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[EmpireGlobalfx]

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[EmpireGlobalfx]

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[EmpireGlobalfx]

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[EmpireGlobalfx]

Weekend news.

 

Eurozone agrees to further €12 billion for Greece

Eurozone finance ministers have agreed to an additional 12 billion euros in bailout funds for debt-crippled Greece, days after the Greek parliament passed a new raft of austerity measures amid violent protests in the capital, Athens.

 

Euro zone finance ministers agreed on Saturday to disburse a further 12 billion euros to Greece and said the details of a second aid package for Athens would now be finalised by mid-September.

 

After a conference call, the 17 euro zone ministers agreed that the fifth tranche of a 110-billion-euro bailout agreed with Greece in May 2010 would be paid by July 15, as long as the IMF’s board signs off when it meets on July 8.

 

The payment will allow Greece to avoid the immediate threat of default, but the country still needs a second rescue package, which is also expected to total around 110 billion euros and which ministers said would be worked out “in the coming weeks”

 

Full article and video at

http://www.france24.com/en/20110703-greece-austerity-bailout-eurozone-debt-papandreou

[EmpireGlobalfx]

Euro extends gains vs friendless USD

The euro rose to a one-month high against the dollar in Asia on Monday while commodity currencies like the Australian dollar held onto last week's hefty gains, as diminishing worries about Greece prompted investors to embrace risk.

Trading though is expected to be subdued with U.S. markets shut for the Independence Day holiday.

 

Euro zone finance ministers on Saturday approved a 12 billion euro instalment of Greece's bailout and said details of a second aid package for Athens would be finalised by mid-September.

 

However, they signaled that Greece must expect significant losses of sovereignty and jobs. As well, whether Athens can successfully implement the reforms demanded by international lenders remains to be seen. All of which means the euro's path higher will be strewn with obstacles.

 

Still, BNP Paribas analysts said if it became clear that dips aren't running much below $1.4500, real money investors would be tempted to add long euro exposure in the week ahead and leveraged accounts would also start betting on further gains in the common currency.

 

"Thursday's ECB meeting now looms large. The easing of Euro peripheral stress should allow markets to re-price further policy moves from the central bank, perhaps following the message to be delivered by ECB President Trichet following the rate rise set to be announced on Thursday," they wrote in a note.

 

The euro last traded at $1.4572, extending last week's 2.5 percent rally -- its heftiest since January. The breach of last week's high around $1.4551 triggered more stop-loss buying, traders said.

 

 

Read more: http://forums.babypips.com/rate-my-broker/39599-latest-market-news-empireglobalfx.html#ixzz1R6Bp0RH7

[EmpireGlobalfx]

Stocks at 4-1/2 week high, risk back in favour

 

World stocks hit a 4-1/2 week high on Monday and oil rose as investors grew confident over the prospects for the global economy after Greece avoided an early default on its debt and data pointed to a moderate slowdown in China's growth.

 

Shanghai stocks hit a six-week high after data last week showed Chinese manufacturing growth moderated in June, raising expectations that the economy may not be headed for a sharp slowdown despite monetary policy tightening.

 

Over the weekend, euro zone finance ministers approved a 12 billion euro installment of aid for Greece and said the details of a second aid package would be finalized by mid-September.

 

But the euro pared its gains after ratings agency Standard & Poor's said a debt rollover plan being considered for Greece may still put the country into "selective default.

 

"Greece was always going to be a sticking point and this issue of debt rollover and rating agencies views will be something that the market will keep an eye out for," said Jeremy Stretch, head of currency strategy at CIBC World Markets.

[EmpireGlobalfx]

Euro knocked off one-month highs by S&P Greece comments

 

The euro slipped from one-month highs against the dollar after Standard & Poor's said a debt rollover plan being considered for Greece may put the country into selective default, though expectations for a second Greek bailout kept it underpinned.

 

The euro had hit a one-month high of $1.4580 earlier on Monday after a weekend decision by euro zone finance ministers to approve a 12 billion euro loan that Greece needed to avert immediate default, but the country still needs another rescue package expected to total around 120 billion euros.

 

Euro zone officials are working on how private creditors can be involved voluntarily, with French banks, major holders of Greek sovereign debt, putting in place proposals to rollover the bonds when they fall due.

 

S&P's latest salvo served as a reminder to investors that the common currency's recovery would be at best rocky.

 

"The French proposal is certainly raising a lot of interest in the market and the S&P's comment that it still constitutes a technical default does not really help the euro," said Audrey Childe-Freeman, EMEA head of currency strategy at JP Morgan Private Bank.

 

Aside from a relief rally after the Greek parliament approved austerity and reform measures last week, the euro has also drawn support from market expectations that the European Central Bank will raise interest rates at a policy meeting later this week.

 

The euro dropped from around $1.4550 to as low as $1.4510 immediately after the S&P comments.

 

It traded with slight losses at $1.4511 in afternoon dealing, having risen to $1.4580 on trading platform EBS, its highest since early June. Volumes were light with U.S. markets shut for the Independence Day holiday.

[EmpireGlobalfx]

Gold edges down on dollar gains, technicals weak

 

Spot gold edged down on Tuesday, under the weight of a stronger dollar as a short squeeze boosted the greenback, and a weak technical picture cast a shadow on gold's short-term outlook.

 

The dollar was bought back broadly on a flurry of stop-loss buying and short-covering by macro funds, while the euro was set to snap a six-day winning streak. <USD/>

 

A stronger greenback makes dollar-denominated gold more expensive for buyers who hold other currencies.

 

The technical picture suggested a lack of momentum in bullion, although physical buying by Asian countries, including Thailand and Indonesia, helped support prices.

