September 14th, 2010 17:37:04 GMT

Pimco puts odds of double dip at 25%, Morgan Stanley lower

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Pimco’s ElErian sees a 25% chance the US slips into a double dip recession while Morgan Stanley’s Dick Berner sees the odds as lower than that , Berner expects structural headwinds to slow the US rebound but cyclical supports like strong global growth helping prevent a second dip.Both are appearing on CNBC.

September 14th, 2010 17:34:02 GMT

Markets settling down into consolidations

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Looks like we may have a quiet two hours or so with perhaps a bit of a pick-up just before Wall Street closes for the day.

EUR/USD has been as high as 1.3034 this afternoon but we’ve now settled down and are consolidating a bit. 1.3050 remains an important level near-term, the 61.8% retracement of the 1.3334/1.2588 decline.

USD/JPY spent only a brief time below the 83.00 level after triggering stops as low as 82.92 in New York this morning. Even though Kan remains in power (and is seen as less likely to employ intervention than his rival Ozawa), traders are reluctant to set fresh shorts for fear of BOJ/MOF intervention…

AUD/USD has had an epic performance today, overcoming very strong resistance in the 0.9390/0.9410 area. That area should contain dips near-term while 0.9475 exotic options could attract price action in the sessions ahead unless the RBA snaps to attention.

Cable is near the top of recent ranges after rallying as high as 1.5588. 1.6000/20 is solid resistance and stops are surely perched just above those levels.  It trades now at 1.5578 as it consolidates.

September 14th, 2010 16:45:35 GMT

US Senate Votes To End Debate On Small Business Lending Bill

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–Senate Votes 61 to 37 To End Floor Debate
–Senate Rejects Two Tax Compliance Amendments
–House Expected To Pass Senate Version of Bill Later This Fall

By John Shaw

WASHINGTON (MNI) – The Senate voted Tuesday to end debate on a
small business lending bill that has been stalled since the summer.

The Senate voted 61 to 37 to end debate on the bill. A vote on
final passage of the bill is expected later this week. House Democratic
leaders have indicated they will pass the Senate version of the bill
soon.

President Obama has been pressing the Senate for weeks to pass the
bill and has blamed Senate Republicans for blocking a bill that would
help generate jobs in the small business sector.

The bill creates a $30 billion lending fund for small businesses
and also includes about $12 billion in tax cuts.

The Senate rejected two tax compliance amendments that relate to a
provision in the health care law that would require small businesses to
file a 1099 tax report for every vendor transaction valued at $600 or
more.

Republican senator Mike Johans offered an amendment that would have
repealed this provision which is scheduled to take effect in 2012. This
amendment was defeated 46 to 52. Sixty votes were required for passage.

Democratic senator Bill Nelson offered an amendment to modify the
requirement by exempting businesses with fewer than 25 employees and
increasing the $600 reporting threshold to $5,000. It would have
exempted payments made by credit card and give Treasury more leeway in
implementing the requirement. It also required 60 votes but only secured
56.

Senate Majority Leader Harry Reid said Tuesday the small business
bill is “important legislation” that should be passed “very
expeditiously.”

He said it would help create between 500,000 and 750,000.

** Market News International Washington Bureau: (202) 371-2121 **

[TOPICS: M$U$$$,MFU$$$,MCU$$$]

September 14th, 2010 16:35:20 GMT

ECB Update: ECB Assures Basel III Won’t Hurt Slowing Recovery

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FRANKFURT (MNI) – European Central Bank Governing Council members
have assured that stricter capital requirements for banks under the new
Basel III accord will not undermine the slowing Eurozone recovery.

Still, tougher rules will pose a major challenge for the Eurozone’s
ailing banking system, whose problems remain the ECB’s biggest headache.

Following the decision of central bankers and heads of supervision
from the 27 member countries to more than triple banks’ required core
tier 1 capital ratios to 7% by 2019, ECB President Jean-Claude Trichet
said that “the transition arrangements will enable banks to meet the new
standards while supporting the economic recovery.”

Other ECB Governing Council members, including Mario Draghi, Erkki
Liikanen and Miguel Angel Fernandez Ordonez, also said tougher capital
rules will not undermine the recovery, given the protracted phase-in
period.

It is “a strong agreement which, in making the system more
resilient, will ensure a sustained recovery,” said Draghi, who also
heads the Financial Stability Board.

The assurances appear all the more important as the latest Eurozone
economic data have surprised on the downside, confirming expectations of
a slowing recovery. Industrial production stagnated in July. As a
result, the annual gain slowed to 7.1%, the smallest rise since
February.

