August 19th, 2010 10:06:28 GMT

CBI: Aug Total Orders Highest Since Aug 2008

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–UK CBI Monthly trends: Aug Total Orders -14 vs -16 in Jul
–UK Total Orders Book Least Negative Since Aug 2008
–UK CBI ind. trends: Aug output volume +10 vs +6 in Jul
–UK CBI ind. trends: Aug average prices +11 vs +5 in Jul
–UK CBI ind. trends: Aug export orders -1 vs -12 in Jul
–UK CBI Aug Stocks Lowest Since Jun 2007

London (MNI) – The UK’s manufacturing sector saw an improvement in
output volumes in Augus, and manufacturers expect prices to rise in the
coming months, according to CBI’s monthly industrial trends survey.

The total orders balance rose to -14 in August from -16 in July,
its least negative outturn since August 2008. Export orders played a key
role in the improvement, with the export balance climbing to -1 from
-12.

The output volume balance rose to 10 from 6 in July.

–London bureau: 44 20 7862 7491; email: drobinson@marketnews.com

[TOPICS: M$B$$$,M$BDS$,MT$$$$,MABDS$]

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August 19th, 2010 10:06:19 GMT

BBK: German Banks To Lend More, Keep Core Capital Ratios Unch

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FRANKFURT (MNI) – German banks are likely to step up credit
provisions and keep core capital ratios unchanged over the next twelve
months, the Bundesbank said in its Monthly Report on Thursday.

According to a survey conducted by the central bank in July, German
banks expect rising credit volumes over the coming year, citing better
economic developments and rising demand.

The pick-up in credit will likely be primarily driven by rising
loans to small and medium-sized companies, the report said. In line with
this projection, “on average, smaller banks surveyed appeared somewhat
more optimistic in their assessment of credit developments ahead,” the
report said.

“According to results of the current survey, core capital ratios
will remain unchanged over the next twelve months, with large banks on
average expressing some more pessimism than small banks,” the Bundesbank
said.

Rating downgrades for structured products and debt instruments
should have the most severe negative effect on core capital ratios,
while balance sheet contraction and profit retention should drive up
core capital, the report said.

Some banks will have to raise core capital ratios as regulatory
authorities plan to introduce more stringent capital and liquidity
requirements ahead. Precise ratios required under new rules have not yet
been published.

New Basel III rules will likely tighten lending and reduce
investment during a transition period, Basel and the Financial Stability
Board said on Wednesday. However, the regulators said that the effect
should be temporary.

–Frankfurt bureau; +49-69-720142; frankfurt@marketnews.com

[TOPICS: M$$EC$,MGX$$$,MT$$$$,M$$CR$,M$G$$$,M$X$$$]

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August 19th, 2010 10:06:00 GMT

BBK: Bailout For EMU States Contravenes National Sovereignty

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FRANKFURT (MNI) – Automatic bailout mechanisms for EMU member
states would jeopardize the budget sovereignty of individual
governments, the Bundesbank asserted Thursday.

Rather than risk the moral hazard of creating a guarantee of
EMU-wide support for governments facing insolvency, political
determination is called for to enforce and strengthen EMU budget rules,
the German central bank said in its Monthly Report.

The no-bailout clause of existing EU treaties has already been
“weakened” by measures to support individual countries, it noted.

The hard-line position lends support to the German government’s
efforts to include an orderly default mechanism in any more permanent
European financial stability facility.

Since the EU Stability Pact rules were not respected in the past,
the framework for enforcement must be strengthened, the Bundesbank
argued.

Basic agreement among member states “appears to exist” on the need
to pay greater attention to debt levels and give more importance to the
preventative aspects of the Pact, it observed. The common goal is also
to enhance budget surveillance.

“Further efforts at crisis prevention should aim to reenforce
fiscal policy incentives at the national level,” it argued.

“Responsibility for other countries’ debts (Haftungsuebername) or
automatic, institutionalized support at the European level is not in
line with national sovereignty in the fiscal policy domain,” the
Bundesbank declared.

Without the political determination to respect and enforce the
Stability Pact, “all efforts at reform will be useless,” it warned.

–Paris newsroom +331 4271 5540; e-mail: stephen@marketnews.com

[TOPICS: MT$$$$,M$G$$$,M$$EC$,M$X$$$,MFX$$$,MGX$$$]

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August 19th, 2010 10:05:42 GMT

BBK: Signs Global Economy Cooling; Prospects Remain Favorable

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FRANKFURT (MNI) – The outlook for the global economy in the coming
months remains positive, although risks from financial market tensions
remain, the Bundesbank said Thursday.

