2012.06.07 12:07:13 Global FX & Fixed Income News

SNAPSHOT: -Dollar gains a touch; Treasury yields edge lower; stock futures higher; ICE July Brent 74c lower at $99.90, Nymex July light, sweet crude down 35c at $84.67; spot gold up 0.2% at $1,622.51 -Watch for: initial jobless claims, Ben Bernanke testimony, Fed speakers Top News: China CIC Chief Sees Risk of Euro Breakup; Cloudy US Outlook May Prompt Fed To Act; IMF Says Spanish Banks May Need EUR80B MARKETS OUTLOOK: FOREX: There was some improvement in sentiment in currency markets as investors moved into risk currencies, though there was a pull back as the day progressed. By 0410 ET, the euro had eased to $1.2548 from $1.2581 late Wednesday in New York while the dollar was at 79.28 against the yen, compared with 79.21. Barclays sees EUR/USD topping signs ahead of 1.26, although the bank said a break above 1.2650 would warn of a short-squeeze toward 1.2820 before selling interest would return. BONDS: U.S. Treasurys edged marginally higher in London trade but the market remained quiet ahead of the U.K. MPC rate and bond-buying decision. The September contract was 4/32 higher at 133-135 and the 10-year cash yielded 1.63%. U.S. Treasurys were being supported by comments from various Fed officials that the worrying situation in Europe may prompt it into taking additional steps to support the recovery in the U.S. Markets were also looking ahead to Ben Bernanke's testimony to Congress later Thursday for any hints of further stimulus measures. The cost of insuring corporate European debt against default was lower Thursday, as investors hope central bankers will soon intervene to boost global growth and that European leaders will find a solution for the Spanish banking crisis. Around 0500 ET, the iTraxx Europe index was at 173/174 basis points, two basis point tighter from the close Wednesday, according to data-provider Markit. The Europe index comprises 125 high-grade borrowers, 25 of which are banks and insurers. The Crossover index, which tracks the credit default swaps of 40 mostly sub-investment-grade European corporate borrowers, was eight basis points tighter at 703/706 basis points. EQUITIES: U.S. stocks are seen opening higher Thursday, as investors welcomed the ECB's readiness to act should the financial crisis continue to worsen and in anticipation of Federal Reserve Chairman Ben Bernanke's testimony on the economic outlook, said Markus Huber at ETX Capital. "After a series of much worse-than-expected U.S. economic data and with job growth having slowed substantially over the past few months, many are confident that Bernanke will pave the way for further stimulus by the Fed in the not-so-distant future," added Huber. In European markets, the Euro Stoxx 50 was up 0.6% at 2150.33, edging higher following the results of a Spanish bond auction. Spain sold EUR2.074 billion of bonds, which is just above the EUR2 billion target. "Yields are still significantly above the levels seem when these bonds were last auctioned," said Rabobank. "A strong set of bid/covers as was expected, probably driven by domestics. Spain can clearly still borrow in the markets but it must pay high yields for the privilege," it added. Banks were the biggest gainers, with the Stoxx Europe 600 index for the sector up 1.2%. COMMODITIES: Crude futures fell back in European trade, with Brent tipping below the $100 a barrel mark again, as traders eyed macro-economic events for direction ahead of Ben Bernanke's testimony on the U.S. economic outlook. "For now, crude will trade off macro events while we do not expected a sustained rebound, as we consolidate above June lows in very jittery trading," said Andrey Kryuchenkov, vice president of commodities research at VTB Capital. Spot gold was up slightly in Europe but treading water ahead of Bernanke's testimony to Congress. Gold investors will be on the lookout for signs that further stimulus measures may be on the table. "We expect to see another roller-coaster ride on Thursday when Bernanke's remarks hit the wires," said INTL FCStone analyst Edward Meir. =======TODAY'S CALENDAR======= ET PERIOD 0645 US Boston Fed Pres Rosengren speech 0700 UK Jun Interest rate decision 0830 US Jun 2 Unemployment Insurance Weekly Initial Claims 0830 US Weekly Export Sales 0900 US Treasury Secy Geithner gives remarks at awards ceremony 0945 US Jun 3 Bloomberg Consumer Comfort Index 1000 US 1Q Quarterly Services 1000 US Ben Bernanke testifies at Joint Economic Committee 1000 CAN May Ivey Purchasing Managers Index 1000 US May 26 DJ-BTMU U.S. Business Barometer 1030 US Jun 1 EIA Weekly Natural Gas Storage Report 1200 US Atlanta Fed President Lockhart speech 1300 US Inter-American Dialogue 30th Anniversary Gala 1315 US Minneapolis Fed President speech 1500 US Apr Consumer Credit 1530 US Dallas Fed President Fisher speech 1610 US Chicago Fed President Evans interview on CNBC 1630 US May 28 Money Stock Measures 1630 US Jun 6 Federal Discount Window Borrowings 1630 US Jun 6 Foreign Central Bank Holdings 1950 JPN 1Q 2nd Prelim Quarterly GDP Estimates ============================== TOP STORIES OF THE DAY: WSJ: Probe Widens Into Mortgage Lenders Federal officials are broadening their investigations of mortgage lenders that use a popular federally backed mortgage program, a move that could force more banks to pick up some of the rising tab for losses at the Federal Housing Administration. WSJ: New Risk to Europe's Growth: Banks Cut Lending to Cities Facing tighter solvency rules, European banks have cut back lending to regional governments such as that of Chartres, France, for their infrastructure investments, posing an obstacle to employment and economic growth. China CIC Chief Sees Risk of Euro Breakup The head of China's giant sovereign-wealth fund sees mounting risks of a breakup of the euro zone and says China Investment Corp. has scaled back its holdings of stocks and bonds across Europe. Cloudy US Outlook May Prompt Fed To Act Risks to the economic outlook may require the Federal Reserve to take additional steps to protect the fragile U.S. recovery, the central bank's vice chairman warns. Oil Prices Pressure Airline Profits The global airline industry will face a tough second half and profitability will remain under pressure amid high oil prices, a senior executive at the International Air Transport Association said. 9 Regulators Grilled on J.P. Morgan The "Volcker rule" designed to rein in banks' risky trading would have forced J.P. Morgan to examine its money-losing trades, Fed governor Daniel Tarullo said at a hearing. Global Uncertainty Dragging On Growth Uncertainties about the future of the global economy are impacting the way market participants act, and becoming a drag on growth, a top Fed official says. Swiss FX Reserves Surge In May Value of the Swiss National Bank's foreign currency reserves surge to $317.6 billion in May, central bank data show. Stronger Euro-Zone Countries Must Do More Stronger euro-zone countries should do what they can to contribute to more vigorous economic growth in the region, Norway's finance minister tells Dow Jones Newswires. IMF Says Spanish Banks May Need EUR80B IMF estimates the Spanish banking sector needs at least EUR40 billion and possibly EUR80 billion in new capital. Bailout Right Choice For Spain If Spain were to ask for a rescue package it would be the intelligent choice and would help restore investors' confidence in the country's banking sector, ECB's Ewald Nowotny says. RIM's Patchwork Smartphone Research In Motion executives are racing to cobble together a series of recently acquired or licensed technologies into a device that can compete with the iPhone. Capital Flows To Emerging Markets To Fall By $100B The Institute of International Finance expects net capital flows to emerging markets to decline in 2012, as Europe's debt crisis takes its toll on the global economy. -By Paul Larkins, Dow Jones Newswires; 4420-7842-9319; paul.larkins@dowjones.com (END) Dow Jones Newswires June 07, 2012 06:07 ET (10:07 GMT)