 

Spot gold inched down 0.1 percent to $1,493.70 an ounce by 0617 GMT.

 

"We have seen a lot of interest below $1,500, but it is not enough to bring prices back above the level," said Dominic Schnider, an analyst at UBS Wealth Management.

 

Schnider said that gold's short-term technical picture looked sluggish after prices broke an uptrend from 2008.

 

"A lot of people have cleared positions after the uptrend was broken and we are still in a consolidation phase. Gold could move toward $1,445 from a technical perspective," he said.

 

In the short term, gold's technical signals were seen neutral after prices failed to drop in the previous session, and prices were expected to range between $1,479 and $1,514, said Reuters market analyst Wang Tao.

[EmpireGlobalfx]

Debt limit deal not out of reach

 

You would never know it from all the hot air rising out of Washington, but President Barack Obama and congressional Republicans could easily reach a deal to raise the debt limit and avoid an early August default.

 

Before talks hit a brick wall last weekend, negotiators were tantalizingly close to a $2 trillion-plus budget deal that would enable Congress to sign off on further borrowing, according to Democratic and Republican sources.

 

Since then, things have not looked good. Obama compared Republicans to lazy schoolchildren and Democrats accused them of deliberately sabotaging the economy. Republicans have not shied away from salty language, either.

 

"Washington is addicted to spending, and the addict-in- chief is the president," Republican Senator Jim DeMint said on the Senate floor on Thursday.

 

Analysts worry lawmakers may be painting themselves into a corner. "In order to get out of this mess they're going to have to eat some of their words," said Joe Minarik, a former budget official in the Clinton administration.

 

The Treasury Department has warned the country will face default if Congress does not lift the $14.3 trillion debt ceiling by August 2. That could push the country back into recession and upend financial markets across the globe.

 

Whether Republicans and Democrats can bridge their differences over the coming weeks remains to be seen.

 

From a dollar standpoint, the two sides are closer to a deal than it might appear.

[conglo]

You guys can't even use the English language correctly, your website is embarrassing.

 

But you wouldn't know that.

[EmpireGlobalfx]

You guys can't even use the English language correctly, your website is embarrassing.

 

But you wouldn't know that.

 

Thanks for your opinion Conglo! It does help us grow and improve with hard work! :)

 

=D>

[EmpireGlobalfx]

Gold hovers near 1-1/2 week high on Portugal rating cut

 

Spot gold on Wednesday hovered near a 1-1/2-week high hit in the previous session, supported by renewed worries about the euro zone's debt problem after Moody's slashed Portugal's credit rating to junk.

 

Moody's also warned that Portugal may need a second round of rescue funds, cutting into risk appetite in financial markets and pushing gold to a 1-1/2-week high of $1,516.49 on Tuesday

 

"Portugal was certainly the trigger, and the mood in the financial markets has turned a bit cautious," said a Singapore-based trader.

 

Spot gold inched down 0.2 percent to $1,513.19 an ounce by 11:18 p.m. EDT on Tuesday, after rising more than 1 percent in the previous session.

 

U.S. gold was up nearly 0.1 percent to $1,513.80.

 

The short-term technical picture has turned positive, with spot gold expected to rebound further toward $1,550 per ounce, said Reuters market analyst Wang Tao.

 

Brokerage MF Global expects gold to remain rangebound between $1,490 to $1,550 in July, supported by expectations that global monetary policy will remain supportive.

 

"The rebound in global manufacturing will simply return the economy to a sub-par rate of recovery, which should create an environment of slow but stable growth, volatility in inflation, and accommodative monetary policy," the firm said in a research note.

 

"Such ingredients should maintain a favorable environment for the gold market this month."

 

Spot platinum hit $1,739.50, its highest in nearly two weeks, in an attempt to cross above the 20-day moving average at $1,740.46. It was last quoted at $1,731.74.

 

Spot palladium rose to a three-week high of $774.75, building on gains in the past six consecutive sessions on back of strong equity performance, before easing to $772.15.

 

Investors are watching the ongoing strike in Freeport-McMoran's Indonesia mine as well as threat of strike in South Africa's main gold mines, which can be potentially supportive of prices should any serious production disruption occur. So far market reaction had been muted.

 

Also on investor radar was a key U.S. employment report scheduled for release on Friday, which is expected to show a modest rise in payrolls in June after suffering a setback in the prior month.

[EmpireGlobalfx]

Is Europe’s debt crisis a “Lehman Moment” for America?

 

By Mohamed A. El-Erian

The opinions expressed are his own.

 

With its high unemployment and stretched balance sheets, today’s US economy can ill-afford a negative shock from abroad. Yet, this is what it is experiencing. And it explains why markets go through bouts of nervousness about the debt crisis in Europe, and why American policymakers are worried about a foreign financial situation that is getting worse by the day.

 

Europe’s debt problem is indeed a headwind for what remains a disappointing US economic recovery. It dampens America’s export prospects, can raise the cost of borrowing for some American companies and diminishes an already low enthusiasm among banks to lend to households and small companies.

 

Having said that, it is unlikely, though not inconceivable, that Europe’s debt crisis would constitute a “Lehman Moment” — a situation that totally paralyzes American economic activity, puts the country on the verge of a depression and triggers yet another round of extreme crisis management measures.

 

There is now broad-based recognition of America’s persistent economic weakness. Most recently, the Federal Reserve has been forced again to revise downwards its growth projections for both 2011 and 2012. Moreover, with refreshing candor that speaks well to the uncertainties felt by the average American, Fed Chairman Ben Bernanke acknowledged in his second ever press conference on June 22 that only part of the economic weakness is due to transitory factors such as higher oil prices and supply disruptions associated with the Japanese tragedies.

