2012.06.01 17:45:56 Brazil's Mantega: Industry Shows Signs Of Improvement In 1Q

SAO PAULO (Dow Jones)--Brazil's struggling industry showed signs of life in the first quarter, but weak performance by the agricultural sector undermined gross domestic product growth, Finance Minister Guido Mantega said Friday. Earlier Friday, the Brazilian Institute of Geography and Statistics, or IBGE, said that Brazil's economy expanded by 0.8% in the first quarter compared with the first quarter of 2011. That was the lowest pace of growth since the third quarter of 2009, when gross domestic product shrank 1.5%. Latin America's largest economy also grew 0.2% from the fourth quarter of 2011. Speaking to reporters in Sao Paulo, Mantega said that the Brazilian economy's performance in the first quarter repeated that seen in the fourth quarter of 2011. The biggest positive was the 1.7% growth posted by Brazil's struggling industrial sector in the first quarter from the fourth quarter, which was "good news," Mantega said. That was industry's best performance in four quarters, he added. Brazil's industry has stagnated since mid-2011 as the ongoing European debt crisis sapped international demand for locally produced manufactured goods, while a stronger real currency also caused a flood of cheap imports at home and made Brazilian goods less competitive in global markets. Industry is showing improvement, indicating that tax cuts and other measures aimed at stimulating output at the country's mines and factories are having an effect, Mantega said. "Industry will have a better performance than last year," Mantega added. A sharp decline in financial activity was a black mark in the first quarter, Mantega said. "The banks were not lending, had weak activity, but this should improve," the finance minister said. Brazil is already showing signs of ramping up economic activity in the second quarter, thanks to record-low unemployment, rising wages and greater access to credit, Mantega said. The finance minister expects Brazil to reach annual growth rates of between 4% and 4.5% in the second half of 2012. "The level of economic activity is accelerating, starting from May," Mantega said. The impact of the Brazilian Central Bank's recent series of interest rate cuts, which have brought the Selic base interest rate to a record-low 8.5%, will start having a bigger impact in the second quarter, he added. The recent depreciation of the real currency against the U.S. dollar will also be more favorable in the second quarter, Mantega said. "The second quarter will have greater growth than the first quarter," Mantega said. Despite signs of accelerating activity, Mantega said that Brazil remains ready to inject more stimulus into the economy--especially to boost investments. "Our measures to stimulate investments will be along monetary lines, given that we have space to reduce the Selic," Mantega said. In addition, Brazil will likely unveil fresh stimulus measures for businesses, while new industrial sectors are under consideration for payroll tax breaks, the minister said. -By Rogerio Jelmayer and Jeff Fick, Dow Jones Newswires; 55-21-2586-6085; Jeff.Fick@dowjones.com (END) Dow Jones Newswires June 01, 2012 11:45 ET (15:45 GMT)

2012.06.01 17:43:35 ROUNDUP: Analyst Predictions For The ECB Meeting

By Laura Clarke Of DOW JONES NEWSWIRES LONDON (Dow Jones)--As the European Central Bank mulls the worsening economic landscape and heightened euro-zone fears, observers have their ears to the ground to determine what the central bank might say when it updates markets on policy next Wednesday. A rate decision from the ECB at 1145 GMT is followed at 1230 GMT by a press conference hosted by ECB President Mario Draghi. Here is a rundown of what some analysts and economists expect from the ECB and the currencies market. DANSKE BANK: Expects the ECB to cut its main refinancing rate by 25 basis points, taking the rate from 1% to 0.75% as recent euro-zone growth indicators have deteriorated. Thinks a cut is already partly priced in the market, even though the consensus among analysts is for unchanged rates. It adds that the threshold for any additional non-standard measures is "very high" this side of the Greek elections on June 17 and the European Union growth summit on June 29. If market sentiment worsens on Greek or Spanish concerns, this would trigger additional non-standard measures such as longer-maturity long-term refinancing operations, or LTROs, at future meetings, it says. BNP PARIBAS: Economists here predict a 25-basis-point rate cut from the ECB. "This is likely to be bearish for the euro," it says. It thinks the euro could fall to $1.22 against the dollar in the event of a rate cut. CREDIT AGRICOLE: Expects the ECB to cut its main refinancing rate by 25 basis points while leaving the deposit rate at 0.25% because of easing inflationary pressures. It says that forecasts remain skewed towards "a delayed monetary response," not least because the ECB might want to keep some ammunition for after the Greek elections. It says the ECB is likely to contemplate fresh non-standard measures such as a new LTRO, with an announcement possible at the July meeting. BROWN BROTHERS HARRIMAN: Thinks there could be a chance that ECB will cut rates following the string of poor euro-zone economic data. It suspects the market is underestimating the risk that the ECB will respond to poor economic fundamentals by way of a rate cut to stem the flow. "Draghi has shown he can take decisive action," it says. NOMURA: Assigns a 30% probability that the ECB will cut rates but thinks the ECB is more likely to keep its powder dry until there is more clarity on Greece's euro-area membership. In this case, a rate cut could come in July with some added liquidity-related stimulus that would be euro-positive. In the worst-case scenario, if financial-market conditions continue to deteriorate between now and next Wednesday, it thinks the ECB will be forced to respond with a more drastic policy response, including at the very least a rate cut. SOCIETE GENERALE: Is less than convinced that the ECB will cut rates but thinks this is an opportunity for the ECB governing council to take stock. "It should now be obvious that the euro area is fast heading back to the precipice... As a result, the immediate outlook for inflation is likely to be distinctly lower than a few months ago," it says. BNY MELLON: Expects no change to rates or stance from the ECB but may signal it stands ready to do more. However, it says Draghi is a tricky character to judge so it impossible to know whether he is susceptible to political pressure to cut rates. The bank says the market hasn't positioned itself towards any solid expectations for the decision, "otherwise the euro would be trading higher." But there are bets at the margins so the bank expects the euro to strengthen on any remedial action by ECB such as a liquidity injection. LLOYDS BANKING GROUP: Expects no change in the main rates and no new LTRO in line with much of the market. While it acknowledges there is a chance of much more radical action in the coming months if sentiment sours further after the Greek election. It expects a modestly positive knee-jerk euro reaction on no rate cut but any rally will be short-lived as the lack of action ultimately won't be seen as helping anything in the longer term, it says. -By Laura Clarke, Dow Jones Newswires; 44 20 7842 9496; laura.clarke@dowjones.com; @djfxtrader (END) Dow Jones Newswires June 01, 2012 11:43 ET (15:43 GMT)

