• Should consider fiscal easing if recovery falters, but projects a ‘modest’ pick up in H2 2012
• Fiscal boost could include tax cuts and infrastructure spending
• UK has to continue to stabilise and consolidate its financial system 

Down a round $15 from when i fell out of bed this morning with  recent lows around 1576.  Sharp falls in Crude oil aren’t helping the cause with WTI  down about 80 cents following the OECD growth forecasts

Gold sitting around $1578 a troy ounce with WTI at 92.60 a barrel

Out of a targeted Eur 1.5-2.5 bln

Sold Eur 1.51 bln of Aug 24 2012 Letra, yield 0.846 % (from 0.634%), cover 3.9 (from 7.61)

Sold Eur 1.02 bln of Nov 23 2012 Letra, yield 1.737 % (1.58%), cover 4.3 (from 3.25)

Strong take up but at a price with yields worsening and lower cover.

EUR/USD’s slipping back  to session/day’s lows around 1.2775 as focus  returns on Spain

–Mar SA House Prices -0.6% m/m; -0.4% y/y

LONDON (MNI) – House prices fell on the month in March and
inflation turned negative, figures from National Statistics showed
Tuesday.

House prices declined a seasonally adjusted 0.6% on the month and
were down 0.4% on the year. This was the largest monthly decrease since
September last year.

–London bureau: 0044 20 7862 7491; email: puglow@marketnews.com

[TOPICS: M$B$$$,MABDS$]

-Apr PSNB-X -Stg16.52bn vs Stg9.063bn in Apr 2011

LONDON (MNI) – The headline data for public sector finances showed
a large surplus in April, but stripping out special factors revealed a
large deficit, worse than in the previous year, figures released by
National Statistics showed on Tuesday.

Public Sector Net Borrowing excluding financial sector
interventions showed net lending (a surplus) of Stg16.52 billion in
April, below the median forecast which was for a higher figure of Stg20
billion.

The April figures, however, include the transfer of the Royal Mail
pension plan which amounted to Stg28 billion.

Excluding the Royal Mail transfer, PSNB-X stood at Stg11.5 billion
in April, up from Stg9.063 billion in April 2011. Moreover, there was a
one-off transfer from the BOE to the Treasury due to the wind up of the
Special Liquidity Scheme which flattered the data by Stg2.3 billion.

Excluding both of these special factors then PSNB-X would have been
Stg13.8 billion, significantly higher than the same month a year
earlier.

–London bureau: 0044 20 7862 7491; email: puglow@marketnews.com

[TOPICS: M$B$$$,MABDS$]

-Apr CPI +0.6% m/m; +3.0% y/y vs Mar 3.5% y/y; Below Median Forecast

LONDON (MNI) – Consumer price inflation fell significantly in April
and by enough to save Bank of England Governor Mervyn King from having
to write a letter to the Chancellor explaining why inflation is so high,
figures released by National Statistics showed Tuesday.

The figures show inflation moving downward in line with most
forecasters’ expectations although there remain concerns as to whether
it will continue to fall sharply to the target level of 2% or whether
the pace of decline will slow over the coming months.

Consumer prices rose 0.6% on the month in April and 3% on the year,
down from 3.5% in March, the lowest level of inflation since February
2010. This was broadly in line with the median forecast which was for a
monthly increase of 0.6% and annual rise of 3.1%.

Over the year to April the main downward influences came from
alcoholic beverages and tobacco and clothing and footwear.

During April this year most categories posted price increases,
which is normal for the time of year, with the largest rise from
Transport, mainly due to fuel price rises. In May, it has been reported
that many petrol retailers have cut prices.

BOE Governor King has had to write a letter to Chancellor of the
Exchequer George Osborne in each of the last nine quarters to explain
why CPI inflation has been more than 1 percentage point above the 2%
target.

–London bureau: 0044 20 7862 7491; email: puglow@marketnews.com

[TOPICS: MT$$$$,M$B$$$,MABDS$]

UK DATA: NS House Prices Fall On Month On March
–Mar SA House Prices -0.6% m/m; -0.4% y/y
————————————————————————
House prices fell on the month in March and inflation turned
negative, figures from National Statistics showed Tuesday. House prices
declined a seasonally adjusted 0.6% on the month and were down 0.4% on
the year. This was the largest monthly decrease since September last
year.

UK DATA: Apr PSNB-X -Stg16.52bn vs Stg9.063bn in Apr 2011
————————————————————————
The headline data for public sector finances showed a large surplus
in April, but stripping out special factors revealed a deficit, worse
than in the previous year. PSNB-X showed net lending (a surplus) of
Stg16.52 bn in Apr, below the median forecast of Stg20 billion. The
April figures, however, include the transfer of the Royal Mail pension
plan which amounted to Stg28 billion. Excluding the Royal Mail transfer,
PSNB-X stood at Stg11.5 billion in April, up from Stg9.063 billion in
April 2011. Moreover, there was a one-off transfer from the BOE to the
Treasury due to the wind up of the Special Liquidity Scheme which
flattered the data by Stg2.3 billion. Excluding both of these special
factors then PSNB-X would have been Stg13.8 billion, significantly
higher than the same month a year earlier.

