Of Spain and Of FOMC

Spanish Economic Prospects



The €1.1 trillion Spanish economy is more than four times as large as Greece's and six times Portugal's. Its consequence for the EMU is commensurately greater. Spanish GDP in the second row of EMU and the EU importance, ahead are only the three core countries, Germany France and Italy. If the bond market contagion that is spreading from Greece to Portugal reaches Spain then only the core of the EU will remain untouched. The issue at the center of the Greek problem, economic productivity, is the same for Portugal and Spain. Their economies are not as efficient as those of the central trio. The euro works against their export interests because its relatively high value puts their manufactured and agricultural exports at a price disadvantage. IMF conditional austerity will force lower living standards in any country under its charge and exacerbate fiscal problems as higher taxes encourage resort to the black economy. These issues cannot be solved by a Greek or Spanish bailout. The adjustments ahead for citizens of the EMU are going to be painful and long lasting.





FOMC



No change in rates, little change in language and retention of the most famous economic term of the recession "extended period". The status quo FOMC statement produced scant reaction from the currency or equity markets, The Fed's twin concerns of inflation and unemployment remain solidly on the side of low rates. Core CPI was 1.1% in March and the unemployment rate was 9.7%. The Governors cannot remove the "extended period" characterization without exciting the credit markets into rate hike speculation. If 1st quarter GDP comes in as expected at 3.3%, it would-be the third quarter of growth at an average of 3.7%. The economy has not sustained a higher rate for consecutive three quarters since the second third and fourth quarters of 2003. The baseline for the Fed Governors is straightforward-without an inflation threat there is simply no reason to inflict higher rates on a weak though recovering economy.

28 Apr 10 : End of Day Market Report

STI -1.99% to 2932, turnover $1.8B



* Market outperformers include Kepland +0.26%, Wheelock +0.5%, CapitalComm +0.85%, STX Pan Ocean +1.25%

* NOL -3.15%, said it carried 32% more containers in the four weeks to April 2 YoY. Average rev from each container +12% YOY to USD2,622, faster than the 8% increase in previous 4 week period, with improvement coming from due to higher shipping volumes from the Transpacific and Intra-Asia trade routes as well as an improvement in freight rates.

* Sembcorp Industries -3.21%, the board of Cascal has rejected an offer from Sembcorp Industries (SCI), citing the offer as inadequate and coercive. It has advised shareholders to take no action. The board also contended that Sembcorp's two‐tier and below‐market offer appears to be intended to force shareholders to sell their securities at an inadequate price or risk both a reduction in the consideration offered to them and a loss of access to a liquid market for their securities.

* GoldenAgri -0.83% is due to release its 1Q10 results soon and OCBC expects them to be fairly upbeat, given the buoyant CPO prices in the first quarter. Margins are also likely to improve as GAR should start using some of the cheaper fertilizers bought late last year. Expecting Q1 revenue to come in around USD639.4M, +55.1% YoY (-0.6% QoQ), and core net profit at around USD85.9m, +88.4% YoY and 32.2% QoQ.

* Yangzijiang, -2.86%, announced Q1 results this morning, net profit +21% YoY to RMB586M, in line with expectations.

DBS said growth was largely driven by recognition of about 10 more vessels under construction and higher average value per vessel. Gross margin remains high at 23%.



Commodity stocks begin reporting, today we have Straits Asia, Noble on 6 May, Olam on 13 May





HSI -1.47% to 20949, turnover $63.6B

Shanghai -0.26% to 2900



* HSI Top Gainers: Henderson Land +4.26%, Hang Lung Properties +3.98%, China Resources +3.91%, Sino Land +3.1%, China Merchant Holdings +2.98%.

* HSI Top Decliner: Espirit -1.08%



* Brilliance (1114) +9.79%.

* Hang Seng Index Quarterly Review will be out after market close on 13 May. Nomura expects no constituent changes but possible reweighting of Esprit (0330) from 95% to 90% and BEA(23) from 80% to 85%. Belle(1880) may stand small chance to replace Cosco Pacific (1199) for HSI index. For HSCEI, China Pacific Insurance (2601) and China Longyuan Power (0916) are possible additions while Zhejiang X'pressway (0576) and Shanghai Electric (2727) may be deleted.

* Bank of China reported strong profit growth. Q1 net profit was RMB26.2B vs RMB25B expected.

* China Unicom may cut the price of handsets and fees to boost demand. The price of an Iphone may be cut by RMB1,000.

* China property prices will not fall to 2008 levels this year – Minister from the Ministry of Housing an Urban –Rural Development.

* PetroChina (0857) -1.2%, Q1 results came in stronger than expected. Net profit +71% YoY at RMB32.49B on higher oil prices and strong energy demand vs RMB28.55B expected.

* ZTE (0763) Q1 net profit +40% YoY @RMB109.0M. Mgmt expects better growth in coming quarters largely from India.

* China Mengniu Dairy (2319) swung to a net profit last year with sales recovering from the milk scandal in 2008. FY09 net profit RMB1.12B, vs net loss of RMB948.6M year before.

* Agile Property (3383) -0.45%, bought back 7M shares on 26 Apr for HKD8.758 per share on average.

28 Apr 10 : Forex Morning Report

* The highlight of the day yesterday was S&P's downgrade of Greece to 'Junk' quality and also Portugal's to A-. The cited reason for Portugal's downgrade was difficulty in stabilizing Portugal's high debt ratio and a stagnating economy. Also fear was instilled further by inability of Euro zone officials agreeing on final terms in regards to the Greek aid package. This downgrade also sparked concerns about Greece's eligibility to post collateral with the ECB as the minimum rating accepted by the ECB is BBB- or higher. Greek 10 year bonds traded 660bp above German bunds. The EURUSD made new lows following the downgrades and traded to 1.3141 from 1.3412.

* In the US focus was firmly on Goldman Sachs hearing in Capitol Hill. The allegations seem to strike at the heart of Wall Street's current business model and threaten the whole financial sector. Risk aversion was apparent in the markets as equities traded -1.9% lower and the USDJPY fell to 92.80. From the financial calendar we had a much better than expected consumer confidence report posting at 57.9 compared with the 53.6 expectation. Case Shiller 20 was also out and fell below expectations of 1.4% to 0.6%. 2 year US Treasuries trades between 1.09% and 0.94% and the USDJPY tracked the decline down to 92.80.

* In Australia overnight we had Q1 CPI printing a marginally higher number at 0.9% which increases the likely hood of further rate hikes by the RBA in May. In Canada we had the BoC Governor Carney reiterate the BoC forecasts and stated that the time for emergency stimulus is passing. The USDCAD traded from 0.9999 all the way to 1.0179.

28 Apr 10 : Daily Outlook

Daily Outlook 28 Apr 2010

Overnight, DJ -1.9% to 10992, S&P -2.34% to 1184. S&P downgraded Greece debt by 3 notches to junk bond status and lowered Portugal’s long term rating by 2 notches, causing stocks to finish their worst in 3 months. US Bank reforms blocked again as debate fails by a vote of 57-41.

Opening in Asia, all market down Nikkei225 -2.59%, Korea -1.54%, Taiwan -1.41%, Shanghai -0.38%, STI -4.43%, DJ Futures +11pts. Volatility Index, VIX +30.57% to 22.81.

USD is likely to have a firmer tone, as the EUR is going to lose its reserve currency status in the short term, boosting U.S. treasuries and gold prices. Until the issue is resolved – cleanly - portfolio managers are going to underweight Europe and central banks and sovereign accounts will be looking elsewhere for investments.

The stronger USD may create a headwind to corporate profits. Hedge funds may look to take advantage of the high yields on European sovereign debt. The rotation into high yield sovereign debt could cut down on the demand for equities or cause some profit taking and/or selling in equities. The crisis in European debt could spill into corporate debt, slow corporate financing, and raise the cost of capital.

Also, the Fed’s policy statement is likely to slightly upgrade the outlook for growth given the recent strong economic data. However, there are two factors which will keep the Fed from sounding too hawkish and signaling a near term rate hike: 1) The European fiscal crisis is very destabilizing to the global markets. 2) U.S. banks still hold a high level of non-performing loans. The provision for loss is falling, but bank lending remains anemic looking at real estate and commercial and industrial loans. The Fed is also looking out into next year and sees higher marginal taxes, the potential for tighter regulation, and budget cuts at the state and local government level.
Yesterday, US Consumer Confidence much stronger than expected to 57.9 vs 53,5 expected, vs 52.5 previously. S&P Case-Shiller comes in in line with expectations 144.03 vs 144.8 expected vs 145.32 previously.
.
China:

China’s stock market correlation with other major markets is extremely low. 5 year average SCI/S&P correlations is a statistically insignificant 0.37, currently it is below zero - moves opposite. SCI's key determinants are momentum and liquidity. Shanghai's 11% fall YTD corresponds to 9 percentage points decline in YoY growth rate in M1 money supply (cash in circulation plus demand deposits).

On the commodities front, now, Jun Crude 82.03 (-0.4), Jun Gold 1166.1 (+3.9). Oil cuts below 50 MDA and breaks below $84 support. These worries overshadowed strong earnings results and European economic data. BP, the biggest oil and gas producer in the Gulf of Mexico, reported +14% in net income to $6.08B in Q1, with helps of high crude oil price and pick-up in refinery margins. Other majors reporting: Shell (Wed), Exxon and ConocoPhillips, and Italy's Eni (Thu), Chevron and Total (Fri).
Safe haven flows may continue to provide support to the gold price in the near term.

Shipping wise, have been observing a steadier rise in BDI, yesterday +183 to 3203

27 Apr 10 : Euro... Will it be affected by Greek AGAIN

Markets price in worst case scenario for Greek Debt!

