the top priority as it negotiated a rescue, said Thomas Joyce, the chairman and chief executive officer. The Jersey City, New Jersey-based company, one of the country’s biggest market makers, had to lock up an infusion of capital to preserve its businesses, Joyce said in a telephone interview today. Knight fell 24 percent to $3.07 as investors prepared for hundreds of millions of shares to enter the market via convertible securities. “This was absolutely the right thing to do for this organization,” Joyce said. “We understand the dilution is a large amount, but for the future of Knight Capital Group, as tough as it was to see happen, it was the right thing to do.” ‘Dry Powder’ Tyson Foods Inc. (TSN) slipped 8 percent to $14.17. The largest U.S. meat processor cut its full-year sales forecast and said profit will be lower after the cost of animal feed rose because of the country’s drought. The company is also cutting capital expenditures and stock buybacks partly to keep “a lot of dry powder around for an opportunistic acquisition,” Chief Executive Officer Donnie Smith said. AES Corp. (AES) slumped 4.4 percent to $11.71. The power producer with operations in 27 countries reported that 2012 profit would be at the lower end of guidance. HCA Holdings Inc. (HCA) lost 4 percent to $25.55. The biggest U.S. hospital operator said its cardiology practices had come under scrutiny from the U.S. Justice Department. Interpublic Group of Cos. tumbled 7.8 percent to $10.11 after Publicis Groupe SA said it hasn’t held takeover talks with the ad company or engaged a bank to support discussions, following a newspaper report saying the French company may bid. FreightCar America Inc. (RAIL) slid 8.7 percent to $19.15 after the maker of railroad freight cars posted quarterly profit and sales that trailed analysts’ estimates. S&P Downgrade Global investors can’t get enough American securities a year after S&P downgraded U.S. government debt. The dollar has outperformed its peers in the past 12 months, rising by 10 percent against a basket of six currencies. U.S. stocks have been the best performing equity market in terms of dollars, with the Dow Jones Industrial Average advancing 14 percent. Treasuries also have done better since the S&P action late on Aug. 5, 2011, returning 6.7 percent to investors compared with 6.1 percent for other government bonds. “We’re seeing negative data come in from a lot of parts of the world,” said Kenneth Rogoff, a professor at Harvard University in Cambridge, Massachusetts, and a former chief economist at the International Monetary Fund. “The rest of the world is looking at the United States and saying, ‘I wish we were the United States.’”

Australian Stock Futures Rise on China Stimulus Outlook

By Adam Haigh - Jul 16, 2012 7:11 AM GMT+0800 Australian stock futures rose amid speculation China may take more economic stimulus measures, boosting the earnings outlook for companies that generate sales in the Pacific nation’s biggest trading partner. American Depositary Receipts of BHP Billiton Ltd. (BHP), the world’s largest mining company, gained 1.3 percent. Shares of Whitehaven Coal Ltd. (WHC) may be active after a group led by Australian Nathan Tinkler offered to buy the rest of the miner at a 51 percent premium to its most recent closing price, valuing the company at A$5.3 billion ($5.4 billion). ADRs of Cnooc Ltd. (883), China’s largest offshore oil producer, rose 0.8 percent as crude prices advanced for a fourth day. Futures on Australia’s S&P/ASX 200 Index advanced 0.8 percent to 4,082 as of 6:59 a.m. in Sydney. Japan’s equity markets are closed today for a public holiday. New Zealand’s NZX 50 Index rose 0.3 percent in Wellington. “There remains significant capacity for China to stimulate further,” said George Boubouras, Melbourne-based head of investment strategy at UBS AG’s Australian wealth-management unit. The Swiss bank has about $1.5 trillion in assets under management. “This is not only from a monetary perspective, which includes further rate cuts or lowering the reserve required ratio again, but also the ability for additional targeted fiscal stimulus.” Futures on the Standard & Poor’s 500 Index fell 0.2 percent today. The underlying gauge gained 0.2 percent last week as a rally in JPMorgan Chase & Co. (JPM) and speculation China will boost stimulus measures tempered concern about earnings and the global economy. JPMorgan jumped 6.4 percent for the week as Chief Executive Officer Jamie Dimon said the bank will probably post record earnings for 2012 even after reporting a $4.4 billion trading loss. China Rates China’s central bank may cut interest rates by as much as one percentage point in the coming year to spur lending, the swap market signals, as slowing industrial production and exports cool the economy. China needs to expand consumption and restructure the economy, Vice Premier Li Keqiang said during an inspection tour in central Hubei province, the official Xinhua News Agency reported July 15. This comes two days after a report showed China’s gross domestic product expanded 7.6 percent in the second quarter from a year earlier, the slowest pace in three years. China’s Premier Wen Jiabao warned the momentum for a recovery in economic growth isn’t yet in place and that “difficulties” may persist for a while, the official Xinhua News Agency reported. ‘Bearing Fruit’ Even so, the current pace of economic expansion is within the targeted range and government measures to stabilize growth are “bearing fruit,” the premier said during an inspection tour in southwest Sichuan province, according to Xinhua yesterday. The article didn’t mention government policies for the property market. China is facing downward pressure on economic growth and will maintain “proactive” fiscal policy in 2012, the People’s Bank of China said in its stability report on its website after the close of Hong Kong and Chinese markets on July 13. The MSCI Asia-Pacific (MXAP) fell 2.8 percent last week, the largest weekly drop since May, amid concern slowing economic growth from China and Korea to Australia will hurt corporate profits. Investors are demanding policymakers do more to stimulate growth even after central banks in China, Europe, Taiwan, South Korea and Brazil cut interest rates in the past fortnight to bolster economies against the impact of Europe’s debt crisis and the faltering recovery in the U.S. Commodities Rise The MSCI Asia Pacific Index fell 11 percent from its 2012 high on Feb. 29 through July 13, paring this year’s gain to 1.3 percent. Shares in the measure are valued at 11.7 times estimated earnings on average, compared with 13.1 times for the Standard & Poor’s 500 Index and 10.7 times for the Stoxx Europe 600 Index. The Thomson Reuters/Jefferies CRB Index of raw materials climbed 1.3 percent July 13. West-Texas Intermediate crude oil futures advanced 0.1 percent today, gaining for a fourth day. The Bloomberg China-US Equity Index (CH55BN) of the most-traded Chinese shares in New York gained 1.3 percent to 87.77 on July 13, trimming its loss last week to 3.7 percent.

