Good Morning Ladies & Gentlemen,
Attention focused this week on Europe and their attempts to introduce new taxes on financial transactions.
Germany and France are pressing ahead with their plan for a tax on financial transactions in the European Union by raising the issue for discussion at the bloc's next meeting of finance ministers early next week.
In a letter to the Belgian EU presidency, Wolfgang Schäuble, German finance minister, and his French counterpart Christine Lagarde asked for "an informal discussion" at Tuesday's session of the EU's Ecofin council.
Germany and France will jointly make proposals for discussion in order to carry forward a European solution," the ministers said in the letter, seen by the Finanical Times, and called the tax "both feasible and necessary".
The letter marks the start of what looks set to be a controversial discussion among EU members - as they seek to implement EU-wide bank levies and tougher regulation of banks and banker bonuses.
In parallel to national efforts, EU countries have asked the European Commission to consider the feasibility of introducing such a tax in Europe and to make suggestions of its own as to how one could be implemented.
The initiative comes three weeks after the EU's driving duo failed to get a global agreement about a transaction tax at the G20 summit in Toronto - both countries at the time promised a European initiative instead. By raising the issue at the Ecofin council, these two countries are signaling that the tax remains a priority.
German officials concede that the fate of the tax lies largely in the hands of the UK government, which is expected to protect the interests of the City of London as Europe's premier financial centre.
But officials also note that David Cameron, prime minister, has shown himself more open towards the European Union than many had expected - and that he has a big budget deficit, which new taxes could help plug.
However, Britain remains opposed to the idea of a transaction tax, arguing that it wants to operate within the framework set out by the International Monetary Fund for the taxation of banks.
The UK has already implemented the IMF's suggested levy on bank balance sheets and a Treasury spokesman said: "We are also interested in the idea of a tax on excess profits and remuneration."
In spite of the uncertainty of implementation at European level, Berlin has already budgeted €6bn revenues from the tax in its four-year, €80bn budget-consolidation package, which was agreed by the cabinet this week.
Mr Schäuble this week tried to play down London's hold over the tax - or parts of his budget - by saying the 16-member Eurozone should consider introducing it if the 27-member European Union failed to agree on the tax.
But other policymakers have already questioned such a move. Ewald Nowotny, a member of the European Central Bank's governing council, said a transaction tax would only work in Europe if London was included.
Elsewhere this week, the US declined to name China as a currency manipulator in a politically sensitive report on Thursday, citing Beijing's loosening of the RMB peg in June as "a significant development".
The report had been delayed from April as part of a process of quiet diplomacy to encourage China to allow some flexibility in the exchange rate.
The RMB, which was allowed to float upwards by 21% between July 2005 and July 2008, was then repegged in response to the financial crisis. Beijing said on June 19 it would permit some movement but did not commit itself to a target.
Tim Geithner, Treasury secretary, said: "What matters is how far and how fast the RMB appreciates."
Mr Geithner, who has been criticised by some lawmakers for failing to push Beijing hard enough, said: "We will closely and regularly monitor the appreciation of the RMB ... in close consultation with Congress."
Key lawmakers said that China would have to allow faster appreciation of the RMB then previously. Sander Levin, chairman of the House ways and means committee, said: "This is a first step, but clearly only that."
Members of Congress have threatened legislation to restrict Chinese imports on the grounds that the currency is undervalued and preventing US companies from competing.
"We must monitor China's progress but also give serious consideration to all options in the event, as was the case in 2005-08, that China fails to take the additional necessary steps," Mr Levin said.
Naming a government a manipulator, which involves a complex set of criteria, carries no sanctions except a commitment to start negotiations, which in the case of the US and China have been under way for years.
Meanwhile, the International Monetary Fund said on Thursday the US economy had rebounded faster than expected but faced the threat of contagion from sovereign debt problems in Europe.
In an advance summary of its annual health check of the US economy, the IMF said: "While still modest by historical standards, the recovery has proved stronger than we had earlier expected, owing much to the authorities' strong and effective macro-economic response."
The release of the report was accompanied by good news on the economy, which contrasts with a run of recent disappointing data. The number of Americans filing for jobless claims last week fell more than expected, offering some measure of comfort that the recovery in the labour market is advancing, albeit slowly.
But the IMF warned that, along with risks of renewed weakness in the US housing market, international events of recent months had introduced risks to the recovery.
All interesting stuff and I am beginning to wonder whether the IMF have lost the plot!
On to the numbers for the week that was: |
| US Markets
How the US did this week ..... | |
 US stocks were up for the fourth straight day on Friday as the "risk on" trade returned to the market ahead of Monday's earnings season kick-off.
At the close on Friday, the S&P 500 was up 0.1% to 1,071.73, and 4.8% higher on the week.
The Dow Jones Industrial Average was flat at 10,143, and rose 4.7% during the week.
The Nasdaq Composite advanced 0.3% to 2,180.89, leaving it 4.3% higher on the week.
The Vix index, a measure of market volatility, fell 16.2% to 25.23 during the week.
Retail stocks were some of the week's worst performers, following Thursday's mixed retail sales data.
Gap was down 4.8% over the week to $18.54 after its June same-store sales disappointed on Thursday.
TJX Companies, which operates several chains that sell discount apparel and home furnishings, dropped 2.1% to $41.48 over the week as its same-store sales also missed consensus estimates.
Family Dollar Stores suffered a 6.5% weekly loss to $36.10 after the discount retailer forecast fiscal year-end profit of up to $2.58 per share, below the average $2.59 estimate forecast by analysts.
Best Buy, a leading consumer electronics retailer, lost 1.1% on Friday to $34.01 as the stock was cut to "hold" from "buy" by Jefferies, which cited concerns about continued softness in consumer electronic sales.
"While Best Buy shares look cheap, they may stay cheap as we think sales trends may be eroding further from first-quarter levels," the brokerage said.
Madison Square Garden, owner of the New York Knicks basketball team, dropped 3.6% on Friday to $19.64 following an announcement by LeBron James, the most valuable player in the National Basketball Association for the past two seasons, that he will join the Miami Heat. Shares in Madison Square Garden had surged on Wednesday on rumours that he would sign with the Knicks.
US-listed shares in BP surged 12.8% during the week to $33.12 as speculation mounted on whether it was looking for an equity injection from a sovereign wealth fund. The company said work was progressing on its relief well to stem the oil leak in the Gulf of Mexico.
Google was up 1.5% to $463.17 on Friday as its operating licence in China was renewed.
The internet company has been at loggerheads with the Chinese government since its announcement in January that it would stop self-censoring the searches on its Chinese website.
Visa advanced 2.1% on Friday to $76.63 as the stock was added to Goldman Sachs' "conviction buy" list.
Separately, the world's biggest payments network passed a US antitrust review of its announced acquisition of CyberSource, which provides electronic payment services.
Rival MasterCard was up 0.7% to $211.21.
Time Warner also advanced on Friday, climbing 0.9% to $29.86 as the full-year earnings estimates for the media company were raised at Credit Suisse and added to its "US focus" list.
Full-year earnings per share for the current year were increased to $2.24 from $2.23, and to $2.63 from $2.56 for next year. |
| European Markets
What has been happening in Europe this week ..... | |
 European markets rose on Friday for a fourth consecutive session, capping a week of strong gains as positive sentiment rippled through the region's financial institutions and sent the benchmark index back above a key support level.
The FTSE Eurofirst 300 edged up 0.6% to 1,022.11 on Friday, but gained 5.4% for the week, as increased visibility on Europe's banking stress tests eased concerns and helped bank stocks repair much of the damage inflicted over previous sessions.
Germany's Xetra Dax edged up 0.5% to 6,065.32 on Friday, gaining 4% for the week. Deutsche Bank climbed 0.4% to close at €48.21, up 9.2% for the week. Commerzbank was flat on Friday, closing at €6.29, but was still 6.2% higher over the week.
Other big gainers included Lufthansa, which rose 1.2% on Friday to €12.11, up 6.4% for the week after the resolution of the airline's months-long labour dispute.
Construction companies also did well as German industrial figures came in better than expected. Man finished up 0.4% on Friday to €72.47, but the truckmaker surged 7.6% for the week.
France's CAC 40 index finished up 0.5% to 3,554.48 on Friday, 6.2% higher on the week.
But Société Générale fell 2.4% on Friday after Geniki Bank, the Greek bank in which it owns a majority stake, said it was proceeding with a $428m rights issue. Yet, the French bank was still up 16.8% for the week. Dexia was also down 1.3% to €3.14 on Friday, but surged 12.3% for the week.
In the periphery, it was a similar story, as Spain's Ibex 35 recovered much of the losses it endured in June. It was up 0.5% on Friday to 10,127.30 and 9.5% higher on the week. BBVA closed up 1.1% to €9.65 on Friday, giving a weekly gain of 13.2%. Banco Santander edged just positive on Friday, rising 13.8% on the week to close at €9.97.
On Friday, among the biggest gainers on the index was Gestevisión Telecinco, which rose 2.7% to €8.21. Spain's advance to the World Cup final on Sunday has helped the media group, which has the rights to show the tournament on "free-to-air" television in Spain. The stock was up 18.2% for the week.
GERMANY
German stocks rose, sending the benchmark DAX Index to its biggest weekly gain in almost two months, as BASF SE and K+S AG advanced.
BASF followed chemical shares higher, rising 1.6%. K+S AG climbed 1.3% as its competitors' shares advanced in US trading.
The DAX rose 29.58, or 0.5%, to 6,064.47. The broader HDAX Index gained 0.5% Friday.
The DAX is still down 4.2% from its April 26 high on concern that the sovereign-debt crisis in Europe and slowing growth in China and the US will hurt German companies.
BASF, the world's largest chemicals company, advanced 1.6% to 45.75 Euros. Chemical shares were among the best performers in Europe Friday.
K+S, Europe's biggest potash producer, gained 1.3% to 38.77 Euros. Cheuvreux highlighted in a note the increases in share prices of peers such as Potash Corp. of Saskatchewan Inc., citing a "further rise in crop future prices." Potash Corp. advanced 1.8% in New York trading.
HeidelbergCement AG rose 1.7% to 39 Euros.
"We are positive on HeidelbergCement ahead of the second- quarter results," due July 30, Credit Suisse Group AG said, citing a "very attractive valuation," positive growth and an improvement in margins.
Qiagen NV gained 3.8% to 16.01 Euros. WestLB AG upgraded the Dutch biotechnology company to "buy" from "add," citing the stock's recent decline. The brokerage also said "Qiagen has a significant first-mover advantage over its competitors and its instruments are unmatched in terms of throughput."
Deutsche Lufthansa AG increased 1.2% to 12.11 Euros. Europe's second-largest airline said the number of passengers in the first half rose by 1.8% to 27.2 million, helped by gains in the Middle East and Africa.
German industrial output grew more than expected in May, as production of intermediate and consumer goods increased compared to April.
The seasonally adjusted industrial production increased 2.6% month-on-month in May, following a revised growth of 1.2% in April, the Federal Ministry of Economics and Technology said Thursday. Economists had forecast just a 0.9% rise. On an annual basis, industrial production logged a 12.4% growth in May. That was slightly slower than April's revised 13.9% increase, but exceeded the expected increase of 9.3%.
May's sharp rise in German industrial production adds to evidence that the negative effects from the Euro-zone fiscal crisis are being more than offset by the global economic upturn and weaker Euro. The German upturn may do little to improve prospects of the vulnerable economies in the periphery.
Detailed data showed that production of intermediate goods rose 3.2% on a monthly basis, better than April's 2.8% increase and that of capital goods climbed at a faster pace of 4.6% compared with the 0.2% gain seen in the previous month. Manufacture of consumer goods rebounded with a 1.7% growth.
The recent improvement in business and consumer sentiment, pick-up in retail sales and exports suggest that the prospects for the German economy is brightening further. Bundesbank forecasts the economy to expand 1.9% this year and at a slower pace of 1.4% in 2011.
German exports rebounded more than expected in May, indicating that the economy is benefiting from the ongoing world trade recovery.
The calendar and seasonally adjusted exports increased 9.2% month-on-month in May, data released by the Federal Statistical Office showed Thursday. Economists had foreseen only a 4% rise following a revised 6.3% decline in April. On an annual basis, exports increased 28.8% to Eur 77.5 billion. The statistical agency said it was the highest year-on-year increase in exports for a month since May 2000.
Meanwhile, imports logged their highest month-on-month increase since the beginning of seasonal adjustments in foreign trade statistics in 1990. They rose 14.8% in May following a revised decline of 7.2% in April. That was much better than the expected rise of 3.5%. The strong rise in imports underlines some improvements in domestic demand. Germany imported commodities to the value of Eur 67.7 billion in May, an increase of 34.3% from the previous year. That was the highest annual growth since January 1989.
