October 5th, 2010 09:45:27 GMT.

EU Comm Report: EMU Banks Still Hampered By Lack Of Liquidity

by

BRUSSELS (MNI) – The position of the Eurozone’s banking sector has
improved but is still hampered by a lack of liquidity and difficulties
in obtaining wholesale funding, the European Commission said in its
quarterly report published on Tuesday.

“Some improvements have…been visible in the euro area banking
sector, where July’s stress tests have helped to assuage balance sheet
concerns,” the report said.

“However, problems related to a lack of liquidity and difficulties
in tapping wholesale funding have not disappeared altogether,” it added.

The European Commission said that the developments in the Eurozone
economy have been “generally positive.”

“Looking further ahead, however, risks remain elevated, and the
recovery can be expected to be fairly uneven and relatively moderate,”
it said.

“One important aspect of the short-term outlook is the likely
unevenness of the upswing to come,” the Commission noted.

“At the heart of this divergence of growth lie the accumulated
macroeconomic imbalances in some member states,” it continued. “The
rebalancing process will take time and be associated with a period of
divergence in growth within the euro area.”

The Commission said that more work is needed on rebalancing prices
and competitiveness levels within the Eurozone to aid current account
adjustment in the 16-nation currency bloc.

“So far, there have been only a few signs of rebalancing of prices
and competitiveness across the euro area and further efforts are clearly
needed here,” the report said.

It asserted that correcting current account deficits “generally
entails a period of sluggish growth and rising unemployment” but that
this could be mitigated if prices and wages were adjusted and
competitiveness improved.

“For the member states facing large current account adjustments,
these findings underscore the urgent need for wage moderation and gains
in competitiveness and, more generally, for reforms aimed at increasing
the flexibility of the economy,” the report said.

On Greece, the report noted that “important steps forward have
already been made with the structural reform agenda.”

“To curb its external deficit, Greece will have to boost its export
sector,” it said.

And it said that “encouraging signs for a rebalancing of supply
towards the export sector exist,” because a high proportion of companies
are involved in export activity.

“This suggests that the important competitiveness-boosting reforms
foreseen in Greece’s economic adjustment programme are likely to pay off
all the more quickly,” the report said.

The report said that corporate balance sheet adjustment might
hamper the recovery because it could result in lower investment rates
and labour compensation.

“It is therefore crucial to counteract these dampening forces on
growth by frontloading growth-enhancing reforms,” it concluded.

In a separate section, the report said that real house prices in
the Eurozone “have decreased significantly since the beginning of the
global economic and financial crisis” and are closer to their
“equilibrium values” than in the US or in the UK.

“This comparatively healthier position of the housing market in the
euro area as a whole is good news for a future recovery in housing
investment and private consumption,” the report said.

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

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

2010-10-05T09:45:27+0000

October 5th, 2010 09:35:23 GMT.

ECB Allots E197.049 Bln In 7-Day Funds At Fixed Rate Of 1.0%

by

FRANKFURT (MNI) – The European Central Bank on Tuesday allotted
E197.0491 billion in its main seven-day refinancing operation at a fixed
rate of 1.0%.

The ECB satisfied all of the 148 bids received.

Today’s operation resulted in a net addition of E30.6881 billion
after the ECB allotted E166.361 billion in its 7-day MRO last week.

–Frankfurt bureau. Tel: +49-69-720-142. Email: frankfurt@marketnews.com

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

2010-10-05T09:35:23+0000

October 5th, 2010 09:15:29 GMT.

Analysis: EMU August Retail Sales Unexpectedly Fall Back M/M

by

Real, seasonally and workday-adjusted retail sales:

August: -0.4% m/m, +0.6% y/y

MNI survey median: +0.2% m/m
MNI survey range: -0.2% to +0.3% m/m

July: +0.1% m/m (unrevised)
June: +0.3% m/m (revised from +0.2%)
May: +0.5% m/m (unrevised)
April: -0.9% m/m (unrevised)
March: +0.7% m/m (revised from +0.8%)

FRANKFURT (MNI) – Eurozone retail trade volumes fell in August
faster than even the most pessimistic forecasts had suggested, with a
decline in food, drink and tobacco sales more than offsetting a rebound
in non-food turnover, Eurostat reported on Tuesday.

On the month, retail sales slipped 0.4% in August, undoing the
modest gains from both July and June. Sales rose 0.6% on the year.

Food, drink and tobacco sales contracted 0.7% m/m, leaving annual
turnover at -1.1%. In contrast, non-food sales rebounded 0.3% after
July’s one-time dip for a +2.5% annual gain.