 

As Bernanke hinted, and as PIMCO’s analyses have demonstrated for a while, the US unfortunately faces four structural headwinds that are yet to be addressed properly by policymakers.

 

First, and nearly three years after the global financial crisis, the US housing market is still unable to find a firm enough footing. This undermines confidence and limits labor mobility.

 

Second, joblessness remains worrisomely high, and to make things even worse, is increasingly structural in nature. Witness the 9% unemployment rate, declining labor participation and an alarming 24% unemployment rate among 16-19 year-olds and a 40% rate for African-Americans.

 

Third, credit is yet to flow properly in the economy. With bank lending still hampered, it is small companies and poorer households that suffer the most.

 

Fourth, there is a problem of debt and leverage. Coming off a “great age” of debt and credit-entitlement that went way too far, balance sheet rehabilitation has been uneven and generally insufficient. Yes, some sectors, led by multinational companies, have recovered strongly. But far too many in the private sector are still over-indebted. Meanwhile, public balance sheets, be they of the Federal Reserve or the fiscal agencies, are contaminated to such an extent that they now constitute a source of medium-term uncertainty.

 

Policy responses have been too timid in the face of the economic challenges, and for too long, lacking a central vision. Instead, they have been ad hoc, too reactive and lacking sufficient structural underpinnings.

 

In the absence of a credible alternative, the role of the country’s main economic spokesperson has fallen to President Obama who, understandably and correctly, is extremely busy with many other national and international priorities. Meanwhile, the other arms of government — Congress in particular — are hostage to extreme political polarization, posturing and bickering. And the recurrent drama associated with budgetary legislation discussions — including the continuing budgetary resolution of a few months ago or today’s debt ceiling debate — adds to the uncertainties facing the nation.

 

In sum, this is not an economy that is well positioned to deal with a shock from abroad, let alone a major one. Its ability to absorb a systemic shock has been worn down by persistent internal economic weaknesses and the agility needed to sidestep, or at least minimize the impact of the shock, has been eroded by slow economic policy responses and stretched balance sheets.

 

All this helps to explain America’s concern about Europe’s debt crisis, which has led to periodic selloffs in capital markets and warnings from policymakers. It also speaks to why some commentators have gone as far to suggest that the country faces another “Lehman Moment” — a devastating shock that totally paralyzes the economy, disrupts the functioning of the financial system and pushes the country to the verge of a great depression.

 

This situation was last faced in the fourth quarter of 2008 following the disorderly collapse of Lehman Brothers, the investment bank. As illustrated by various recounts of those nervous months, policymakers came very close to losing complete control of the situation, despite all the firepower at their disposals.

 

Indeed, if it weren’t for the aggressive use of what was at that time a relatively healthy public sector balance sheet (especially that of the central bank’s), the US would have been forced into temporarily shutting down its financial system (including by declaring a “bank holiday”) and experiencing an economic depression which, according to some, would have been worse than that of the 1930s.

 

The question of the “Lehman Moment” becomes even more important now that policymakers have less firepower at their disposal to counter a huge shock. So what should we expect in the months ahead?

 

To be sure, the European debt crisis is a serious political, economic and financial engineering predicament that is hard to solve. As such, it will likely get worse before it gets better. In the process, it will slow global economic growth, increase risk premiums and darken the cloud over the health of the financial sector in Europe.

 

None of this is welcome news to an American economy that urgently needs to create jobs. But it need not result in a repeat of the total Lehman paralysis provided three conditions are met: a banking system that remains robust, no disruptions to money market funds and limited blockage to the plumbing of the country’s payments and settlement system.

 

Chairman Bernanke has spoken publicly to all three. Noting the Fed’s focus on these issues, he has indicated that the US does not face a new Lehman Moment.

 

Published data, to the extent that they are comprehensive and accurate, support his view; as do the actions taken by certain institutions. But risks remain, particularly within a money market complex starved for yield, and where certain firms appear to have stretched far and wide for extra returns.

 

A small risk of a catastrophic event should never be ignored. Accordingly, there is no room here for any complacency among policymakers whose economic management to date has fallen far short of what is needed to create jobs and put the country back on the path of high and sustained economic growth. Indeed, Europe serves to amplify warning sirens that have been ringing for a while.

 

Let us all hope that the increasing volume of the alarm will finally push America to design and implement the type of holistic measures that are desperately needed and long overdue. In the meantime, risk-averse companies, households and investors are justified in taking some extra precautionary steps.

[EmpireGlobalfx]

Obama to meet Congress leaders Thursday on debt

 

--------------------------------------------------------------------------------

President Barack Obama rejected proposals on Tuesday for a short-term deal to raise the U.S. debt limit and pressured congressional leaders to reach a broad agreement within two weeks to avoid a government default by August 2.

 

Obama invited Democratic and Republican leaders of the U.S. Congress to the White House on Thursday to take stock of the stalled negotiations to reach a deal on budget cuts that would give Congress political cover to raise the $14.3 trillion debt ceiling that caps U.S. borrowing.

 

The talks collapsed in acrimony two weeks ago and both sides have blamed the other for failure to reach a deal.

 

Democrats and Republicans have reached a rough agreement on billions of dollars in government spending cuts but are at loggerheads over taxes. Democrats want to increase taxes on wealthier Americans to help lessen the deficit, while Republicans refuse any tax increase, fearing it would worsen the country's 9.1 percent jobless rate.

 

The White House is looking to clinch a deal by July 22 to soothe market fears and give Congress time to approve it.

 

"We need to come together over the next two weeks to reach a deal that reduces the deficit and upholds the full faith and credit of the United States government and the credit of the American people," Obama told reporters at the White House.