* Yesterday was a light day in terms of economic data with no major or minor releases. The USD remained range bound across the board, gaining against the GBP and losing against the JPY. The Dow Jones managed to make a new 19 month high as Caterpillar, a heavy duty machinery producer, released some strong earnings indicating that global demand and construction is improving. On the other hand we saw financial stocks get sold off as fear over the law suit against Goldman Sachs threatens Wall Street's business model. By the end of the session the Dow Jones closed 0.01% up and the S&P500 closed negative to -0.43%. US 2 year yields traded from 0.96% to 1.09% and the USDJPY made new highs at 94.33.
* In Europe yesterday we saw Greece officially request an activation of the EU/IMF bailout package, now the focus turns to the required hurdles of each individual member state to approve the package with some fears that certain member states may delay the process. Despite the high likely hood of activating the package we see the 10 year benchmark spread of Greek bonds over German bunds trade at a staggering 629bp. 2 year Greek bonds are currently yielding 13% and we saw contagion fears spread to Portugal, Spain and Ireland as their own individual 10 year benchmark spreads made new highs. Overall we note that short positions in the Euro have increased dramatically which implies a possible quick bounce once the package is approved. The bounce however is expected to be short lived as longer term fundamentals may drag on European Growth for some time to come. EURUSD traded between 1.3289 - 1.3413.
* Today the market shifts its attention to a number of economic reports, in the UK we will have the CBI distributive trades for April expected at 15. In the US the calendar will include Case Shiller 20 mm for February expected to drop by 0.1%. We have Consumer Confidence for April expected at 53.5. We also have Richmond Fed and Midwest MFG for the month of March expected to shed some light on the manufacturing section.

Currency to watch out for: EURUSD & USDJPY

* § The EURUSD pivot point is at 1.3315 with a preference to enter into Long positions at 1.3325
* § The USDJPY pivot point is at 93.70 with a preference to enter Long positions at 93.75

Today's calendar and market movers:

* § UK CBI Distributive Trades for April expected at 15
* § US Case Shiller 20 mm for February expected at -0.1%
* § US Consumer Confidence for April expected at 53.5
* § Japan retail sales for March expected at 3.6%

Equity Markets:

* US equities closed mixed yesterday with the DJIA and the SP500 closing 0.01% and -0.43% respectively. The European bourses were positive on Friday with the FTSE closing 0.53% the DAX and the CAC closing down at 1.16% and 1.17%. The NIKKEI and the HSI at the time of writing is 0.20%% and -1.0% respectively.

The Future of the Fed

If there is no noticeable change in US economic prospects or an external crisis, sometime in the next two or three meeting the Federal Reserve will change the language in the FOMC statement. "Extended period" will become one of the famous catchphrases of economic history and interest rates will begin a long progression to normality. But before we count "extended period" out, it is important that we not lose sight of the Fed's original policy goals last year when the term was first coined. .

Inflation is in check. Whatever may be said of the inflationary potential of Fed's $1.7 trillion portfolio of long-term bonds, mostly mortgage backed securities (MBS), there is no current impact. Core CPI in March was 1.1%, as low as it has been in 30 years. It was at that level in November and December 2003 and January 2004. However, that spell did not last; by June of that year, five months later, it was at 1.9%, by September 2.0%. Core CPI did not drop below 2.0% again until December 2008 amid the crashing markets and prices. Since December 2009 core CPI has fallen 0.7% in the three months. In a historical sense, it is much closer to deflation than inflation.

Unemployment is high and static. The rate has been above 9.0% for twelve months; (we can safely add April to the list). It has been above 8.0% for fifteen months. The broad or U-6 rate (unemployed, part time and discouraged workers) was 16.9% in March; it has been above 16.0% for eleven months. The economy has lost jobs for 24 of the last 27 months.

Yes, things are improving, job losses have subsided. Yet there is no indication that job creation has been revving in secret and is about to burst forth. Employers have been adding to hour's worked and temporary workers, some of that is no doubt in lieu of new hires. Over the past few months, the government has, if anything, added to the reasons for hiring restraint. The health care bill has enormously complicated employer provision of insurance. Financial reform will not, whatever its final shape, encourage banks to take lending risks. And with the climate bill and its job destroying carbon tax waiting in the Congressional cloakroom, whatever job growth may be percolating will be diminished by the tremendous uncertainly on these topics.

Let us consider how the Fed may approach its next rate cycle and what the history of the Bernanke Fed indicates. The Fed has demonstrated both a patient, gradualist approach to rate policy and market shock. In the years before the crash, from mid 2004 to mid 2006 the Fed took the target rate from 1.0% to 5.25% in seventeen steps, 0.25% each time.

Under the pressure of the sub-prime meltdown in September 2007, the Fed shook the markets by trimming 0.5% from the target rate. This was months before the Bear Stearns collapse, and a year before the Lehman debacle. It was well before the markets, investors and probably the Fed itself had any clue about the severity of the coming dislocation. Based on his study of the Depression and the potential for deflation Chairman Bernanke was willing to risk the surprise and the damming economic assumptions that would naturally follow. The cuts that continued were event driven, and even the Fed's several months jump on Bear Stearns did little to mitigate the crash that came hard on the dissolution of Lehman in the fall of 2008. Many arguments can be made about the causes and culpabilities of the recession but what cannot be doubted is the Fed's willingness to act. On this topic if no other, Bernanke and the Fed governors have proven their mettle.

Given the current economic situation, no drastic action on rates or liquidity is likely. A dramatic rise in inflation, especially if accompanied by rising inflationary expectations, might be enough to prompt the Fed into an initial large hike to break the expectation cycle. However, except for that specific circumstance the coming Fed policy will mirror the economy itself. A slow, gradual economic recovery matched by the rate gradualism of the 2004--2006 policy. Every analysis and policy move by the Fed since the sub-prime crisis began indicates a defensive caution towards economic growth; the governors will not abandon that concern.

Mr. Bernanke considers this recession a near run on the Depression. In the early stages of the financial meltdown, he warned of the dangers of deflation and a deflationary cycle. Given that reference, any analysis of potential Fed policy must make allowance and err on the side of inflation and low rates.

The Fed will not remove the "extended period" reference lightly. Indeed, it cannot remove the language without undermining the rate conditions it has worked so hard and taken so many risks to achieve. The excision will be taken by the currency and credit market as an unequivocal sign that the Fed has changed policy.

The Fed is trapped by its own language. By letting the market know, in the depths of the financial panic that it would do whatever was necessary with rates, keep them as low a s necessary for as long a necessary to support the economy and avoid deflation, it has made the phrase the telltale of its policy. It cannot remove "extended period without the market immediately telescoping a series of deliberately modulated increases into a bum rush for the exit.

27 Apr 10 : Daily Outlook

Daily Outlook 27 Apr 2010

Yesterday, DJ +0.01% to 11205, S&P -0.43% to 1212. Quarterly earnings from Caterpillar and Whirlpool boosted investor confidence, however, the financial sector weighed on markets as the govt begins plans to divest itself of Citigroup. Goldman Sachs -3.41% to 152.03 after Senate panel released emails from Goldman execs celebrating profit from a shattered housing market.

Opening in Asia, all market down Nikkei225 -0.31%, Korea -0.1%, Taiwan +-0.07%, Shanghai -0.7%, STI -0.42%, DJ Futures +13pts.

Stocks are expected to be supported by favorable earnings growth, attractive valuation to treasuries and cash, and a burst of M&A activity.

Yesterday, Greek bond market plunged as investors were worried that Greece might have to restructure its debt before it can qualify for a bailout. 2 year bond yield +3%, the highest 1 day jump in 9 years. This is the highest yield on short dated debt in the world, higher than Argentina at 8.8% and Venezuela at 11%. Greek stock market fell nearly 3%. Former IMF economist said that Greek problems could spread as PIIGS bonds are losing value and property across the EU could slump as a result of the bailout. Key date for Greece is May 19th when EUR8.5B Greek bonds mature.

US bank stocks fell amid fresh concerns about proposed legislation on the sector. The market is worried that the Senate banking bill will lead to an unwinding of derivative trades and hurt bank profitability. The separation of business units, capital markets verses traditional banking, could hurt diversification and dampen efficiency.

Results from a Charles Schwab survey of more than 500 of its active traders showed that bullish sentiment was sharply down, only 28% expressed a bullish outlook for the next 6 months vs 50% in the last survey published in Dec 09 (50% are neutral).

Caterpillar and Whirlpool were upbeat about the global industrial economy.

Caterpillar +4.7%, net profit of 50cents per share, vs 39cents per share expected. Whirlpool +14.8%, EPS at $2.13 vs $0.91 YoY, while sales +20% to $4.3B. Both manufacturers were buoyed by emerging market demand while mature economies remained sluggish. Blackrock, the world's largest asset manager, -7.5% as its 1Q results missed expectations, EPS at $2.4 vs $2.44 expected.

This week is an important week in terms of earnings, nearly as many S&P 500 companies - 164 of them - will report as have already reported in the past 3 weeks - 172. So far, 83% of the 172 companies have reported earnings that exceeded analyst expectations.

China may raise interest rates by end June to curb inflation, researcher at the NDRC China’s PBOC is highlighting likely to raise interest rates within a limited range. Deputy Head of the International Finance Research Office said that China will raise rates 2 or 3 times this year.

On the commodities front, now, Jun Crude 84.03 (-0.17), Jun Gold 1156.8 (+2.8). All the largest western oil companies report 1Q results this week. BP (Tue), Shell (Wed), Exxon and ConocoPhillips, and Italy's Eni (Thu), Chevron and Total (Fri).

Currencies:

Today, we have the S&P/Case-Shiller Home Price Index and we assess US and Germany Consumer sentiments. UK BBA Mortgage Approval will reveal property scenario in UK.