In May, German exports to the member states of the European Union stood at Eur 47.1 billion, an increase of 22.8% over the previous year. Imports from the region totaled Eur 43.2 billion from those countries, up 32.1% annually. Shipments to the Euro area were worth Eur 32.1 billion, representing an increase of 21.4%, while goods valued at Eur 30.6 billion arrived from the region, up 32.8%.
Commodities to the value of Eur 15 billion were dispatched to EU countries not belonging to the Euro area, while imports from those countries were worth Eur 12.5 billion. Exports to those countries increased 25.8% and imports from them surged 30.5%. Shipments to countries outside the European Union amounted to Eur 30.4 billion in May, while imports from those countries totaled Eur 24.6 billion. Compared with May 2009, exports to such countries increased by 39.5% and imports from those countries by 38.2%.
The foreign trade balance showed a surplus of Eur 9.7 billion in May, down from Eur 13.1 billion surplus in April, but unchanged from last year. Trade surplus during the first five months of the year amounted to Eur 60.4 billion compared to Eur 46.9 billion recorded in the same period last year.
According to provisional results of the Deutsche Bundesbank, the current account of the balance of payments showed a surplus of Eur 2.2 billion in May, down from Eur 11.3 billion in April and Eur 4.7 billion recorded last year.
FRANCE
France's benchmark CAC 40 Index advanced 17.28, or 0.5%, to 3,555.53 at the close in Paris, for a weekly gain of 6.2%, the biggest in a year. The SBF 120 index also climbed 0.5%.
Areva SA rose 5.1% to 347.55 Euros, its biggest gain since May 10. The world's largest maker of nuclear reactors signed a contract with Canada's province of New Brunswick and New Brunswick Power to develop a mid-sized nuclear plant and renewable energy production capacities near Point Lepreau in Canada.
Eutelsat Communications, the world's third- largest satellite company, climbed 2.4% to 27.16 Euros, rising for a third day. EDF Senators passed an amendment allowing alternative suppliers to take stakes in nuclear reactors controlled by Electricite de France SA, Les Echos reported, without saying where it got the information.
BofA Merrill Lynch raised the shares to "buy" from "neutral."
Kaufman & Broad increased 2.2% to 18.15 Euros, its highest price since May 4. The French real-estate developer reported a first-half profit of 2.3 million Euros ($2.9 million), compared with a year-earlier loss of 27.5 million Euros, and confirmed it sees a return to profit at the full-year level for 2010 and an improved outlook.
PSA Peugeot Citroen advanced 2.1% to 23.13 Euros, a fourth day of gains. France's biggest automaker signed a contract with China Changan Automobile Group Co. to assemble Citroen DS cars in China by 2012 in a joint venture that will also introduce a new brand to the fast-growing market.
The carmakers will together invest 935 million Euros to increase and upgrade capacity at Changan's plant in Shenzhen, creating shared output of 200,000 vehicles a year, the companies said in a statement Friday.
Schneider Electric climbed 2.3% to 85.4 Euros. Credit Suisse Group AG upgraded the world's biggest maker of circuit breakers to "outperform" from "neutral," predicting that the company's second-quarter results should be strong.
Vivendi, owner of Universal Music Group, advanced 1% to 17.35 Euros, its highest level this month. France's competition watchdog may drop most of the accusations against Canal Plus following a recommendation by head regulator Virginie Beaumeunier, La Tribune reported, without saying where it got the information.
Canal Plus is still being investigated and could be fined over claims it has not respected engagements made at the time of the purchase, La Tribune said.
French business confidence dropped for the third month in a row in June, a monthly survey by the Bank of France showed Thursday.
The business sentiment index stood at 100 in June, down from 101 in May. The reading matched economists' expectations. The survey showed that industrial activity picked up slightly compared with the previous month. All sectors, excluding automotive and other transport equipment sectors, improved in June.
Further, the capacity utilization rate recorded a small rise, but remained below its long-term average. Order books were deemed slightly above normal levels, while inventories of final goods were close to targeted levels. Forecasts suggest table levels of production in the coming months.
The business sentiment indicator in services stood at 97 in June, unchanged from May. Activity in the services sector increased, but at a much slacker pace than in May. Temporary work and IT posted slower growth. Prices remained overall stable. Staff levels recorded a significant rise. The outlook for activity indicates a moderate increase in activity in the short-term.
According to the monthly index of business activity, GDP is expected to rise 0.4% in the second quarter, revised downward by 0.1 point.
The French trade deficit increased to Eur 5.5 billion in May from Eur 4.25 billion in April, data from the Customs Office showed Wednesday. This was the biggest deficit since October 2008. Economists had expected the shortfall to narrow to Eur 3.9 billion.
Exports dropped 5.2% on a monthly basis to Eur 29.88 billion in May. At the same time, imports dipped only 1.1% to Eur 35.38 billion. In April, exports were valued at Eur 31.53 billion and imports at Eur 35.79 billion.
As the improvement in foreign trade position in the first quarter was largely neutralized by the fall in investment, the French economy grew only 0.1%, slowing from 0.6% growth in the final quarter of 2009. In the first quarter, exports grew at a faster pace of 4.1%, whereas growth in imports slowed to 2.1%.
The French trade deficit increased to Eur 5.5 billion in May from Eur 4.25 billion in April, data from the Customs Office showed Wednesday. This was the biggest deficit since October 2008. Economists had expected the shortfall to narrow to Eur 3.9 billion.
Exports dropped 5.2% on a monthly basis to Eur 29.88 billion in May. At the same time, imports dipped only 1.1% to Eur 35.38 billion. In April, exports were valued at Eur 31.53 billion and imports at Eur 35.79 billion.
As the improvement in foreign trade position in the first quarter was largely neutralized by the fall in investment, the French economy grew only 0.1%, slowing from 0.6% growth in the final quarter of 2009. In the first quarter, exports grew at a faster pace of 4.1%, whereas growth in imports slowed to 2.1%.
BELGIUM
The Bel 20 in Brussels closed the trading session Friday on 2,462.75, up 0.28% for the day.
Belgium's federal planning bureau maintained its forecast for the average increase in consumer prices this year at 2%, the same rate it projected on June 1.
The agency also kept its 2011 inflation projection unchanged at 1.9%, according to a statement posted on the Brussels-based bureau's website Friday.
The bureau lowered its forecast for the average oil price this year to $75 a barrel from $77 and raised its estimate for the Euro to $1.29 from $1.28 on average.
On the basis of discrimination, the Belgian savings bank Argenta (Argenta Banque d'Épargne) has decided to formally contest the manner in which contributions from financial institutions in Belgium are calculated.
Indeed, Argenta has submitted a request to the country's Constitutional Court calling for the annulment of article 169 (provisions 1 and 5) of the law from December 23, 2009 (la Loi-programme du 23 décembre 2009). The article provides for the introduction of a 0.15% bank tax in Belgium, the basis of which is exclusively private savings deposits. Given that these contributions, which are initially paid into a deposit protection fund, are then immediately transferred to the state, Argenta maintains that the contributions represent an actual tax on the country's banks.
Defending its complaint, Argenta emphasizes that the levy imposed on banks has both a disproportionate and discriminatory effect on the different types of financial institutions within the banking sector, affecting in a disproportionate manner institutions such as savings banks with a much larger deposit base presenting a low risk.
Argenta also notes that the levy imposed on banks reduces, in a disproportionate manner, the profits of those institutions presenting less of a risk, thereby preventing them from establishing their own assets.
In its statement, Argenta underlines the fact that the size of banking deposits does not constitute a relevant basis for a tax on banks, given that it does not allow the risk to society posed by a financial institution to be measured. On the contrary, during the economic crisis, neither Argenta nor any other savings bank had recourse to state intervention, it argues.
Daiwa Securities Group Inc., Japan's second-largest brokerage, agreed to buy KBC Groep NV's convertible bond and Asia equity derivatives units for about $1 billion as the Belgian bank raises funds to repay state aid.
Under the agreement, Daiwa is paying about $200 million for assets and about $800 million for the trading position, the companies said in a joint statement Friday. The transaction is subject to regulatory approval and is expected to be completed early in the fourth quarter, according to the release.
Daiwa Chief Executive Officer Shigeharu Suzuki is expanding broking and investment-banking operations globally after ending a decade-long venture with Sumitomo Mitsui Financial Group Inc. in December. The acquisition will help Daiwa boost revenue at its equities and bond business by about 15 billion Yen ($171 million) annually.
THE NETHERLANDS
The AEX in Amsterdam ended the week on Friday, closing at 324.42, up 0.56%.
A Dutch company that was part of a joint venture that Won $6 billion in contracts to build liquefied natural gas facilities in Nigeria has agreed to pay $240 million to resolve bribery charges, Justice Department officials said Wednesday.
Snamprogetti Netherlands BV and its former parent company, ENI SpA, also agreed to jointly pay $125 million to settle a related civil complaint by the Securities and Exchange Commission.
The settlement is the latest chapter in a long-running probe into allegations of bribery by corporations seeking lucrative business contracts in Nigeria going back to the mid-1990s.
Snamprogetti Netherlands BV, which is based in Amsterdam, was part of a joint venture that included former Halliburton Co. subsidiary Kellogg Brown & Root Inc., France's Technip SA and Japan's JGC.
Federal prosecutors say the Snamprogetti authorized the joint venture to hire two agents and a Japanese trading company to bribe Nigerian government officials so the joint venture could win engineering and construction contracts for a liquefied natural gas plant on the African nation's Bonny Island.
All told, the joint venture paid more than $180 million to the agents and the trading company, funds intended to be used, in part, as payoffs for the Nigerian government officials, prosecutors said.
Dutch industrial output rose at a slower pace in May, the Statistics Netherlands said Thursday. The growth was also much slower than forecast.
Production of industry increased 7.2% year-on-year in May compared to a downwardly revised 9.6% in April. Economists were looking for a 9.3% rise in production. The first estimate for April had shown an increase of 10.2%.
Output of the food and beverages industries increased 1.8% year-on-year slightly faster than the 1.2% in April. Production of transport equipment climbed 31.2% during the month compared to 9.5% in the previous month. For basic metals and metal products, production rose 27% annually.
Turnover in industry rose 15.8% year-on-year in May compared to 17.9 in April. After adjusting to working day variations, the turnover index increased 2%. Prices of manufactured products sold in May were 10.5% higher than last year.
Turnover in domestic market increased 10% annually and in foreign market, turnover was up 21%. Meanwhile, new orders received by Dutch industrial firms rose at a weaker pace of 17.5% in May compared to 43.2% increase in April.
Dutch consumer price inflation continued to ease in June, a report by the Central Bureau of Statistics showed on Thursday.
The consumer price index, or CPI rose 0.8% year-on-year in June, slightly slower than 1% growth in the previous month. Economists had expected an inflation of 0.9%. A year ago, prices increased 1.4%. On a monthly basis, the CPI dropped 0.5% in June, after a flat reading in May. Economists' were looking for a decline of 0.4%.
The decline in inflation was mainly due to the price of gasoline. Prices of gasoline rose only 6.9% on an annual basis in June, compared to 11.5% rise in May.
Food and soft drinks prices slipped 0.7% annually in June, following a 1.1% drop in the previous month, clothing and footwear prices declined 2%. Housing, water and energy prices decreased 1.6%, but health charges grew 1.5%. Transport costs rose 3.7% and communications charges climbed 1.7%. Education costs rose 1.4%.
Meanwhile, the harmonized index of consumer prices, or HICP, meant for EU comparison purposes, rose 0.2% on an annual basis in June, slower than 0.4% in the preceding month. Inflation slowed for the third straight month and compares with the Eurozone figure of 1.4%.
Philips said on Thursday it had asked Frans van Houten, a former executive, to return to the Dutch conglomerate and take over as chief executive next year when Gerard Kleisterlee retires.
The group had been expected to favour an insider to replace Mr Kleisterlee but the choice of Mr Van Houten still allows it to tap someone with a long history at the company. The 50-year-old spent much of his career at Philips before leaving in 2006 when Philips quit the semiconductor business and founded NXP Semiconductors, where Mr van Houten initially served as chief executive.
In April, Philips announced the departure later this year of one leading internal candidate, Andrea Ragnetti, the head of its "consumer lifestyle" business. Other potential candidates had been Rudy Provoost, who runs the lighting business, or Pierre-Jean Sivignon, the chief financial officer.
"I am happy to see Frans return to our company," Mr Kleisterlee said in a statement. "Frans was a strong member of my team and a strong contributor in setting the direction of the company."
Mr Van Houten, who has been advising ING, the financial services group, on splitting its banking and insurance businesses, will become chief operating officer in October and take over as chief executive on April 1 next year. Shareholders will have to approve the appointment at a meeting next March.
For Mr Kleisterlee, who has spent his entire career at Philips, his successor will be crucial in vindicating his attempts to overhaul Philips to attain steady profitability.
