July 26th, 2010 07:25:57 GMT

ECB: E61.119 Bln Covered Bond Purchases Settled Jul 25


FRANKFURT (MNI) – The European Central Bank said Monday that a
total of E61.119 billion Eurosystem covered bond purchases had settled
as of July 25.

As of July 22, settled acquisitions had totaled E61.117 billion,
the ECB said Friday.

The program is aimed at revitalizing a market segment that has been
exceptionally hard hit by the financial turmoil.

–Frankfurt Bureau tel.: +49-69-720 142, email: frankfurt@marketnews.com

[TOPICS: MT$$$$,M$$EC$,M$$FI$,M$X$$$,MGX$$$]

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July 26th, 2010 06:17:43 GMT

Eurostoxx 50 futures up 0.9% early


DAX futures up 0.6% cac 40 futures up 0.9%

Despite the generally rather negative (sceptical) media coverage of Friday’s European bank stress tests, EUR/USD holding up pretty well in early Euroipean trade. Presently at 1.2935.

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July 26th, 2010 05:35:28 GMT

Rpt: ECB Constancio: EU Tests Severe, Rigorous, Comprehensive


BRUSSELS (MNI) – European Central Bank Vice President Vitor
Constancio Friday rejected suggestions that stress tests of European
Union banks had not been stringent enough.

Earlier Friday, the Committee of European Banking Supervisors said
7 of 91 banks tested had failed the tests and needed a total of E3.5
billion in additional capital. Some market participants have criticised
the tests, saying they need to price in European sovereign debt

The stress tests are “severe, rigorous and very comprehensive,”
Constancio told reporters at a press conference after the release of the

“They show the resilience of the EU banking sector and the tests
themselves are a big contribution to financial stability in the EU,” he

“We have not included a default of any country,” he admitted.

“We have not done that, because we don’t believe their will be a

But he said each of the 91 banks had revealed, during the course of
the exercise, its exposure to the sovereign debt of each EU country,
much more information than had been disclosed before.

“I think that the these stress tests are the more extensive and the
more severe that have been conducted in industrial countries,” he said.

And he pointed out that Europe’s tests come after some of the banks
tested had already increased their capital ratios, in response to the
economic crisis which began in 2008.

“Governments since 2008, have injected more than E200 billion (in
to the banking sector), so the test comes after that,” he said. It is
important, he said to take in to account “the starting points and what
has already been done,” before comparing to other stress tests.

“The starting point was not the starting point that has been
characterised by many commentators,” he said, “if you want to criticise
the tests, you must criticise the assumptions, not the results,” the
Vice President said.

–Brussels: 0032 487 (0) 32 803 665; email: echarlton@marketnews.com;

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

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July 26th, 2010 05:35:27 GMT

Rpt: CEBS: 7 Of 91 EU Banks Failed To Pass Stress Tests


–Adds Quotes, Detail To Version Transmitted At 1714 GMT
–ECB Vice President Says Tests Were Severe, Rigorous
–ECB To Continue To Provide Unlimited Liquidity If Needed

BRUSSELS (MNI) – Seven European banks failed tests to prove they
could weather a mild recession or bout of severe market turbulence and
as a result need to raise more capital, the Committee of European
Banking Supervisors (CEBS), said on Friday.

Five Spanish banks, one German bank and one Greek bank didn’t meet
the requirements of the tests, CEBS said, in an exercise designed to
shore up investor confidence in the EU banking sector, by proving that
most of the regions banks had enough capital to withstand future shocks.
In total, they need E3.5 billion in additional capital to meet the
minimum 6% tier one capital ratio that the tests required, CEBS said.

The stress tests are “severe, rigorous and very comprehensive,”
European Central Bank Vice President Vitor Constancio told reporters at
a press conference after the release of the results.

“They show the resilience of the EU banking sector and the tests
themselves are a big contribution to financial stability in the EU,” he

Constancio said the European Central Bank would continue to provide
“unlimited liquidity” to Europe’s banks, if they needed it, as has been
its policy throughout the financial crisis.

In total, the EU tested 91 of its banks, constituting 65% of all
banking assets.

Spain’s Espiga, Diada, Banca Civica, Cajasur and Unnim failed the
tests, along with Germany’s Hypo Real Estate and Greece’s ATEbank.

Those banks should “take the necessary steps to reinforce their
capital positions through private-sector means and by resorting, if
necessary, to facilities set up by Member State governments, in full
compliance with EU state-aid rules,” the Committee of European Banking
Supervisors, the European Central Bank and the European Commission said
in a joint statement.

In a joint statement, the CEBS, the ECB and the European
Commission, said they welcomed the level of disclosure that EU banks had
agreed to provide.

“Such disclosures ensure transparency regarding conditions in the
EU banking sector,” the statement said.

“The adverse scenarios used in the stress test are designed as
‘what-if’ scenarios reflecting severe assumptions which are therefore
not very likely to materialise in practice,” the statement said.

“Accordingly, the results of the test confirm the overall
resilience of the EU banking system to negative macroeconomic and
financial shocks, and are an important step forward in restoring market
confidence,” it concluded.