Asian Stocks Snap Six-Day on European Economic Slowdown

By Jonathan Burgos - Jul 5, 2012 10:14 AM GMT+0800 Asian stocks fell, with the regional benchmark index headed for its first loss in seven days, as a worsening economic slump in Europe overshadowed expectations the European Central Bank will cut interest rates today. Esprit Holdings Ltd. (330), a clothier that counts Europe as its largest market, slid 1.5 percent in Hong Kong. Aquarius Platinum Ltd. tumbled 8.9 percent in Sydney after saying output will decline. Mitsubishi UFJ Financial Group Inc. (8306), Japan’s biggest publicly traded lender by market value, gained 1 percent in Tokyo after Bank of Japan Governor Masaaki Shirakawa said today the BOJ will continue monetary easing. The MSCI Asia Pacific Index (MXAP) lost 0.4 percent to 118.77 as of 11:12 a.m. in Tokyo, with almost three shares falling for every two that rose. The gauge climbed yesterday to its highest level since May 10 after euro-zone leaders last week agreed to relax conditions for rescuing lenders, easing concern about the region’s debt crisis. “The market remains skeptical that policy measures in Europe will be in place in a timely fashion,” said Tim Schroeders, a portfolio manager who helps manage $1 billion in equities at Pengana Capital Ltd. in Melbourne. “Significant details still need to be addressed, but for the time being the initiatives to tackle the debt crisis have broadened.” Japan’s Nikkei 225 Stock Average (NKY) lost 0.1 percent after swinging earlier gaining as much as 0.3 percent. Australia’s S&P/ASX 200 Index fell 0.2 percent. Hong Kong’s Hang Seng Index both dropped 0.4 percent, while China’s Shanghai Composite Index declined 1.2 percent.