26 Apr 10 : FX Market Update

* USD: Higher, optimism about the US and global recovery competes with Greek debt worries
* JPY: Lower, improving risk sentiment, corporate goods prices rise
* EUR: Lower, Greek German bond spread widens to a new record high
* CHF: Lower, Jordan says rates are right for now, reaffirms SNB commitment to stop CHF appreciation
* GBP: Higher, house prices rise, conservative party expands their lead
* CAD and AUD: AUD higher & CAD lower, tracking equities, RBA and BOC policy uncertainty limit gains

Overview
USD starts the week mixed with EUR pressured by pessimism about the Greek aid plan. Greek German ten-year bond spreads widened to a new record high. The growth led currencies outperform supported by optimism about the global recovery as equity markets rise. Improving US economic data and a statement from the G-20 that the global recovery has been better than expected fuels demand for equities and encourages risk appetite. AUD and CAD gains limited by RBA and BOC policy uncertainty and weaker crude prices. GBP traded higher supported by report of rising UK house prices and BOE rate hike speculation. JPY traded lower pressured by improving risk appetite sparked by a surge in the Nikkei. No major US economic data was released in today's trade. Focus turns to the FOMC policy meeting Tuesday/Wednesday and further developments on the Greek aid package. Today's press is filled with negative articles about Greek debt worries which include conflicting reports about the type and timing of aid for Greece, German reticence to provide aid to Greece, fears that the Greek debt crisis will spread and one report suggests pressure is mounting for Greece to leave the EU. Canada's Finance Minister Flaherty said the G-20 fears the current Greek aid plan is insufficient. The FOMC is expected to hold policy steady and may announce the start of asset sales. Signs of global recovery compete with Greek debt worries for FX price direction.

Today's US data:
No major economic data was released in today's trade.

Upcoming US data:
This week's US economic calendar includes the April 27th release of February Case Shiller Home Price Index expected to rise by 0.5% compared to the 0.7% decline last month. April consumer confidence will also be released on the 27th expected to rise to 54.2 from 52.5 last month. FOMC policy meeting will be held on April 27/28th. No policy change is expected. On April 29th initial jobless claims for the week ending 4/24 will be released expected at 448k compared to 456k last week. On April 30th Q1 employment cost index, GDP, core PCE index, Chicago April PMI and April University of Michigan final consumer sentiment will be released. The Q1 employment cost index is expected unchanged at 0.5%. Advanced Q1 GDP is expected at 3.5% compared to 5.6% last quarter. Q1 core PCE is expected at 1.4% compared to 1.8% last quarter. Chicago PMI is expected at 60 compared to 58.8 last month and the Michigan consumer sentiment is expected unchanged at 69.5.

JPY
JPY traded lower pressured by improving risk appetite as the Nikkei closed to 251 points higher. Recent improvement in US housing and jobs data, the G-20 communicate which said that the global recovery is better than anticipated and NABE report which expressed optimism about the US economy and job creation combined to fuel today's stock market rise and improving risk appetite. Additionally, the Nikkei may have benefited from report that the FSA plans to extend restrictions on short selling of stocks. JPY downside was limited by gains in cross trade to EUR with the EUR pressured by ongoing uncertainty about the Greek debt situation and higher inflation. March corporate service price index rose by 0.5%. The rise in corporate good prices may be a sign that deflationary pressures are abating. Last week Japan reported a widening of its trade surplus as exports surge. The surge in exports is confirmation of improving outlook for Japan's economy. Improving outlook for Japan's economy coupled with today's report of higher corporate good prices will reduce the likelihood of additional easing measures by the BOJ. Focus turns to the start of the two-day FOMC policy meeting Tuesday and April 30th release of Japan's CPI. The FOMC meeting and Japan's CPI report will be key to the outlook for Fed in BOJ policy. JPY remains vulnerable to widening of yield differential as the Fed is seen moving closer to withdrawing liquidity and the BOJ is expected to remain on hold for the remainder of the year. JPY direction is expected to continue track equities.

This week's Japanese economic calendar includes the April 28th release of March retail sales expected to fall by 1.1% compared to 0.9% rise last month. On April 30th March CPI will be released expected to rise by 0.3% compared to -0.1% last month. March household spending, unemployment, industrial output, housing starts and construction orders will also be released on April 30th. Household spending is expected to decline by 0.7% compared to a 0.5% decline last month. The unemployment rate is expected unchanged at 4.9% with the participation rate rising to 59.1 from 58.9 last month and employment growth to decline by 100k. Industrial output is expected to rise by 1% compared to a 0.6% decline last month. Housing starts are expected to rise by 3% compared to 8% fall last month and construction orders are expected to decline by 6.4% compared to 20.3% last month.

Key technical levels to watch in USD/JPY include support at 93.31 the April 23rd low with resistance at 94.78 April 5th high.

EUR
EUR drifted lower pressured by uncertainty about the timing and details of the Greek aid plan. Pessimism about the Greek aid plan sparked widening of the Greek/German 10 year bond spread to a new record high of 633bps. The widening of the Greek German bond spread increases the cost of funding the Greek debt. There are numerous press reports raising concern about the Greek debt outlook with some German officials warning that Germany could reject aid for Greece and that Germany is not ready to write a blank check for Greece. In addition The Times reports that the Greek meltdown is in danger of spreading and the Financial Times reports that this is the most important week in the EMU's history. Harvard professor Rogoff says that the Greek rescue won't be the last as focus will shift to Ireland and Spain. ECB's Nowotny says that interest rates are adequate but he warns that divergence of EU economies could complicate monetary policy. Nowotny went on to say that he expects the central bank to make no policy changes for the foreseeable future as price pressures remain subdued. He downplayed the risk of contagion from the Greek debt crisis. Investors will be watching closely to see if Germany seeks to hold back on the bailout. In a statement today German Chancellor Merkel gave few clues about Germany's aid plans for Greece

This week's EU economic calendar includes the April 29th release of EU business climate expected at 99.8 compared to 99.6 last month. On April 30th EU March unemployment will be released expected unchanged 10% along with April HICP expected at 1.5% compared to 1.4% last month.

The technical outlook for the EUR is negative as EUR struggles to hold above 1.3300. Expect EUR support at 1.3206 the April 23rd high with resistance at 1.3422 the April 22nd High.

CHF
CHF drifted lower as the SNB's Jordan reiterates the central bank's commitment to stop CHF appreciation. Jordan said that interest rates are right for now and he is against excessive CHF rise. For the year the CHF is down about 5% versus the USD and remains near record high versus the EUR.CHF gains versus the EUR are attributed to safe haven flows as investors seek shelter from the turmoil of the Greek debt crisis. The SNB has been defending EUR/CHF cross around 1.4300 with intervention or the threat of intervention. Because of intervention the SNB' EUR holdings rose to 56.4bln in the first quarter. Recent Swiss economic data points to a recovery in the Swiss economy with rising inflation. This may encourage the SNB to begin to move towards policy normalization. At the last SNB policy meeting the SNB upgraded its outlook for the Swiss economy and expressed concern about rising house prices. Last week the SNB reported that producer and import prices stopped falling. Jordan's comments suggest that the SNB is still taking a wait-and-see approach to monetary policy despite improving economy and rising prices. Jordan went onto say that the SNB is keeping close eye on the mortgage market. This week's Swiss economic calendar includes the March UBS consumption indicator due for release Tuesday expected at 1% compared to 1.2% last month. On Friday April KOF indicator will be released expected it 1.98 compared to 1.93 last month CHF price direction and has re- linked with risk sentiment. Expect USD /CHF support at 1.0674 the April22nd low with resistance at 1.0955 the July 6th high.

GBP
GBP traded higher supported by report of rising UK house prices and sharp gains in cross trade to the EUR. Hometrack reports that UK house prices rose by 0 .2% last month. Although the house price rise was modest the data suggest that the UK economy continues to recover and the report follows last week's release of higher than expected UK inflation. UK March inflation rose by 3.4%, well above the 3% limit of the UK government's inflation target range. The combination of improving UK domestic economy and rising inflation increases the likelihood that the Bank of England may raise interest rates before year-end. GBP gains in cross trade to the EUR are attributed to ongoing worries about the Greek debt outlook as the cost of financing the Greek debt rises to new record high. GBP was also supported by the latest UK election polls which suggest that the Conservatives lead with 34% of the vote. The Conservatives have pledged to take quick action to cut the UK deficit. GBP has underperformed pressured by concern that the UK election could lead to a hung parliament. A hung Parliament would be less inclined to take quick action to reduce the UK deficit. Failure to reduce the UK deficit could lead to a downgrade in the AAA debt rating.

On April 29th April GFK consumer confidence will be released expected at -12 compared to-15 last month.

The technical outlook for GBP is mixed as GBP struggles to hold above 1.5400. Expect near-term support at 1.5290 the April 20th low with resistance at 1.5575 the February 23rd high.

CAD
CAD traded mixed with support from firmer equity market trade and Yuan revaluation speculation. As noted above the G-20 communiqué said the global recovery was faster than expected and the National Association for Business Economics (NABE) Expressed optimism about the prospects for US growth. The NABE cited better earnings and job creation with GDP expected to grow by more than 2% this year. The G-20 communiqué and the NABE report fueled demand for equities and contributed to improving risk appetite. Canada's Finance Minister Flaherty said that it is increasingly likely that China will revalue the Yuan. Yuan revaluation could be a boon for global exports and demand from China. CAD gains were limited by weaker crude prices. CAD is consolidating near parity versus the USD supported by improving Canadian domestic economy and BOC rate hike speculation. Last week the BOC elected to hold rate policy steady, raised its 2010 GDP forecast to 3.7% and ended its commitment to maintain low rates. The BOC policy statement says that the Canadian recovery was somewhat more rapid than expected and the BOC dropped the language in its policy statement that interest rates would remain low through June 2010 conditional on inflation. Dropping the conditional inflation language in its policy statement is a shift in BOC policy and a signal that interest rates will soon be raised. The BOC policy statement was seen as more aggressive than expected and could lead to an earlier than expected rate hike. Last week Canada reported weaker than expected inflation and retail sales. Canada's annual inflation rate slowed to 1.4% from 1.6% last month with the core inflation declining by 0.2%. Canada's retail sales rose by 0.5% in February, a 0.8% rise was expected. These reports may dampen BOC rate hike speculation. Canadian inflation and retail sales data suggest that the BOC may not be in a hurry to withdraw stimulus. This week's Canadian economic calendar is relatively light with investors looking to the data to gauge the probability of an earlier BOC rate hike.

