July 13th, 2010 11:35:22 GMT

Text: US NFIB Survey – June Optimism Index -3.2 to 89.0

by

WASHINGTON (MNI) – The following is the text of the National
Federal of Independent Business’ monthly Small Business Optimism index,
published Tuesday:

Small Business Optimism Declines in June

WASHINGTON, July 13, 2010 – The National Federation of Independent
Business Index of Small Business Optimism lost 3.2 points in June
falling to 89.0 after posting modest gains for several months*. The
Index has been below 93 every month since January 2008 (30 months), and
below 90 for 23 of those months, all readings typical of a weak or
recession-mired economy. Seventy percent of the decline this month
resulted from deterioration in the outlook for business conditions and
expected real sales gains. Owners have no confidence that economic
policies will fix the economy.

“The U.S. economy faces hurricane force headwinds and the
government is at the center of the storm, making an economic recovery
very difficult,” said William Dunkelberg, NFIB’s chief economist.

Optimism Components Net % Change
PLAN TO INCREASE EMPLOYMENT 1 0
PLAN TO INCREASE CAP. OUTLAYS* 19 -1
PLAN TO INCREASE INVENTORIES -3 -5
EXPECT ECONOMY TO IMPROVE -6 -14
EXPECT HIGHER REAL SALES -5 -10
CURRENT INVENTORY SATISFACTION -1 -1
CURRENT JOB OPENINGS* 9 0
EXPECTED CREDIT CONDITIONS -13 -1
NOW A GOOD TIME TO EXPAND* 6 1
EARNINGS TRENDS -32 -4

*Note: These components are measured as actual percentages of all
respondents and are not net percentages. A net percentage is the
percent positive minus percent negative.

Employment

Average employment growth per firm turned negative in April of 2007
and has remained negative for 10 of the 12 following quarterly readings
ending with a negative .18 in April (seasonally adjusted). May and
June show no reversal in the bad news, posting average declines of
negative .48 and negative .28 workers per firm respectively.

In June, 9 percent (seasonally adjusted) reported unfilled job
openings, unchanged from May and historically very weak. Over the next
three months, 8 percent plan to reduce employment (up one point), and 10
percent plan to create new jobs (down four points), yielding a
seasonally adjusted net 1 percent of owners planning to create new jobs,
unchanged from the May reading and positive for the second time in 20
months.

Capital Spending and Outlook

The frequency of reported capital outlays over the past six months
was unchanged at 46 percent of all firms, two points above the 35-year
record low (reached most recently in December 2009). Of those making
capital expenditures, 30 percent reported spending on new equipment
(down two points), 15 percent acquired vehicles (down two points), and
11 percent improved or expanded facilities (unchanged). Four percent
acquired new buildings or land for expansion (down one point), and 9
percent spent money for new fixtures and furniture (down one point).

The percent of owners planning to make capital expenditures over
the next few months fell one point to 19 percent, 3 points above the 35
year record low. Six percent characterized the current period as a good
time to expand facilities, up 1 point. But a net negative 6 percent
expect business conditions to improve over the next six months, down 14
points from May.

“Owners do not trust the economic policies in place or proposed,
and they are distressed by global and national developments that make
the future more uncertain,” said Dunkelberg.

Sales and Inventories

The net percent of all owners (seasonally adjusted) reporting
higher nominal sales in the past three months lost four points, falling
to a net-negative 15 percent, 19 points better than June 2009, but still
far more firms are reporting negative sales trends quarter-to-quarter
than positive. The net percent of owners expecting real sales gains
lost 10 points, falling to a net-negative 5 percent of all owners
(seasonally adjusted).

“Hiring and capital spending depend on expectations for growth in
future sales, so the outlook for improved spending and hiring is not
good,” said Dunkelberg.

Small business owners continued to liquidate inventories and weak
sales trends gave little reason to order new stock. A net-negative 21
percent of all owners reported gains in inventories (more firms cut
stocks than added to them, seasonally adjusted), one point worse than
May. Plans to add to inventories declined five points to net-negative 3
percent of all firms (seasonally adjusted).

Inflation

The weak economy continued to put downward pressure on prices.
Thirteen percent of owners (down one point) reported raising average
selling prices, and 27 percent reported average price reductions (down
one point). Seasonally adjusted, the net percent of owners raising
prices was a negative 13 percent, a two point increase in the net
percent raising prices. June is the 19th consecutive month in which
more owners reported cutting average selling prices rather than raising
them. Plans to raise prices fell three points to a seasonally adjusted
net 11 percent of owners.

Earnings

A net-negative 32 percent of small business owners reported
positive profit trends, three points worse than in June and 28 points
worse than the best expansion reading reached in 2005. The persistence
of this imbalance is bad news for the small business community. Profits
are important for the support of capital spending and expansion.