For the second half of this year “prospects remain favorable,
despite signals for somewhat slower growth of global production and
international trade,” the German central bank said in its Monthly
Report.

Some emerging economies, which had shown signs of “overheating”
during a “tempestuous expansion phase”, have already shifted to more
moderate growth trajectories, it noted.

“This is particularly true for China, where credit conditions for
business and households have been tightened significantly,” it said. “In
the US and Japan growth is clearly slowing as well from the quite robust
pace” of previous months.

At the same time, the pick-up in demand for German capital goods
exports speaks for “growing optimism about future prospects,” it said.

While the Eurozone economy has continued to recover, there is still
considerable slack, “uncertainties on financial markets persist, and
money supply and lending trends remain overall sluggish,” the Bundesbank
noted.

These subdued Eurozone money supply and lending trends show that
there are “no marked risks for price stability,” it said.

Noting the stronger fluctuation of overnight rates after the
expiration of the ECB’s 12-month tender in July, the German central bank
argued that rising money market rates reflected improving market
conditions and should not be interpreted as “a monetary policy signal”
– echoing the view of the ECB Governing Council.

–Paris newsroom +331 4271 5540; e-mail: stephen@marketnews.com

[TOPICS: MT$$$$,M$G$$$,M$$EC$,M$X$$$,MI$$$$]

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August 19th, 2010 10:05:27 GMT

BBK: Germany Must Not Relax Consolidation As Growth Picks Up

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FRANKFURT (MNI) – Germany’s public deficit should remain well below
5% of GDP this year and could fall to 4% next year, thereby increasing
the chances that the 3% ceiling can be respected by 2012, the Bundesbank
said Thursday.

However, stronger than expected economic growth must not serve as a
pretext for relaxing budget consolidation efforts, and more concrete
measures are needed to bring public finances into balance by 2016, the
German central bank said in its Monthly Report.

Indeed, since consumption and wages will lag overall economic
growth, the stronger activity this year will have only limited impact on
the deficit, which will widen from last year’s 3.1% as a result of
declining revenues and expansive fiscal policy, it said.

Nevertheless, the deficit “should come in lower than initially
feared and remain well below 5%. The debt ratio, which had already risen
sharply to over 73% of GDP last year, will continue to mount.”

As stimulus measures are unwound next year, economic conditions and
spending cuts should roll back the deficit to 4%, it said. “The
additional consolidation measures announced in June could reinforce the
decline. However, the debt ratio should rise further as a result of the
still high deficit.”

While the 3% deficit threshold could be attained by 2012, the state
of public finances will remain worse that before the crisis and the goal
of budget balance still “far” away, it reminded.

The central bank welcomed the recent savings measures and the
government’s “clear commitment” to fiscal consolidation. “What is
important now is to avoid the cardinal error of past years” — namely to
take positive economic surprises as an excuse to dilute
deficit-reduction plans, it said.

Instead, improved economic prospects should be used “to reach
deficit targets earlier.”

In order to balance the books by 2016, further policy action will
be needed, the Bundesbank stressed, noting that spending will have to be
cut further and there is “practically no leeway” in meeting debt
targets. Stronger growth this year will have little impact other than
lowering the starting point for the reduction of the structural deficit,
it said.

The federal states will also have to reduce their “high structural
deficits” in the coming years in order to assure that overall finances
return to balance by 2016, it reminded.

–Paris newsroom +331 4271 5540; e-mail: stephen@marketnews.com

[TOPICS: MT$$$$,M$G$$$,M$$EC$,M$X$$$,MFX$$$,MGX$$$]

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August 19th, 2010 10:05:14 GMT

BBK: Germany’s Growth To Slow In 2H; 2010 GDP Gain Around 3%

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FRANKFURT (MNI) – The strong second quarter and ongoing growth over
the rest of this year should help the Germany economy to grow by 3% in
2010, the Bundesbank said in its Monthly Report released Thursday.

The new projection marks a sharp upward revision from the previous
1.9% forecast issued in June and follows a much stronger than expected
GDP rise of 2.2% in the second quarter and an upwardly revised first
quarter result (+0.5% after +0.1%).