This week's Canadian economic calendar includes the April 30th release of Q1 GDP expected to rise by 0.8% compared to 0.6% last quarter. April raw material prices will be released on April 30th expected at 0.6% compared to 0.4% last month.

The technical outlook for CAD is positive as USD/CAD trades below 1.0000. Look for near-term support at 0.9931 the April 21st low with resistance at 1.0164 the April 20th high.

AUD
AUD traded higher as firmer equity markets fueled demand for growth led currencies. Optimism about the US and global recovery contributes to improvement in risk appetite and demand for commodity currencies. AUD has been firming supported by RBA rate hike speculation. Late last week AUD rally stalled in reaction to statements from the RBA which generate doubts that the RBA will hike rates next month. RBA Governor Stevens said that interest rates are close to the average and the future course of rates is an open question. His comments dampen speculation that the RBA will raise interest rates again next month. Last Thursday Australia reported weaker than expected vehicle sales with March new vehicle sales declining by 2.7%.The decline in vehicle sales may dampen enthusiasm about the strength of the Australian economic recovery and also dampen RBA rate hike speculation. AUD price direction is closely tracking risk appetite with recent gains are attributed to RBA rate speculation. The RBA hiked rates by 25bps to 4.25% earlier this month. Last Thursday, Australia reported that inflation expectations rose to the highest level since October 2008. The rise in Australia's inflation expectations could add pressure on the RBA to hike rates. RBA Governor Stevens's comments cloud the outlook for RBA policy and may tip the scales in favor of a steady rate decision in April.

This week's Australian economic calendar includes the April 27th release of Q1 PPI expected at 0.7% compared to -0.4% last month and the April 28th release of Q1 CPI expected to rise by 0.8% compared to 0.5% last quarter. On April 29th February leading Index will be released expected at 0.1% compared to -0.2% last month and Q1 business conditions expected it 14 compared to 13 last month. On April 30th March private sector credit will be released expected unchanged at 0.4%. Next RBA policy meeting will be held on May 4th.

The technical outlook for the AUD is mixed as the AUD struggles to hold above 9300. Expect AUD support at 9157 the April 19th low with resistance at 9365 the April 15th high.

26 Apr 10 : End of Day Market Report

STI +0.47% to 3002, turnover $1.53B



*Capitaland underperforms market -2.28% and sector peers. CityDev 1.48%, Keppel Land +1.85%.



* Shipping related names decline, CoscoCorp -2.23%, YZJ -4.2%, NOL bucks trend +1.4%

Baker Tech has accepted the offer to sell its stake in PPL Holdings (PPLH) to YZJ led consortium. The sale is subject to shareholders' approval in an EGM. Saberon Investments Pte Ltd, Baker's controlling shareholder with about 69.63% stake, has agreed to vote in favour of the sale, however Sembcorp Marine (who has a 85% interest in PPL Shipyard) has alleged that the sale would be a circumvention of its pre-emptive rights by not giving it a first right-of-refusal over the sale. Although Baker Tech's lawyers have said that Sembcorp Marine "has no basis for its claims", OCBC feels that a drawn-out tussle for PPLH may affect YZJ's offshore initiatives.



* Oil names extremely strong, surprising as oil prices have been consolidating more than firming. KepCorp +3.78%, SembMarine +3.23%, Swiber +3.51%.



* Healthcare sector outperforms, Parkway +4.06%, Raffles Medical +2.4%. Raffles Medical 1Q10 PATMI of SGD9.1M (+16.4% YoY) came in within consensus, revenue +10.2% YoY to SGD56.2M in 1Q10. CIMB says that growth in revenue was a result of positive contribution from all divisions (Healthcare Services +8.8% YoY; Hospital divisions +12.0% YoY). Higher patient load, a wider range of medical specialties and improved operating efficiencies contributed to higher EBIT of SGD11.1M (+15.7% YoY).





HSI +1.61% to 21587, turnover $56.7B

Shanghai -0.47% to 2969.



* HSI Top Gainers: Henderson Land +4.26%, Hang Lung Properties +3.98%, China Resources +3.91%, Sino Land +3.1%, China Merchant Holdings +2.98%.



* HSI Top Decliner: Espirit -1.08%



* Swire Pac (0019) is seeking to raise up to HKD24.29B by spinning off a stake in its real estate arm, with roadshow starting today. Indicative price range reported of HK$20.72 to HK$22.9 per share, exp. listing date 14 May.



* CNOOC (0883) +2.94% plans to double annual imports of LNG by 2020



* Uni-President (0220) said 2009 profit more than doubled to RMB704.9M due to increased sales from higher-margin products like instant noodles and bottled beverages.



* BOC (3328) said to have received approval for RMB42B rights issue for both A and H shares, on the basis of 1.5 to 10 existing shares held.


* Directors’ Trading: Director Activity was high for the fourth consecutive week with 235 transactions worth HKD847M last week, sharply up from the previous week's 189 transactions worth HKD458M. Buyers outweighed sellers with 25 companies that recorded 144 purchases worth HKD584 million versus 23 firms with 91 disposals worth HKD263M. Buying seen in Regal Hotels International Holdings (0078), Luk Fook Holdings (0590). Selling seen in Wing Shan International, Vinda International Holdings.

26 Apr 2010 : Daily Outlook

On Fri, DJ +0.63% to 11204, S&P +0.71% to 1217. Gold +0.17% to 1156, Oil +0.07% to 85.18.

Opening in Asia, markets all up strong except Singapore and Shanghai: Nikkei225 +2.08%, Korea +1%, Taiwan +1.65%, Shanghai +0.08%, STI +0.54%, HSII +1.55%, DJ Futures +21pts.

Macro numbers on Fri, investors kept happy with US New Home Sales coming in much stronger than expected, in fact the best since 1963. Greece formally requested for aid on Fri evening and it seems like the first round will come from IMF. There seems to be some chatter suggesting that there is pressure within the Fed to sell assets and a story saying that some Fed members are worried that rates will be kept low for too long.

US New Home Sales much stronger than expected, 27% surge to 411K, although this is should be largely contributed to the USD8K tax credit which expires next week. US Durable Good Orders much weaker -1.3% vs +0.2% expected but Ex Transport, much stronger than expected +2.9%, vs +0.7% expected. Also, G20 (the G-20 has become the world's premier economic policy group, replacing the G-7, a club of rich countries—the U.S., Canada, Japan, Britain, France, Germany, Italy) meeting failed to reach any specific agreements and were skeptical about a proposed bank tax.

Remember that when they met in Sep 2009, they put forward a plan to increase banks' required capital to ensure that governments can shutter big financial institutions without undermining the global economy. G-20 leaders next meet in Canada in Jun.

24 Apr 10 : Weeky Update

Weekly market update (April 24, 2010)


- Positive sentiment driven by strong corporate earnings won out over yet another round of Greek drama this week as the Dow pulled off its eighth consecutive week of gains for the first time since 2004. The signature events were blowout earnings from Goldman Sachs and Apple, and Greece's request to activate its package of emergency EU/IMF loans. Weekly employment claims saw mild improvements, while the March existing and new home sales data returned strongly to growth, aiding homebuilders and overall sentiment. On Monday Chicago Fed President Evans said the recession is "definitely over" and the odds of a "double-dip" are low, although the IMF is warning that a new phase of the economic crisis could grow out the sovereign debt situation. For the week the the DJIA rose 1.7%, the Nasdaq gained 2% and the S&P500 increased 2.1%.


- Quarterly results from Goldman Sachs, Morgan Stanley and Citigroup blew earnings targets out of the water this week. For Citi and Morgan Stanley, the numbers were an impressive rebound from the doldrums, while Goldman continued its streak of meeting or beating expectations every quarter since early 2005. Both Goldman and Morgan Stanley disclosed strong increases in revenue from proprietary trading. But Goldman's killer results only slightly offset the intensely negative fallout from the SEC's fraud charges - Goldman's shares fell 2% on the week, while Morgan Stanley's are up nearly 10%. Goldman had a very bad week in the court of public opinion, thanks to heaps of bad press coverage and statements from several European governments noting that they would review relationships with the bank.


- Wells Fargo and much of the other regional and super regional banks offered strong results. PNC Bank and BB&T crushed expectations. SunTrust, Zion Bancorp and KeyCorp all disclosed smaller-than-expected quarterly losses, while US Bank and Regions Financial met expectations. A broad improvement was seen in credit quality among the regionals, with loss provisions, non-performing assets and charge offs declining at most institutions. SunTrust's CEO said his bank is seeing a significant decrease in credit-related costs. Credit card names American Express and Capital One both indicated that they are turning the corner on credit losses.


- Apple destroyed consensus estimates as sales of iPhones soared, while Microsoft offered the usual staid, inline report, noting that revenue has been driven by strong demand for Windows 7. Korea's Hynix reported Q1 earnings and revenues well ahead of estimates, supporting the case that supply conditions remain tight in chip markets. Amazon offered solid quarterly results free of any surprises. The company insists that sales of its Kindle eReader remain strong despite competition from iPad. IBM, Coca Cola and J&J remain in the red on the week thanks to various sour notes in their earnings reports. IBM's backlog fell slightly over last quarter, J&J trimmed its 2010 outlook slightly and guided full-year revenue slightly below par, and Coca Cola missed revenue targets. Verizon and AT&T largely met analysts' expectations, while wireless customer additions slipped on a m/m basis at both firms. Verizon highlighted the recovery in its FiOS business. US comps are finally taking off for McDonalds, after flattish to negative quarterly comparisons more recently.