 

 

Republicans were skeptical that a new White House meeting would make much difference.

 

"I'm happy to discuss these issues at the White House, but such discussions will be fruitless until the president recognizes economic and legislative reality," House of Representatives Speaker John Boehner said in a statement.

 

"The legislation the president has asked for -- which would increase taxes on small businesses and destroy more American jobs -- cannot pass the House, as I have said repeatedly," said Boehner, the top Republican in Congress.

 

Senate Republican leader Mitch McConnell said he viewed the meeting as an opportunity to know "whether or not the president will finally agree to a serious plan to reduce the deficit."

[EmpireGlobalfx]

Euro extends losses, AUD falls after China rate hike

 

The euro extended losses and commodity currencies fell on Wednesday after China raised rates for the third time this year, driving investors to shed exposure in riskier assets in a market already shaken by Portugal's rating being cut to junk

 

Investors cut exposure to stocks, commodities and growth-linked currencies, pushing the Australian dollar down 0.3 percent to $1.0660. Analysts, though, said the sell-off was a knee-jerk reaction and would be limited.

 

"When the Chinese raise interest rates the initial reaction of the commodity currencies is normally negative in the short-term but the story is that China is serious about moderating the pace of its economy and the trend is still a positive one," said Peter Kinsella, analyst at Commerzbank.

 

The latest move increases China's benchmark one-year lending rate to 6.56 percent, and lifts its benchmark one-year deposit rate to 3.5 percent.

 

It weighed on an already soft euro, dogged by renewed concerns of sovereign debt contagion after Moody's downgraded Portuguese debt by four notches to Baa2, saying the country may need a second round of official financing before it can return to capital markets.

 

The euro was last down 0.7 percent at $1.4322, close to it's lowest level in a week with decent-sized offers cited from $1.4280 to $1.4300.

 

Investors like model funds, sovereign investors and short-term speculators sold the single currency after spreads of Portuguese, Spanish and Italian government bond yields over their German counterparts widened in European trade. Heightened concerns about funding also saw Portuguese credit default swaps jump.

 

Many expect losses to be checked as the market gears up for a quarter percentage point rate hike by the European Central Bank on Thursday, and President Jean-Claude Trichet's news conference will be closely watched for clues on the ongoing pace of the tightening cycle.

 

"Market participants are closing positions ahead of the ECB meeting tomorrow and taking a bit of profit," said Kinsella.

 

"We have lost nearly two figures over the last two days and could see it around $1.4300 or $1.4280 but I don't think it'll go much further before the ECB meeting tomorrow."

[EmpireGlobalfx]

Exclusive: Treasury secretly weighs options to avert default

 

A small team of Treasury officials is discussing options to stave off default if Congress fails to raise the country's borrowing limit by an August 2 deadline, sources familiar with the matter said on Wednesday.

 

Senior officials, including Treasury Secretary Timothy Geithner, have repeatedly said there are no contingency plans if lawmakers do not give the U.S. government the authority to borrow more money.

 

But behind the scenes, top Treasury officials have been exploring ways to prevent a financial meltdown that would be triggered if the government were unable to pay its bills on time, sources told Reuters.

 

Treasury has studied the following issues:

 

- Whether the administration can delay payments to try to manage cash flows after August 2

 

- If the U.S. Constitution allows President Barack Obama to ignore Congress and the government to continue to issue debt

 

- Whether a 1985 finding by a government watchdog gives the government legal authority to prioritize payments.

 

The Treasury team has also spoken to the Federal Reserve about how the central bank -- specifically the New York Federal Reserve Bank -- would operate as Treasury's broker in the markets if a deal to raise the United States' $14.3 trillion borrowing cap is not reached on time.

 

The U.S. government currently borrows about $125 billion each month. The Obama administration wants Congress to raise the limit by more than $2 trillion to meet the country's borrowing needs through the 2012 presidential election.

 

The contingency discussions, which have remained a closely guarded secret throughout weeks of negotiations with Congress over the debt ceiling, are being led by Mary Miller, Assistant Secretary for Financial Markets, who is effectively custodian of the country's public debt.

 

Miller's team has debated whether Obama could ignore Congress and order continued borrowing -- by relying on the 14th Amendment of the U.S. Constitution -- if it fails to raise the borrowing cap.

 

The fourth section of the 14th Amendment states the United States' public debt "shall not be questioned." Some argue the clause means the government cannot renege on its debts.

 

Obama dismissed talk of invoking the amendment on Wednesday. "I don't think we should even get to the constitutional issue," he said. "Congress has a responsibility to make sure we pay our bills. We've always paid them in the past."

 

HINT OF PLAN B COULD HURT TALKS

 

The White House declined to comment on the discussions at Treasury, but administration officials sought to tamp down talk of relying on the 14th Amendment.

 

There has been growing speculation in Washington in recent days that the administration could use the amendment to ignore the congressionally imposed limit on the amount of money the United States can borrow.

 

"Despite suggestions to the contrary, the 14th Amendment is not a failsafe that would allow the government to avoid defaulting on its obligations," said White House spokeswoman Amy Brundage.

 

Miller's team has discussed the Government Accountability Office's 1985 assessment that Treasury has the authority to prioritize payments in the event of a default -- an option Treasury officials have been wary of.

 

The administration's nightmare scenario is that investors panic at the prospect of a default, triggering a crisis that eclipses the 2008 financial meltdown. That could plunge the U.S. economy into another recession, something that could doom Obama's re-election prospects in 2012.

 

Some conservative Republicans have argued the Treasury can prioritize payments and manage a default. The administration wants to keep lawmakers focused on the August 2 deadline, and even a hint of a "Plan B" could lessen the urgency to strike a deal by then.