Years of restructuring have turned Philips into a company designed around three main divisions - lighting, healthcare and "consumer lifestyle", which makes products including televisions and electric razors. It has shifted from an engineering-led company that, jointly with Sony, invented CDs but narrowly escaped going bankrupt, into a marketing-led group with a much greater focus on the bottom line.
SWITZERLAND
The SMI in Zurich brought the week to a close Friday, ending on 6,210.49, a gain of 0.89%.
The Swiss National Bank's foreign currency reserves dropped to CHF 225.8 billion in June, central bank data showed Tuesday. Reserves fell from a record high of CHF 232.1 billion recorded at the end of May. At the same time, the central bank's gold holdings increased to CHF 15.01 billion from May's CHF 39.08 billion.
The decline in currency reserves suggests that the central bank has lowered buying foreign currencies to control Swiss franc's appreciation against Euro. As deflationary pressures diminished in the economy, the central bank stopped intervening currency market in June. Since March 2009, the SNB has intervened aggressively to prevent the franc appreciating too sharply against the Euro. The stated aim was to reduce the deflationary risk from a sharp fall in import prices.
The Swiss franc eased from multi-day highs against other major currencies during early European deals on Tuesday after the release of Switzerland's Consumer Price Index report at 3:15 am ET. The franc eased from a 4-day high against the Yen, 5-day high against the Pound and near a 12-week high against the US Dollar. Meanwhile, the Franc fell to a 4-day low against the Euro, from a 4-day high hit recently.
Data released by the Federal Statistical Office showed that consumer price inflation slowed to 0.5% in June from 1.1% in May. The rate was much smaller than the expected figure of 0.9%. A year ago, consumer prices had dropped 1%. On a monthly basis, prices fell 0.4% in June, which was slightly faster than a 0.1% decline economists had foreseen.
Switzerland's seasonally adjusted jobless rate dropped to 3.9% in June from 4% recorded in May, data released by the State Secretariat for Economic Affairs showed Thursday. That was in line with economists' expectations. There were 155,318 unemployed in June.
The unadjusted jobless rate eased to 3.7% from 3.8% in the previous month, with the total jobless number at 144,473. The unemployment rate matched economists' expectations. Compared to May, the unadjusted number of unemployed decreased by 6,601.
Unemployment among youngsters decreased 1,387 from May to 21,131 in June. A total of 209,270 jobseekers were registered in June, down 5,994 from May. At the same time, the number of vacancies increased by 545 to reach 17,642.
Swiss consumer price inflation slowed to 0.5% in June from 1.1% in May, data released by the Federal Statistical Office showed Tuesday. The rate was much smaller than the expected figure of 0.9%. A year ago, consumer prices had dropped 1%. On a monthly basis, prices fell 0.4% in June, which was slightly faster than a 0.1% decline economists had foreseen.
Core consumer prices, which excludes food, beverages, tobacco, seasonal products, energy and fuel rose 0.2% annually, while fell 0.4% on a monthly basis. A breakdown of data showed prices of food and non-alcoholic beverages fell 1.5% year-on-year and those of alcoholic beverages and tobacco rose 0.5%. Housing and energy prices increased 2.2%.
On June 25, the Swiss National Bank said in its June quarterly bulletin that the risk of deflation in Switzerland has largely disappeared as a result of the positive economic developments. The central bank on June 17, left its key interest rate unchanged at 0.25% for a fifth time, continuing its expansionary monetary policy stance to help the economy attain a sustainable recovery.
The SNB, which aims to keep inflation below 2%, increased its inflation forecast for 2010 and 2011, while kept it unchanged for 2012. Assuming an unchanged three-month Libor of 0.25%, average inflation is expected to amount to 0.9% this year, 1% in 2011 and 2.2% in 2012. The central bank expects the economy to expand 2% this year. Gross domestic product rose 0.4% sequentially in the first quarter following 0.9% increase in the fourth quarter.
AUSTRIA
The ATX in Vienna headed into the weekend at 2,333.46, up 0.08%.
Austria's wholesale price inflation eased in June, a latest data from Statistics Austria showed on Tuesday.
The wholesale price index, or WPI, rose 4% on an annual basis in June, slower than a 4.9% growth in the previous month. Wholesale prices increased for the sixth consecutive month. A year earlier, the WPI decreased 10.3%.
Waste and residual materials prices grew 74.8%, while hides, skins and leather prices climbed 46.2%. Wholesale prices of Iron and steel rose 31.1% and other petroleum products increased 22.9%. On the other hand, prices of non-alcoholic beverages slipped 7.4% and grain, seeds and animal feed fell 4.8%.
For the first half of the year, wholesale prices increased 3.1% compared to the same period of the previous year. However, the wholesale prices for fertilizers and agricultural chemical products dropped 34.6%, computers and peripheral units slipped 8.1%. Grain, seed and feed prices fell 7%.
Austria's jobless rate fell slightly to 4.4% of the Labour force in the second quarter from 4.7% in the first three months of this year, a flash estimate by Statistics Austria said Friday. A year ago, the rate stood at 4.6%.
The number of unemployed declined 5.9% year-on-year to reach 187,100 during the period. Jobless rate among men decreased to 4.3% from 5.2% in the last quarter. Meanwhile, among women, unemployment rate increased to 4.5% from 4.1%. For youth, the jobless rate was 8.4%, down from 9.5% in the first quarter.
Separately, the statistical agency reported that a total of 33, 068 new passenger cars were registered in June, representing a 8.4% annual decrease. During the first half of this year, new car registrations increased 2.3% to total 169 786 units.
Austria's economy grew 0.4% annually in the first quarter, after contracting 1.2% in the December quarter. Sequentially, the gross domestic product remained unchanged during the period, official figures have shown. Last month, the International Monetary Fund had noted that though country's economy is recovering from recession, it needs more financial stability and structural reforms to reinforce the growth potential.
Austrian Strabag's spokesperson confirmed that the company is negotiating the termination of a contract to build a network of motorways in the Bosnian Serb Republic (Republika Srpska), worth 3 billion Euros, Bosnia Daily.
In a statement for Austrian agency APA, she said that Strabag expects this to happen within the next three weeks. The company has been unsuccessful in ensuring a loan from the EBRD because it was commissioned for the job by RS in late 2008 without a public tender.
Strabag plans to apply in a new competition for this contract. It was in late 2006 that the Austrian company and authorities in RS stroke a direct bargain, and the construction of 400 kilometers of motorway complete with a 30-year concession was finally agreed in November 2008. Construction was expected to start in mid 2009.
SWEDEN
The OMX in Stockholm ended the session Friday anmd the week on 1,028.12, up 1.48%.
The Swedish economy is set for unexpectedly strong growth this year, marking a rare bright spot in beleaguered Europe, Finance Minister Anders Borg said on Monday.
The finance ministry upgraded sharply its forecast for growth to 3.3% this year from 2.5% estimated in April.
"Sweden's economy is strong and appears as an obvious spot of light in Europe where many countries are facing large problems," he said in a statement.
Speaking four days after Sweden became only the second western European country after Norway to raise official interest rates since the global economic crisis, he said that strong recovery could well be accompanied by a faster fall in unemployment than had been forecast.
The growth forecast came just over two months ahead of Sweden's next general elections in which the centre-right coalition government is seeking a new four years in power.
On Thursday, the Swedish central bank raised its key rate by a quarter of a point to 0.5% from 0.25%, the rate held for 12 months. The bank said then: "The Swedish economy is developing strongly following the severe downturn."
The latest details from Sweden fit a general landscape in which Nordic countries in general appear to be among the leaders in Europe in emerging from the downturn.
"We see a strong recovery in Sweden, but there are still serious risks in the world economy," Borg was quoted by the TT news agency as saying at a gathering of all the country's political parties in Visby, on the Swedish island of Gotland off the eastern coast.
When it comes to next year's growth, the ministry was slightly less optimistic than before, forecasting on Monday that the economy would grow by 3.8% in 2011, down from the previously expected 3.9% growth.
For 2012, the government now expects 3.9-percent growth, up from the previous estimate of 3.5 and for 2013 the new figure was 3.3, up from 3.2%.
For 2014, 2.7-percent growth is now expected, down from the last forecast of 2.8%.
"We consider there is some room for reform in 2011. But the manoeuvre room during the whole next mandate period is at the same time considered to be very uncertain and should be regarded with much caution," the finance ministry said in its statement.
Monday's new forecast was more upbeat on development on the employment front.
"What is most surprising in the Swedish economy is that the employment market is developing stronger than expected," Borg said.
According to the latest estimate, Swedish unemployment will stand at 8.9% this year, down from the previously expected 9.2%.
The jobless rate is expected to gradually shrink to 6.0% in 2014, according to the latest figures.
Swedish consumer price inflation eased in June from the previous month.
The consumer price index, or CPI, rose 0.9% year-on-year in June, slower than a 1.2% growth in the previous month, a report by the Statistics Sweden showed on Thursday. Economists had expected an increase of 1%.
On a monthly basis, the CPI remained unchanged in June, in line with economists' expectations. In May, prices increased 0.2%. Clothing and footwear prices fell 2.7% in June, while prices for package holidays climbed 7.4%. Interest costs for owner occupied housing grew 1.9% that contributed upwards by 0.1 percentage points.
The annual inflation rate for CPIF stood at 1.9% in June, slowing from 2.1% in May. Economists' had expected the inflation rate to ease to 1.8%. Month-on-month, the CPIF remained stable in June, compared to 0.1% fall expected by economists'. Similarly, the CPIX rose 1.6% annually and was down 0.1% from the preceding month.
Meanwhile, the harmonized index of consumer prices, or HCIP, rose 1.6% year-on-year in June and decreased 0.1% compared to the previous month.
Swedish central government payments showed a shortfall of SEK 23.8 billion in June, the National Debt Office said on Wednesday. The deficit was bigger than the Debt Office's deficit forecast of SEK 18.9 billion due to larger disbursements of tax refunds.
The first disbursement of tax refunds regarding last year were made in June, which was SEK 4 billion more than estimated. Meanwhile, interest payments on central government debt were SEK 0.4 billion, in line with the forecast.
For the twelve-month period up to the end of June, central government payments resulted in a deficit of SEK 59 billion. Central government debt amounted to SEK 1,115 billion at the end of June.
The debt office in June reduced its budget deficit estimates for both 2010 and 2011 as the economy recovers more quickly than expected. The budget deficit for 2010 is seen at SEK 14 billion and that for 2011 to fall to SEK 8 billion.
DENMARK
In Copenhagen, the OMX drew a volatile week to a close on 406.58, down 0.10%.
Denmark's banking industry does not have a large global reach - something made clear in the efforts of its mortgage banks to lobby other countries' regulators to be heard in Basel.
But the industry's officials could in fact have their own kind of global clout if recently introduced transparency laws are taken up elsewhere.
Last week the Danish Financial Supervisory Authority published the first round of reports into individual banks and will do so regularly, extending the number of banks until all are covered annually.
For the hyper-sensitive banking industry, the reports are a risk. In the aftermath of the financial crisis, transparency has emerged as crucial for investor confidence. But banks have successfully argued - until now - that reports of this sort of detail on individual institutions pose a potential threat to the health of the still fragile banking system if they caused investors to take fright.
Danish bank shares dropped as much as 5% when the first round of reports were released - even as their European peers elsewhere rallied on news of unexpectedly positive lending data from the European Central Bank.
Denmark has also led the way in making public solvency targets for its banks and their success in meeting these. The figures are now included in the FSA reports. Danske Bank, for example, was set a target of 10.1% at the end of 2009 but its actual ratio far exceeded that at 17.8%.
"For the good banks, the reports are good. For the bad ones, they're bad," said one banking analyst familiar with the region. "As an analyst its good to get the information but for banking system stability, I'm not too sure you want to disclose too much." Although mild by comparison with political rhetoric, the reports are extremely blunt by the general standards of regulators. Of Danske Bank, Denmark's largest bank, the FSA ordered it to make two changes to remedy perceived deficiencies.
Among the regulator's comments it noted that "in some cases, the bank's own risk classification of customers was too positive".
It also included generalised comparisons with the bank's rivals, commenting that "although a very large proportion of the loan portfolio had a normal level of risk, the overall credit quality was below the level for retail lending at other large banks".
Denmark's Industrial Output increased in May from the previous month.
Industrial production rose a seasonally adjusted 4.4% on a monthly basis in May, a report by the Statistics Denmark showed on Tuesday. Year-on-year, industrial output grew 1.9%, but was 20.1% smaller than two years ago.
Manufacture of non-durables goods increased 7.2% monthly in May and output of durables grew 5.7%. Similarly, production in intermediate industry increased 2.6%.
Meanwhile, total industrial turnover climbed 7.1% month-on-month in May. Investment goods industry recorded the biggest turnover of 12.4%. Manufacture of non-durables goods increased 8% and output of durables rose 5.8%.
Industrial new orders increased 13.4% in May from the previous month. New export orders climbed 16.1%, while there was a 5% rise in orders received from the domestic market. The export orders received by the investment goods industry, rose 21.7%.