While a further breakdown for August is not available,
disaggregating July’s non-food sales sub-index showed broad gains on the
month, led by a 4.5% jump in textiles, clothing and footwear sales, and
a 3.0% m/m rise in pharmaceuticals.

Markit Economics’ Eurozone retail purchasing managers index slipped
to 48.7 in September, reflecting an additional decline on the month.
According to the PMI report, the slide was broad-based, with respondents
from Germany, France and Italy highlighting lower turnover.

However, the slides in both Germany and France were marginal, while
Italy’s decline was the second smallest in eight months. Furthermore,
taking the third quarter as a whole, German retail turnover was the
strongest seen since late 2006, leaving the Eurozone PMI for the quarter
at its highest since 2Q 2007.

“Overall, the Eurozone retail data still point to a sharper q/q
rise in consumer spending in Q3,” Markit senior economist Trevor Balchin
said.

In the second quarter, private consumption gained 0.5% compared to
1Q and contributed 0.3 percentage point to overall growth, while
household jobless fears continued to weaken, falling below the long-run
average to their lowest level in over two years, the European Commission
noted.

However, unemployment is still at record highs; global demand is
expected to slow as the economic recovery loses steam; wage growth is
subdued; and fiscal austerity measures are expected to begin biting.
These factors may well induce households to delay unnecessary purchases,
thus hampering retail turnover in the short-term.

Despite the reported decline in sales in September, retail
sentiment continued to strengthen last month, boosted by a brighter
current situation and expectations that reached their most optimistic
level in over two years, according to the Commission.

French retail sales fell 0.8% on the month in August, partially
undoing July’s notable gain, to more than halve the annual increase to
+3.1 from July’s +6.4% figure.

After hitting a trough in June, consumer sentiment in France has
steadily improved, reaching a five-month high in September, the national
statistics agency INSEE reported. However, the indicator and most of its
components remain well below the norm, including major purchase
intentions, which have been below the long-run average since November
2007.

Still, with purchasing power likely to strengthen in the second
half of this year, wage growth expected to outpace inflation and job
creation continuing, consumption growth should pick up modestly in both
3Q and 4Q, a recent INSEE report suggested. Currently, the statistics
office has penciled in an increase in private consumption of 0.4% in the
third quarter and +0.5% in the last three months of 2010.

Retail sales in Germany fell by a further 0.2% on the month in
August (+2.1% y/y), suggesting that a falling jobless rate, improving
consumer confidence and higher propensity to buy has not yet translated
into actual consumption.

German retailers polled by Markit reported a further contraction in
sales in September, representing “another setback for the German economy
during September,” Markit economist Tim Moore said. However, optimism
for October, measured in the same report, hit its highest level since
February 2008, with job growth in the retail sector seen at a three-year
high.

While retail sales data for Italy is not currently available,
ISAE’s latest sentiment survey showed a rebound in consumer morale in
September, with the personal economic climate sub-indicator recovering
to its highest level since February.

Still, Markit’s retail PMI for Italy slipped to 46.0 points last
month, pointing to “a significant slowdown in consumer spending during
the third quarter of 2010,” the PMI report read.

Turnover in the Spanish retail sector managed a strong 1.1% rebound
between July and August to give a -4.6% annual figure, despite the VAT
increase that had come into effect one month before.

Nevertheless, consumer morale in Spain dropped in September, as
worsening job prospects and personal finances undid most of the
improvements seen in both July and August, the Official Credit Institute
(ICO) reported. With unemployment at a record high and growing,
consumers are likely to limit their spending to essential items, which
should soon be reflected in retail turnover.

— Frankfurt bureau: +49 69 720 142; e-mail: frankfurt@marketnews.com —

[TOPICS: M$X$$$,M$XDS$,MT$$$$]

2010-10-05T09:15:29+0000

October 5th, 2010 09:15:28 GMT.

Update: UK Sep CIPS Services Picks Up But Q3 Growth Weak

by

–Adds Detail, Quotes To Version Transmitted At 0844 GMT
–UK Sep CIPS Manufacturing PMI 52.8 Vs 51.3 In Aug – Markit/Reuters

LONDON (MNI) – The pace of growth in UK service sector picked up
unexpectedly in September, but Q3 growth was at its lowest level since
the second quarter of 2009, the latest Markit/Chartered Institute of
Purchasing and Supply survey, published by Reuters, showed.

The PMI services activity index rose to 52.8 in September from 51.3
in August, well above analysts’ median forecast for a 51.0 outturn and
reversing the run of three monthly declines in the rate of services
growth.