2012.06.01 17:42:24 MARKET TALK: BOC May Have Erred In Not Hiking Rates -Nomura

11:41 (Dow Jones) The Bank of Canada might have made a mistake in not hiking rates by now, according to Nomura Securities economist Charles St. Arnaud. The issue is housing, particularly concerns about a bubble in Toronto. Low rates are driving demand for houses and leading to higher household debt. 1Q GDP report showed that housing investment in Canada rose 2.9%, the fastest pace in two years. "It can come to a very sharp end very quickly. That's a concern," St. Arnaud says. It's a "complicated situation" with "a lot of different moving parts," but "the more I look at it, the more I think the Bank of Canada may have made a mistake not increasing rates earlier," he says. With 1Q GDP undershooting the Bank of Canada's forecast, increased uncertainty from the euro-zone crisis, and US and Asian data that indicates slowing growth, now "they're stuck in a place where it's harder for them to act," St. Arnaud says. (nirmala.menon@dowjones.com) Call us at (212) 416-3100 or email bradley.davis@dowjones.com (END) Dow Jones Newswires June 01, 2012 11:42 ET (15:42 GMT)

2012.06.01 17:40:44 UPDATE: May Factory Activity Slows But Still Expanding - ISM

--ISM PMI slows to 53.5 from 54.8 in April --New orders index jumps to highest level since April 2011 --Price index shows input costs falling in May (Adds details in first, fifth through eighth, 10th and 12th paragraphs.) By Kathleen Madigan Of DOW JONES NEWSWIRES NEW YORK -(Dow Jones)- The U.S. manufacturing sector slowed down a bit in May although new orders stayed strong, according to data released Friday by the Institute for Supply Management. Input prices contracted for the first time this year. The ISM's manufacturing purchasing managers' index last month fell to 53.5 from 54.8 in April. A reading above 50 indicates expanding activity. Economists surveyed by Dow Jones Newswires had expected the May PMI to slip only to 53.9. The ISM report came out 90 minutes after the U.S. Bureau of Labor Statistics reported only 69,000 new jobs were created in May, less than half the 155,000 forecasted by economists. Other economic data for May, including regional factory reports and consumer confidence, have come in weaker than expected. The ISM report runs counter to the other weaker numbers but "it reflects exactly what's happening [in manufacturing] in the month of May," said Bradley Holcomb, who oversees the survey for the ISM. What is especially encouraging, he said, is the high level of demand. The new orders index rose to 60.1 from 58.2 in April. The May reading is the highest since April 2011. Even with the problems in economies around the world, foreign demand is still growing. The ISM exports index fell to 53.5 from 59.0 in April. Holcomb said the comments from respondents showed "steady to higher sales" and the gain in new orders was "broad-based." Other ISM indexes weakened but were still in expansion mode. The production index fell back to 55.6 from 61.0. The employment index slowed slightly to 56.9 from 57.3 in April. Earlier Friday, the BLS data showed 16,000 jobs were created in the factory sector last month. The inventory index dropped to 46.0 from 48.5. Holcomb says he measures the difference between new orders and inventory index to gauge future factory activity. The gap in May was 14.1, the highest level since May 2010, suggesting manufacturers will be increasing production. U.S. manufacturers saw price pressures plunge last month. The prices index dropped to 47.5 from 61.0. It was the first reading below 50 since December 2011. -By Kathleen Madigan, Dow Jones Newswires; 212-416-2466; kathleen.madigan@dowjones.com (END) Dow Jones Newswires June 01, 2012 11:40 ET (15:40 GMT)

2012.06.01 17:37:33 UPDATE: Allscripts To Add 3 Board Members, Resolving Dispute

2012.06.01 17:37:33 UPDATE: Allscripts To Add 3 Board Members, Resolving Dispute

2012.06.01 17:35:41 WSJ BLOG/Real Time Economics: With Rates so Low, QE3 Won't Matter