- Greece remained the central theme in both FX and fixed income markets. Last week the IMF and the Euro Zone disclosed that their combined debt backstop would amount to €40B, helping deflate CDS spreads and letting the Hellenic Republic sell some short term paper. Early this week Greece sold another €450M in 13-week notes, although the steep 3.65% rate seemed to knock things off balance and kick spreads back into uncharted territory. At its worst point, late in the week the 10-year Greek/German spread widened out to 590 bps while the 5-year CDS tested 645 bps. Meanwhile, the yield on two-year Greek government debt soared to over 11%, making it clear that activation was nigh. The final blow came as the EU stats agency revised Greece's 2009 budget deficit-to-GDP ratio up by almost a full percentage point to 13.6%, noting that it had "reservations" about Greek data. In a final curtain call, Moody's promptly downgraded Greece's credit rating one notch. The Greek government requested activation of the debt backstop on Friday morning, virtually guaranteeing a weeks-long encore of intra-European squabbling and multiple national- and EU-level votes to fully release the funding (that's before questions of what happens when Greece eventually has to borrow in markets again). EUR/USD was testing one-year lows at 1.3201 on Friday.


- Contagion fears quickly spread into other Euro Zone peripheral sovereign debt markets, as five-year CDS spreads for both Portugal (500 bps) and Spain (175 bps) pushed out to fresh all-time highs. Overall the budding sentiment appeared to be that the Euro-Zone would need a weaker currency to offset deflationary policies in peripheral member states. The ECB collateral rules might be another pothole, given recent sovereign downgrades. The Moody's cut left Greece's ratings three notches above the equivalent rating at Fitch, and one notch above S&P. Crucially, this means Greek paper is still eligible collateral for ECB refinancing operations. The weekend will feature G7, G20, IMF and World Bank meetings in Washington, DC with Greece fiscal crisis and the Chinese currencies likely to dominate agendas.


- For the better part of the week US Treasury prices benefitted from turmoil across the Atlantic. Risk adverse traders kept a lid on yields, but by weeks' end they were seen rising in the wake of stronger US data and ahead of a fresh $118B in coupon supply scheduled for next week. The benchmark 10-year yield dipped back below 3.75% midweek only to retake 3.8% on Friday. The spread between 2 and 10-year notes narrowed below 275 basis points, helped by media reports Friday morning indicating an increasing number of Fed officials are beginning to give serious thought to shrinking the balance through MBS sales in particular. Next week's FOMC policy meeting may yield more decisive signals on the exit policy in general and Fed asset sales in particular.


- UK news has been dominated by politics, politics, politics this week, especially the second televised debate between the three main candidates for PM. When the dust settled, pundits seem to agree that Liberal Democrat leader Nick Clegg managed to escape with the momentum from his surprise victory in round one (and subsequent poll boost) still intact. A third debate takes place next week and with the election to be held on May 6th the prospects for a 'hung parliament' (in which no party has a majority in the House of Commons) is growing stronger by the day. It is territory the UK has not ventured into for decades, and an outcome increasingly being priced into FTSE, Gilts and sterling. UK inflation exceeded expectations while other UK economic data seems to favor PM Brown ahead of May 6th election. Sterling maintained a firm tone following the claimant data which showed a larger-than-expected decline in March by almost 33K. GBP/USD tested above the 1.54 level while EUR/GBP approached the 0.8600 area. The BoE MPC minutes from the April showed an unanimous board in favor of a steady repo rate and keeping the asset purchase target at £200B.


- In Japan, USD/JPY moved away from the risk aversion theme early in the week and reflected the fundamental economic problems and interest rate differentials. Fitch commented that Japan's Sovereign Creditworthiness was at risk from rising government debt. Fitch noted that the Japanese government was one of the most indebted in the world. In the absence of sustained economic recovery and fiscal consolidation, government debt would continue to rise, placing downwards pressure on sovereign credit and ratings over the medium term. USD/JPY hit two-week highs with US rates firming following the Durable Ex Transportation data and talk that at least 6 FOMC members were favoring asset sales to implement the US exit strategy.


- The Canadian Dollar surged mid-week after the Bank of Canada removed its pledge to maintain interest rates at the 0.25% level through the end of Q2. USD/CAD dipped below parity on rate-hike expectations. By Friday, some of the upward momentum was sidelined by tepid Canadian inflation and retail sales data. USD/CAD held above parity with USD as the week drew to a close, with buy-stops building above the 1.01 area. Dealers noted that the loonie has been aided by reserve diversification in every overnight session for the last three weeks.


- In China, equities took heat from government efforts to rein in excessive mortgage lending. On Monday, the Chinese State Council ordered yet another tightening measure, requesting that banks suspend loans on purchases of third homes and also called on banks not to lend to applicants who have no verified proof of income. Then on Thursday, an editorial in the China Securities Journal warned that delaying policy action risks economic health and social stability. Finally, the head of the CBRC announced that policymakers will begin to monitor mortgage lending on a family, rather than individual basis, suggesting that some families had gamed the system to obtain better loans by submitting applications through a relative. A report in the local press underscored growing concern regarding speculative property lending by some of the banks calling for as much as a 60% down payment for loans on purchases 3rd homes - above the current 40% requirement.


- With ten days to go until the next Reserve Bank of Australia decision, the week offered mixed signals about policymakers' expectations for tightening. On Tuesday, the minutes of the April meeting strengthened the possibility of yet another tightening, revealing central bankers to believe that interest rates remain below average, with expectations for a trade surplus rising from February and the "buoyant" housing market contradicting the recent decline in home loan approvals. However, late on Friday, Governor Stevens clarified that the adjustment would proceed in a "timely manner" and policy options still remain open. More notably, Stevens finally acknowledged soft patches in the retail sector. Recall the RBA neglected to comment on monthly declines in retail sales the past two out of three months going into the last rate decision. The market interpreted these most recent comments as a signal the central bank would be more cautious about another hike in early May, as the probability for another 25bp move fell over 10 points to below 25%.

24 Apr 10 : USD Higher, New Home Sales Surge 26.9%

* USD: Higher, FOMC may sell assets, new home sales rise 26.9%, durable goods rise ex. transports
* JPY: Lower, widening yield differential, improving risk sentiment, concern about Japan's debt
* EUR: Higher, Greece seeks to activate EU/ IMF aid, German IFO rose by more than forecast
* GBP: Lower, Q1 GDP comes in below expectation, BOE seen on hold
* CAD and AUD: AUD & CAD lower, dovish RBA comments, weaker Canadian inflation and retail sales

Overview

A report that Greece seeks to activate the EU/IMF aid package and a surge in the German IFO business sentiment index sparked a short covering rally in the EUR. The EU commission said that Greek aid will be as soon as possible. The cost of financing the Greek debt dropped after the announcement that Greece seeks aid. USD traded mainly higher versus the majors with GBP pressured by report of weaker than expected UK Q1 GDP, AUD pressured by dovish comments from RBA Governor Stevens and CAD pressured by report of weaker than expected Canadian inflation and retail sales. Lower Canadian inflation may ease BOC rate hike pressure. USD was also supported by a CNBC report which says that a growing bloc of the Fed board members favor selling of assets. The selling of assets by the Fed would signal the beginning of withdrawal of monetary stimulus. JPY traded to a two-week low versus the USD in reaction to strong US economic data and Thursday's warning from Fitch that the Japanese sovereign debt rating is at risk of downgrade because of the rising Japanese budget deficit. US economic data was positive with durable goods posting solid gain ex. transportation and new home sales surged. Today's US economic reports follow yesterday's report of stronger than expected existing home sales and drop in jobless claims. These data fuel hope that the US recovery is gaining momentum. Focus turns to next week's FOMC policy meeting with investors looking for confirmation that the Fed is seeking to start its exit strategy.

March durable goods declined by 1.3%, a reading of 0.3% was expected. Durable goods ex-transportation rose 2.8%. March new home sales rose 26.9% to 411k, a reading of 32k was expected.

Next week's US economic calendar includes the April 27th release of February Case Shiller Home Price Index expected to rise by 0.5% compared to the 0.7% decline last month. April consumer confidence will also be released on the 27th expected to rise to 54.2 from 52.5 last month. FOMC policy meeting will be held on April 27/28th. No policy change is expected. On April 29th initial jobless claims for the week ending 4/24 will be released expected at 448k compared to 456k last week. On April 30th Q1 employment cost index, GDP, core PCE index, Chicago April PMI and April University of Michigan final consumer sentiment will be released. The Q1 employment cost index is expected unchanged at 0.5%. Advanced Q1 GDP is expected at 3.5% compared to 5.6% last quarter. Q1 core PCE is expected at 1.4% compared to 1.8% last quarter. Chicago PMI is expected at 60 compared to 58.8 last month and the Michigan consumer sentiment is expected unchanged at 69.5.

JPY

JPY traded lower pressured by report that some of the FOMC board members want to begin selling of assets and in reaction to Thursday's warning from Fitch of possible downgrade of Japan's sovereign debt rating because of rising Japanese government debt. JPY remains vulnerable as low yield currency because the BOJ has pledged to maintain accommodative policy to combat deflation. Recent improvement in US economic data and rising US inflation encourages speculation that the Fed may be moving towards a shift in its policy bias. Today's report that some of Fed board members want to begin selling assets would begin the beginning of withdrawal liquidity and shift yield differential in favor of the USD. Earlier in the week the IMF raised its global GDP forecast but warned that the global recovery is vulnerable to rising sovereign debt risks. Japan faces a record budget deficit and the Fitch warning of a possible downgrade of Japan's sovereign debt rating limits demand for the JPY. JPY was also pressured by a 1% surge in the EUR/JPY cross with the EUR supported by report that Greece seeks to activate EU/IMF aid. There was limited reaction to the statement from BOJ Governor Shirakawa that is inappropriate to use FX as a tool to narrow trade deficits. Shirkawa was referring to China's Yuan policy. Shirakawa also warned against focus on inflation. His comments suggest that the BOJ is less inclined to take additional easing measures. This may partly reflect the fact that recent Japanese economic data points to improving growth with report Thursday of a jump in Japan's export sales. In addition to BOJ is expected to raise its CPI and growth forecast in its semiannual report due for release on April 30th.JPY remains vulnerable to its low yield status as interest rates are set to rise in many of the industrialized nations and to concern about Japan's sovereign debt rating. JPY traded to the day's lows as US durable goods and new home sales data fuel speculation that the US economy is gaining momentum.