 

"As we have said repeatedly over the past six months, there is no alternative to raising the debt limit," Treasury spokeswoman Colleen Murray said when asked to comment on the Treasury discussions.

 

"The only way to prevent a default crisis and protect America's credit-worthiness is to enact a timely debt limit increase, which we remain confident Congress will do."

[EmpireGlobalfx]

A year after Dodd-Frank, CFTC tackles manipulation

 

Futures regulators will gain much more muscle to crack down on market manipulation under a rule set to be finalized on Thursday as part of the financial overhaul passed a year ago.

 

The rule would expand the CFTC's ability to prosecute market manipulation by requiring that it show a trader acted recklessly -- a less burdensome standard of proof than it faces now. For the first time, it would allow the CFTC to prosecute fraud-based manipulation.

 

The proposal comes as no surprise, being almost identical to a draft introduced last October.

 

Under existing rules, the CFTC must prove an individual intended to manipulate prices -- evidence that is difficult to find through e-mails or phone calls. It also has to show the person had the market power to move the price of a commodity and that the trader caused an artificial price to occur.

 

With such a high bar, the CFTC has only claimed a single victory in a manipulation suit in its history.

 

"We currently have a nearly impossible manipulation standard," said Bart Chilton, a CFTC commissioner.

 

"We will now be able to swiftly and aggressively 'get at' these types of fraudulent market practices, which can contribute to uneconomic or false prices in commodities markets," he said.

 

A CFTC official told reporters in a briefing that the new authority would allow it to "capture a larger category of fraud cases." For example, the CFTC would now have the authority to bring a case when a defendant misappropriates material nonpublic information, and trades on it.

 

The futures regulator cautioned that a failure to disclose information prior to a transaction will not automatically be considered a violation. The final rule also included protection to ensure good-faith mistakes such as mistyping a number or negligence will not be classified as a violation of the law.

 

The CFTC's five commissioners are expected to vote on the manipulation measure and four other rules at a meeting on Thursday. It is the first meeting to finalize rules mandated under Dodd-Frank that increased its oversight of the $600 trillion over-the-counter derivatives market.

 

The CFTC has said it will miss the July 16 deadline for implementing dozens of rules contained in last year's Dodd-Frank legislation. It proposed last month a plan that would delay some swap rules to ease growing anxiety among traders and fend off possible legal challenges.

 

The futures regulator, armed with the new Dodd-Frank anti-manipulation powers and a new enforcement chief, David Meister, who has vowed to act aggressively, could push the CFTC to move quickly to combat traders who manipulate prices or defraud investors.

 

Some expect to see more cases, such as the one the CFTC filed in May when it charged traders Nick Wildgoose of London-based Arcadia Energy and James Dyer of Oklahoma's Parnon Energy, and their companies, for manipulating oil prices. The charges came under CFTC's current authority.

[EmpireGlobalfx]

Oil jumps 4 pct to 3-week high on jobs data

 

Oil jumped on Thursday by the biggest percentage in two months, hitting a three-week high as U.S. data on jobless claims and retail sales came in stronger than expected, raising hopes that economic recovery was gaining traction.

 

Independent data showing U.S. private hiring surged in June set the stage for a possible upside surprise in Friday's U.S. non-farm payrolls report, traders said.

 

After weekly U.S. data showed a surprisingly small decline in oil stocks, ICE Brent crude extended its rally while the U.S. benchmark faltered.

 

The Brent/WTI spread blew out by $3 to top $20 a barrel, the widest since June 20, as production problems plagued North Sea oil supplies and as traders bet that European governments would release fewer barrels than expected under a global injection of emergency stocks that has failed to tame prices.

 

In London, ICE Brent crude futures for August delivery settled at $118.59 a barrel, gaining $4.97, or 4.4 percent, their biggest one-day gain since May 9. It hit a session high of $118.70, the highest intraday since June 15.

 

U.S. August crude lagged, rising by just $2.02, or 2.1 percent, to settle at $98.67, off its session high of $99.42 -- the highest intraday price since June 15.

 

Traders focused on the jobs-related data even after U.S. government data showed crude oil inventories fell by just 889,000 barrels last week. That decline was less than forecast and well below the 3.2 million barrel drawdown in an industry report on Tuesday.

 

"Prices are still up, with investors minding pundits' views that the economy will pick up in the second half," said Mark Waggoner, president of Excel Futures in Bend, Oregon.

 

ECONOMY DRIVES

 

U.S. private hiring surged in June, data from payrolls processor ADP showed while the Labor Department reported new claims for unemployment benefits fell more than projected last week.

 

Leading U.S. retailers reported better-than-expected sales for June, further boosting hopes for oil demand.

 

U.S. equities rallied on the economic data while the euro rose against the dollar, with investors now looking ahead to Friday's employment report to provide more evidence of a pick-up in growth. .N

 

Economists polled by Reuters prior to the ADP figures expected the report, due at 8:30 a.m. EDT on Friday, to show employers added 90,000 jobs in June.

[EmpireGlobalfx]

Dollar falls versus yen after jobs data; euro tumbles

 

The dollar dropped against the yen, and the euro tumbled on Friday after data showed U.S. nonfarm payrolls rose by only 18,000 in June, the weakest reading since September and well below economists' expectations.

 

The dollar fell as low as 80.71 yen on Reuters data following the news, compared with 81.45 yen earlier. It was last down 0.5 percent at 80.83 yen.

 

The euro briefly tumbled 1 percent to a session low of $1.4204 as the jobs data dented risk appetite. It was last at $1.4262, down 0.7 percent on the day.