(This story has been posted on The Wall Street Journal Online's Real Time Economics blog at http://blogs.wsj.com/economics.) By Neal Lipschutz Of course, the talk now turns to the Federal Reserve riding to the rescue of the U.S. economy. Here's the problem, already cited by many observers: the market has done what any additional Fed monetary easing (code name: QE3) would maximally accomplish, lowering interest rates to induce more borrowing and increase economic activity. News flash: the 10-year U.S. Treasury note yields about 1.5%. The overnight federal funds rate controlled by the central bank has stood at about zero for three-and-a-half years. To further ease monetary policy after the disappointing May jobs data (69,000 new jobs) and mounting evidence of decelerating economic growth would only offer evidence the Fed has reached the limits of its power to spur growth. Oh sure, another easing round might create a stir in the declining stock market for a time, but any real economic impact will be quite limited. The reasons rates are so low in the U.S. are ominous. It's not just slowing economic growth and job creation here. It's the disheartening fear that is taking hold in Europe because of the banking/sovereign debt crisis. That fear is causing the distortions of capital flows that push us out of the mainstream of market behavior. There have been negative yields on short rates in Germany. The safe-haven nations' debt prices are flying and yields are plummeting. The Fed policy makers are likely worried about helping keep the wheels attached to the global economic train and might act to ease further in that regard. Low interest rates are supposed to stimulate borrowing, economic growth and job creation. But, as others have said, rates keep going lower but the rush is not on to borrow and grow. Too many other uncertainties are holding people and institutions back. "I have long maintained that monetary policy is but one gear in the complicated gearbox that drives job creation," said Federal Reserve Bank of Dallas President Richard Fisher in a February speech. QE3 or no QE3, the Fed already has fully greased its gear. The many other parts needed for job creation, including the need for a stable global financial system, are the ones inefficiently clanging about. -For continuously updated news from The Wall Street Journal, see WSJ.com at http://wsj.com. (END) Dow Jones Newswires June 01, 2012 11:35 ET (15:35 GMT)

2012.05.31 18:52:19 MARKET TALK: Soc Gen Calls For 10-Yr Treasury Yield To Drop Below 1%

12:51 (Dow Jones) A daring call from Soc Gen: The 10-year Treasury yield will go below 1%, its analysts say. The call might sound extremely bold at the moment, but it does show what panic buying in Treasurys would look like. "The euro-zone crisis will be a sideshow when the main act appears on stage," the big French bank says in a research note. "As well as a slide back into recession in the US, a hard landing in China will crush any residual optimism of the equity bulls, taking global equities below April 2009 lows." For sure, the bank's call might not come to pass if its scenario doesn't pan out, especially if the deepening crisis pushes policymakers to act. Major central banks like the Fed and the ECB and even PBOC may pump more liquidity. The 10-yr note is recently 14/32 higher to yield 1.576%. (min.zeng@dowjones.com) Call us at (212) 416-3100 or email bradley.davis@dowjones.com (END) Dow Jones Newswires May 31, 2012 12:52 ET (16:52 GMT)

2012.05.31 18:51:48 Fed's Lacker Warns Federal Debt Could Put Pressure On Central Bank

By Kristina Peterson Of DOW JONES NEWSWIRES WASHINGTON -(Dow Jones)- If federal debt approaches unsustainable levels, Congress could pressure the central bank to let inflation rise, Federal Reserve Bank of Richmond President Jeffrey Lacker warned in a message in the regional bank's 2011 annual report Thursday. Facing a mounting federal debt, Congress could be tempted to lean on the Fed to permit higher inflation to shrink the real level of debt or make the cost of borrowing cheaper, said Lacker, a critic of the central bank's easy-money policies. "Indeed, there have been calls in some quarters for the Fed to deliberately engineer higher inflation to reduce the real debt burden on private borrowers," Lacker wrote in his message accompanying the annual report. "It's only a short step from that position to advocating inflation to reduce the real burden of the federal debt or to minimize the interest expense on federal obligations." Over the last five years, the federal government's budget outlook has "deteriorated markedly," he said. It isn't yet clear how lawmakers will act this year to deal with the expiration of Bush-era tax cuts and a payroll-tax break at the end of the year and more than $1 trillion in budget cuts that begin to kick in next year, a situation Fed Chairman Ben Bernanke has termed the "fiscal cliff." But if lawmakers allow spending to increase sharply in federal government safety-net programs, while tax revenue stay near their current level, federal debt could rise to "alarming" levels and push the country near "what economists call the 'fiscal limit,'" Lacker wrote. At that point, the real level of debt might be reduced through default or the central bank's decision to let inflation rise. While the Fed currently maintains political independence and a commitment to keep inflation low and stable, "pressures could emerge that would threaten that independence if the federal government were on the brink of default," Lacker said. The Richmond Fed president worried that inflation could still "break loose" even earlier, if financial markets thought the country was approaching that fiscal limit. "Such expectations could raise inflation without any change in central bank policy," Lacker worried. Though lawmakers may find a way to avoid increasing the federal debt from reaching these levels, policymakers "must not be complacent," Lacker said, noting that the Fed's credibility, "once lost, can be recovered only at a steep price." Lacker is one of the five regional Fed bank presidents who can vote this year at meetings of the policy-setting Federal Open Market Committee. At the last FOMC meeting, he dissented against the Fed's statement that it expects to keep short-term interest rates near zero at least through late 2014. -By Kristina Peterson; Dow Jones Newswires; 347-882-7215; kristina.peterson@dowjones.com (END) Dow Jones Newswires May 31, 2012 12:51 ET (16:51 GMT)