Owners continued to hold the line on compensation, with 8 percent
reporting reduced worker compensation, and 13 percent reporting gains.
Seasonally adjusted, a net 4 percent reported raising worker
compensation, only six points better than February’s record low reading
of net-negative 2 percent.

“In past recovery periods, compensation improved at a much faster
pace than we have experienced in this recovery period,” said Dunkelberg.

Credit

Regular NFIB borrowers (29 percent accessing capital markets at
least once a quarter, a survey record low) continued to report
difficulties in arranging credit. A net 13 percent reported loans
harder to get than in their last attempt, unchanged from May. Overall,
90 percent of the owners reported all their credit needs met (or they
did not want to borrow).

“The small business sector is not on a positive trajectory and with
this half of the private sector missing-in-action, the economy’s poor
growth performance is no surprise,” said Dunkelberg. “Small business
owners are not happy about the future of the economy being painted by
the administration or economic events. Confidence is lacking and the
news out of Washington is discouraging. Until this changes, don’t expect
small businesses to start hiring.”

*The survey was conducted through June 30 and represents 805 small
business owner respondents.

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

[TOPICS: M$$CR$,MAUDS$,M$U$$$]

July 13th, 2010 11:30:01 GMT

European Morning Wrap: Bit livelier than Monday, thank goodness

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Things hummed along this morning, action picking up from Monday’s dull fare.

EUR/USD sits at 1.2580, little changed from early 1.2590, but inbetween we’ve seen a solid recovery from session low 1.2523.  EUR/USD had already given a little ground when news broke that Moody’s had downgraded Portugal.  EUR/USD sitting around 1.2560 quickly saw stops through 1.2540 tripped on the way to the low.

BIS came in buying around the lows providing support and then a successful Greek t-bill auction provided the fuel for recovery.  A disappointing German ZEW survey seemed to be largely ignored.

USD/JPY down at 88.25 from early 88.60.  Talk of sell orders layered from 88.70 up to 89.10.  Reports interest to buy yen for Mizuho share offering.

Cable up nicely. Presently at 1.5085 from early 1.5025, having been as high as 1.5117 at one stage.  Slightly stronger than expected CPI and house price data provided some support.  UK clearer notable seller above 1.5100.

EUR/GBP  down at .8338 from early .8378, having been as low as .8315 at one stage.  Big US bank seen notable buyer at low.

July 13th, 2010 11:15:44 GMT

ECB Drains E60 Bn In 1-Week Term Deposit Tender, As Intended

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FRANKFURT (MNI) – The European Central Bank Tuesday drained E60
billion from the banking system in a one-week liquidity-absorbing
operation intended to sterilize the ECB’s purchases of Eurozone
government bonds.

The amount drained matched the total volume of government bonds
purchased by the ECB and settled as of last Friday. It was the ninth
consecutive weekly term deposit tender since the ECB announced in May
that it would buy bonds to shore up sovereign debt markets.

The drained amount compares with E59 billion drained last week.
This week’s targeted total means that an additional E1 billion worth of
bonds were purchased and settled in the last week.

85 banks placed bids totaling E98.288 billion today, or 1.6 times
the ECB’s desired volume. This compares to a ratio of 1.5 last week.

The weighted average allotment rate for today’s operation was
0.56%, matching last week’s operation, the ECB said. The lowest rate was
0.31%. The highest rate accepted, or the marginal rate, was 0.65%.

The drained liquidity takes the form of fixed-term deposits. These
can be used as collateral in the Eurosystem’s refinancing operations.

There will be another liquidity-draining operation next week, the
ECB said Monday.

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

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

July 13th, 2010 11:05:39 GMT

EU Fin Mins Give Finland, Cyprus Deficit Correction Deadlines

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BRUSSELS (MNI) – European Union finance ministers Tuesday gave
Finland until 2011 to bring its budget deficit below 3% of its gross
domestic product, and they gave Cyprus until 2012 to do the same, EU
diplomats said.

The ministers adopted the decisions, which are based on
recommendations from the European Commission, at their regular meeting
here in Brussels.

EU rules require all of the bloc’s 27 member states to keep their
budget deficits below 3% of their gross domestic product.

Non-Eurozone members Bulgaria and Denmark were also given deadlines
— Bulgaria for 2011 and Denmark for 2013.

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

[TOPICS: MT$$$$,M$$FX$,M$$EC$,M$X$$$,M$$CR$,MGX$$$]3

July 13th, 2010 10:33:11 GMT

EUR/GBP rebounds, cable slips back

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EUR/GBP back up at .8343 from session low .8315.  Sources report a big US bank came in scooping up the cross from the lows.

Cable slipping lower, presently at 1.5080 from session high 1.5117, with Uk clearer seen notable seller above 1.5100.