[EmpireGlobalfx]

Exclusive: EU calls emergency meeting as crisis stalks Italy

 

European Council President Herman Van Rompuy has called an emergency meeting of top officials dealing with the euro zone debt crisis for Monday morning, reflecting concern that the crisis could spread to Italy, the region's third largest economy.

 

European Central Bank President Jean-Claude Trichet will attend the meeting along with Jean-Claude Juncker, chairman of the region's finance ministers, European Commission President Jose Manuel Barroso and Olli Rehn, the economic and monetary affairs commissioner, three official sources told Reuters.

 

Van Rompuy's spokesman Dirk De Backer said: "It's a coordination, not a crisis meeting." He added that Italy would not be on the agenda and declined to say what would be discussed.

 

However, two official sources told Reuters that the situation in Italy would be discussed. The talks were organized after a sharp sell-off in Italian assets on Friday, which has increased fears that Italy, with the highest sovereign debt ratio relative to its economy in the euro zone after Greece, could be next to suffer in the crisis. A second international bailout of Greece will also be discussed, the sources said.

 

The spread of the Italian 10-year government bond yield over benchmark German Bunds hit euro lifetime highs around 2.45 percentage points on Friday, raising the Italian yield to 5.28 percent, close to the 5.5-5.7 percent area which some bankers think could start putting heavy pressure on Italy's finances.

 

Shares in Italy's biggest bank, Unicredit Spa, fell 7.9 percent on Friday, partly because of worries about the results of stress tests of the health of European banks that will be released on July 15. The leading Italian stock index sank 3.5 percent.

 

The market pressure is due partly to Italy's high sovereign debt and sluggish economy, but also to concern that Prime Minister Silvio Berlusconi may be trying to undermine and even push out Finance Minister Giulio Tremonti, who has promoted deep spending cuts to control the budget deficit.

 

"We can't go on for many more days like Friday," a senior ECB official said. "We're very worried about Italy."

 

Monday's emergency meeting will precede a previously scheduled gathering of the euro zone's 17 finance ministers to discuss how to secure a contribution of private sector investors to the second bailout of Greece, as well as the results of the stress tests of 91 European banks.

 

GREECE

 

Greece is already receiving 110 billion euros ($157 billion) of international loans under a rescue scheme launched in May last year but this has failed to change market expectations that it will eventually default on its debt.

 

Senior euro zone officials worry that progress toward a second Greek bailout, which would also total around 110 billion euros, is not being made quickly enough and that the delay is poisoning investors' confidence in weak economies around the region.

 

"We need to move on this in the next couple of weeks. It's not a case of waiting until late August or early September as Germany is saying. That's too late and markets will make us pay for it," a top euro zone official told Reuters on Saturday.

 

German officials insist they too want to put together the second Greek bailout as quickly as possible, but the private sector's contribution is proving to be a major sticking point.

 

Germany, the Netherlands, Austria and Finland are determined that banks, insurers and other private holders of Greek government bonds should bear some of the costs of helping Athens. But more than two weeks of negotiations with bankers represented by the Institute of International Finance (IIF), a lobby group, have made next to no progress on agreeing a formula acceptable to all sides.

 

Initially talks focused on a complex French plan for private creditors to roll over up to 30 billion euros of Greek debt, buying new bonds as their existing ones matured. Around half of proceeds from Greek bonds maturing before the end of 2014 would be rolled over into very long-term debt while 20 percent would be put into a "guarantee fund" of AAA-rated securities.

 

But as that plan has floundered, Berlin has revived a proposal to swap Greek bonds for longer-dated debt that would extend maturities by seven years. Proposals to buy back Greek bonds and retire them have also been floated.

 

In a buy-back, the euro zone's bailout fund, the European Financial Stability Facility, might buy Greek bonds from the market, or the EFSF might lend Greece money to buy bonds. However, these schemes would require further changes to the EFSF's rules and would therefore have to go through national parliaments, an official source said.

[EmpireGlobalfx]

Global stocks, euro fall on Italy debt contagion woes

 

World stocks hit one-week lows and the euro slid across the board on Monday as intensifying concerns that Italy could be the next victim of the euro zone debt crisis prompted an emergency meeting of top European officials.

 

Fresh signs of tension in Italy's government and problems for Economy Minister Giulio Tremonti -- trusted by financial markets to cut spending -- prompted a sell-off in the country's government bonds. Italy has the euro zone's highest sovereign debt ratio relative to its economy after Greece.

 

A weaker-than-expected U.S. jobs report on Friday and data showing China's import growth fell to its slowest pace in 20 months also encouraged investors to sell their risky assets.

 

"Investor sentiment is on the back foot this morning. Nobody knows where this is going to stop and when the next domino will fall," said Jeremy Batstone-Carr, strategist at Charles Stanley.

 

"Italy is in a different order of magnitude from Greece, Portugal and Ireland and takes the crisis to a whole new level."

 

The MSCI world equity index .MIWD00000PUS fell 0.7 percent to a one-week low.

 

European stocks markets/index?symbol=gb%21FTPP">.FTEU3 fell 0.7 percent while emerging stocks .MSCIEF lost 1 percent. U.S. stock futures fell almost 1 percent, pointing to a weaker open on Wall Street later.

 

The Euro STOXX 50 volatility index .V2TX rose 7.9 percent, its highest in nearly two weeks.

 

JP Morgan says Italian banks are vulnerable because of their high reliance on wholesale funding. Their loan-to-deposit ratio stands at 1.42 -- higher than that of Spanish banks and above the average of 0.9 for French and German banks.

 

Moreover, their government bond holdings stand at 6.33 percent of assets, higher than those of Spanish banks.