A.P. Moller-Maersk, upgraded its profit forecast for 2010 saying it expects a profit compared to the initial expectation of a modest profit, made in March. The Danish container shipping line said that it expects profits for this year to exceed the 2008 profits of $3.5 bln. However, the outlook for 2010 is still subject to considerable uncertainty, not least due to the development in the global economy, the company said.
FINLAND
In Helsinki the local bourse, the OMX, brought the curtains down on the week at 6,399.45, a gain of 0.64% on the day.
Finland's general government EMU debt increased Eur 2.3 billion to Eur 77.7 billion in the first quarter, the Statistics Finland said in a report on Friday. Growth in debt was mainly due to increased central government debt.
Of the consolidated general government debt, Eur 70.1 billion was central government debt and the remaining Eur 11.5 billion local government debt. General government debt is consolidated debt, which excludes debt items between sub-sectors. For this reason general government debt is smaller than the combined debts of its sub-sectors.
Further, data showed that central government bonds rose Eur 6 billion, while short-term money market instrument debt decreased by Eur 3.6 billion. The debt of local government remained on level with the previous quarter.
Finnish GDP indicator increased in May from the preceding month, the Statistics Finland said on Thursday.
The gross domestic product, or GDP indicator increased a working day adjusted 2.9% year-on-year inn April, compared to a 1.4% fall in the previous month, which was revised from 0.3% fall reported initially. The annual GDP increased for the first time since September 2008. A year earlier, the GDP indicator slipped 12.3%. The main reason for the revision was the benchmarking of the data to quarterly accounts, the statistical office said.
Month-on-month, the seasonally adjusted output grew 1.2% in April, same as in the previous month.
According to the working day adjusted series, primary production climbed 12% from the previous year, while the secondary production, includes manufacturing and construction, edged up 8%. Services output remained unchanged from the prior year. Primary production refers to agriculture, forestry and fishery.
Finnish economy contracted for a second consecutive quarter following growth in the third quarter of 2009. Sequentially, the gross domestic product fell 0.4% in the first quarter, following a 0.2% decline in the fourth quarter.
The Finnish government has announced that from Friday all its citizens will enjoy a basic high-speed internet connection as a fundamental right, in much the same way they get post or telecoms services.
In an announcement on the Finnish Ministry of transport and communications site, the government said that from the first of this month all local telecoms providers must offer both home users and business clients " reasonably priced connections".
"From now on, a reasonably priced broadband connection will be everyone's basic right in Finland. This is one of the government's most significant achievements in regional policy and I am proud of it," said Suvi Lindén, Finland's Minister of Communications.
Only those service providers classed as local will be required to provide such services, she explained, adding that the population had more than 26 firms to choose from.
"I hope that people will make use of the opportunity and turn to telecom operators in the area in which they live," she added.
Prices must also be 'reasonable' according to accompanying information released by the government. However, it accedes that tariffs may vary depending on location and the availability of services.
NORWAY
The OBX in Oslo closed out the Friday trading session at 318.98, up 1.04%.
Norway's Ministry of Petroleum and Energy has unveiled the country's 21st Licensing Round, all in frontier northern offshore areas.
Fifty-one blocks are on offer in the Barents Sea and 43 in the Norwegian Sea. Applications must be submitted by midday, Nov. 3. Resultant production licenses should be awarded during 2Q 2011.
Terje Riis-Johansen, Minister of Petroleum and Energy, cautioned: "The 21st Licensing round will be concluded in light of what we are now experiencing in the Gulf of Mexico. Before awarding licenses...I will ensure I have deeper knowledge about the accident."
He added, however, that new petroleum activity was needed in these regions to stimulate jobs and the economy in northern Norway.
Norway's manufacturing production increased in May, a report by the Statistics Norway showed on Wednesday.
Manufacturing production grew a working day adjusted 2.2% on an annual basis in May, compared to a 3.7% growth expected by economists. At the same time, output in ships and oil platforms dropped 7.1%, while production in wood and wood products, basic chemicals and basic metals climbed.
Month-on-month, manufacturing output decreased a seasonally adjusted 0.9% in May. Economists' were looking for an increase of 0.2%. The output in ships and oil platforms dropped slightly in May, while production in wood and wood products increased. In the March to May period, production increased 0.6% compared to the previous three months. For the first five months of the year, manufacturing output rose 1% over a year earlier.
Meanwhile, industrial production rose 0.4% in May from the previous month, after falling 0.8% in April. Production slipped 0.8% over a year earlier. For the first five months of the year, industrial production dropped 4% compared to the same period of the previous year.
Separately, the statistical office said, manufacturing turnover rose 0.6% on an annual basis in May and was up 0.5% compared to the preceding month. Thus, the overall industrial turnover grew 6.1% over a year earlier.
Norway's jobless rate rose to 2.8% in June from 2.7% in May, the Norwegian Labour and Welfare Service said in a report on Friday. The rate matched economists' expectations. The registered unemployed in June was 71,600.
Data released by the Statistics Norway on June 23 showed that the jobless rate stood at 3.7% in April, measured by the average of three months from March to May. The unemployment rate stood at 3.4% in December to February and it was 3.5% during February to April.
SPAIN
In Madrid the IBEX finished the week on 10,127.30, up 0.46%.
Spain's services sector activity continued to expand in June but at a weaker rate, a closely watched survey has found.
Markit Economics said the services purchasing managers' index fell to a seasonally adjusted 51.8 in June from 52.3 in May. A reading above 50 indicates expansion while one below suggests contraction. Output in the sector has now increased in each of the past four months.
New work received by Spanish service providers declined for the first time in four months in June, and at the fastest pace since last December. Respondents attributed the fall to scarce demand combined with intense competition.
Reflecting the lesser inflow of new work, employment levels in the services sector were reduced again, extending the current sequence of job shedding to 28 months. However, the rate of job cuts eased for the second month running and was only modest.
Input prices faced by service providers increased for the fourth successive month. Respondents blamed higher salary payments and rising fuel costs for the spike in inflation. But despite this, output charges were slashed again amid intense competition.
Three of the six sub-sectors registered increased activity, led by other services. Hotels & restaurants and transport & storage also posted rises in output, while the steepest declines were recorded by financial intermediation and post & telecommunications.
Spanish export price index rose at a faster annual rate in May, as charges for most of its components increased, data released by the Spanish statistical office showed Monday. Export prices rose 5.5% year-on-year following April's 4.4% increase. On a monthly basis, export prices rose 1.1% after logging 1.3% growth in April.
Export prices of consumer goods increased 1.5% year-on-year after a 0.5% growth in April. Growth in durable consumer goods export prices climbed to 2.7% from previous month's 1.1% and that for non-durable consumer goods accelerated to 1.4% from 0.5%. Export prices for capital goods increased 0.7% in May over the previous year, a tad higher than April's 0.6% rise. Intermediate goods prices were up 7.9% annually following 5.6% rise. Growth in energy prices eased to 45.9% from 48.2%.
On the other hand, import prices logged a monthly increase of 2.4%, which took the annual growth rate to 10.2%. In April, import have grown 0.6% month-on-month and 7.7% annually.
Import prices of consumer goods were 4% expensive in May this year compared to the previous year. Durable consumer goods prices rose 2.5% and non-durable consumer goods prices climbed 4.5%. Capital goods were 1.2% costly, while prices for intermediate goods increased 9.9%. Energy was 40.3% expensive.
The number of people seeking jobless benefits in Spain decreased by 83,834 in June to 3.98 million, official figures show. Analysts had forecast a 65,000 fall.
The Ministry of Employment and Immigration said jobless claims fell by 2% last month compared with May. The number of males seeking jobless benefits fell by 2.9% and the number of females was down 1.2%.
Employment Secretary General Maravillas Rojo said the monthly fall represented the biggest in five years. "The further decline in unemployment confirms that job losses are slowing and that we are moving gradually towards monthly figures prior to the crisis."
Jobless claims fell across the country, with the biggest decreases recorded in Catalonia, Valencia and Castile & Leon. The only community to record an increase in jobless claims was the Canary Islands.
PORTUGAL
Lisbon's PSI General bourse led the markets into the weekend on 2,610.72, down 0.4%.
New orders received by Portugal's industrial firms declined further during the three-month period ending May, the Statistics Portugal said Wednesday.
During the period, new orders fell 3.2% year-on-year compared to 2.9% during the three-month ending April. The statistical office said that the decline reflected a particular behavior observed in the domestic market. New orders in domestic market dropped 8% during the three-month period, steeper than the 3.8% in the previous period.
New export orders, however, recorded 1.4% growth annually after falling 2.1% during the three-month ending April. New orders to capital goods industry fell 8% year-on-year and had the biggest impact on the overall index.
Official figures have shown that the Portuguese economy expanded 1.8% year-on-year in the first quarter, rebounding from a 1% contraction in the previous quarter. This was the first positive GDP figure since the third quarter of 2008. The European Union has asked the Portugal government to detail its budget-cutting measures, formulated to achieve the deficit target of 1.5% of the GDP by next year.
ITALY
Italy's benchmark FTSE MIB Index rose 235.25, or 1.2%, to 20,478.98 in Milan.
Ansaldo STS rose 9 cents, or 0.8%, to 11.44 Euros, a third gain this week. Exane BNP Paribas reiterated an "outperform" rating on Finmeccanica SpA's railway-technology unit as it expects second-quarter results to show a "strong top-line growth."
Fiat gained for a fourth session, rising 10 cents, or 1.2%, to 8.82 Euros. Mediobanca Securities said in a note that "the positive impact of the spinoff does not seem to be reflected in the share price as consensus believed it would have been derailed by current market conditions."
Separately, the carmaker said in an e-mailed statement that it agreed in Turin Friday with the CISL and UIL unions to implement the accord regarding the "production continuity" at Pomigliano plant.
Gemina gained 1.4 cents, or 2.6%, to 54.8 cents, a second consecutive increase. The owner of Rome's airport operators was rated "overweight" in new coverage by Barclays Capital. The brokerage set a price estimate of 80 Euro cents.
Gemina "will soon benefit from the implementation of a new regulatory framework," according to the brokerage, saying "market concerns on a potential rights issue, which is to follow long-awaited regulatory clarity, should not materialize before the group finalizes its long-term capex plan."
Lottomatica dropped 32 cents, or 2.9%, to 10.59 Euros, ending a three-day advance. BofA Merrill Lynch Global Research downgraded the lottery company to "underperform" from "neutral." The brokerage cited "a continuing slowdown in the core Italian lottery business and higher tax and depreciation charges going forward."
Luxottica Group increased 29 cents, or 1.5%, to 19.63 Euros, a fourth straight gain, as Natixis Securities initiated coverage of the world's largest maker of eyeglasses with a "buy" rating.
Mediaset rose 3.8 cents, or 0.8%, to 4.71 Euros, a fourth straight gain. Fidentiis Equities SV SA upgraded the broadcaster to "buy."
Tenaris, the world's biggest maker of seamless steel tubes for oil and gas extraction, rose 32 cents, or 2.2%, to 15.09 Euros. Crude oil rose for a third day as equities gained on optimism that the global economic recovery will accelerate.
Italy's service sector expanded at a slower pace in June, results of a survey by Markit Economics showed on Monday.
The Markit/ADACI Purchasing Managers Index (PMI) for services dropped to 51.5 in June from 53.7 in the previous month. This was the third consecutive month of decrease in growth after a two-and-a-half year peak recorded in March. A reading above 50 indicates expansion, while one below 50 suggests contraction.
However, the service sector output increased for the seventh straight month in June, while incoming new business levels grew at slower pace. At the same time, the ongoing cost considerations led Italian service providers to implement cautious staffing policies in June. Thus, job losses extended into a twenty-first consecutive month.
"There is evidence, however, that growth momentum shifted downwards towards the end of the quarter, with June's activity reading only marginally above the critical 50.0 no-change level," Andrew Self, economist at Markit said. "Although firms maintain a positive outlook for future output growth, fears surrounding the stability of the pan-European recovery are hitting sentiment."
Italian jobless rate was 8.7% in May, unchanged from April and March, statistical office Istat said Friday. Economists had foreseen an increase to 9%. A year ago, the rate was 7.5%. The current rate is the highest since the monthly data began in 2004.
There were 2.17 million unemployed in May, a fall of 3,000 from April, but an increase of 291,000 from a year ago. On the other hand, the number of employed stood at 22.87 million, down 38,000 from April and 262,000 from the previous year. Employment rate was at 56.9%, with the rate for men at 67.9% and that for women at 46%. Youth unemployment rate was 8.7%, while inactivity rate stood at 37.7%.
There are signs of a better Labour market prospects for the Italian economy. Thursday, survey data released by Markit Economics showed that manufacturers reported the weakest reduction in staffing numbers since August 2008. As the country is set to tighten its fiscal policy, households expect their income to come under pressure. This fear was reflected in their confidence, which dropped to the lowest level since March 2009.