FOREX-Euro, sterling on defensive as central bank action eyed

FOREX-Euro, sterling on defensive as central bank action eyed By Ian Chua SYDNEY, July 5 (Reuters) - The euro wallowed near one-week lows on Thursday, struggling to find any traction ahead of a widely expected interest rate cut by the European Central Bank. The single currency traded at $1.2522 early in Asia, having fallen around 0.7 percent on Wednesday in trading made subdued by a U.S. holiday. Surveys showing all of Europe's biggest economies are in recession or heading there added to the gloom. Support is seen around $1.2495, the 76.4 percent retracement of Friday's dramatic rally sparked by an EU deal to tackle the region's debt crisis. Traders said part of the euro's weakness overnight was due to heavy selling against the Swedish crown, which surged to an 11-1/2 year high after the Swedish central bank kept interest rates on hold at 1.5 percent. Traders said the absence of stronger hints on future rate cuts by the Riksbank saw the crown squeeze higher, pushing the euro down some 1 percent to as far as 8.6495 crowns, lows not seen since late 2000. The euro also lost ground on the yen, slipping to 100.06 from Wednesday's session high of 100.65. It hit a fresh all-time low on the New Zealand currency at NZ$1.5541 . Softness in the single currency saw the dollar index bounce to 82.199, off Friday's trough of 81.430. Against the yen, the greenback held firm at 79.92, continuing to slowly recover from a low of 79.08 set last Friday. With expectations mounting that the ECB, Federal Reserve and also the Bank of England will have to do more to stimulate their respective economies, the market continued to favour high-beta currencies. The Australian dollar, already lifted by upbeat retail sales data on Wednesday, was at $1.0270, having climbed as high as $1.0320 -- its best level since early May. The ECB is due to announce its decision at 1145 GMT, followed by a news conference at 1230 GMT. A Reuters poll of economists showed the majority expect the ECB to cut its main rate by 25 basis points to 0.75 percent. They were evenly split on whether the ECB will lower its deposit rate. A reactivation of the ECB's bond-buy plan, however, is seen unlikely for now, although it is the tool many investors would like it to use to cap the bond yields of countries embroiled in the euro zone crisis. Barclays Capital analysts expect the ECB to lower its main rate by a more aggressive 50 basis points and see a quarter point cut as well to the deposit rate to zero. "We suggest that selling the EUR and buying a relatively 'high beta' currency, such as the AUD, would perform well in light of a more aggressive ECB response to the problems," they wrote in a note. The BOE is expected to launch a third round of monetary stimulus as it moved to counter a recession and the effects of a worsening debt crisis in the euro zone. That is weighing on sterling, which has fallen to $1.5592 , down more than a full U.S. cent from Friday's peak.

GLOBAL MARKETS-Shares, euro consolidate from lows, remain vulnerable

By Chikako Mogi TOKYO, May 28 (Reuters) - Asian shares and the euro edged up from lows on Monday as surveys showing a lead in opinion polls for Greece's pro-bailout camps helped ease risk aversion and calm fears of a disorderly exit from the euro bloc. The MSCI's broadest index of Asia-Pacific shares outside Japan inched up 0.2 percent, after hitting its lowest level since late December on Friday. The pan-Asia stock index posted a third consecutive week of losses last week, shedding 0.8 percent for its longest losing streak in six months. The index has now wiped out all its gains for the year, having been up some 15 percent from end-2011 levels in late February. Japan's Nikkei average opened up 0.3 percent. It posted its longest weekly losing run in 20 years last week. Investors sold off riskier assets and fled to the safety of the U.S. dollar last week on mounting concerns about Greece and instability in the Spanish banking sector amid a lack of immediate policy responses from European leaders. Currency speculators raised long dollar positions to the highest level since at least mid-2008 while euro short positions rose to the highest on record, Commodity Futures Trading Commission data showed on Friday. Speculators also were net short on the Australian dollar, having cut their net long positions all month. "In the absence of bold policy responses from Europe so far, we recommend being long the USD and JPY," Barclays Capital analysts said in a research note. "Should data or headlines surprise to the upside, safe haven longs may see some unwind, and we favour fading these moves," they said. Trading is expected to be subdued on Monday amid a lack of key economic data and a U.S. market holiday for Memorial Day. U.S. crude rose 0.5 percent to $91.31 a barrel on Monday while Brent was up 0.1 percent at $106.97 a barrel. EURO ON GUARD The euro was up 0.4 percent at $1.2561 on Monday while the Australian dollar inched up 0.1 percent to $0.9810, well above a six-month low of $0.9690 hit last week. The euro fell to its lowest since July, 2010, on Friday at $1.2495, after the president of Catalonia, Spain's wealthiest autonomous region, said it was running out of options for refinancing more than 13 billion euros ($16.27 billion) in debt due this year. Sentiment has been weakening on fears that rising bank rescue costs could force the euro zone's fourth largest economy to seek an international bailout. A government source said on Sunday that Spain may recapitalise its fourth-largest bank, Bankia, which last week asked for 19 billion euros in funding ($24 billion). with government bonds in return for shares. On a positive note, surveys showed on Saturday Greece's conservatives have regained an opinion poll lead that would allow the formation of a government committed to keeping the country in the euro zone. Uncertainty, however, will persist until Greece holds the crucial election on June 17, keeping markets guarded. Switzerland is drawing up plans for emergency measures including capital controls in case the euro collapses, although it does not expect to need them and will continue to defend a cap on the franc in the meantime, the head of the central bank said. Investors cut their risk exposure across assets. Data from EPFR Global showed in the week ending May 23, Emerging Markets Equity, Commodities and Energy Sector Funds and Europe Equity Funds all saw redemptions in excess of $1 billion while High Yield Bond Funds had their biggest outflows in over nine months.