 

"The higher the market pressure on BTPs, the lower the appetite of Italian banks to sponsor their domestic government bond market for fear of raising their sensitivity to the sovereign even further," the bank said in a note to clients.

 

Bund futures rose 50 ticks. The Italian/German 10-year yield spread widened by 14 basis points to 258 bps, as BTP futures tumbled more than 100 ticks to 103.29.

 

Herman Van Rompuy, the president of the European Council, will meet European Central Bank President Jean-Claude Trichet and Jean-Claude Juncker, the chairman of the Eurogroup, ahead of a meeting of the 17 euro zone finance ministers later.

 

"Concerns over Italy show contagion risks in the euro zone are increasing. Investor confidence remains low and will limit demand for euro denominated assets," said Manuel Oliveri, currency analyst at UBS in Zurich.

 

The dollar .DXY rose 0.7 percent against a basket of major currencies. The euro extended earlier losses to lose 0.7 percent on the day to $1.4113.

 

A Financial Times report saying some EU leaders were considering allowing a selective default by Athens to put its debt on a more sustainable footing also dented the single currency, traders said.

 

Data last Friday showed U.S. jobs growth nearly halted in June, adding to concerns about the health of the world's biggest economy.

 

The dismal jobs report was also seen complicating efforts to avert a looming U.S. debt default. President Barack Obama and congressional leaders of both parties were in high-stakes talks to break the impasse over raising the debt ceiling.

[EmpireGlobalfx]

Gold kept steady by euro worries while dollar rises

 

Gold steadied on Monday, having risen for five days in a row, supported by investor concerns over the spread of the euro zone debt crisis, although gains were tempered by the dollar's strength.

 

The euro fell 1 percent against the dollar, which hit two-week highs against a basket of currencies .DXY, as European Union officials held an emergency meeting to discuss whether the troubles that have plagued Greece, Portugal and Ireland could spread to Italy.

 

Italian bonds and stocks tumbled, while perceived safe-haven instruments such as German Bunds and the Swiss franc gained, along with euro-denominated gold, which hit record highs above 1,091 euros ($1,583) an ounce.

 

Friday's U.S. non-farm payrolls data, which showed job creation had virtually ground to a halt, dampened hopes that the world's largest economy would bounce back from its slowdown in the first half of this year and helped gold stage a 3.9 percent weekly rise in its best week since November 2009.

 

Spot gold rose to a 2-1/2-week high of $1,547.56, before trading at $1,543.96 an ounce, unchanged on the day, at 1100 GMT. U.S. gold August futures were up 0.2 percent at $1,544.70 an ounce.

 

"There's some lingering reaction to the poor U.S. jobs data ... but this morning has mostly been about Europe and this emergency meeting called today to discuss Italy," said Credit Suisse analyst Tom Kendall.

 

"As this European crisis develops further, you would expect to see, and we are already seeing, people coming into gold on the physical side, not necessarily through ETFs but through other avenues, and you will see some defensive positioning from investors on the institutional side," he said.

 

Euro-priced gold rose to an all-time high of 1,095.02 euros an ounce earlier in the day.

[EmpireGlobalfx]

Obama increases pressure on Republicans on debt

 

President Barack Obama on Monday increased pressure on Republican lawmakers to make concessions for a deal to avoid an August 2 debt default and said both sides must "pull off the Band-aid" and make sacrifices.

 

"If not now, when?" Obama said as he prepared to meet top U.S. lawmakers at 2 p.m. EDT, searching for a way to break a budget impasse that is holding up a vote on raising the $14.3 trillion debt ceiling.

 

The Treasury Department has warned it will run out of money to cover the country's bills if Congress does not raise the debt limit by August 2.

 

Failure to act could push the United States back into recession, send shock waves through global markets and threaten the dollar's reserve status.

 

The lack of progress in debt talks was cited as a factor for a more than 1 percent decline in U.S. stocks on Monday.

 

"The closer we get to the deadline, the more problematic it becomes," said Walter Todd, who helps manage $950 million at Greenwood Capital in Greenwood, South Carolina.

 

Obama used the latest in a series of White House news conferences to urge lawmakers on both sides to stop putting off the inevitable and agree to tax increases and cuts in popular entitlement programs, trying to persuade Americans he is the grownup in a bitter summer battle over spending and taxes.

 

"What I've said to the leaders is, bring back to me some ideas that you think can get the necessary number of votes in the House and in the Senate. I'm happy to consider all options, all alternatives that they're looking at," Obama said.

 

Republicans are adamantly opposed to raising taxes while Obama's Democrats are equally determined to protect Social Security, Medicare and Medicaid, the sacred cow pension and healthcare programs for the poor and elderly.

[EmpireGlobalfx]

Euro sinks to record low vs Swiss franc as debt concerns spread

 

The euro was beaten down further in Asia on Tuesday, plunging to a record low versus the Swiss franc and sinking to a four-month trough against the dollar on growing concerns that the euro zone's sovereign debt crisis was spreading.

 

The single currency fell as low as $1.3932 -- its lowest since March 17 -- after a slew of stop-loss orders were triggered below $1.3980. The euro fell broadly, dropping to an all-time low of 1.1660 Swiss franc.

 

The euro was on the defensive as an emergency meeting by European financial officials failed to offer fresh measures to tackle the region's debt problems, dealers said.

 

Market participants were especially concerned about the debt of countries such as Spain and Italy, which came under strong selling pressure the day before.

 

"The market has become particularly concerned due to the sell-off in Italian bonds. A steep widening of the spread between Italian and German bonds is making the market worried," said Osamu Takashima, chief forex strategist at Citibank in Tokyo.

 

"The market was to a certain extent expecting the problems in Greece to spread to Spain, but this drastic move in Italian bonds was very surprising."