GREECE
The Athex Composite concluded another hectic week, closing at 1,527.62, up 0.17%.
Greece will cut its budget deficit to achieve 2010 target without taking additional austerity measures, Bank of Greece Governor George Provopoulos reportedly said Tuesday.
In an interview with Greek television Mega Channel, Provopoulos, who is also a member of the European Central Bank Governing Council, said, "I believe the country will achieve the deficit target of 8.1% of GDP." "I am categorically saying that no new measures will be needed as long as progress continues at the current pace," he added. The central banker noted that the budget deficit contracted 42% in the first half of this year.
Athens has promised to cut its budget deficit to 8.1% of gross domestic product this year from a huge 13.7% recorded last year. This is in exchange for a Eur 110 billion financial support from the International Monetary Fund and the European Union. The bailout package was intended to help Greece to avoid a default as the country's sovereign debt crisis worsened, threatening the stability of the Eurozone.
Further, Provopoulos ruled out concerns that Greece may need to restructure its debt. "Of course I believe that debt restructuring is not necessary, and I am categorical about that," he said, adding that thinking about restructuring would be dramatic. Moreover, he noted that Greek banks face no liquidity problems and they are expected to perform good in the stress tests.
Greek consumer price inflation eased in June, the statistical office said on Wednesday.
The consumer price index, or CPI, rose 5.2% year-on-year in June, slower than a 5.4% growth in the previous month. Inflation rate eased for the first time since May 2009. A year earlier, the CPI increased 0.5%.
Food and non alcoholic beverages prices fell 0.8% annually in June, while clothing and footwear prices grew 2.4%. Transport and communication charges rose by 18.2% and 3.7%,respectively. Education costs climbed 3%.
Month-on-month, the CPI slipped 0.3% in June, compared to a 0.8% growth in the preceding month. Food and non alcoholic beverages prices fell 1.4%, while housing costs grew 0.2%. Health charges slipped 2.4%.
Meanwhile, the harmonized index of consumer prices or HICP rose 5.2% on an annual basis in June, slowing from 5.3% in May. A year earlier, the HICP increased 0.7%. Month-on-month, the HICP slipped 0.2%, compared to a 0.1% fall in the previous year.
Business conditions across Greece's manufacturing sector continued to deteriorate at the end of 2010's second quarter, latest survey data from Markit Economics showed Thursday.
The seasonally adjusted Markit Greece manufacturing purchasing managers' index, or PMI, stood at 42.2 in June, up from May's 41.8. But, the index continued to stay below the 50 mark to suggest contraction in the sector.
In June, new orders to the Greek manufacturing sector fell for the twentieth time in the past twenty-one months. However, the rate of contraction was less severe than in May. Both domestic and foreign demand declined on month, although the decrease in new external sales was slower than that registered for total new business.
Firms turned their efforts to clearing backlogs as new orders decreased in June, and outstanding business was depleted at a considerable rate. However, this was not sufficient to support production levels, which continued to fall sharply. The latest decline in manufacturing activity was the most marked for fourteen months.
Job shedding accelerated slightly as firms continued to cut costs due to the deterioration in operating conditions. A scarcity of certain raw materials and industrial action caused delays to supplier deliveries. Input prices rose further albeit at a slower pace. Due to poor demand and strong competition, companies trimmed output prices sharply. |
| The UK Market
Did it follow the Global trend ..... |  Stocks in London were higher for a fourth consecutive session, but after three days of strong gains investors exercised a little more caution on the final day of the week.
Banks have been fuelled in the past few sessions on speculation that a new bid vehicle is preparing to buy assets in the UK sector.
Meanwhile, stress tests have failed, as yet, to dig up any nasty suprises about the ability of the European sector to capitalise itself. Further optimism towards the sector was provided on Tuesday by an upbeat outlook from US lender State Street.
Lloyds Banking Group added 1.7% to 61.3p, while HSBC climbed 0.6% to 628.4p.
The FTSE 100, already up by 5.5% this week, climbed a further 0.5% at the open to 5,132.94, an advance of 27 points.
Ben Potter at IG Markets said: "It does seem as if after the heavy bout of selling, we may be on the cusp of a shift in sentiment and assuming there are no big surprises then this latest rally may well prove to have legs despite those lingering concerns of a double-dip recession."
Miners also helped the benchmark index advance its rally. Vallar, the cash shell which began conditional trading after a £700m IPO, helped drive the mining sector. Vallar said it was looking to purchase metal and mining assets, but added it had not yet identified any particular acquisition target.
Antofagasta, the Chilean copper miner, rose 4.1% to 876.9p, while Australia's Rio Tinto added 3.2% to £31.93.
Among the few companies reporting on Friday, Bovis Homes offered a valuable insight into the strength of the UK housing market.
The builder, which reported solid first-half trading, said it planned to resume dividend payments at the end of its current financial year as long as conditions in the new homes market prevailed.
However, acting in response to weaker-than-expected house price data from Halifax, HSBC cast a cloud over the sector by saying it saw structural deficits among UK housebuilders. The bank delivered "neutral" ratings on Bovis and Berkeley Group, while much of the rest of the sector received "underweight" ratings.
Bovis outperformed, falling just 1.6% to 349.5p, Redrow fell 3.1% to 109.8p, while Bellway lost 1.9% to 612p.
The mid-cap FTSE 250 index, on which the housebuilders are listed, climbed 0.3% to 9,745.79, supported by employment services groups after stronger-than-forecast second-quarter earnings from Michael Page.
The shares gained 2% to 393.6p after the company reported that gross profit had risen 33% compared with the same quarter a year ago.
Shares in other employment groups were buoyed. Hays rallied 1.6% to 97.2p and SThree added 3.8% to 285.3p.
The Bank of England on Thursday left its key interest rate unchanged at a historic low and maintained the size of asset purchase scheme at GBP 200 billion as expected.
At the end of two-day rate setting meeting, policy makers led by Governor Mervyn King, decided to hold the official Bank Rate paid on commercial bank reserves at 0.5%. The current rate is the lowest since the central bank was established in 1694.
The Monetary Policy Committee also voted to maintain the stock of asset purchases financed by the issuance of central bank reserves at GBP 200 billion. The central bank will release the minutes of the meeting on July 21.
It is likely that Andrew Sentance again voted for a rate hike given his recent comments, but we doubt any other members will have joined him given ongoing concerns about the economic impact from fiscal consolidation and external weakness.
The interest rate is set to start rising in February 2011, but this looks questionable with the economy already set to be hit by Value Added Tax rising to 20% next January. The first rate hike may well be delayed until the second quarter.
The UK house price slump continued in June according to the latest monthly report from Halifax.
The lender said prices fell another 0.6% last month, following a 0.5% monthly decline in May. This was in contrast to analyst expectations for a 0.2% increase. Halifax said this took the average house price down to GBP 166,203.
The bank said the cooling housing market was largely due to a surge in the number of properties coming on to the market following the abolition of Home Information Packs. "A shortage of properties for sale in 2009 contributed to an imbalance between supply and demand and was a key factor driving up house prices last year" said the Bank.
"An increase in the number of properties available for sale in recent months has helped to reduce the imbalance, relieving the upward pressure on prices. The low level of interest rates, however, continues to support housing demand."
HIPs had been introduced by the previous Labour government as a means for sellers to provide buyers with a range of information regarding the property being put up for sale. It was scrapped by the coalition government in May.
House prices in June were still 6.3% higher on an annual basis as measured by the average for the latest three months against the same period a year earlier. Analysts had forecast a 6.7% increase after the 6.9% growth in the previous month.
The Halifax survey does not chime with that of rival mortgage lender Nationwide, which showed a modest 0.1% monthly gain in prices last month. The building society had calculated an 8.7% annual price gain.
The third successive drop in prices reported by the Halifax in June adds to a recent flurry of soft data on the housing market and stokes our relative pessimism over the housing market. It is increasingly suspected that house prices will be only flat over the rest of the year.
In separate research, Halifax found that the cost of owning and running a home in the UK has declined 6% over the past two years. Between April 2008 and April 2010, the average annual cost associated with owning and running a home fell by GBP 544 from GBP 9,564 to GBP 9,020. This was mainly due to a decline in mortgage payments. |
| Asia Pacific Regional Markets
Did they set the tone or follow the lead ..... |  JAPAN
Tokyo stocks rose on Friday as buying in technology shares gained renewed traction on further yen weakening, while late support for heavily weighted Fast Retailing helped the market to overcome a sharp plunge in Inpex Holdings shares.
The Nikkei Stock Average rose 49.58 points, or 0.5%, to 9585.32. The Topix index of all the Tokyo Stock Exchange First Section issues also rose 0.19 point, or 0.02%, to 861.21, with just 15 of 33 Topix subindexes ending in positive territory.
September Nikkei 225 futures closed up 40 points, or 0.4%, at 9580 on the Osaka Securities Exchange.
Stocks opened modestly higher follow buoyant overnight markets and a further rise in the Euro to the mid-Y112 level, which helped tech stalwarts such as Fanuc add 2.3% to Y10,710. Large index components Inpex and Fast Retailing saw steep initial selling, however, keeping broader market gains contained.
But Fast Retailing, which cut its full-year forecasts for its flagship domestic Uniqlo clothing store business, saw its shares rise later in the session before closing up 0.6% to Y12,800 despite a slew of negative opinion on its announcement. Traders said while retail investors sold on the disappointment, mainly long-only institutional investors saw no surprise in the firm's outlook cut given recently weak same-store sales.
Morgan Stanley MUFG Securities nevertheless cut Fast Retailing's target price to Y13,200.
Fast Retailing's performance helped offset Inpex's 13% fall to Y415,000 following the energy developer's announcement after yesterday's market close to raise about $6 billion through a new share issuance to fund development of its projects. Shares went limit-down after remaining ask-only at the opening bell for several minutes.
While many investors said the capital raising deal made sense given the firm's stretched portfolio of costly projects, one foreign brokerage analyst appraised the deal as not necessary, noting, among other things, that the company's highly touted Ichthys gas field is already 70% project financed, while the drawdown for Ichthys funds will not take place until years No. 3 to 7. Inpex trading volume totaled about six times average.
Shares of Sony closed up 0.9% to Y2,445 as hedge funds were said to be buying back its stock following the Bank of Korea's unexpected interest rate hike from record lows. A fund manager at a Japanese asset management firm said the slip in the Dollar against the Korean Won elevated Sony's competitive position against Korean rivals such as Samsung Electronics on a currency basis.
SOUTH KOREA
The Bank of Korea on Friday unexpectedly raised the benchmark interest rate from a record-low level, as it grew more concerned about inflation and less about economic recovery.
BOK Governor Kim Choong-soo and his fellow monetary policymakers decided to increase the seven-day repurchase agreement rate by 0.25 percentage point to 2.25 percent a year.
For the past 16 months, they had kept the borrowing cost unchanged at 2 percent, an all-time low, to help power the economy's recovery from the global financial crisis.
"A 0.25 percentage point rise doesn't mean a shift in our accommodative monetary policy stance," Kim told a press conference after the rate decision. The interest rate is still low enough to be considered as monetary easing, considering the rapid pace of economic recovery, he added.
"Inflation next year, if the pace is kept, will go beyond 3 percent. I believe this is the right timing to start raising the rate," Kim said.
Korea's economy expanded by 8.1 percent year-on-year in the first quarter of this year, driven by strong exports and reviving domestic consumption.
The second-quarter growth data is yet to be released, but Kim said the economy probably has grown more than 7 percent in the first half.
The Finance Ministry said last month that the country's GDP growth for the full of 2010 would reach 5.8 percent, raising its forecast from its December projection of 5 percent. The BOK is scheduled to release its revised forecast for economic growth and inflation on Monday.
Annual inflation came in at 2.6 percent in June, down from 2.7 percent in May, well within the central bank's mid-term target band of between 2 and 4 percent.
However, the BOK expects a continuous buildup of upward inflationary pressure, going forward, it said.
Local shares rose as investors welcomed the surprise rate hike as a sign that the economy is firmly on a growth path. The benchmark stock index KOSPI closed at 1,723.01 points on Friday, up 1.43 percent from a day earlier. The local currency strengthened to 1,196 Won per Dollar, up 13.3 Won.
Foreign investors were buyers of a net 314.5 billion Won ($260.3 million) worth of stocks. Institutions bought a net 118 billion Won worth of shares and retail investors sold a net 484 billion Won worth.
Advancers outnumbered decliners 461 to 316 and 91 issues ended flat. Trading volume stood at 464 million shares worth 5.5 trillion Won, compared with 324.8 million shares worth 5 trillion Won in the previous session.
The KOSPI 200 Sept futures index ended up 3.50 points at 225.30, and the KOSPI 200 spot index gained 3.66 points to 224.44.
The junior Kosdaq market ended 0.65 percent higher at 492.15.