Next week's Japanese economic calendar includes the April 28th release of March retail sales expected to fall by 1.1% compared to 0.9% rise last month. On April 30th March CPI will be released expected to rise by 0.3% compared to -0.1% last month. March household spending, unemployment, industrial output, housing starts and construction orders will also be released on April 30th. Household spending is expected to decline by 0.7% compared to a 0.5% decline last month. The unemployment rate is expected unchanged at 4.9% with the participation rate rising to 59.1 from 58.9 last month and employment growth to decline by 100k. Industrial output is expected to rise by 1% compared to a 0.6% decline last month. Housing starts are expected to rise by 3% compared to 8% fall last month and construction orders are expected to decline by 6.4% compared to 20.3% last month.

EUR

EUR traded higher rebounding from a one-year low versus the USD supported by report that Greece has asked to activate the EU/IMF aid package and in reaction to above expectation German IFO business sentiment report. Greek/German 10 year bond spreads dropped to 534bps as the cost of financing the Greek debt eased a bit in reaction to the news that Greece wants to tap EU/IMF aid. The Greek fiscal situation is complicated and seeking to activate the EU/IMF aid package may offer only temporary relief from concern about the Greek budget deficit. The EU commission says there is no deadline for decision on Greek request for aid. It remains to be seen how quickly the EU acts on the aid package and how effective aid package will be. It's not yet clear how much aid Greece plans to ask for or if all EU members will agree to aid Greece. A unanimous agreement is needed from all EU members to activate aid to Greece. Wire reports suggest that the EU wants the IMF to be the first to give Greece funds. Investors are also concerned about the potential contagion from the Greek fiscal troubles and the IMF says the Greece needs more structural reforms to help restore credibility. The Greek bailout process is likely to be rocky and uneven and the USD may continue to benefit from safe haven demand. Today's EU economic data was positive. EU February industrial orders rose by 1.5% and the German April business sentiment index rose to 101.6 compared to 98.2 last month, a reading of 98.6 was expected. German IFO is at a two year high. The IFO current conditions index also jumped to 99.3 from 94.5 last month and the expectations index rose to 104 from 102. The strengthening of the EU recovery complicates the ECB's policy outlook as the ECB must balance the risks to the EU recovery from the Greek debt crisis and the potential inflationary risk that could result from maintaining low yields as the recovery gains momentum. Uncertainty about the efficacy of the Greek aid plan and ECB policy outlook should limit the EUR rebound. Analysts at CMC markets said that the EUR may fall to 1.27 pressured by EU disagreements over the Greek financial aid plan. We are entering the next chapter in the Greek tragedy but the story is far from over.

Next week's EU economic calendar includes the April 29th release of EU business climate expected at 99.8 compared to 99.6 last month. On April 30th EU March unemployment will be released expected unchanged 10% along with April HICP expected at 1.5% compared to 1.4% last month.

GBP

GBP traded lower pressured by report that UK Q1 GDP came in weaker than expected. UK Q1 GDP rose by 0.2%, a reading of 0.4% was expected. The weaker than expected UK GDP report generates concern about the strength of the UK recovery and may dampen speculation that the BOE will soon end its asset purchases. Earlier in the week the UK reported stronger mortgage approvals and higher inflation but retail sales came in below expectations. GBP has been supported by speculation that the BOE was shifting to a less dovish policy bias. The BOE monetary policy minutes state that some of the board members are becoming concerned about rising UK inflation. The concern about rising UK inflation coupled with the BOE's more upbeat outlook for the UK recovery hints at a shift to a less dovish BOE policy. Today's UK GDP data suggest that he UK recovery remains uneven and will raise questions about the probability of the shift in BOE policy bias. GBP focus will shift back to the UK May 6th general election. UK press reports that the Liberal Democratic candidate and Conservative Party candidate were the main winners of last night's UK election debate on foreign policy. The debate results may generate continued fears that the UK election will result in a hung parliament. A hung parliament is less likely to take quick and aggressive steps to reduce the UK budget deficit. Ratings agencies have warned that if the UK does not take quick action to reduce its deficits that the UK may lose its AAA sovereign debt rating. UK PM Brown warns that cutting the deficit could increase the risk that the UK economy would return the recession. If Brown's party were to secure a majority in parliament it could be perceived as a negative for the GBP. Brown does not support quick action on the UK deficit. Next week the UK will hold a third and final pre election debate Thursday. The topic of the debate will be the economy.

Next week's UK economic calendar includes the April 25th release of April Hometrack housing prices expected at -0.2% compared to -0.8% last month. On April 29th April GFK consumer confidence will be released expected at -12 compared to-15 last month.

CAD

CAD traded lower pressured by report of weaker than expected Canadian inflation and retail sales. Canada's annual inflation rate slowed to 1.4% from 1.6% last month with the core inflation declining by 0.2%. Canada's retail sales rose by 0.5% in February, a 0.8% rise was expected. These reports may dampen BOC rate hike speculation. Tuesday the BOC elected to hold rate policy steady, raised its 2010 GDP forecast to 3.7% ended its commitment to maintain low rates. The BOC policy statement says that the Canadian recovery was somewhat more rapid than expected and the BOC dropped the language in its policy statement that interest rates would remain low through June 2010 conditional on inflation. Dropping the conditional inflation language in its policy statement is a shift in BOC policy and a signal that interest rates will soon be raised. The BOC policy statement was seen as more aggressive than expected and could lead to an earlier than expected rate hike. BOC Monetary Policy Report released Thursday confirmed that Canada's economy grew faster than expected in Q1 and that withdrawal of stimulus will depend on output and inflation. Today's Canadian inflation and retail sales data suggest that the BOC may not be in a hurry to withdraw stimulus.

Next week's Canadian economic calendar includes the April 30th release of Q1 GDP expected to rise by 0.8% compared to 0.6% last quarter. April raw material prices will be released on April 30ht expected at 0.6% compared to 0.4% last month.

AUD

AUD traded lower pressured by dovish comments from RBA Governor Stevens. Stevens said that interest rates are close to the average and the future course of rates is an open question. His comments may dampen speculation that the RBA will raise interest rates again next month. Thursday Australia reported weaker than expected vehicle sales with March new vehicle sales declining by 2.7%.The decline in vehicle sales may dampen enthusiasm about the strength of the Australian economic recovery and also dampen RBA rate hike speculation. AUD price direction is closely tracking risk appetite with recent gains attributed to RBA rate speculation. AUD traded sharply higher Tuesday in reaction to hawkish RBA policy minutes. The April RBA policy minutes state that interest rates are still below average and need to rise more. According to the RBA minutes the boom in exports meant that the RBA could not delay further rate hikes. The RBA hiked rates by 25bps to 4.25% earlier this month. Last Thursday, Australia reported that inflation expectations rose to the highest level since October 2008. The rise in Australia's inflation expectations could add pressure on the RBA to hike rates. Today's comments from RBA Governor Stevens cloud the outlook for RBA policy and may tip the scales in favor of a steady rate decision in April.

Next week's Australian economic includes the April 27th release of Q1 PPI expected at 0.7% compared to -0.4% last month and the April 28th release of Q1 CPI expected to rise by 0.8% compared to 0.5% last quarter. On April 29th February leading Index will be released expected at 0.1% compared to -0.2% last month and Q1 business conditions expected it 14 compared to 13 last month. On April 30th March private sector credit be released expected unchanged at 0.4%. Next RBA policy meeting will be held on May 4th.

23 Apr 10 : Gold and Oil News

Gold traded in a wide range testing $1150 before crashing nearly $20 an ounce in the US session. Overall trading with a low of USD$1131 and high of USD$1150 before ending the New York session at USD$1142 an ounce. Ended Flat in a mixed day of trading.

Oil Closed +$0.02 at $83.70 a barrel

Earnings Announcement Next Week

Earning announcements may provide a catalyst for stocks that have been undergoing a consolidation phase.





Next week

26 Apr Rickmers Maritime, Starhill Global REIT

27 Apr QAF

29 Apr Ascendas India Trust

30 Apr Ascott Residence Trust, CDL H Trust, Indofood Agri, SMRT



2 weeks time

4 May Great Eastern Holdings

5 Mat SATS

6 Lippo-Mapletreet Trust, Noble, Parkway Life REIT, Starhub

7 May DBS, Sembcorp Marine, UOB

23 Apr 10 : Morning Daily Update

Daily Outlook 23 Apr 2010

Overnight DJ +0.08% to 11134, S&P +0.23% to 1209. Gold -0.21% to 1141, Oil - 0.14% to 83.58. Amazon earnings and revenue came in better than consensus, but guides sharply lower for Q2, stock +2.77%, but -1.67% after hours. Amex earnings and revenue better than expected, +1.7%, and +1.33% after hours. Microsoft’s results were slightly stronger than expected, +0.19% but -1.31% after hours.

Opening in Asia, markets slightly lower to slightly up: Nikkei225 -0.17%, Korea - 0.31%, Taiwan +0.49%, Shanghai +0.3%, STI +0.04%, DJ Futures +2pts.

Earnings came in better than expected albeit probably not has strong as expected. Markets not favouring it. Greece concerns heightened very much. Macro figures out yesterday were mostly inline: US PPI MoM in line at +0.7% vs +0.5% expected vs -0.6% previously. PPI YoY in line at +6% vs +4.4% previously. Initial Claims are very much in line with expectations, at 456K vs 450K expected, vs 484K previously. Continuing Claims unexpectedly rose to 4646K vs 4600K expected vs 4686K previously. Existing Home Sales come in slightly stronger than expected, at 5.35M vs 5.29M expectedly vs 5.02M previously.