2012.05.31 18:51:07 ISM-Chicago Data: Waning Factory Orders Threaten US Recovery

By Howard Packowitz Of DOW JONES NEWSWIRES CHICAGO (Dow Jones)--Shrinking order backlogs and inventories for U.S. manufacturers threaten the nation's economic recovery and raise the risk of a recession, a survey of Chicago area purchasing managers indicated Thursday. The Institute for Supply Management-Chicago reported its business barometer fell 3.5 points in May to a near 2 1/2-year low of 52.7, the third straight monthly decline. Three consecutive declines are "associated with the onset of each of the last seven national recessions, with a lead [time] of some six-to-eight months," ISM-Chicago said in a release. May marked the measure's 32nd consecutive month above 50.0, which reflects economic expansion. However, the index's inventory and order backlog components signaled a contraction in the economy. The reading on inventories fell to a two-year low of 49.4, while order backlogs' 46.3 reading was the lowest since October 2009, ISM-Chicago reported. Companies are "eating through any pre-existing orders they had," said Andrew Wilkinson, chief economic strategist for Miller Tabak & Co. A purchasing manager who participated in the survey said, "our backlog only takes up through the end of June." Another participant told ISM-Chicago the decline in backlogs for one business led to the first workforce reductions since the late 1970's. ISM-Chicago's employment index reflected continued expansion in the labor market, but at a slower pace. May's employment index was at 57.0, from 58.7 in April. Production fell to a neutral reading of 50.0 in May, down 7.1 points from April and 18.6 points from March. The ISM-Chicago report provides additional evidence that the economy has lost momentum gained earlier this year. Labor Department data released Thursday showed the number of workers filing for unemployment benefits rose by 10,000 to 383,000 for the week ended May 26. Additionally, the latest reading on gross domestic product--a measure of all goods and services produced in the U.S.--rose just 1.9% in the first quarter. On Friday, the government is scheduled to release its monthly employment report. The ISM-Chicago report "fits with other signs of weakness in the U.S. economy, and the question is now how long will this lull last," said Wilkinson. The business barometer is formerly known as the Chicago Purchasing Managers Index, or Chicago PMI. Purchasing managers participating in the survey do business beyond the Chicago region, thus providing a snapshot of nationwide economic activity. The purchasing managers, according to ISM-Chicago, represent various sectors of economy including retail, manufacturing, and resources. Kingsbury International compiles the data for ISM-Chicago. Deutsche Boerse AG (DBOEF, DB1.XE) purchased Kingsbury's assets in June 2011. -By Howard Packowitz, Dow Jones Newswires; 312-750-4132; howard.packowitz@dowjones.com. (END) Dow Jones Newswires May 31, 2012 12:51 ET (16:51 GMT)