 

The spread on the 10-year Italian bond yield over that of German bonds widened to above 300 basis points the previous day from about 180 bps at the start of the month.

 

The euro was trading at 1.1690 Swiss francs, down 0.3 percent from the day before.

 

Against the yen, the euro was down 0.6 percent at 111.86 after falling as far as 111.67 -- the lowest since March 18.

 

Against the dollar, the single currency dropped 0.5 percent to $1.3962.

 

Support is seen around $1.3905/10, a 50 percent retracement of the January-May rally as well as the 200-day moving average.

 

Weakness in the euro helped push the dollar up against a basket of major currencies. The dollar index .DXY climbed as high as 76.370 -- its highest since April 1.

 

"I feel that the euro zone debt situation particularly deteriorated after Portugal was downgraded to junk status last week. The market again started to focus on the debt problem as being a problem for the whole region," said Kimihiko Tomita, head of foreign exchange at State Street and Trust.

 

"The fact that the euro broke decisively below $1.4 is significant. The most recent selling appears to be a bit too rapid, but the market could test the euro further in the short term given current sentiment," Tomita said.

 

In a bid to stop financial contagion engulfing Italy and Spain, officials promised to provide cheaper loans, longer maturities and a more flexible rescue fund to help Greece and other EU debtors.

 

They declined to rule out the possibility of a selective default by Greece, a move officials said bolstered Germany's push to involve investors in easing Greece's debt despite the concerns of the European Central Bank.

 

European Union finance ministers meet later on Tuesday and are under the cosh to soothe market nerves ahead of Thursday's Italian bond auctions. Italy is aiming to raise 7.75 billion euros in the debt market, according to estimates from Barclays Capital.

[EmpireGlobalfx]

Latest House debt plan may lead to compromise

 

The latest Republican plan to avert a looming U.S. default is a fierce statement of conservative principles that pushes the party's negotiating position farther to the right.

 

That's why it may be the first step on the road to compromise.

 

By giving Tea Party conservatives in the House of Representatives a chance to take their favored legislation as far as it will go, House Speaker John Boehner may buy himself some needed goodwill from a vocal segment of his party that has sometimes viewed his deal-making efforts with suspicion.

 

That could make it easier for Boehner to eventually pass legislation that could be acceptable to President Barack Obama and the Democratic-controlled Senate, clearing the way for an increase in the debt ceiling before August 2 when the federal government faces a default on its financial obligations.

 

Even as Boehner touted his party's latest plan at a news conference on Friday, he left open the possibility that the House may take up a compromise being shaped in the Senate that so far has failed to catch on with junior lawmakers.

 

"The cut, cap and balance plan that the House will vote on next week is a solid plan for moving forward. Let's get through that vote, and then we'll make decisions about what will come after," he said at a news conference.

 

The cut, cap and balance bill conditions a debt-limit increase on passage of a constitutional amendment that would require the federal government to balance its books each year.

 

Constitutional amendments require a two-thirds vote. That's not likely in the Democratic-controlled Senate, and may even be a stretch in the House.

 

Even if it were to pass Congress, the amendment would not take effect until at least 38 of the 50 state legislatures ratify it.

 

Economists say a balanced-budget requirement would tie the federal government's hands during a recession, when tax revenues plummet and welfare costs rise, by forcing it to slash spending or raise taxes.

 

"That would make a recession worse," said Dan Seiver, a professor of finance at San Diego State. "It's exactly the opposite of what intelligent fiscal policy should do."

 

SMART POLITICS

 

But it's smart politics. Polls show that the public, and especially Republican voters, favor a balanced-budget requirement by wide margins.

 

"This is a vote where ... the House Republican majority gets to align itself with the American public at large," said Kevin Madden, a Republican strategist and former Boehner spokesman.

 

Some Democrats have lined up behind a balanced-budget amendment, but few are expected to back the Republican version, which also limits spending to 18 percent of gross domestic product and requires a two-thirds vote for tax increases.

 

The House is expected to vote on the cut, cap and balance plan on Tuesday, but has not yet set a vote for the balanced-budget amendment.

 

The Senate could vote on several balanced-budget amendments next week, a Democratic aide said. All are expected to fail.

 

That would clear the way for a so-called "Plan B" introduced last week by Senate Republican Leader Mitch McConnell, which would essentially pin the onus for a debt-ceiling increase on Obama and his Democrats.

 

Senate Democratic Leader Harry Reid is currently working with McConnell to make the plan more palatable to his party.

 

Democrats want to include about $1.5 trillion in spending cuts, including military cuts, along with a payroll tax-cut extension to boost the economy and an agreement on funding levels for the coming two fiscal years to avoid further budget showdowns, aides said.

 

The plan would also include a special deficit-reduction committee, made up of equal numbers of Republicans and Democrats, that would examine more sensitive budget topics like taxes and benefits. The panel would be guaranteed a vote on its findings, due by the end of the year.

 

House Republicans and outside conservative groups have been cool or hostile to the plan so far. While McConnell hopes to win control of the Senate in the 2012 elections by embarrassing Democrats, House Republicans are focused on delivering the deep spending cuts they promised voters last fall.

 

They might warm to McConnell's plan if they are allowed input on the spending cuts, as a Democratic aide suggests.

 

The failure of cut, cap and balance, coupled with an increasingly frantic lobbying campaign by business allies, could soften their opposition as August 2 approaches.

 

A sharp drop in the markets could change minds as well.

 

"What may look like something less than optimal today, if we're unable to get to an agreement might look pretty good a couple of weeks from now," Boehner said at a news conference on Thursday. "I think it's an option that may be worthy at some point."