July 13th, 2010 10:05:39 GMT

Caja Madrid Passes Eurex Repo Stringent Membership Criteria

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— Eurex, Caja Madrid Move Helps Allay Stringency Test Fears

LONDON (MNI) – Caja Madrid earlier this month became the first
Spanish institution to join Eurex Repo and also Eurex Clearing, passing
its stringent membership criteria, Market News International
understands.

The fact a Spanish counterparty has been accepted into Eurex Repo
is likely to help soothe market fears ahead of the EU’s banking sector
stress-test results, which are due to be published on July 23. To date,
Spanish institutions have been regarded as amongst the most vulnerable
to financial turmoil arising from the credit squeeze on European banks.

To the fore are market concerns that some institutions in the
Spanish banking sector may be hiding losses on property loans and also
losses in various government bond holdings. For Caja Madrid, these
concerns surfaced back in May when it said that it was going to miss
E1.12 million in interest payments on residential mortgage-backed
securities (RMBS), due to soaring defaults on the underlying home loans.

Caja de Ahorros y Monte de Piedad de Madrid or “Caja Madrid”, one
of Spain’s leading savings banks, becomes a “Direct Clearing Member”
(DCM) of Eurex Repo, the trading platform and central (clearing)
counterparty for fixed income assets. The membership also allows Caja
Madrid to act as a intermediary with other domestic companies so that
they can finance their Spanish Treasury Debt positions, something it
could not do that until now.

The move will certainly help allay market fears over Caja Madrid’s
financial health. In order to become a DCM, it was necessary for the
bank to pass several criteria, both in terms of the size of its balance
sheet and operating capacity. In addition, it also has to provide a
“clearing fund contribution” as laid down by the clearing house and
regulators.

According to Eurex, it has “some very rigorous risk systems in the
calculation of margins and collaterals that each member must deposit, in
order to cover any type of bankruptcy that a company, which uses the
clearing house can suffer”. Currently, the capital requirement for a DCM
is E17.5 million, with a clearing contribution of a minimum E1.0
million, a Eurex spokesman said.

Caja Madrid, is currently in the process of creating a large
financial group with Bancaja, by taking over five smaller cajas, and
once this is done it will become Spain’s third-largest bank, behind
Banco Santander and BBVA, with E340 billion in assets.

Underlining the scale of the potential risks from holding eurozone
government debt, analysts estimate total exposure of banks in the four
most troubled eurozone countries at more than E200 billion. This figure
far exceeds the ECB’s current bond purchase scheme, which currently
stand at some E60 billion.

A total of 91 European banks are currently being “stress-tested”,
representing 65% of the EU banking sector. However, there is already
some skepticism in the market about whether the tests will be tough
enough to offer reassurance to markets.

However, the advantage Caja Madrid has, is that its membership to
Eurex Repo may temper market fears of any potential counterparty risks,
one of the downsides of a less-than-glowing report from the stress
tests, as membership guarantees payments between parties and offers
members financing in better market conditions.

According to Caja Madrid, its membership of Eurex Repo offers
advantages to the Spanish market overall, as it allows them to
act as an intermediary with other domestic companies, so that they can
easier finance their Spanish Treasury positions.

But, there will obviously be no formal ties to Eurex for the other
Spanish institutions conducting client business through Caja Madrid.

Even this, Caja Madrid says, is a step forward, as no Spanish
intermediary has been able to offer this service before.

Eurex is one of Europe’s leading derivatives exchanges, with 235
member companies and is part of the Deutsche Boerse Group. Market News
International is a wholly owned subsidiary of Deutsche Boerse AG.

–London newsroom: 00 44 20 7862 7494; email: nshamim@marketnews.com

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

July 13th, 2010 09:55:22 GMT

BOE Allots Stg 5.0 bn In 3-Mo L/T Repo; Cover 1.28

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LONDON (MNI) – The Bank of England alloted Stg 5.0 billion in
3-month money, covered 1.28 times at its long-term repo.

3-Month Repo 14/10/10

Amount on Offer: Stg 5000 mln
Total Bids recieved: Stg 6400 mln
Amount allotted: Stg 5000 mln
Cover ratio: 1.2
Stop Out Rate (1) 25bps 25bps

Collateral Set Summary 2 Narrow wide

Total Bids recieved: Stg 4850 mln 1560 mln
Amount allotted: Stg 4162 mln 862 mln
Cover ratio: 0.97 0.31
Pecenatge alloted 82.76 17.24
Stop Out Rate 91) 25bps 1 bps 26bps

— London newsroom: 00 44 20 7634 1655; e-mail: nshamim@marketnews.com

[TOPICS: M$B$$$,M$BDS$,M$$FI$,MT$$$$,M$$BE$]

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