2012.05.31 18:50:19 Interbank Foreign Exchange Rates At 12:50 EST / 1650 GMT

Latest Previous %Chg Daily Daily %Chg Dollar Rates Close High Low 12/31 USD/JPY Japan 78.34-38 79.05-09 -0.90 79.13 78.22 +1.88 EUR/USD Euro 1.2373-76 1.2365-68 +0.07 1.2430 1.2338 -4.52 GBP/USD U.K. 1.5416-20 1.5477-81 -0.39 1.5526 1.5362 -0.80 USD/CHF Switzerland 0.9704-06 0.9709-13 -0.06 0.9735 0.9668 +3.55 USD/CAD Canada 1.0326-30 1.0298-303 +0.26 1.0365 1.0262 +1.16 AUD/USD Australia 0.9740-44 0.9703-07 +0.38 0.9761 0.9674 -4.57 NZD/USD New Zealand 0.7548-54 0.7529-34 +0.26 0.7575 0.7502 -2.89 Euro Rates EUR/JPY Japan 96.93-98 97.76-81 -0.85 98.02 96.52 -2.62 EUR/GBP U.K. 0.8023-26 0.7988-91 +0.44 0.8035 0.7989 -5.11 EUR/CHF Switzerland 1.2008-12 1.2007-11 +0.01 1.2020 1.2008 -1.33 EUR/CAD Canada 1.2778-84 1.2735-43 +0.33 1.2808 1.2732 -3.41 EUR/AUD Australia 1.2701-06 1.2737-46 -0.30 1.2778 1.2691 +0.06 EUR/DKK Denmark 7.4288-330 7.4289-329 +0.00 7.4427 7.4204 -0.06 EUR/NOK Norway 7.5469-544 7.5311-87 +0.21 7.5609 7.5026 -2.52 EUR/SEK Sweden 8.9817-70 8.9813-906 -0.02 9.0005 8.9596 +0.76 EUR/CZK Czech Rep. 25.747-82 25.706-59 +0.12 25.811 25.628 +0.66 EUR/HUF Hungary 301.01-64 300.89-02 +0.01 304.09 300.08 -4.37 EUR/PLN Poland 4.3888-946 4.3886-954 -0.01 4.4268 4.3794 -1.70 Yen Rates AUD/JPY Australia 76.30-36 76.71-79 -0.55 76.97 75.78 -2.42 GBP/JPY U.K. 120.77-86 122.35-44 -1.29 122.50 120.19 +1.06 CAD/JPY Canada 75.84-91 76.72-80 -1.16 76.86 75.48 +0.72 NZD/JPY New Zealand 59.13-21 59.52-59 -0.64 59.76 58.71 -1.07 Other Dollar Rates USD/CZK Czech Rep. 20.806-32 20.789-826 +0.06 20.907 20.642 +5.40 USD/HUF Hungary 243.27-74 243.34-93 -0.05 245.71 241.62 +0.15 USD/DKK Denmark 6.0036-62 6.0078-101 -0.07 6.0229 5.9798 +4.67 USD/NOK Norway 6.0982-1034 6.0904-57 +0.13 6.1227 6.0450 +2.08 USD/PLZ Poland 3.5467-508 3.5492-541 -0.08 3.5745 3.5292 +2.95 USD/RUB Russia 33.390-414 32.793-864 +1.75 33.651 32.408 +3.89 USD/SEK Sweden 7.2585-616 7.2631-97 -0.09 7.2858 7.2154 +5.52 USD/ZAR S. Africa 8.4877-972 8.5280-417 -0.50 8.5844 8.4660 +5.01 USD/CNY China 6.3685-706 6.3485-506 +0.31 6.3777 6.3454 +0.80 USD/HKD Hong Kong 7.7614-22 7.7669-77 -0.07 7.7674 7.7602 -0.07 USD/MYR Malaysia 3.1684-750 3.1599-664 +0.27 3.1839 3.1650 -0.18 USD/INR India 56.050-150 56.160-240 -0.18 56.498 55.743 +5.80 USD/IDR Indonesia 9372-432 9435-35 -0.35 9567 9409 +4.09 USD/PHP Philippines 43.287-530 43.417-660 -0.30 43.699 43.450 -1.01 USD/SGD Singapore 1.2868-78 1.2882-89 -0.10 1.2902 1.2838 -0.71 USD/KRW S. Korea 1179.39-81.80 1179.79-82.20 -0.03 1185.09 1177.00 +1.72 USD/TWD Taiwan 29.829-90 29.709-70 +0.40 29.849 29.770 -1.34 USD/THB Thailand 31.785-848 31.830-88 -0.13 31.929 31.748 +0.69 USD/VND Vietnam 20805-70 20810-85 -0.05 20850 20870 -0.95 USD/BRR Brazil 2.0151-82 2.0119-84 +0.07 2.0263 2.0064 +8.09 USD/MXN Mexico 14.2780-818 14.1381-459 +0.98 14.3516 14.0924 +2.39 USD/ARS Argentina 4.4667-740 4.4660-734 +0.01 4.4704 4.4696 +3.75 Source: ICAP Plc. (END) Dow Jones Newswires May 31, 2012 12:50 ET (16:50 GMT)

2012.05.31 18:39:34 EIB Hoyer: EIB One Part Of Crisis Solution, Isn't The Solution