UK DATA: Apr CPI +0.6% m/m; +3.0% y/y vs Mar 3.5% y/y
–Just Below Median Forecast of +0.6% m/m; +3.1% y/y
————————————————————————
Consumer price inflation fell significantly in April and by enough
to save Bank of England Governor Mervyn King from having to write a
letter to the Chancellor explaining why inflation is so high. The
figures show inflation moving downward in line with most forecasters’
expectations although there remain concerns as to whether it will
continue to fall sharply to the target level of 2% or whether the pace
of decline will slow over the coming months. Consumer prices rose 0.6%
on the month in April and 3% on the year, down from 3.5% in March, the
lowest level of inflation since February 2010. This was broadly in line
with the median forecast which was for a monthly increase of 0.6% and
annual rise of 3.1%.

After 0.3%m/m, 3.5% y/y last month, Lowest y/y since Feb 2010

April RPI 0.7%m/m, +3.5% y/y (as expected)  but lowest since Dec 2009

No need for explanations this time from Mervyn King, with inflation still high but  a small falllower in line with expectations.

Cable’s off a touch around 1.5815 from  around 1.5835 prior to the release

A UK clearer’s reportedly behind the current rally.

We’re sitting around 0.8087 and heading into the reported offers from hedge funds again ahead of 0.8100.

Well it’s all a bit dull isn’t it.

A friend just send me this link for a lighter take on recent events…

LONDON (MNI) – Bank of England Monetary Policy Committee member
David Miles writes today that the Bank’s monetary policy actions have
helped prevent a much worse economic situation in the UK.

“Monetary policy cannot solve all our problems. But it has helped
prevent a much worse economic situation,” Miles wrote in an op-ed piece
in the Daily Mail newspaper.

“And it can encourage recovery and lessen the consequences of a
much sharper economic rebalancing,” he added.

–London Bureau; Tel: +442078627492; email:ukeditorial@marketnews.com

[TOPICS: M$B$$$,M$$BE$]

TOKYO (MNI) – Japan’s economy will grow 2.0% this year, recovering
from last year’s 0.7% fall on the back of fiscal spending programs to
rebuild the earthquake-hit areas, the Organization for Economic
Cooperation and Development said Tuesday.

But as fiscal stimulus wanes, the growth rate will slow to 1.5% in
2013, the organization said in its latest Economic Outlook.

The OECD’s latest GDP projection for Japan was virtually unchanged
from +2.0% for 2012 and +1.6% for 2013 estimated in its World Economic
Outlook published last November.

“Following a trade-induced slowdown in late 2011, public
reconstruction spending in response to the Great East Japan Earthquake
will help boost growth to around 2% in 2012,” said the Paris-based
group. “As reconstruction outlays wane, the expansion will be supported
through 2013 by a pick-up in exports.”

“Deflation is likely to diminish, although the unemployment rate
will remain above its pre-2008 crisis level.”

The OECD expects Japanese consumer prices to fall 0.2% in both 2012
and 2013, improving from its previous forecast for -0.6% and -0.3%. CPI
fell 0.3% in 2011 in both total and core readings.

Among the downside risks to a smooth recovery, OECD said a power
supply shortage during the summer peak demand season could hamper
factory production.

“In addition, the delay in fiscal consolidation and the continuing
rise in the public debt ratio increase the risk of a run-up in long-term
interest rates,” the OECD said.

There are risks related to the global economy, exchange rates and
commodity prices, it said.

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

[TOPICS: M$J$$$,M$A$$$,MAJDS$,MI$$$$]

PARIS (MNI) – As French economic growth is likely to recover slowly
over the next two years, the government will have to put the brakes on
spending in order to cut the public deficit below 3% of GDP in 2013, the
Organization for Economic Cooperation and Development said Tuesday.

In its semi-annual Economic Outlook, the OECD said it expected
France’s economy to grow by just 0.6% this year (revised up from +0.3%
forecast in November) and by 1.2% (1.4%) next year. The European
Commission’s latest growth projections are comparable at 0.5% and 1.3%,
respectively.

While this year’s public deficit target of 4.5% of GDP appears
within reach thanks to last year’s head-start, the “real challenge” will
be to reach 3% next year, it said.

“The resolve of the new government will no doubt be quickly
tested,” it warned. “It is critical that this commitment is fulfilled in
order to continue to build credibility. Improving the fiscal framework
through a strengthened national fiscal rule and creating an independent
fiscal council would send the right signals.”

“Most of the consolidation effort in France must come from curbing
spending,” the OECD argued. “Given the persistent long-term
deterioration of public finances, there is no room for discretionary
measures to offset the economic weakness without risking an upsurge in
financing costs.”