Although weaker global growth is likely to slow the export-lead
recovery in the months ahead, the central bank expects the domestic
upswing to be increasingly self-sustaining.

In face of wide criticism that Germany’s export-driven growth model
does nothing to help weaker Eurozone countries out of the recession and
will instead contribute to imbalances in the region, the central bank
pointed out that other euro area states very much benefit from Germany’s
strong rebound.

“The economic upward trend should continue in the second half of
the year,” the Bundesbank predicted. “After the extraordinary spring,
the rate of growth should normalize,” as export demand is likely to slow
amid weaker global growth.

The Bundesbank said that growth rates in southern and eastern Asian
countries should be less dynamic in the months ahead, while the growth
outlook for industrial countries is “moderate”. This echoes observations
from the European Central Bank, which said there could be some
moderation in global growth particularly in emerging markets.

At the same time, increasing demand for German investment goods —
outpacing basic goods exports for the first time in the second quarter
– reflects growing optimism among Germany’s key trading partners, the
central bank noted.

Along with weaker export growth, the strong impulse to domestic
activity from the construction sector in the second quarter is likely to
wane as the positive effects from a catch-up after the exceptionally
cold winter and government stimuli peter out, the report said.

Nevertheless, the central bank said that domestic activity should
be able to pick up some of the slack from weakening exports, given
“signs that the economic recovery in Germany is increasingly
self-sustaining.” The recent pick-up in investment goods demand and
private consumption already bear this out, the Bundesbank said.

The report said that the recovery in domestic industry “should have
continued into the second half. Looking ahead, industrial investment
activity should gain momentum due to urgent maintenance needs and needed
updating of product lines. Rising corporate optimism also point to a
pick-up in investment, the Bundesbank added.

In light of the high capacity underutilization in many sectors, it
is still likely to take some time before domestic investment activity
returns to normal levels, the Bundesbank cautioned.

As firms opt to invest, credit availability should not pose a
constraint, the central bank said. “Neither surveys among banks nor
surveys among companies point to risks of a credit crunch in Germany.”

Private consumption, which has only recently returned to positive
growth, should also play a more supportive role in the months ahead, the
Bundesbank said, citing the ongoing recovery in the labor market.

Following criticism that Germany is not doing enough to help its
Eurozone neighbours by stimulating domestic demand, the central bank
pointed out that the export-lead recovery had resulted in positive
growth impulses of European neighbours.

“With a view to trade with EMU countries, it stands out that during
the first two quarters of 2010, imports to Germany rose twice as fast as
exports from German companies to the region,” it said.

“European partner countries thus benefit substantially from the
strong growth rates of the German economy, that are primarily driven by
exports to external markets.”

Industrial production has recovered on a broad basis, reflected in
the 5.2% surge in 2Q manufacturing output, it said. While consumption
goods production rose only slightly, basic goods posted a sharp 6.9%
gain and investment goods were up 5.5%. Stronger industrial activity
also helped the services sector as demand from industry rose, the report
said.

Meanwhile, private consumption should have been positive in the
second quarter after declining in the previous three quarters.
Construction rose by 16.1%, driven mainly by one-off effects from public
stimulus and catch-up effects after a cold winter.

–Frankfurt bureau; +49-69-720142; frankfurt@marketnews.com

[TOPICS: M$$EC$,MGX$$$,MT$$$$,M$$CR$,M$G$$$,M$X$$$]

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August 19th, 2010 10:05:13 GMT

UK CBI: Aug Monthly Industrial Trends Survey

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LONDON (MNI) – The following data were released Thursday as part
of the monthly industrial trends survey by the Confederation of British
Industry. Figures are percentage balances.

Aug10 Jul10 Jun10 May10 Apr10

Total order book -14 -16 -23 -18 -36
Export order book -1 -12 -2 3 -16
Volume of output (next 3m) 10 6 15 17 14
Average prices (next 3m) 11 5 9 14 16
Stocks Relative To Demand 1 3 11 10 10

[TOPICS: MABDT$,MABDS$]

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August 19th, 2010 09:16:27 GMT

EUR/USD: In well travelled 1.2750/1.2900 range

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Asian central bank bids starting at 1.2770 were enough to dissuade an uncommitted market from trying further downside and the EUR/USD has now started to bounce back towards its opening level of the day at 1.2850. Until this pair breaks beyond either 1.2735 or 1.2935, the next move will be hard to pick. Definitely one for the range-traders at the moment.

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