Greece’s benchmark 10-year bond yield rose to 8.13%, the highest since 1998 and more than twice the comparable German rate. EUR fell to a marginal new 11-month low on the news, with no bottom in sight at the moment. Moody’s cut Greece’s sovereign ratings to A3. EU says Greek deficit may exceed 14% GDP on swaps, social security. Its 2009 budget deficit totaled 13.6% of GDP vs Apr 7 forecast of 12.9%. Ireland back to becoming a rising concern as it overtook Greece to have the highest budget deficit of GDP, at 14.3%.

Asean Exchange in the forming: By the middle of 2011, initial trades on a pilot basis would link the Kuala Lumpur, Bangkok exchange, Philippines Stock Exchange and the Singapore Stock Exchange. Vietnam's Ho Chi Minh Stock Exchange and the Indonesia Stock Exchange are also backing the project. NYSE Technologies is developing the software designed to link the exchanges to brokers in all countries involved. The idea is to create a system that will link the trading engines of the different markets to enable electronic trades to go through seamlessly from one country to another. Clearing would be carried out by the home exchanges of the stocks traded, with settlement in the local currency

On the commodities front, now, Jun Crude 83.70 (unchanged), Jun Gold 1140 (- 2.7).

22 Apr 10 : USD higher, Greek budget deficit revised higher

FX Highlights

* The USD is trading higher with the EUR pressured by ongoing worries about the Greek fiscal outlook as Greek credit spreads widen to a new record level and the Greek budget deficit is revised higher, GBP trades lower pressured by UK election polls which point to a hung parliament and report of record UK public borrowing in March, GBP downside was limited by report of higher than expected mortgage approvals and gains in cross trade to the EUR, commodity currencies trade lower in reaction to weaker equity markets and a dip in risk appetite, AUD trades lower in reaction to report of weaker than expected new vehicle sales, CAD trades lower pressured by a 1% decline in price of crude oil, JPY is trading higher tracking equities and the drop in risk appetite with gains limited by Fitch warning on Japan's sovereign debt
* Focus turns to today's release of US jobless claims, PPI and existing home sales and Canada's leading index
* Greek/German 10 year bond spread widens to record 519bps, Greek 2009 budget deficit revised to 13.6% of GDP from 12.7%,EUR lower
* Japan's March trade surplus came in at ¥948.9bln, exports rose by 43.5%, imports rose by 20.7%, Fitch warns that Japan's sovereign debt rating is at risk from rising government debt, IMF says Japan may need to consider new stimulus measures, JPY higher
* Australia's March new vehicle sales fall 2.7%,AUD lower
* UK public sector borrowing rises to a record level in March of 23.49bln, March retail sales rose by 0.4%, mortgage approvals rise to 52k from 48k last month, GBP lower
* The IMF increased its global forecast to 4.2% and says the EUR is somewhat overvalued and major currencies of indebted nations may need to weaken, says Yuan substantially undervalued
* US mortgage applications rose in week ending April 16th as mortgage rates slide
* US equity markets set to open lower, European equities 1% lower, Nikkei closed 140 points lower

22 Apr 10 : USD Mixed, EUR Lower on Rising Cost to Fund Greek Debt

* USD: Mixed, IMF warns rising sovereign debt levels pose biggest threat to the global economy
* JPY: Lower, BOJ says Japan to eventually escape deflation, stops short of endorsing an inflation target
* EUR: Lower, Greek/German 10 year bond spread widens to record level, Greek aid talks begin today
* GBP: Higher, labor market improves as jobs claimant count falls more than expected, BOE more upbeat
* CAD and AUD: AUD & CAD mixed, Australia's leading index rises, BOC rate hike speculation

Overview

USD traded mixed with the EUR pressured by ongoing concern about the Greek fiscal debt, GBP supported by report that the UK labor market is improving, commodity currencies trade higher supported by rate hike speculation with AUD supported by report of sharp rise in Australia's leading index and the JPY traded lower with downside limited by comments from BOJ deputy governor that Japan will eventually escape deflation. Greek/ German 10 year bond spread rose to a 12 year high fueling concern about the cost of financing the Greek debt. Greek aid talks begin today and are expected to last two weeks. The German opposition party has threatened to block the government's approval of a fast track of Greek aid. The IMF says that sovereign debt levels pose the biggest threat to the global economy. Persistent EUR selling pressure limits USD downside versus the majors. Growth led currencies continue to outperform supported by optimism about the global recovery as the Bank of India hikes interest rates and the BOC signals rates may soon rise. Rising interest rates are seen as confirmation that the markets are returning to normal. No major US economic data was released in today's trade. Investors will continue to monitor news concerning the Greek debt. Focus turns to Thursday's release of US initial jobless claims and existing home sales.

On April 22nd initial jobless claims for week ending 4/17 will be released expected at 460k compared to 484k last month. March PPI and existing home sales will also be released on April 22nd.PPI is expected to rise by 0.3% compared to 0.6% last month. Existing home sales are expected at 528k compared to 502k last month. On April 23rd March durable goods and new home sales will be released. Durable goods are expected to rise by 0.3% compared to 0.9% last month and to rise by 0.8% ex-transports. New home sales are expected at 320k compared to 308k last month.

JPY

JPY drifted lower pressured by a recovery in risk appetite as Asian equity markets trade higher and India hikes interest rates. The Nikkei closed 183 points higher. The rate hike in India confirms growing confidence in the global recovery and contributes to improving risk appetite. JPY downside was limited by the comments from BOJ deputy governor Nishimura. Nishimura said that Japan will eventually escape deflation and that the economy will continue to recover. His comments reduce the likelihood of additional ease by the BOJ. Members of Japan's ruling party are calling for BOJ to set a 2% inflation target. Nishimura stopped short of endorsing an inflation target but said that the BOJ will try to bring its price view closer to the governments. JPY remains vulnerable to its low yield status as interest rates are set to rise in many of the industrialized nations. JPY cross activity was mixed with the JPY gaining versus the EUR as Greek/German by spreads widened to a record level and JPY weakened versus the GBP with GBP supported by report of improvement in the UK labor market. AUD/JPY drifted lower pressured by profit-taking. The direction of equity markets and risk appetite are the main drivers for JPY trade.

March trade balance and February all industry activity will be released April 22nd. March trade balance is expected at ¥750bln compared to ¥651bln last month. All industry activity is expected to decline by 0.4% compared to the 3.8% rise last month.

EUR

EUR traded lower pressured by Greek debt worries as the cost of financing the Greek debt rises to a 12 year high. Greek ten year bond yield rose above 8% and the spread to Germany widened to a record 502 bps. Greek aid talks begin today and the outcome of those talks will be key to the direction of the EUR. The talks may last as much as two weeks. EU officials have expressed confidence that they will not let Greece fail. Investors remain skeptical about the efficacy of the Greek aid plan. Tuesday the ECB's Weber said that Greece may need up to €80bln in aid and that he €30 billion aid pledge to Greece may not be enough. There is an interesting report on Bloomberg citing analysts at Citicorp warning that the EUR could be doomed without fiscal and political unity. EUR was also pressured by selling in cross trade with JPY supported by report of EU bond redemption and GBP trading at a two month high versus the EUR supported by report of better than expected UK labor data. EUR remains vulnerable to uncertainties about the Greek debt outlook.

On April 22nd EU manufacturing and services PMI for April be released. The manufacturing PMI is expected to improve to 56.7 from 56.3 and the services index is expected to improve to 54.5 from 53.7. On April 23rd German April IFO business climate survey will be released expected at 98.6 compared to 98.1 last month along with EU February industrial orders expected that -1% compared to -2% last month.

GBP

GBP traded higher supported by report of better than expected UK labor market data. UK claimant count dropped by 32,900, a 10k drop was expected and the unemployment rate fell for the second month in row. The improvement in the UK labor market follows yesterday's report of higher than expected inflation. The monetary policy minutes for the BOE's April meeting show that the board voted unanimously to leave interest rates unchanged at 0.5% and the level of asset purchases unchanged at £200bln. The BOE policy statement was a bit more upbeat on the economic outlook and there was a debate over how best to deal with rising inflation and growth risks. Some MPC members expressed concern about above target inflation. Based on today's UK employment report and building inflationary pressures there may be increased speculation that the BOE may soon elect to end quantitative easing and begin to normalize monetary policy. GBP upside was limited by the latest UK election polls which point to the potential for a deadlock in parliament. A You/GUV poll has the Liberals at 34%, Conservatives at 31% and labor at 26%. The UK general election is just two weeks away and a deadlocked parliament could put the UK AAA sovereign debt rating at risk for downgrade. A deadlock or hung parliament is less likely to take quick action to reduce the UK budget deficit. Ratings agencies have warned the UK government that failure to take action to reduce its spending could lead to a downgrade of the UK sovereign debt rating. Focus turns to Thursday's release of UK retail sales, net public sector borrowing and Friday's Q1 GDP. Investors look to these reports for further confirmation that the UK economy is recovering and insights to the UK budget. UK public-sector borrowing is expected to surge to 24bln in March.

On April 22nd March retail sales will be released expected to rise by 0.8% compared to 2.1% last month along with March net public-sector borrowing expected to rise by 24bln compared to 12.3bln last month. On April 23rd Q1 GDP will be released expected at 0.5%.