HONG KONG
Hong Kong shares ended higher Friday, tracking gains in China and US markets, while consumer goods trading firm Li & Fung surged after it said Thursday it signed seven new deals in recent months.
The blue chip Hang Seng Index rose 328.10 points, or 1.6%, to 20,378.66 after trading between 20,116.52 and 20,418.31. The index gained 2.4% this week.
Market volume totaled HK$59.20 billion, up from HK$45.48 billion Thursday.
Analysts said they expect strong demand for China-linked companies to support the benchmark index, which could test its 250-day moving average of slightly below 20,900 in the next week.
The Shanghai Composite Index ended up 2.3% at 2470.92 Friday due to a sharp increase in liquidity as the lock-up period for funds that had failed to subscribe to Agricultural Bank of China's initial public offering ended, allowing the funds to flow back to the market. China's benchmark index rose 3.7% this week.
The Dow Jones Industrial Average rose 1.20% to 10138.99 Thursday, its third straight day of gains, as a bigger-than-expected drop in weekly jobless claims and improved same-store sales from a number of retailers lifted McDonald's, American Express and Coca-Cola.
In Hong Kong, Li & Fung surged 7.2% to HK$37.80 after saying it signed seven deals in recent months, comprising three acquisitions totaling around US$140 million and four licensing deals.
Analysts said the deals would benefit the company, and Bank of America-Merrill Lynch raised Li & Fung's target price to HK$50 from HK$47.
Bank of China rose 2.5% to HK$4.08. China Merchants Bank gained 4% to HK$19.36 after it said after the market's close Thursday it expects its first-half net profit to rise by more than 50% from a year earlier.
Most mainland property firms ended higher on bargain hunting. China Resources Land rose 4.4% to HK$15.52 after falling 4.7% in the two weeks through Thursday's close, and China Overseas jumped 3.1% to HK$15.40, after falling 6% during the same period.
A strategist at a Chinese bank's brokerage arm said investors should be cautious when hunting for bargains among mainland developers because the sector's resilience doesn't gel with property market conditions as sales remain stagnant.
CHINA
China's shares ended higher Friday, with gains across the board, due to a sharp increase in liquidity as the lock-up period for funds that had failed to subscribe to Agricultural Bank of China's initial public offering ended, allowing the funds to flow back to the market.
The benchmark Shanghai Composite Index, which tracks both A and B shares, ended up 2.3%, or 55.77 points, at 2470.92. The Shenzhen Composite Index rose 2.9%, or 28.06 points, to 984.32.
The Shanghai index gained 3.7% this week.
Analysts said the benchmark index will likely face resistance at the psychological 2500 level due to investor caution ahead of the official release of June's macroeconomic data Thursday, as the data will provide cues about the likelihood of new tightening measures from Beijing.
The end of the lock-up period for AgBank's IPO buoyed the stock market Friday. The deal had drained more than CNY500 billion ($73.8 billion) from the market.
Banks got a boost from the increased liquidity. China Merchants Bank gained 3.2% to CNY13.63, and Industrial & Commercial Bank of China rose 1.5% to CNY4.19.
Manufacturers rose due to expectations about strong first-half corporate earnings after some companies issued positive profit guidances.
Baoshan Iron & Steel rose 2.8% to CNY6.15, while auto maker SAIC Motor jumped 3.0% to CNY13.44.
Heavyweight oil firms also gained, though some analysts said investors remain concerned a new resources tax and a possible slowdown in oil-price rises might hurt profits. PetroChina rose 1.5% to CNY10.53, and Sinopec gained 1.9% to CNY8.09.
The July 2010 index futures contract, the most actively traded of the four index futures contracts traded in China, ended up 3.2% at 2650.0.
The futures are referenced to the CSI-300, an index of 300 Shanghai- and Shenzhen-listed yuan-denominated A shares. The CSI-300 ended up 2.8% at 2647.10.
TAIWAN
Taiwan share prices closed up 0.50 percent Friday on follow-through buying after an overnight rally on Wall Street, according to dealers.
The weighted index rose 38.40 points to 7,647.25, after moving between 7,599.84 and 7,652.55, on turnover of NT$102.08 billion (US$3.18 billion).
The market opened up 0.41 percent as investors took hints from the Wall Street gains amid optimism toward the global economy on a better-than-expected drop in US unemployment and a stronger Euro, the dealers said.
While profit-taking emerged during the trading session to compromise the gains, a strong showing of other regional markets, including Japan, Hong Kong and South Korea, helped the local bourse take on the pressure, they said.
A total of 1,539 stocks closed up and 1,548 were down, with 364 remaining unchanged.
The textile sector scored the highest gains, up 1.1 percent.
Cement shares closed up 1.0 percent, and plastics and chemicals were 0.7 percent higher, while financial, and machinery and electronics issues each rose 0.6 percent.
However, the construction sector fell 0.6 percent and paper and pulp shares lost 0.5 percent, while foodstuffs closed unchanged.
Despite Wall Street's three-digit overnight rise, the local bourse moved in a narrow range with small- and medium-cap stocks turning active.
Realtek Semiconductor gained 6.97 percent to close at NT$78.30, while rival King Yuan Electronics rose 4.96 percent to end the day at NT$14.80.
Oceanic Beverage jumped 6.85 percent to finish at NT$15.60 and Taroko Textile rose 5.13 percent to a NT$7.99 close.
The local market has posted significant gains on a strong rebound since the beginning of this month ahead of Wall Street's latest recovery.
As of Thursday, the market had gained almost 5 percent so far this month.
MediaTek gained 3.85 percent to end the trading session at NT$471.5 on a technical rebound from recent heavy losses due to its disappointing June
THE PHILIPPINES
Philippine share prices hit a fresh 29-month high on Thursday following the overnight rally in Wall Street that was driven by bullish earnings forecasts.
At the Philippine Stock Exchange, the local composite index rose 48.08 points, or 1.44 percent to 3,398.16--its highest since January 15, 2008 when it closed at 3,447.29.
The broader all-shares index went up 23.85 points, or 1.12 percent to 2,148, with only the mining and oil indices slipping by 0.38 percent.
Market breadth was positive as gainers beat decliners, 60 to 32, while 71 issues were unchanged. A total of 1.43 billion stocks worth P3.99 billion changed hands.
In addition to the pull of overseas markets, the investors' optimism towards the Philippines' economic prospects have also helped fuel the local stocks' ascent.
Asian currencies, including the peso, also benefited from the investors' upbeat sentiment that was brought about by the International Monetary Fund's hike in its global growth forecast, currency traders said.
At the Philippine Dealing System, the peso gained 12 centavos against the Dollar from Wednesday's 46.55 as it finished at 46.43 on Thursday.
The exchange rate opened at 46.37 and moved to a high of 46.48 and a low of 46.29, with total trading volume reaching $1 billion from $925 million the previous day.
The Peso will test the 46.20 to 46.80 range for the week, with bias leaning on the downside, traders said. However, Europe's problem is putting pressure on the local unit, they said.
SINGAPORE
Singapore share prices rose 0.7 percent on Friday, as investors became more confident of a global economic recovery, a sentiment boosted by the Bank of Korea's unexpected decision to raise interest rates.
The blue-chip Straits Times Index (STI) rose for a third straight session to break through the psychologically important 2,900 mark. It ended at 2,917.17, up 20.02 points from Thursday's close.
In the broader market, gainers outnumbered losers 336 to 157. Overall volume traded jumped to 1.92 billion shares from 1.25 billion on Thursday.
Central banks in South Korea, Malaysia, Taiwan and India have raised rates in the past two weeks, signalling greater confidence in the region's economic growth.
The Bank of Korea on Friday lifted its key policy rate by 25 basis points to 2.25%, its first tightening since August 2008.
Companies that depend on global growth and positive economic outlook were among the gainers on the Singapore Exchange.
Container shipper Neptune Orient Lines added 2.5% to S$2.06.
Singapore Airlines, which stands to benefit with higher passenger loads as the global economic recovery gains traction, rose 2.2% to close at S$14.82.
Keppel Corp added 2.1% to S$8.78 after Nomura said the rig builder may get new orders from Brazilian oil giant Petrobras later this year.
MALAYSIA
Share prices on Bursa Malaysia finished the week on a positive note Friday with sentiment boosted by the uptrend on Wall Street and confidence over economic growth, dealers said.
The FTSE Bursa Malaysia (FBM) Kuala Lumpur Composite Index rose by 8.28 points to close at 1,324.31. It opened 0.13 point better at 1,316.16.
The key index moved between 1,315.88 and 1,327.27 throughout the day.
Dealers said the index was lifted by gains on banking stocks following the increase in the Overnight Policy Rate by 25 basis points to 2.75 per cent yesterday.
Kenanga Research said the main justification for the rate increase was Bank Negara Malaysia's positive note that global recovery has continued in the second quarter, supported by robust and broad-based growth in most emerging economies, in particular Asia, and a moderate recovery in advanced economies.
"Along with the better manufacturing data in May, we reckon it would likely support a reasonably high gross domestic product growth in the second quarter," it said.
Another dealer said the rate increase would help banks boost earnings.
The Industrial Index increased 32.58 points to 2,633.85, Plantation Index gained 24.16 points to 6,273.94 and the Finance Index advanced 58.91 points to 11,951.67.
The FBM Emas Index rose 52.79 points to 8,930.88 and FBM70 Index increased 41.239 points to 8,928.27.
The FBM Ace Index, however, fell 8.12 points to 3,761.73.
Gainers outnumbered losers by 405 to 238 while 276 counters were unchanged, 444 untraded and 25 others suspended.
Volume advanced to 664.333 million shares worth RM1.44 billion from 532.634 million shares worth RM971.134 million yesterday.
Among active stocks, Time Dotcom increased five sen to 50 sen, Axiata rose two sen to RM7.58 and Scomi gained 1.5 sen to 40 sen.
In heavyweights, Maxis rose one sen to RM5.31, Tenaga increased three sen to RM8.45 and IOI Corp advanced four sen to RM5.10. Sime Darby, however, fell one sen to RM7.71.
Among banking stocks, Maybank rose two sen to RM7.58, CIMB gained four sen to RM7.09, Public Bank increased two sen to RM11.94, AMMB Holdings added five sen to RM5.07 and Hong Leong Bank rose 14 sen higher to RM8.75.
Main Market turnover increased to 604.881 million shares valued at RM1.427 billion from 489.382 million shares valued at RM963.515 million yesterday.
Volume on the ACE Market advanced to 31.402 million units worth RM5.011 million from 26.461 million units worth RM3.996 million on Thursday.
Warrants surged to 21.921 million shares valued at RM3.107 million from 14.23 million shares valued at RM1.706 million previously.
Consumer products accounted for 62.774 million shares traded on the Main Market, industrial products 113.083 million, construction 56.257 million, trade and services 193.692 million, technology 20.642 million, infrastructure 34.531 million, finance 59.434 million, hotels 486,900, properties 29.562 million, plantations 15.501 million, mining 45,400, REITs 18.754 million and closed/fund 118,000.
THAILAND
The Stock Exchange of Thailand (SET)composite index moved up 3.03 points, or 0.37 percent, to close at 820.60 points on Friday.
Some 6.44 billion shares worth 24.97 billion baht (about 780 million US Dollars) changed hands.
In Bangkok, energy shares were generally higher as oil rose towards $76 a barrel on Friday, heading for its biggest weekly gain since May. The biggest energy firm, PTT, was up 0.4 percent and top refiner Thai Oil was up 0.6 percent.
National carrier Thai Airways International was up 3.5 percent. Broker Trinity Securities said the stock was cheap, trading at a relatively low price-to-book ratio of 0.7 times, below the region's average of 1.5.
Thailand's current valuations were relatively cheap, with a 12-month forward price to earnings ratio of 10.8 against 11.1-13.7 in Southeast Asia, according to Thomson Reuters StarMine.
INDONESIA
Indonesian shares closed higher on Friday, boosted by foreign capital inflow that lifted banking sector shares.
The market index closed 27.988 points or 0.95 percent higher to 2,943.896 with transaction volume of 5.919 billion shares worth 4. 185 trillion Rupiah (about 426.4 million US Dollars).
Indonesia's Rupiah was little changed this week, halting a run of three weekly gains, as concern inflation will gather pace cooled demand for the currency.
The Rupiah has barely moved since the government on July 1 reported a 5.05 percent increase in the consumer price index for June, the biggest gain in 13 months. Bank Indonesia on July 5 kept its benchmark interest rate at a record-low 6.5 percent and Deputy Governor Budi Mulya said today that last month's pickup in inflation will prove "temporary" and the Rupiah is likely to resume appreciation.
The Rupiah traded at 9,063 per Dollar as of 10:27 a.m. in Jakarta, from 9,071 yesterday, according to data compiled by Bloomberg. It has fluctuated less than 0.2 percent each day so far in July, after strengthening in all but one of the last 10 months. The currency has gained 3.6 percent this year, after jumping 16 percent in 2009.