--Morgan Stanley to notify Citi Friday of its intention to exercise Smith Barney option --Notice will kick off negotiation period of up to 90 days to determine a price for the 14% stake --Talks between the firms will "almost definitely" go to a third party appraiser and likely won't conclude, until late August or September, person familiar says (Adds background on Citi Holdings in the sixth paragraph, information on negotiation process in the 10th and 11th paragraphs and potential payment for deposits in the second-to-last paragraph.) By Brett Philbin Of DOW JONES NEWSWIRES NEW YORK (Dow Jones)--Morgan Stanley (MS) told Citigroup Inc. (C) it plans to acquire an additional 14% stake in their Morgan Stanley Smith Barney brokerage joint venture, a long-awaited step that will bring the securities firm closer to full ownership of the business. Morgan Stanley, which owns 51% of the venture, said that on Friday it intends to notify Citi it's exercising its right to purchase the stake. Under terms of the deal--struck in 2009 when both banks were coping with the fallout of the financial crisis--Morgan Stanley has the option to acquire Citi's stake in increments between 2012 and 2014. The move is a key initiative of Morgan Stanley Chairman and Chief Executive James Gorman, who bet heavily on the wealth management unit as he shifted the firm away from proprietary businesses to client-centric businesses. Specifically, Morgan Stanley needs the brokerage so it doesn't have to rely solely on its volatile investment banking and trading operations. The firm included a potential cash acquisition of the 14% stake in Morgan Stanley Smith Barney in its 2012 capital plan, to which the Federal Reserve offered no objection. For Citigroup, the disposal of the Smith Barney stake is also important as the banking giant wants to focus on commercial and investment banking, and investment advice doesn't fit with that strategy. In a statement, a Citi spokesman said, "Several years ago, after taking a dispassionate look at all of our businesses, we placed Morgan Stanley Smith Barney in Citi Holdings because we decided it was not core to our strategy." Citi Holdings is the entity the bank created to house assets and businesses that are being unwound or divested. He said, "Citi has made enormous progress in reducing similar non-core assets in an economically rational manner, as Citi Holdings is approximately one-quarter of the size it was in 2008." Morgan Stanley's formal notification on Friday will kick off a negotiation process with Citi of up to 90 days to determine the price of the transaction. At Morgan Stanley's annual meeting earlier this month, Gorman said it could "take a couple of months" to acquire the 14% Smith Barney stake. Analysts have said such talks could be tricky as the firms value the brokerage differently. Morgan Stanley's value for all of Morgan Stanley Smith Barney is roughly $15 billion to $16 billion, according to a person familiar with the situation. Citi disclosed that it values its 49% stake at $10 billion based on equity method accounting, but the price Citi will likely demand will depend on the brokerage's financial performance. The accounting value may not reflect the selling price, as analysts disagree over whether the brokerage is worth more than it was three years ago. Under terms of the joint venture contract, Morgan Stanley and Citi will each independently value Morgan Stanley Smith Barney. If the estimates are reasonably close, the value is the average of both figures. If they are far apart, an independent third estimate will be required. Talks between the two firms will "almost definitely" go to a third party appraiser and likely won't conclude, pursuant to an agreement on price, until late August or early September, this person said. Another complication to reaching a potential agreement is that financial results at Morgan Stanley Smith Barney have been depressed amid weak capital-markets conditions and a slower-than-expected integration of the two legacy firms. In the surest example of this, Morgan Stanley's key pre-tax profit margin for its wealth management segment--which includes the brokerage--was 11% in the first quarter, well below its mid-teens forecast, a projection that was lowered from an original goal of 20%. In recent months, some people have speculated Morgan Stanley could make a play for Citi's entire Smith Barney stake. People familiar with the matter had previously told Dow Jones Newswires the two firms were contemplating the possibility of accelerating the timetable for Morgan Stanley to take full control of the brokerage, if the two banks received regulatory approval and could agree on price. But during a conference call with analysts last month, Gorman said Morgan Stanley has "no particular compulsion or anxiety to accelerate" the transaction. His comments had echoed those of Citi Chief Executive Vikram Pandit, who told investors in April that his bank wasn't under any immediate pressure to dispose of its full ownership in the business. Volatile markets, plunging company stock prices, and a pending credit-rating downgrade by Moody's Investors Service were likely factors in the two firms' plans for the business. Moody's is weighing a potential three-notch rating downgrade for Morgan Stanley, a move which would likely increase the firm's funding costs. Meanwhile, Citigroup is face a ratings downgrade of up to two notches. Beyond the Smith Barney stake, Morgan Stanley will also be required to pay for a premium, consistent with interest rates, on $5.4 billion in customer deposits held by Citi, according to a regulatory filing. Shares of Morgan Stanley recently traded up 0.2% at $13.12, while Citi rose 1.1% to $26.29. -By Brett Philbin, Dow Jones Newswires; 212-416-2173; brett.philbin@dowjones.com; Twitter: @brettphilbin --Tess Stynes and Matthias Rieker contributed to this article. (END) Dow Jones Newswires May 31, 2012 12:41 ET (16:41 GMT)

2012.05.31 18:36:35 Bank Of Canada Noon Rates For Thursday, May 31/12

By Kristina Peterson Of DOW JONES NEWSWIRES WASHINGTON (Dow Jones)--If federal debt approaches unsustainable levels, Congress could pressure the central bank to let inflation rise, Federal Reserve Bank of Richmond President Jeffrey Lacker warned in a message in the regional bank's 2011 annual report Thursday. Facing a mounting federal debt, Congress could be tempted to lean on the Fed to permit higher inflation to shrink the real level of debt or make the cost of borrowing cheaper, said Lacker, a critic of the central bank's easy-money policies. "Indeed, there have been calls in some quarters for the Fed to deliberately engineer higher inflation to reduce the real debt burden on private borrowers," Lacker wrote in his message accompanying the annual report. "It's only a short step from that position to advocating inflation to reduce the real burden of the federal debt or to minimize the interest expense on federal obligations." Over the last five years, the federal government's budget outlook has "deteriorated markedly," he said. It isn't yet clear how lawmakers will act this year to deal with the expiration of Bush-era tax cuts and a payroll-tax break at the end of the year and more than $1 trillion in budget cuts that begin to kick in next year, a situation Fed Chairman Ben Bernanke has termed the "fiscal cliff." But if lawmakers allow spending to increase sharply in federal government safety-net programs, while tax revenue stay near their current level, federal debt could rise to "alarming" levels and push the country near "what economists call the 'fiscal limit,'" Lacker wrote. At that point, the real level of debt might be reduced through default or the central bank's decision to let inflation rise. While the Fed currently maintains political independence and a commitment to keep inflation low and stable, "pressures could emerge that would threaten that independence if the federal government were on the brink of default," Lacker said. The Richmond Fed president worried that inflation could still "break loose" even earlier, if financial markets thought the country was approaching that fiscal limit. "Such expectations could raise inflation without any change in central bank policy," Lacker worried. Though lawmakers may find a way to avoid increasing the federal debt from reaching these levels, policymakers "must not be complacent," Lacker said, noting that the Fed's credibility, "once lost, can be recovered only at a steep price." Lacker is one of the five regional Fed bank presidents who can vote this year at meetings of the policy-setting Federal Open Market Committee. At the last FOMC meeting, he dissented against the Fed's statement that it expects to keep short-term interest rates near zero at least through late 2014. -By Kristina Peterson; Dow Jones Newswires; 347-882-7215; kristina.peterson@dowjones.com (END) Dow Jones Newswires May 31, 2012 12:36 ET (16:36 GMT)

