Ya reckon!!

• Need to continue with fiscal consolidation
• Need patience on reforms, no quick fix

Says The New York Times.

From -14.7 in April, demonstrably weaker than Reuter’s median forecast of -15.7.

Ouch!!

• ESM weakens ban on sharing liability across euro zone
• Rescue funds can reduce incentives for solid public finances
• ESM loans must have interest rate surcharge
• Secondary market purchases by ESM “most problematic”
• Direct ESM aid to bank not envisaged

EUR/USD marginally firmer, up at 1.3013 from the 1.2990 that greeted me first thing.

Talk of 1.2950 barrier option interest, with buy orders clustered just ahead of said level and sell stops just below.

On topside, sell orders reportedly clustered 1.3030/50,  trailing buy stops gathering just above 1.3050.

Talk of decent-sized 1.3000 vanilla option expiry at todays New York cut.

TOKYO (MNI) – The Bank of Japan warned of the possibility that the
Federal Reserve’s proposed single-counterparty credit limits (SCCL)
imposed on systemically important U.S. financial institutions could have
unintended impacts on non-U.S. financial systems.

The BOJ said on Monday that it sent a comment letter on April 28 to
the Fed regarding its call for public comments on the SCCL.

“As for the Single-Counterparty Credit Limits, we would like to
raise two specific areas of concerns: potential impact on the conduct of
monetary policy as well as on the payment and settlement via central
bank accounts; and potential impact on the market liquidity of non-U.S.
high-quality sovereign debts,” the BOJ said.

The BOJ also said, “Referring to the first point, as the exposure
to a foreign central bank might be counted as part of the credit
exposure to the central government under the proposed rule, U.S.
financial institutions subject to the rule might not be able to maintain
sufficient amounts of reserves in their current accounts with foreign
central banks.”

“In Japan, the counterparties of the Bank of Japan in conducting
money market operations include a number of U.S. financial institutions
with current accounts with the bank. The proposed rule therefore could
reduce the effectiveness of the bank’s monetary policy conduct, and
hamper the daily payments and settlements via the current accounts with
the bank,” it said.

The BOJ also noted, “On the second, extending the scope of credit
limits to non-U.S. sovereign debts could have a significant adverse
impact on sovereign debt and related funding markets outside the United
States, even if such debts are of high quality.”

“Any consequent withdrawal, triggered by the breach of the limit,
of U.S. financial institutions from the activities in those markets
could reduce market liquidity with incremental effects. It in turn would
hinder the money market operations of central banks, especially the
operations using sovereign debts as safe and liquid collateral assets.”

“As the Federal Reserve must be fully aware, high-quality foreign
sovereign debts play an important role in the local markets as do in the
U.S. markets U.S. Treasuries, which are exempt from the proposed rule.
We are all the more concerned with this issue, because U.S. financial
institutions are also the bank’s counterparties in the money market
operations using Japanese government bonds,” the BOJ said.

tokyo@marketnews.com
** MNI Tokyo Newsroom: 81-3-5403-4833 **

[TOPICS: M$J$$$,M$A$$$,MMJBJ$,MMUFE$,MI$$$$]

According to government source.

Reuters reporting.

Thought PM said he wasn’t in favour of a bad bank? Oh well, go figure.

To ask him to try and form a coalition government.

Good luck with that one. Let the horse trading begin…..

Ouch!!

Did something happen then?

• If necessary will use public funds to rescue banks, as last resort
• Not in favour of bad bank
• Government will take over an ailing region if necessary
• To announce details on bank asset segregation Friday
• Spain should return to growth in 2013

Slightly weaker than Reuter’s median forecasts of +0.2%, -0.9% respectively.

Love him or loathe him, latest from AEP at The Telegraph.

Demonstrably weaker than Reuter’s median forecast of -5.4%.

Economic news out of Spain just keeps getting betta and betta……..NOT!!

–Updates Numbers, Adds Details, Poll For Parliamentary Elections

By Stephen Sandelius

PARIS (MNI) – French voters gave Socialist candidate Francois
Hollande a fairly modest victory over incumbent president Nicolas
Sarkozy in the final round of elections on Sunday.

Hollande took around 51.7% of the ballot, less than the polls had
predicted, for a margin of a million votes. The voter turnout of over
81% was higher than in the first round two weeks ago.

“The French on this 6th of May have chosen change!” Hollande told
his supporters. “It’s starting now.”

The election marks a quantum leap in the political career of the
57-year-old former Socialist Party captain and parliamentarian from a
rural district in southern France.

A graduate of the country’s elite schools of administration,
Hollande held various low-profile positions in Socialist governments
before taking over leadership of party from 1997 to 2008. Along with his
political savvy and determination, he owes his victory as much to the
fact that as party candidate, he offered voters on the Left the best
odds to block Sarkozy’s re-election.

Hollande’s campaign pledge to overcome social divisions will be put
to the test in the coming five years, as he aims to wipe out a public
deficit of 5% of GDP during a period when anemic economic growth and
high unemployment will make to hard to compress social outlays.

“The challenges that await us … are many, and they are heavy,”
Hollande said, citing the need to boost production, reduce deficits and
preserve the nation’s “social model”.