Bank Indonesia's Mulya said today he expects foreign direct investment to double this year from 2009 and loan growth is forecast to be 22 percent to 24 percent. Policy makers are not considering raising borrowing costs yet, he said.
The Jakarta Composite Index has gained 1.6 percent so far this week, buoyed by overseas investors' net purchases of $49.6 million of Indonesian shares in the last four days.
INDIA
The Indian markets closed near the day's high with gains of over 1 per cent to end the week on a positive note. The BSE Sensex closed at 17,833 up 181 points and the NSE Nifty ended at 5,352 up 55 points. For the week, the Sensex gained 2.15 per cent and the Nifty added 2.19 per cent (provisional).
The Dalal Street tracked the global markets that rose following an upbeat mood on the Wall Street. The number of jobless claims dropped in the US. Investors took to buying stocks sensing the revival in the world's biggest economy was on track.
FMCG was the only sector that saw selling pressure in today's session. Investors dumped defensive stocks like HUL (down 1.26 per cent) in favour of high beta stocks like DLF (up 4.73 per cent) and Hindalco (up 2.52 per cent).
The BSE realty index rose 2.48 per cent followed by Teck and metal stocks. The small cap index underperformed with gains of 0.38 per cent. Mid caps rose 0.90 per cent. Overall, 52 per cent stocks advanced on the BSE indicating that the market breadth continued to be positive.
For the week, the Teck index rose 5.8 per cent, consumer durables 5.4 per cent and the IT index gained 4.5 per cent.
On the Sensex, 22 stocks advanced against 8 declines. Bharti Airtel was the top gainer up 9.70 per cent. According to reports, Singapore's Singtel bought 15.88 lakh shares of Bharti from open market.
HDFC Bank added 3.09 per cent and Reliance Comm gained 2.82 per cent. ACC, Reliance Infra and TCS declined.
Telecom stocks were the flavour of the day after Credit Suisse's report stated that concerns on 3G auction fee was overstated and upgraded telecom stocks. Idea Cellular rose 13.31 per cent. Tata Teleservices gained 5.54 per cent.
Sugar stocks surged on expectations of a decontrol. Dwarikesh Sugar rose 11.59 per cent, Bajaj Hindustan gained 4.84 per cent, Balrampur Chini added 3.87 per cent and Shree Renuka advanced 3.12 per cent.
Among news driven stocks, Steel Strips Wheels rose 9.86 per cent. The company received an order from Audi for exports in Germany.
HCL Infosystems gained 1.59 per cent. The company has bought 60 per cent stake in Dubai based NTS. Titagarh Wagons gained 2.37 per cent. The company has got approval for acquisition of a French company. Petronet LNG rose 4.27 per cent. Citi has upgraded the stock to buy.
For the week, Bharti gained 16.3 per cent followed by Idea that rose 15.1 per cent. BPCL and M&M gained more than 6 per cent each. ACC declined 3.6 per cent, HUL 2.2 per cent and NTPC fell 2.2 per cent for the week on Nifty. Among the midcaps, Indiabulls Finance gained 17.2 per cent, Blue Dart 16.3 per cent and Deccan Chronicle added 12.9 per cent.
India's net direct tax kitty for the first quarter of the current fiscal swelled by 15.49% to Rs.68,675 crore, up from the Rs.59,465 crore in the year-ago quarter. Collection in Corporate Taxes grew by 21.65% to Rs.43,439 crore as against the Rs.35,709 crore in the same quarter last year. That of Personal Income Tax that includes STT, BCTT and residual FBT, was up by 1.24% at Rs.24,075 crore from the earlier Rs.23,780 crore.
The collection of corporate advance tax for the first quarter soared by 31.4% to Rs.26,876 crore compared to the Rs.20,456 crore in the corresponding quarter last year. It was the fastest growth that the country witnessed since 2005.
However, collection under Securities Transaction Tax (STT) was down by 25.21% in the first quarter at Rs.1,094 crore from the Rs.1,462 crore in the same period last year.
AUSTRALIA
The Australian share market hit an eight-day high Friday notching up its first weekly gain in three weeks, with energy, materials, financials and industrials rising on the back of further strength on Wall Street.
Corporate activity remained in focus, with Santos surging on reports that Royal Dutch Shell was looking to take a stake in the Santos-led Gladstone LNG project.
The benchmark S&P/ASX 200 closed up 39.4 points, or 0.9%, at 4396.3 after rising as high as 4397.5. However, share trading trading volume was very light before the weekend.
Corporate activity boosted Centennial Coal, Sandfire Resources, CSR, Sigma Pharmaceuticals and Extract Resources this week, while Santos surged on speculation of a deal.
Santos rose 9.7% to A$14.00 on media reports it was in talks with Royal Dutch Shell about Shell taking a 30%-35%, or A$2 billion, stake in the Santos-led Gladstone LNG project. Santos, which didn't mention Shell, said it was in discussions with a number of parties about LNG sales and equity in the project.
Origin Energy, which has a coal seam gas to LNG joint venture project with ConocoPhillips in Gladstone, rose 2.8% to A$15.50 on the Santos news.
Among financials, major banks rose 0.5%-1.2%, Macquarie jumped 2.8% and AMP rose 1.1%.
In materials, BHP Billiton rose 0.7% and Rio Tinto rose 1.6%.
RBS reiterated its 5300 year-end target for the S&P/ASX 200. "Current risk aversion in the Australian equity market is a good investment opportunity, as FY11 earnings seem well supported. We also believe global pressures, while significant, are manageable," the broker said.
"Corporate profitability should not be under-estimated and in time will be the micro issue that takes centre stage, pushing macro issues to the background. Following two years of savage declines in expectations, and given the fact that we are entering the first year of synchronised positive global economic growth, Australian equity consensus estimates appear both defensible and achievable to us, at 24% growth forecast for FY11," it added.
Australia's unemployment rate remained steady in June but managed to beat expectations, official figures showed on Thursday. The number of jobs added during the month also grew more than expectations.
The Australian Bureau of Statistics said the unemployment rate stood at a seasonally adjusted 5.1% in June, while May's unemployment was downwardly revised to 5.1% from 5.2%. A year ago, the unemployment rate stood at 5.8%.
The unemployment rate among males was unchanged at 5%, while that among females slid to 5.2% from 5.3%. Some 598,400 Australians were unemployed by the end of June, a decrease of just 200 from May. The number of people looking for full-time work decreased by 11,000 to 424,700, while those looking for part-time work increased by 10,700 to 173,700.
At the same time, the total number of employed people increased by 45,900 to 11.1 million - higher than forecasts for a 15,000 increase. Full-time employment increased by 18,400 to 7.79 million while part-time employment was up by 27,500 to 3.31 million.
The Labour force participation rate, which is the proportion of the country's working-age population that is employed, increased to 65.2% from 65.1%. The aggregate number of hours worked decreased by 6.4 million to 1.57 billion hours.
Economists at Westpac Bank said the decline in the headline unemployment rate is gradual and likely to reach 5% by end-2010. They pointed out that while the headline job growth figures surprised on the upside, trend figures were still slowing. In trend terms, jobs growth eased to 20,400 in June from 24,900 in May.
The strong rise in the employment headcount is more good news for the government, which saw the economy grow 0.5% between January and March. Last year, the government projected the unemployment rate to reach as high as 8.5% before falling. But the Labour market has recovered sooner, with the unemployment rate reaching a peak of just 5.8% in June last year.
The solid numbers also keep alive the chance of an interest rate hike by the Reserve Bank of Australia next month. On Tuesday, the bank decided to hold its cash rate steady at 4.50% offering businesses and households a reprieve for the second month running. The RBA hinted that its next move would depend on the June quarter inflation figures, which are due at the end of July.
Latest inflation data from the statistical office showed that the nation's annual inflation rate was 2.9% in the March quarter, close to the 3% ceiling of the bank's target range. Meanwhile, a gauge of inflation from TD Securities and Melbourne Institute showed earlier this week that the indicator rose 3.6% in June compared to a year ago, suggesting at a higher inflation print in the June quarter.
Australia has benefitted hugely from surging demand in China and other Asian economies for its large mineral resources. Official figures released on Tuesday showed that the country's trade balance recorded a large surplus of A$1.65 billion in May compared to an upwardly revised A$1.12 billion surplus in the previous month. The rise was fueled by a large increase in exports of commodities such as coal, iron ore and non-monetary gold.
But various other domestic economic indicators have cooled off in recent times on the back of the RBA's aggressive rate rises. Retail sales slowed for the third consecutive month in May while building approvals and housing sales declined. Purchasing managers' surveys showed that Australia's manufacturing and services growth slowed down in June.
NEW ZEALAND
New Zealand shares ended higher late Friday, although light trading pointed to still highly cautious investors opting to remain on the sidelines.
The benchmark NZX-50 ended up 0.7%, or 21 points, at 3005.25. The index added 2.3% over the course of the week.
Auckland Airport shed 0.5% to NZ$1.92 with some investors choosing to take some profit after its shares gained Thursday in the immediate aftermath of announcing it is taking a 25% stake in Queenstown Airport in a strategic alliance aimed at boosting tourism growth. Some investors were also unsure about the impact such a deal would have on the company bearing in mind its small size.
Bellwether Telecom continued to fare better, once again benefiting from the improved sentiment. The stock added 2.7% to NZ$1.92. Brokers said, however, the stock is likely to range trade until there is more certainty about its involvement in the government's ultrafast broadband rollout.
Sky Television added 1.7% to NZ$4.72. Earlier Friday, Auckland-based Sky TV, 43.7% owned by News Corp., that owns Dow Jones & Co., publisher of this newswire and The Wall Street Journal, announced it was buying the assets and liabilities of outside broadcast operator OnSite Broadcasting Ltd., or OSB New Zealand, from Australian media company Prime Media Group for NZ$13.5 million.
Medical devices maker Fisher & Paykel Healthcare was hurt by the higher New Zealand Dollar, shedding 0.6% to NZ$3.09.
The New Zealand Institute of Economic Research's latest quarterly survey of business opinion showed that confidence among businesses fell to 28% in the June quarter from 36% in the March quarter. The think tank said the fall in confidence suggested that the recovery may be stumbling.
Of concern is a renewed weakness in manufacturing, construction, and investment intentions, NZIER said. "Firms are less optimistic as the economy has yet again failed to deliver on expectations of a strong recovery. The recovery may be stalling," said Shamubeel Eaqub, principal economist at NZIER.
The think tank said the signs of a faltering recovery were worrying at a stage when the economy should normally be recovering strongly. "Slowing momentum of global economic growth and financial market dislocation add risks to the economic outlook," it said. "In this environment the [Reserve Bank of New Zealand] needs to take care not to stifle already anaemic domestic demand and derail a fragile export recovery."
The survey's Labour market indicators continued to improve in the June quarter, with job shedding easing to -7% from -15% in the previous quarter. "However, hiring intentions are not picking up," the think tank said. "The lagged effects of Labour market weakness will dampen wages for at least another year." |
| Global Commodities
'Food for thought' or 'a Grain of truth' ..... |  The price of white sugar jumped 11% last week as a shortage of available supplies squeezed the market.
The Thai sugar board on Friday said the country would hold an auction on Tuesday to buy back 100,000 tonnes of sugar that had been earmarked for export.
Although the quantity is small relative to the size of the international sugar market, the fact that Thailand, the world's second-largest exporter after Brazil, has run short is a sign of the tightness in the market and has boosted prices.
While Brazil and India are expected to produce large crops, availability of the sweetener for immediate delivery is extremely tight. That is because consumers have been rushing to restock after running down inventories when prices spiked to a three-decade high in January.
Liffe August white sugar hit a fresh four-month peak of $623.50 a tonne on Friday, up 33% since the start of June. ICE October raw sugar, on the other hand, was flat on the week at 16.71 cents a Pound.
Elsewhere, soyabeans rose to a six-month high after the US Department of Agriculture said the amount of last year's beans left in storage will be 175m bushels by the end of August, down 10m bushels from its previous estimate. The agency also raised its forecast of US soyabean exports this year to a record 1.46bn bushels on greater sales to China, the world's top importer of the oilseed.
CBOT July soyabeans rose 6.6% on the week to $10.26 a bushel, the highest since January.
Corn wavered after the USDA said stronger consumption would reduce stockpiles.
Elsewhere, Nymex August West Texas Intermediate crude oil rose $3.50, or 4.9%, to $75.64 a barrel. Gold ended the week flat at $1,210 a troy ounce.
Not so long ago, hedge funds would send their most junior analysts to the seminars that bullion bankers hosted.
Gold, for much of the past two decades, was the ultimate dreary asset - of interest only to central bankers and miners.
Now those same bankers are struggling to find time in their diaries to fit in many of the hedge fund industry's biggest players.
In mid-town New York, funds that employ barely 100 staff are finding themselves with gold holdings larger than those of some developed nations.