CAD

CAD traded mixed continuing to find support from BOC rate hike speculation. Tuesday the BOC elected to hold rate policy steady, raised its 2010 GDP forecast to 3.7% ended its commitment to maintain low rates. The BOC policy statement says that the Canadian recovery was somewhat more rapid than expected and the BOC dropped the language in its policy statement that interest rates would remain low through June 2010 conditional on inflation. Dropping the conditional inflation language in its policy statement is a shift in BOC policy and a signal that interest rates will soon be raised. The BOC policy statement was seen as more aggressive than expected and could lead to an earlier than expected rate hike. BOC rate expectation sparked a CAD rally through parity versus the USD. The increase of the BOC 2010 forecast and the dropping the language from its policy statement that rates will remain on hold through June 2010 conditional on inflation opens the door for a June rate hike. Focus turns to Thursday's BOC Monetary Policy Report for further clues to the outlook for BOC policy and possible timing of a rate hike. CAD upside was limited by report of weaker than expected wholesale trade. February wholesale trade declined by 1.2%, a 0.5% rise was expected. Inventories rose by just 0.1% which could be a red flag to the BOC's upbeat assessment of the economic outlook for Canada. The wholesale trade report had limited impact on CAD trade as some analysts suggest that the report may have been distorted by the Olympics and bad weather. The main focus for CAD trade will be Friday's release of retail sales and CPI. These reports should give a better reading of the strength of the Canadian recovery and inflationary pressures.

On April 22nd March leading indicators will be released expected at 1% compared 0.8% last month. On April 23rd March CPI will be released expected to rise by 0.9% compared to 0.7% last month along with February retail sales expected to rise by 1.2% compared to 0.7% last month.

AUD

AUD traded mixed initially supported by report that Australia's leading index rose to its highest level in 13 years. Australia's February leading index rose by 7.2%. March imports rose by 4%. These reports are seen as confirmation of improving outlook for the Australian domestic economy and the data may intensify RBA rate hike speculation. AUD traded sharply higher Tuesday in reaction to hawkish RBA policy minutes and a rate hike in India. The April RBA policy minutes state that interest rates are still below average and need to rise more. According to the RBA minutes the boom in exports meant that the RBA could not delay further rate hikes. The RBA hiked rates by 25bps to 4.25% earlier this month. The Reserve Bank of India raised interest rates 25bps to 3.75%. This is the second consecutive monthly rate hike by the RBI and reflects the central bank's view that the Indian recovery is firmly in place. The strength of the Indian recovery and RBA minutes may increase pressure on the RBA to hike rates at next month's policy meeting. Last Thursday, Australia reported that inflation expectations rose to the highest level since October 2008. The rise in Australia's inflation expectations could add pressure on the RBA hiked rates. Australian inflation report and RBA minutes may tip the scales back in favor of another 25bps RBA rate hike next month. AUD gains were limited by a report from Freeport that they expect China's H2 copper demand to slow. AUD direction remains tied to risk appetite and RBA policy.

This week's Australian economic calendar includes the April 22nd release of March new car sales expected to rise by 3% compared to -1.9% last month. On April 23rd Q1 export and import prices will be released. Export prices are expected to rise by 0.7% compared to a 1.7% decline last quarter and imports prices are expected to fall by 0.6% compared to a 4.3% decline last quarter.

22 Apr 10 : Daily Outlook

Daily Outlook 22 Apr 2010


Overnight DJ +0.07% to 11125, S&P -0.1% to 1206. Gold -0.2% to 1147, Oil -0.29% to 83.43. Boeing and Apple helped DJ to edge higher but healthcare sector and retreat among financial sectors limited gains. Morgan Stanley had a winning set of results. 1Q EPS@$1.03 vs 57cents expected. 1Q revenue@$9.0B vs $8.15B expected Wells Fargo had less than shimmering results with earnings coming in slightly stronger but revenues lower. 1Q EPS@45cents vs 43cents expected. 1Q revenue@$21.45B vs $21.73B expected. Today, there are plenty of earnings results out, from Amazon.com, American Express, Blackstone Group, Credit Suisse, Microsoft, Nokia, PepsiCo.

Opening in Asia, markets all in the red: Nikkei225 -1.9%, Korea -1.1%, Taiwan -1.15%, STI -0.49%, Shanghai -1.19%, DJ Futures -32pts.

Greek Finance Minister said that 1) It could activate aid before IMF/EU talks end. 2) The talk of restructuring debt was absurd 3) Talks with the EU and the IMF about activating the aid package will likely last two weeks. He also told lawmakers that one has to expect Greece to call for aid.

Unexpectedly, some developing countries have come out to be allies with the US, joining protests against China's undervalued currency. Head of Brazilian central bank said that a stronger Chinese currency was "absolutely critical for equilibrium of the world economy". He said there was "some distortions in world markets, one of them is a lack of growth and another is China." Governor of the Reserve Bank of India said that an undervalued RMB was creating problems for countries, including India. "If China revalues the yuan, it will have a positive impact on our external sector... If some countries manage their exchange rate and keep them artificially low, the burden of adjustment falls on some countries that do not manage their exchange rate so actively.

On the commodities front, now, Jun Crude 83.23 (-0.45), Jun Gold 1145.7 (-3). EIA showed larger-than-expected jumps in oil and gasoline inventories last week.

Currencies:

Today in US, we will have initial and continual jobless claims. Claim numbers were wonky last week, jumping +24K unexpectedly, vs -440K decline anticipated, due to Easter holiday- related factors. Also, existing home sales figures will come out today. Over in UK, eyes will be on UK retail sales. PMI figures for Germany and EU will affect EUR as well.

Tomorrow, we will have US durable goods orders and new home sales. UK will reveal its 4Q GDP. Germany IFO and industrial new orders will come out.

21 Apr 10 : USA Market Morning Notes

FX Highlights

* The USD is trading mixed firming versus the EUR as Greek/German 10 year bond spread widens to a 12 year high and doubts persist over Greek aid, Greek aid talks begin today, the talks could last two weeks, GBP outperforms supported by report of a sharp drop in UK claimant count, CAD trades higher supported by BOC rate hike speculation, the AUD trades higher supported by report of a sharp rise in Australia's leading index, a rate hike in India and speculation rates will rise in Canada and Australia generate speculation that markets are retuning to normal and fuels demand for growth led currencies, JPY is trading lower pressured by improving risk appetite as global equities rise in Asia with downside limited by comments from BOJ deputy governor that Japan will eventually escape deflation

* Focus turns to today's release of Canada's wholesale trade

* Australia's February leading index rose 7.2% to the highest since 1997, March merchandise imports rose by 4%,AUD higher

* YouGuv poll has Liberals at 34%, Conservatives at 31% and Labor at 26%, the poll points to a deadlock in parliament, UK average earnings rise 2.3%, March claimant count falls by 32.9k, unemployment rises 0.2% to 8%, BOE voted unanimously to keep rate policy and asset purchases steady in April, GBP higher

* Greek/ German 10 year bond spread widens to a 12 year high, EUR lower

* SNB holdings of EUR rose to 56.4bln in March reflecting recent SNB intervention , CHF lower

* BOJ deputy governor Nishimura says that Japan will eventually escape deflation and that the economy will continue to recover, JPY lower

* IMF says rising sovereign debt levels pose biggest threat to the global economy

* WSJ reports that UK and Germany told to cut ties with Goldman

* Analysts at Citigroup say the EUR is doomed without fiscal and political unity in Europe

* US equity markets set to open mixed , European equities 1% lower, Nikkei closed 189 points higher

Upcoming Events

* US- Wednesday, no major US economic data scheduled for release today
* CAN-Wednesday, February wholesale trade will be released expected at 0.7% compared to 3% last month

21 Apr 10 : Candian Dollar Gain

Canadian Dollar gains following rate decision by the BoC

* Tuesdays trading was one of volatility across the board despite a light US financial calendar; this time around focus was on the EUR, GBP, AUD and CAD. This resulted in a weak overall dollar performance. The Euro fell on uncertainty about Greece activating the aid package. The sterling surged as CPI beat expectations and the market re-assessed the BoE future policy. AUD surged following bullish RBA minutes and the star performer of the day, the Canadian dollar, surged against the dollar as the BoC removed the conditional commitment on low interest rates from their rhetoric. This leaves the door open for a rate hike in Canada as soon as July. The Loony subsequently traded below parity to 0.9957 from 1.0162.

* In the US despite the light financial calendar we had a number of positive earnings reports from major fortune 500 companies. Goldman Sachs reported huge earning for Q1 of $3.3bln however we did not see an immediate follow through as the SEC law suit is keeping investors nervous about owning Goldman Sachs stock. Another star yesterday was Apple as the company posted a 90% jump in net income as Apple sold 8.8mln iphones for the quarter. Overall the SP500 closed 0.81% higher for the day and the USDJPY tracked this gain by trading back up to 93.37 from a 91.57 low.

* In Europe we had better than expected ZEW reports for Germany, ZEW reports are leading indicators measuring sentiment and activity expectations in Germany. Despite this news the EURUSD still managed to lose some ground as concerns over the activation of the EU/IMF package made for uncertainty and the pair was sold off. EURUSD price action was between 1.3521 - 1.3397.

* Today the main focus will be on the UK economy and the upcoming employment report. ILO unemployment is expected to remain unchanged at 7.8% for the month of February. MPC minutes will be released also at the same time shedding some more light on BoE future policy moves. One thing is guaranteed for the GBPUSD today and that is volatility!

Currency to watch out for: EURUSD & USDJPY

* § The EURUSD pivot point is at 1.3385 with a preference to enter into Long positions at 1.3395
* § The USDJPY pivot point is at 92.95 with a preference to enter Long positions at 93.00

Today's calendar and market movers:

* § UK ILO unemployment for February expected at 7.8%
* § Canada Wholesale Trade for February expected at 0.7%
* § US Crude Oil Inventories for the week expected at 0.1mln

Equity Markets:

* US equities closed positive on Tuesday with the DJIA and the SP500 closing 0.23% and 0.81% respectively. The European bourses were positive on Tuesday with the FTSE closing 0.97% the DAX and the CAC closing down at 1.65% and 1.41%. The NIKKEI and the HSI at the time of writing is 1.71% and 0.12% respectively.