ZEW’s barometer for the future of the Eurozone’s largest economy
also disappointed in September. ZEW indicator of economic sentiment in
Germany plunged 18.3 points to -4.3, its lowest level since February and
57.3 points below the recent peak in April. The index fell more sharply
than even the most pessimistic forecasters had imagined.

While these data should still be in line with the ECB’s base
scenario and Monday’s European Commission forecast for 0.5% GDP growth
in 3Q slowing to 0.3% in 4Q, they will no doubt add to concerns over the
economic developments in a cooling global economic environment.

And private bankers continue to warn that new Basel rules will
weaken banks’ ability to lend and might thereby hamper the recovery of
the real economy.

New rules “will have consequences on the volume and cost of
lending and therefore a cost on our economy too,” European Banking
Federation Secretary General Guido Ravoet warned. He also said that the
tougher rules could put European’s ability to access credit at a
disadvantage as in Europe 75% of the lending to the private sector is
carried out by banks, against only 25% in the US.

Perhaps more importantly, new regulation also poses a significant
challenge to the ailing European banking system.

Achieving the new capital standards will require “hundreds of
billions,” estimated Governing Council member Nout Wellink, who heads
the Basel Committee on Banking Supervision. “I hesitate a bit to mention
numbers because it concerns a very long phase-in period that will take
about eight years and numbers will change over time.”

Raising fresh capital will be particularly hard for banks in the
periphery that, according to data released Tuesday, remain very much
dependent on the ECB for cash and have held up the central bank’s exit
from non-conventional support measures.

Overall borrowing from Greece, Ireland, Portugal and Spain fell by
E15 billion in August but continued to rise as a share of overall
Eurosystem lending to around 60% — more than three times their share of
Eurozone GDP.

Spanish banks decreased their reliance on the central bank to E126
billion from E140 billion in July. Nevertheless, this still
significantly exceeded the E91 billion borrowed in April before concerns
over the country’s banking system erupted.

Borrowing from Greek and Portuguese banks remained largely
unchanged in August at E95.9 billion after E96.2 billion and E49.1
billion after E48.8 billion, respectively. Irish banks’ ECB borrowing,
on the other hand, rose notably to E95.1 billion from E89.5 billion in
July, hitting the highest level since January.

While hawkish Council members Axel Weber and Yves Mersch suggested
that the central bank might announce a further unwinding of
non-conventional support measures in December, the stubborn dependency
of peripheral banks on ECB funding raises questions over the central
bank’s ability to withdraw support.

Potential spillover effects of a liquidity shortage in the
periphery’s banking system on the sovereign debt worries have thus far
deterred the central bank from pushing ahead with its exit, even as
overall money market conditions have continued to recover.

With the Basel III accord, life for banks in the periphery has
become more difficult and unless an alternative solution is found, the
ECB might have to continue providing generous liquidity well into next
year. This is especially true as long as the debt worries, which forced
the ECB to step up its bond purchase last week to the highest level
since mid-August at E237 million, persist.

–Frankfurt newsroom +49 69 72 01 42; Email: jtreeck@marketnews.com

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

September 14th, 2010 16:18:00 GMT

AUD/USD rally puts exotic options in play

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AUD/USD continues on a tear, reaching 0.9445 so far. We are picking up talk that the exotic we mentioned earlier today is at 0.9475 and is a one-touch, meaning the market must trade at 0.9475 for the owner of the option to collect $25 mln. Lots of incentive to ramp this thing higher and lots of incentive from the bank that is short the option to defend that level.

September 14th, 2010 15:58:22 GMT

EUR/USD near highs as Europe squares

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Several times in the last week we’ve seemed to hit our range-extremes just as Europe heads out the door at 16:00 GMT. Let’s see of we get a replay today with EUR/US at 1.3010.

Traders report selling from a smaller Middle Eastern central bank near these levels. Often, these guys are like the pilot fish that follow the larger shark…

September 14th, 2010 15:49:41 GMT

Goldman says no change in view

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As some have already noted, Goldman says that today’s conference call reiterated its view that the Fed will do something like $1 trln in further QE in November or December. There have been no changes, the firm says…

Sometimes “news” just catches the market at a vulnerable point and sets off an avalanche. Today looks to be one of those day with the market short EUR/USD intraday on the poor ZEW data and on the potential for a double top at the 1.2910/20 level…That level is now solid support…

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