The Markit/CIPS report, however, highlighted the weakness of
service sector growth, with the data supporting the view Q3 GDP growth
is likely to be well below Q2 growth, with CIPS Q3 services growth at
its lowest level for a year and a quarter.

Chris Williamson, chief economist at Market, highlighted the
further slowing in new business growth, which has fallen back to close
to the 50 contraction/expansion level.

The rate of new business growth was the weakest for 15 months.

“Of greatest concern, new business growth slowed closer to
stagnation and confidence for the year ahead remained at a level only
reached at times of extreme stress. Unless trends in new business show
an improvement soon, the lack of confidence is consistent with a
downturn in business activity in the coming months,” Williamson said.

Employment in the services sector stabilized in September,
following the sharpest fall for 10 months seen in August.

The survey found evidence of pipeline inflation pressures. Input
costs hit a four-month high, driven up in part by higher utility bills,
but output prices were little changed, showing a squeeze on margins.

Vicky Redwood, at Capital Economics, said the CIPS data suggested
Q3 UK quarterly GDP growth could fall to around 0.4% from 1.2% in Q2.

Other analysts also expressed concern about the slower underlying
pace of growth.

“An upside surprise on the PMI services is heartening, particularly
after the previous three months of falls. However activity is still
subdued, and this does not detract from the evidence that a marked
slowdown in the economy is underway,” Hetal Mehta at Daiwa Capital
Markets said.

–London newsroom 0044 207 862 7491; email:drobinson@marketnews.com

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

2010-10-05T09:15:28+0000

October 5th, 2010 09:05:30 GMT.

EMU DATA: Retail sales in the Eurozone fell 0.4% on..

by

EMU DATA: Retail sales in the Eurozone fell 0.4% on the month in August,
leaving the annual change at +0.6%, Eurostat reported on Tuesday.
— EMU August retail sales m/m below MNI median fcast (+0.2%)
— EMU July retail sales unrev +0.1% m/m
— EMU July & August avg retail sales +0.2% vs 2q avg; 2q +0.1% q/q
— For more information, please see Mainwire

2010-10-05T09:05:30+0000
2010-10-05T09:03:46+0000
2010-10-05T09:00:50+0000

October 5th, 2010 08:55:17 GMT.

UK Sep CIPS Services Picks Up; Q3 Growth Weakest Since Q2 ’09

by

–UK Sep CIPS Manufacturing PMI 52.8 Vs 51.3 In Aug – Markit/Reuters

LONDON (MNI) – The pace of growth in UK service sector picked up
unexpectedly in September, but Q3 growth was at its lowest level since
the second quarter of 2009, the latest Markit/Chartered Institute of
Purchasing and Supply survey, published by Reuters, showed.

The PMI services activity index rose to 52.8 in September from 51.3
in August, well above analysts’ median forecast for a 51.0 outturn and
reversing the run of three monthly declines in the rate of services
growth.

The Markit/CIPS report, however, highlighted the weakness of
service sector growth, with the data supporting the view Q3 GDP growth
is likely to be well below Q2 growth, with CIPS Q3 services growth at
its lowest level for a year and a quarter.

Chris Williamson, chief economist at Market, highlighted the
further slowing in new business growth, which has fallen back to close
the 50 contraction/expansion level.

“Of greatest concern, new business growth slowed closer to
stagnation and confidence for the year ahead remained at a level only
reached at times of extreme stress. Unless trends in new business show
an improvement soon, the lack of confidence is consistent with a
downturn in business activity in the coming months,” Williamson said.

–London newsroom 0044 207 862 7491; email:drobinson@marketnews.com

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

2010-10-05T08:55:17+0000

October 5th, 2010 08:55:17 GMT.

BBK Zeitler: Financial Crisis Not Over Yet; Markets Fragile

by

BERLIN (MNI) – German Bundesbank Vice President Franz-Christoph
Zeitler warned Tuesday that the crisis in financial markets is not yet
over and it will take more time for confidence to return.

“Despite the unexpectedly quick recovery of the real economy in
Germany, the financial crisis is not by any means over yet,” Zeitler
said according to a draft of a speech to be delivered at a conference
in Berlin today.

“Financial markets remain fragile,” the Bundesbank Vice President
observed. Even smaller tensions or sometimes only rumors lead to
significant market reactions, he remarked.

“This shows that it will still take some time until the basic
confidence in the resilience of markets and market participants
returns,” Zeitler argued.

Thus, improving international financial regulations remains a key
duty, he stressed.

–Berlin bureau: +49-30-22 62 05 80; email: twidder@marketnews.com

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

2010-10-05T08:55:17+0000
2010-10-05T08:37:21+0000
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