2012.05.31 18:29:49 UPDATE: Fed's Pianalto: US Monetary Policy Appropriate For Conditions

--Cleveland Fed president: Bank directors provide valuable info on economy --Adequate safeguards in place to shield regional banks from conflicts with directors, Pianalto says --Adds lower energy costs aiding U.S. manufacturing improvement (Updates with additional comments on U.S. employment outlook beginning in the 14th paragraph.) By Bob Tita Of DOW JONES NEWSWIRES CLEVELAND -(Dow Jones)- A Federal Reserve Bank president said Thursday adequate procedures are in place to keep bankers serving as directors of regional Fed banks from influencing Fed supervision of their banks. Sandra Pianalto, president of the Cleveland Federal Reserve Bank, said she depends on bank executives who serve as directors of her bank to provide frequent and timely information about economic conditions. "It's important information that I get," she said during a remarks to reporters following a speech at a Cleveland conference for the National Association for Business Economics. Regional Fed bank boards have been in the spotlight since Sen. Bernie Sanders (I., Vt.) introduced legislation last week that would prohibit bankers from serving as directors for regional Federal Reserve banks. Sanders described the current arrangement as a blatant conflict of interest because the Fed is responsible for regulating banks whose executives serve as directors of Fed banks. The Federal Reserve system has 12 regional banks. Each one has its own board with nine directors who come from outside the central bank system. Commercial banks that belong to each regional bank district elect six of the nine board members and the Fed's Washington-based Board of Governors appoints the remaining three. Pianalto declined to comment directly on Sanders's bill, but said she's confident that no conflict exists between the Fed's supervisory activities and the bankers serving as Fed bank directors. "Policies are in place that protect supervisory information" from bank directors, she said. Pianalto said she supports recent procedural reforms that barred bankers from selecting their regional Fed bank presidents. "We have appropriate policies in place that bank directors are not involved" in the selection of Fed bank presidents, she said. Pianalto's sentiments appeared to be in line with those of Narayana Kocherlakota, president of the Federal Reserve Bank of Minneapolis, who last week said it would be a mistake to banish banking executives from the boards of regional Fed banks. Sanders's push to change the board structure of the regional banks came in the aftermath of J.P. Morgan Chase & Co.'s (JPM) disclosure of more than $2 billion in trading losses from bad investments at a time when Chief Executive James Dimon is serving on the New York Fed's board. Sanders has said Dimon's presence on the New York Fed board exposes the bank to speculation that Dimon could influence the bank's regulatory actions toward J.P. Morgan. Pianalto, a voting member of the monetary policy setting Federal Open Market Committee, said the Fed's current monetary policy remains appropriate for the performance of the U.S. economy. She expects the U.S. economy to grow by 2.5% this year and by 3% in 2013 and 2014. She said the sluggishness in U.S. employment is not an indicator that the U.S. GDP expansion is stalling. "One month, or even a couple of months, of [weak] job data isn't changing my outlook that the economy will continue to expand," she said. She added that it may take as long as five years for the U.S. unemployment rate to drop to the 6% level widely considered as a full-employment level. Nevertheless, Pianalto said she's convinced that persistently high unemployment, especially in the manufacturing sector, is a lingering side effect of the severe economic recession in 2008, rather than a structural change in the U.S. economy that will result in fewer available jobs going forward. She said low natural gas costs and a U.S. work force with improved skills have made the U.S. more competitive as a location of job creation and investment in capital equipment. She added that overall U.S. production capacity remains 6% lower than in 2007, suggesting that companies have lots of catching up to do after closing plants and scaling back production during the recession. -By Bob Tita, Dow Jones Newswires; 312-750-4129; robert.tita@dowjones.com (END) Dow Jones Newswires May 31, 2012 12:29 ET (16:29 GMT)

2012.05.31 18:24:19 *Court Approval Granted For Acquisition Of Viterra By Glencore> VT.T

2012.05.31 18:24:19 *Court Approval Granted For Acquisition Of Viterra By Glencore> VT.T

2012.05.31 18:21:50 USD/JPY intraday: under pressure.

12:20 (Dow Jones) The Swiss National Bank's reserve data showed that during the month of April FX reserves increased by about $5.47 billion, as the central bank sold Swiss francs to defend its floor for the euro, according to an analysis of changes in the SNB's short forward position in EUR/CHF conducted by Barclays. It's a small amount compared with the SNB's $80.8 billion intervention in May 2010, and Barclays notes that the CHF1.20 floor for EUR/CHF may have come under even more pressure during the month of May. Traders say the SNB has been buying and selling euros this month through Dutch-based Rabobank, as it continues to defend the floor and diversify reserves out of the common currency. SNB would not comment at the time of the trader chatter, nor would Rabobank. (matt.walter@dowjones.com) Call us at (212) 416-3100 or email bradley.davis@dowjones.com (END) Dow Jones Newswires May 31, 2012 12:23 ET (16:23 GMT)

2012.05.31 18:21:14 EUR/JPY intraday: under pressure.