Europe’s policymakers hope that the publication of these results
will have the same effect as similar ones carried out in the US last
year, which prompted 10 banks to raise additional capital and were
widely credited with giving the sector a much-needed boost.

But investors may want more evidence that EU banks have been tested
stringently enough.

Analysts were skeptical of the decision of the treatment of banks’
sovereign debt holdings, with the stress test haircuts only applied to
the banks’ trading books and not its bank books.

Gary Jenkins at Evolution Securities said “the majority of these
(sovereign) bonds are held on the banking books” adding the favourable
approach to sovereign debt is “consistent with the EU’s comments that no
EU sovereign will be allowed to fail.”

“We have not included a default of any country,” ECB’s Constancio
admitted. “We have not done that, because we don’t believe there will be
a default.”

He said each of the 91 banks had revealed, during the course of the
exercise, its exposure to the sovereign debt of each EU country, much
more information than had been disclosed before.

“The information is there if the market wants,” he said. “You must
criticise the assumptions of the tests, not the results.”

Europe’s policymakers say it is unfair to compare the EU and US
stress tests because the US tested its banks before they’d raised any
capital, whereas the European tests come after many banks have increased
their capital ratios by taking government funding or raising capital in
the markets.

“I think that the these stress tests are the most extensive and the
most severe that have been conducted in industrial countries,”
Constancio said.

–Brussels: 0032 487 (0) 32 803 665, echarlton@marketnews.com

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

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July 26th, 2010 05:11:46 GMT

S.Korean fx authorities seen buying dollars to curb won’s strength – Dealers


At some juncture would expect the Koreans to turn a portion of those dollars into euros.

EUR/USD sits at 1.2925, hardly changed from North American close Friday around 1.2915.

Buy orders noted down at 1.2850/70, sell orders at 1.2950 and more up around 1.3000. Talk of some stops through 1.2970.

No major euro zone economic data releases today.

EDIT:  Size of Korean intervention said to have been not overly large.

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July 26th, 2010 05:04:04 GMT

Japan “Your Party” head: Monetary easing, weak yen, aggressive fiscal policy needed to beat deflation


USD/JPY has traded very marginally firmer during the Asian session, presently at 87.60 from North American close Friday around 87.35.  The rally is proving tough sledding for the yen bears as they battle through reported sell orders layered from 87.50 up to 88.00. Probably stops gathered just above 88.00, but I don’t have confirmation of such. But there is talk of sizeable stops through 88.50.

Guys overnight mentioned sizeable stops above 113.50 in EUR/JPY. These getting tripped would no doubt ease the tough sledding in USD/JPY.


July 26th, 2010 04:23:55 GMT

ForexLive Asian Session Wrap – Option Plays The Likely Catalyst for the next Euro move up


  • Sterling sentiment starting to turn
  • Japan’s June trade balance +41.1% YoY; Japanese exports rose more than expected in June from a year earlier but the pace of increase slowed for the fourth straight month, a sign the economic recovery may lose steam on moderating overseas demand
  • UK economy: July house prices -0.1% MoM
  • EUR related news will be watched later in Europe; reports that some euro banks didn’t fully divulge details of sovreign debt; and the German EconMin’s increase in GDP forecast from 1.4% to 2% 
  • Australian PPI rose 0.3% Q/Q 1.0 % Y/Y – a softer number than expected; if CPI follows suit later then rates likely to be left on hold
  • Japanese FinMin Noda and Spokesman Sengoku reported on reuters; further rhetoric and acknowledgement that reform needs to go ahead, cuts need to be made, economy is a mess and the yen strength isn’t helping
  • More of the Asian growth story – this time Korea – South Korean Economy Expanded Faster-Than-Estimated 1.5% in Second Quarter
  • Vince Cable in the UK urging the banks to ‘get lending’ to businesses to assist productivity, stimulate the economy
  • Wall Street Journal warns what we already expect the potential problem to be : European Banking’s Next Focus Is Funding

The stress test results from friday were received with a large amount of skepticism which led to a soft opening in Asia with a sell off in risk; this was short-lived as the market has reacted to strength in the EUR brought about by option plays and the attraction to test important levels particularly in EUR/JPY at 113.50.

For most of the session the ranges have been quiet although trading has erred with a  risk-on tone following firm equities in Asia.

EUR/USD trades 1.2930 (range 1.2878/1.2943); EUR/JPY met selling just below the key level of 113.50 (range 112.59/113.47) but has remained well bid during the last few hours.

USD/JPY, CABLE & USD/CHF have had an unevenful session currently trading 87.66, 1.5463 and 1.0535 with narrow ranges; CABLE’s strength from friday is underpinning the sterling crosses.

AUD/USD ranged 89.27/82 and came off the upper range some 20 pips with the soft PPI as did AUD/JPY ( range 78.04/73) ; currently 0.8957 and 78.53 respectively; Australian CPI on wednesday will confirm whether or not the RBA are likely to move on rates – unlikely if CPI follows the PPI result. 0.9000 has barrier interest on the topside with stops above

Nikkei has lost some of it’s early gains as we open after lunch, up 0.8% on the day; GOLD 1193.3 and OIL 79.13

I expect the European session challenge will be to test the resolve of the selling interest in EUR/JPY – beware large stops above 113.50 and 114.00

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