“The problems won’t disappear with the depart of the incumbent,” he
had warned during the campaign. “Afterwards it will be tough.”

Hollande has promised little in the way of costly social programs
apart from increased support for families, subsidized training for youth
hires in private firms and the partial reconstitution of the public
education staff decimated over the past five years.

Nevertheless, by increasing taxes on big business, on higher
incomes and on investment revenues and by capping top salaries in public
firms, the new president may render the bitter medicine of budget
austerity easier to swallow. This budget austerity is absolutely
necessary to keep away the wolves of the financial world, which he once
targeted as his “adversary”.

Hollande’s task will be facilitated somewhat by Sarkozy’s overhaul
of the pension system and local business taxes. But the Socialist is
likely to put a damper on further painful structural reforms advocated
by many economists to bolster economic competitiveness. His intention to
rescind the planned VAT hike aimed at financing cuts in social payroll
taxes, to accelerate the rise in minimum wages, and to hike payroll
taxes slightly to finance early retirement for some employees will only
add to labor costs.

“Europe is watching us,” Hollande said. “I am certain that in many
European countries [this victory] is a relief, a hope — the idea that
finally austerity is no longer a fatality.”

Yet the new president’s lack of international experience could
prove a handicap for his ambitious plans to shift gears at the European
level away from pure budget austerity toward structural investments to
promote growth. While he demonstrated his talent for consensus-building
by papering over divisions within his own party for years, bringing
together European partners with divergent national interests may well
prove harder than he pretends.

Germany remains stubbornly opposed to Hollande’s proposal for
eurobonds and to jaw-boning the European Central Bank for easier
financing of national deficits. Pushing back Sarkozy’s target date for
balanced public finances by one year to 2017 could undermine his
credibility in Berlin as well as Brussels.

German Chancellor Angela Merkel, who had refused to meet with the
Socialist candidate during the campaign, congratulated him Sunday and
invited him to come to Berlin as soon as possible.

The immediate challenge for the new president will be to gain a
supportive parliamentary majority for his government in the elections to
be held on the second and third Sundays of June. In contrast to the
presidential ballot, all candidates winning at least 12.5% of the
registered electorate in a given voting district qualify for the
run-offs for the National Assembly.

The strong showing of the right-wing candidate Marine Le Pen in the
first round of the presidential elections suggests that her National
Front party could split the electorate on the Right in a large number of
districts, which would be a boon for parties on the Left and thus for
Hollande.

At the same time, the Socialist Party will have to assure that it
is not knocked out of the run-offs in a smaller number of districts due
to divisions on the Left. The Socialists have cobbled together a
coalition with the Greens and the Leftist Radicals but may have to
sacrifice some seats in parliament to their rivals on their left flank,
the Communists and the Leftist Party, who will not be docile allies.
Even the Greens might eventually split ranks if Hollande continues to
unravel the accord over the reduction in dependence on nuclear energy.

An Ifop poll conducted Sunday of voters’ intentions for the
legislative elections gave the Socialists a slight edge over Sarkozy’s
UMP party of 31% to 30%, with the National Front taking 18%. The total
on Left would amount to 44% versus 32% for the Center-Right.

The defeated incumbent, speaking to his saddened supporters, said
he had spoken with Hollande to wish him “good luck amid the challenges.”

“It will be difficult,” Sarkozy warned. “But I hope with all my
heart that he succeeds.

–Paris newsroom +331 4271 5540; email: ssandelius@marketnews.com

[TOPICS: M$F$$$,M$X$$$,MGX$$$,MFX$$$]

Well not yet anyways

BERLIN (MNI) – German Chancellor Angela Merkel and the newly
elected French President Francois Hollande in a phone conversation on
Sunday stressed the importance of the German-Franco relationship, the
German chancellery said.

“Both agree about the importance of close German-Franco relations
and asserted each other that they aim for a good and faithful
cooperation,” the chancellery explained.

Merkel invited Hollande to come to Berlin as soon as possible.

French voters gave Socialist candidate Francois Hollande a fairly
modest victory of 51.7% over incumbent president Nicolas Sarkozy in the
final round of elections on Sunday.

The German government has made clear on many occasions that it
opposes any renegotiations of the EU fiscal compact, as demanded by
Hollande.

–Berlin bureau: +49-30-22 62 05 80; email: twidder@marketnews.com

[TOPICS: MGX$$$,M$X$$$,M$$CR$,M$G$$$,MFX$$$,M$F$$$]

EUR/USD sits at 1.3010.

What’ll we see first 1.2900 or 1.3100?

As usual, reasoning very much appreciated but not obligatory.

• Must monitor whether currency moves reflect speculation or economic fundamentals
• Stocks falling, yen rising partly due to uncertainty after elections in Europe
• Think incoming French president Hollande understands need for fiscal discipline

USD/JPY sits at 79.77, pretty much unchanged from Friday’s North American close. EUR/JPY down at 103.75 from around 104.45 after the weekends French and Greek election results.

Talk buy orders clustered down at 79.50/65, sell stops through 79.50.

DAX futures down -2.7%, CAC 40 futures down -2.3%.

Got any ideas you’d like to share with your fellow readers, then here’s where to stick ‘em.