GBP/USD intraday: under pressure. Update on supports and resistances. Pivot: 1.553 Our preference: Short positions below 1.553 with targets @ 1.533 & 1.5275 in extension. Alternative scenario: Above 1.553 look for further upside with 1.56 & 1.5645 as targets. Comment: the immediate trend remains down and the momentum is strong. Key levels 1.5645 1.56 1.553 1.5409 last 1.533 1.5275 1.523 Trading Central recommends MT5 to publish FX charts Copyright Trading Central 1999-2011

2012.05.31 18:21:02 US Federal Reserve Money Stock For Wk Ended May 14

Money stock measures are seasonally adjusted, in billions of dollars. P = preliminary. NA = not available. Source: Federal Reserve (H.6). M1 13 wk 4 wk Weekly 2011/12 Average Change Average Change Average Change Feb 20 2197.2 2220.1 2216.7 Feb 27 2201.3 4.1 2218.2 -1.9 2213.2 -3.5 Mar 5 2204.0 2.7 2216.6 -1.6 2213.4 0.2 Mar 12 2207.5 3.5 2216.4 -0.2 2222.3 8.9 Mar 19 2210.8 3.3 2213.0 -3.4 2203.1 -19.2 Mar 26 2215.8 5.0 2214.3 1.3 2218.5 15.4 Apr 2 2219.3 3.5 2221.8 7.5 2243.2 24.7 Apr 9 2220.7 1.4 2225.7 3.9 2238.0 -5.2 Apr 16 2223.5 2.8 2236.9 11.2 2248.0 10.0 Apr 23 2225.8 2.3 2246.3 9.4 2255.9 7.9 Apr 30 2228.2 2.4 2248.4 2.1 2251.7 -4.2 May 7 2228.1 -0.1 2243.3 -5.1 2217.6 -34.1 May 14 2230.7 2.6 2245.6 2.3 2257.3 39.7 M2 13 wk 4 wk Weekly 2011/12 Average Change Average Change Average Change Feb 20 9689.0 9766.1 9771.3 Feb 27 9703.8 14.8 9768.1 2.0 9768.1 -3.2 Mar 5 9719.9 16.1 9776.0 7.9 9784.1 16.0 Mar 12 9735.3 15.4 9780.0 4.0 9796.3 12.2 Mar 19 9748.8 13.5 9780.7 0.7 9774.2 -22.1 Mar 26 9764.1 15.3 9791.8 11.1 9812.7 38.5 Apr 2 9773.6 9.5 9804.4 12.6 9834.5 21.8 Apr 9 9781.0 7.4 9812.5 8.1 9828.4 -6.1 Apr 16 9789.7 8.7 9832.6 20.1 9854.6 26.2 Apr 23 9794.7 5.0 9832.9 0.3 9814.1 -40.5 Apr 23 9803.2 8.5 9841.8 8.9 9869.9 55.8 May 7 9812.1 8.9 9851.7 9.9 9868.2 -1.7 May 14 9819.4 7.3 9856.9 5.2 9875.5 7.3 -By Rodney Christian; Dow Jones Newswires, 202-646-1880; csstat@dowjones.com (END) Dow Jones Newswires May 31, 2012 12:21 ET (16:21 GMT)

2012.05.31 18:14:49 UPDATE: Fed's Pianalto: US Monetary Policy Appropriate For Conditions

12:19 (Dow Jones) GimmeCredit, while keeping its view steady on JPMorgan (JPM) despite the brouhaha involving its big trading loss, does see the banking giant's bonds underperforming given the renewed debt issues in Europe. Spreads on JPM 4.5% bonds due in 2022 have widened 0.31 percentage point this month to 2.05 as its stock has slumped 23%. (patrick.mcgee@dowjones.com) Call us at (212) 416-2354 or email kevin.kingsbury@dowjones.com (END) Dow Jones Newswires May 31, 2012 12:19 ET (16:19 GMT)

2012.05.31 18:12:59 *Fed Lacker's Comments In Richmond Fed 2011 Annual Report

(MORE TO FOLLOW) Dow Jones Newswires May 31, 2012 12:12 ET (16:12 GMT)

2012.05.31 16:40:23 MARKET TALK: BRL Weakness Behind Central Bank Rate Caution

10:40 (Dow Jones) Preventing further weakness in BRL is another reason for "parsimony" in Brazilian central bank rate cuts, says Nomura's Tony Volpon in a note. Recent BCB intervention clearly signals the government isn't comfortable with BRL much weaker than the 2.00 level; BRL has traded weaker than fundamentals suggest since the central bank's surprise August 2011 rate cut, suggesting that policy action may have added to BRL underperformance, Volpon writes. The central bank may -- despite assurances to the contrary -- be worried about the currency weakness on inflation, given the widely held opinion that a good part of BRL's recent fall may be permanent in nature, he says. (matthew.cowley@dowjones.com) Call us at (212) 416-2181 or john.shipman@dowjones.com (END) Dow Jones Newswires May 31, 2012 10:40 ET (14:40 GMT)