Paulson & Co, one of the world's most successful hedge fund managers, denominates a third of its $33bn of assets under management in a share class bolstered by huge positions in the gold market.
In fact, gold is the firm's largest single position. The $3.4bn stake in the SPDR Gold Trust, a listed US instrument backed by physical gold, equates to a greater tonnage of the metal than Australia holds.
The reason for this is simple. Amid fears that the global economy could be heading for a double-dip recession - and as financial markets continue to gyrate - some hedge managers are becoming increasingly bullish about the precious metal. They are drawn to gold's traditional status as a store of value in crises.
Paulson & Co is the largest hedge fund to back gold, but others including Soros Fund Management, Tudor Investment Corp, Greenlight Capital and Third Point, are now converts.
The consensus view among the funds is that the price of gold - trading at around $1,200 an ounce - will rise to well above $1,500 before it suffers any sizeable correction.
This expectation of further prices rises (gold has increased four-fold since 2002) is based in part on the view that bullion provides a hedge against a rise in inflation.
Some fund managers believe a sharp jump in inflation is unavoidable as a result of central banks' monetary easing policies, which have, in effect pumped more money into the economy.
Historically, they say, the correlation between gold and inflation is hard to ignore.
Over the past half century, the gold price has tracked the amount of money in the world - measured broadly in terms of "M2" monetary supply - fairly accurately, peaking at times of inflation, such as the mid-1970s and early 1980s.
The hedge funds argue that the recent swelling of the monetary base will translate into a spike in monetary supply. When it does, gold prices will follow.
In common with other investors, hedge funds are also keen to hold their gold in physical form - either as bars in a vault or as an investment in an exchange-traded fund backed by physical assets.
Paulson & Co remains optimistic that the trade is not crowded. In a presentation to potential investors, salesmen from the firm point out that gold ETF holdings amount to $78.3bn,a fraction of the $2,849bn held by US money market funds. The implication is that, with massive unconventional monetary easing under way, gold will become the ultimate store of value.
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| Global Currencies
In for a Penny, in for a Pound ..... |
The Australian Dollar surged this week as strong domestic data crushed speculation of interest rates cuts by the end of the year and a rebound in global stocks boosted the prospects of the commodity-linked currency.
The Australian Dollar was lifted as employment figures showed the country's economy added three times more jobs than expected in June.
This saw the interest rate market move to quash expectations that the Reserve Bank of Australia, which was the first leading central bank to raise interest rates after the financial crisis, would move to cut rates by the end of the year as the global economy slowed.
Indeed, the Australian Dollar was also boosted after the RBA struck a less dovish tone than expected after its policy meeting, saying elevated commodity prices would continue to support domestic income and demand growth and keep growth rates around trend levels.
The news helped ease concerns over the prospects for the Australian Dollar sparked by recent weak economic data from the US and China that raised fears over the sustainability of the global economic recovery.
The Australian Dollar was also lifted along with other commodity-linked currencies by a rebound in global equity markets.
Investor confidence was boosted by an upbeat earnings outlook from State Street, the US bank, and a pick-up in US retail sales.
Over the week, the Australian Dollar jumped 4.1% higher to $0.8761 against the US Dollar and climbed 5.1% to Y77.52 against the Yen.
Other commodity-linked currencies also advanced with the New Zealand Dollar climbing 3% to $0.7088 over the week, the Canadian Dollar gaining 2.9% to C$1.0314 and the South African rand climbing 2.5% to R7.5540.
Increasing investor optimism also boosted Asian currencies with the South Korean won in the vanguard as the Bank of Korea delivered an unexpected interest rate rise.
Over the week, the won rose 2.7% to Won1,195.95 against the Dollar while the Malaysian ringgit climbed 0.9% to M$3.1930 and the Taiwanese Dollar gained 0.5% to T$32.05.
Meanwhile, the Euro also climbed 0.5% to $1.2622 against the Dollar as haven demand for the US currency waned in the face of rising investor optimism.
The single currency was also boosted as fears over the health of the Eurozone financial system eased as the European Central Bank announced plans for stress tests of banks in the region.
Over the week, the Euro also climbed 1.3% to Y111.72 against the Yen.
Elsewhere, the Yen lost 0.8% to Y88.46 against the Dollar as haven demand for the Japanese currency waned.
However, the Yen did rally close to an eight-month high against the Dollar on Tuesday after data showed China had bought a record amount of Japanese government bonds from January to May.
Sterling came under pressure as weakening UK economic data, including the wider-than-expected May trade deficit, raised concerns over the pace of Britain's economic recovery.
The Pound fell 0.6% to $1.5110 against the Dollar on the week and dropped 1.2% to £0.8352 against the Euro.
To close currencies here in China, the RMB was higher against the US Dollar late Friday afternoon because the People's Bank of China set the Dollar-RMB central parity lower following the Dollar's weakness against the Euro overnight.
On the over-the-counter market, the Dollar was at CNY6.7735 around 0930 GMT, down from Thursday's close of CNY6.7761. It traded between CNY6.7700 and CNY6.7751.
The central bank set the central parity at 6.7753, down slightly from 6.7768 Thursday after the Euro rose to $1.2703 in New York trading from $1.2648 late Wednesday. |
| China
Key news eminating from China this week ..... |
 China says that it will keep the exchange rate of its currency, the RMB, "basically stable" with conditions not right for a large appreciation. The State Administration of Foreign Exchange, which serves as the country's foreign exchange regulator, said that expectations for a rise in the value of the RMB had been cooling as shown by the easing of foreign currency inflow pressures. "We will apply dynamic management and adjustments to the floating range of the RMB's exchange rate, maintaining its basic stability at a reasonable and balanced level, and promote basic balance in international payments," SAFE said in a Q&A statement on its website. Chinese authorities have prevented the RMB from strengthening against the Dollar since July 2008 to help exporters cope with the global financial downturn. The currency appreciated 21% in the three years after after a peg to the Dollar was scrapped in July 2005 and replaced by a managed float against a basket of currencies including the Euro. Last month, the government said it would loosen its exchange rate regime, although it ruled out a large one-off revaluation. China's trading partners have long criticized that the Chinese government deliberately undervalues its currency in order to boost exports. SAFE also forecast China's current account surplus to shrink further this year, as it seeks to rebalance its economy more towards domestic consumption. The current account surplus narrowed to 6.1% of China's one-year national output in 2009 from 9.6% in the previous year. The SAFE statement is the fourth in the line of a Q&A series, which is being published as part of an effort to better communicate the country's exchange rate policy stance and the management foreign currency reserves to the public. In an earlier statement, the regulator said it was confident of achieving stable returns in the long run from its foreign currency reserves, despite the fall in the value of the U.S. Dollar. China has the largest pool of foreign exchange reserves in the world, valued at around $2.5 trillion. ********************************** China is planning to extend its resource tax scheme to cover the entire nation in a bid to boost local economic development, reports said on Thursday citing a government official. Du Ying, vice chairman of the National Development and Reform Commission, was quoted as saying the government will extend its tax scheme on oil, gas and coal extraction, although no timeline has yet been set to when the tax will come into effect. The resource tax, first introduced last month in the Xinjiang province, levies 5% on crude oil and gas sales. Premier Wen Jiabao has also pledged to cut the corporate investment tax for the poorer Western regions of the country, to 15% from the current 25%, according to state media. Du said the levy rate could vary from region-to-region. The government hopes to raise greater fiscal revenue which will then be invested to develop infrastructure in remote areas such as Inner Mongolia and Xinjiang. ********************************** China's State Administration of Foreign Exchange said on Wednesday that gold cannot become a main channel for the investment of foreign exchange reserves. As the supply is limited, procuring large quantity of gold will push up its prices. The country has raised its holdings of gold by more than 400 tonnes to 1,054 tonnes. In response to a question, SAFE said China will not use its reserves as an "atomic weapon." Such concerns are unnecessary, the agency said in a question and answer statement posted on its website. The regulator urged the U.S. and other major nations to adopt responsible measures to maintain the value of their currencies. These nations need to exit from monetary stimulus in a reasonable manner and should rely less on deficit spending. Since late 2009, the Dollar appreciated 20% against the Euro. The Dollar will possibly appreciate against other currencies, said SAFE. Increasing or decreasing its investment in U.S. Treasury bonds are normal operations. Further, the regulator said it is making investment as a financial investor and does not seek to gain control over the firms in which it is investing. Yesterday, SAFE said it is confident of achieving stable returns in the long run from its foreign exchange reserves. The decline in the value of U.S. Dollar will not result in any real loss from Chinese foreign reserve investment. The regulator said currency translation losses are only paper loss and it will not realize any loss unless the central bank exchange it back into RMB. ********************************** China is not well prepared to exit from its loose monetary policy stance and active fiscal policy, Yang Guozhong, head of the central bank's business management department, wrote in an article published in the China Finance magazine, reports said Wednesday. The government should exit monetary stimulus first and then wind down fiscal policy, the official noted. Yang said excess liquidity is the major problem and credit quotas are not the fundamental solution. The People's Bank of China should take market oriented measures like open market operations, reserve requirements and interest rates at an appropriate time. Elsewhere, PBoC's research bureau director Zhang Jianhua said negative real interest rates are unlikely to affect the economy in the short term, but they would trigger resource misallocation in the longer term. Further, the Chinese central bank must deal with excess liquidity, Zhang wrote in an article published in the China Daily on Wednesday. |
| Summary
The coming week looks like ..... | 
The Euro's rebound could continue into next week as fears about Europe's bank and debt woes ease, and as technical momentum stays positive after the currency climbed to a two-month high against the US Dollar.
Greater clarity on the European bank stress tests, strong economic data out of the Euro zone, along with growing worries about a US recovery have pushed the Euro up more than 6% since it hit a four-year low of $1.1875 in early June.
While analysts reckon the impact of the debt crisis on the Euro zone's financial system and the economy will remain evident for a long time, they said much of the bad news had been priced in during the Euro's rapid fall earlier this year.
On Friday, the Euro hit a two-month high of $1.2722, according to Reuters data, and was last at $1.2646 Euro, down 0.4% as investors booked profits before the weekend.
The Euro has risen 0.7% against the Dollar this week at current prices and gained 3.4% so far this month.
Investors are awaiting the results of European bank stress tests, which are scheduled to be released on July 23.
Euro zone finance ministers are expected to discuss next week the policy response countries will take if the tests show problems.
Some analysts said the Euro's recent rally is nothing more than a short-term bounce, pointing to the wide gap between 1-month and 1-year risk reversals in the Euro/Dollar, which indicates traders are still willing to pay a higher premium to buy the right to sell the Euro in coming months.
Investors will also scrutinize key economic data out of the United States and China next week for clues about the outlook for the global recovery.
Recent US data showing slowing growth in the services and manufacturing sector, weakness in housing and a stagnating jobs market has worried investors, although most economists say it is too early to call a "double-dip" recession.
US economic indicators due out next week includes retail sales, Empire State manufacturing activity, producer and consumer inflation, net capital flows, and consumer sentiment. The minutes from the Federal Reserve's last meeting will also be released.
If US data is consistent with the idea growth is going to be more moderate, then that might be something that proves less helpful to the Dollar than more.
In China, second-quarter gross domestic product data is scheduled for Thursday, with all 32 economists polled by Reuters predicting a moderation in China's year-on-year growth rate, though the expansion rate could still be in the double digits. June exports and imports figures are due out Saturday.
Despite expectations for a slower growth from China, a large number of traders like the Australian Dollar. The Aussie rallied 4.1% versus the greenback this week, the biggest weekly rise since May, 2009.
As long as markets are willing to put on just a bit of risk, then the Aussie versus the US Dollar is a good play both for the carry and for currency appreciation it is felt.
Investors also will closely watch the Dollar/RMB exchange rate after the largest US Labour group urged Congress on Friday to pass legislation to fight China's currency practices, a day after the Obama administration again declined to label Beijing a currency manipulator.
Next week looks to be another quiet on for the EU, though it's possible there could be another development on the psychological front. Furthermore, investors will begin anticipating the stress test results.
Investors will likely be focusing on the key data from China and the US, beginning with China's trade balance figure due tomorrow.
That being said, if there are more signs of China slowing then this could weigh on the risk trade, and vice versa.
Investors will also be reacting to the beginning of US earnings season and will be looking to see if the EU fiscal crisis has had a noticeable impact on corporate revenue.
Personally, I see earnings coming out once again 'better than expected' (we are going round in circles with those three words it seems), I see markets pushing higher for all the wrong reasons.
All told, markets this week gained upward of 5.5% in the main and it will be critical if markets are to show some form of a sustained recovery, that they hold on to those gains.
It is certainly going to be an interesting week once again. |
As always, I will keep you posted with major developments as/when they occur in the week ahead.
In the meantime, I wish you all a very pleasant weekend.
Market Newsletter Written By
Adrian Page
Managing Director
Financial Page International | |
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