“Considerable savings” could be made in the public health care
system by reducing the hospital stays, lowering administrative costs,
eliminating reimbursement of ineffective drugs and expanding the use of
generics, it asserted. Streamlining the territorial political structures
and more incentives to control local government spending could “also
generate substantial savings”.

Government debt in Maastricht terms is seen rising to 93.5% of GDP
in 2013.

Employment is seen contracting by 0.1% this year and recovering by
only 0.2% next year, which would lift the jobless rate to 10% on average
next year (10.4% including overseas territories). Average pay gains are
expected to slow from 3.5% last year to 1.9% by 2013, with nominal unit
labor costs up 1.6% this year and 0.7% next year.

Harmonized inflation would ease from 2.4% this year to 1.8% next
year, with core rates of 1.6% and 1.7%, respectively.

Private consumption growth would pick up from 0.6% this year to
1.2% next year. Investment is seen regaining steam to grow by 1.7% next
year after +0.6% this year.

With exports outpacing imports, foreign trade would add 0.6 point
to GDP growth this year and 0.3 point in 2013. (The forecasts assume
that VAT rates would be hiked this fall to offset a cut in social
payroll charges, a measure President Francois Hollande has pledged to
rescind.)

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

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

PARIS (MNI) – Ireland’s gradual recovery should gain strength next
year as stronger growth in Europe and North America boosts exports, the
Organization for Economic Cooperation and Development said Tuesday.

The OECD forecast that growth in the Irish economy will amount to
0.6% this year and 2.1% in 2013, a slight downgrading from the previous
forecasts of 1.0% and 2.4%, respectively.

In its semiannual Economic Outlook report, the OECD said that
Ireland’s competitiveness has improved, making exports a more dynamic
engine for growth, while domestic demand remains slack, because of
government cutbacks and a weak housing market.

Ireland’s unemployment rate is expected to stabilize, dropping from
14.5% this year to 14.4% in 2013, the OECD said.

The forecasts assume that the Irish government will continue to
implement budget consolidation measures, reducing the deficit from 9.4%
of GDP in 2011 to 7.6% in 2013.

“Progress in narrowing macroeconomic and financial imbalances is
being made and needs to continue. It is the only way to gain further
confidence of financial markets,” the OECD said.

While Ireland’s deficits are declining, its overall debt continues
to rise sharply. The OECD forecast that Ireland’s general government
debt, which was only 65.1% of GDP in 2009, will rise to 115.7% this year
and 120.9% in 2013.

–Paris newsroom, +33142715540; jduffy@marketnews.com

[TOPICS: M$$CR$,M$X$$$,M$D$$$,MT$$$$,MGX$$$]

PARIS (MNI) – Greece’s economy will contract by 5.3% this year but
could begin to stabilize in 2013 if it continues to implement the EU/IMF
bailout agreement, the Organization for Economic Cooperation and
Development said on Tuesday.

In its semiannual Economic Outlook report, the OECD said the Greek
economy might only fall by 1.3% next year as the pace of fiscal
consolidation begins to ease and structural reforms already completed
begin to bear fruit. The economy could even register positive growth in
the second half of the year, the organization said.

But the report, which did not mention the upcoming Greek elections,
said there were “major downside risks” that the bailout program would
not continue to be implemented.

“Reforms could become increasingly difficult to implement, in part
due to rising social and political discontent,” the OECD report said.
“If the EU/IMF programme were not implemented, the risk of debt default
would rise sharply, with incalculable consequences,” it said.

The OECD forecast that Greece’s debt will be 163.3% of GDP this
year and rise to 168.5% in 2013. The government’s fiscal deficit is
expected to fall from 7.4% of GDP this year to 4.9% in 2013.

–Paris newsroom, +33142715540; jduffy@marketnews.com

[TOPICS: M$Y$$$,M$$CR$,M$X$$$,MGX$$$,MT$$$$]

PARIS (MNI) – Spain’s economy is set to contract both this year and
next as government budget cuts and a weak banking system weigh on
domestic demand, the Organization for Economic Cooperation and
Development said on Tuesday.

In its semiannual Economic Outlook report, the OECD forecast that
the Spanish economy would contract by 1.6% this year and 0.8% next year
– a sharp downward revision from its previous forecast in November of
growth of 0.3% in 2012 and 1.3% in 2013.

Unemployment is likely to top 25% before leveling off next year,
the OECD said.

“Employment losses could level off in 2013, slowing the decline in
domestic demand, while accelerating exports will generate some growth
momentum,” the OECD said. But it also warned that “a further increase in
the risk premium on yields of Spanish government bonds would raise
private sector funding costs and deepen the recession.”

Although Spain has yet to release full details on its deficit
reduction measures, the OECD said it assumed that a broad-based
consolidation amounting to about 2.75% of GDP would be implemented,
cutting the deficit to 3.3% in 2013 from an expected 5.4% this year.

Separately, the OECD also downgraded its outlook for Portugal,
predicting that economic activity would decline next year rather than
post a small gain, as it forecast in November.

Portugal’s economy is likely to shrink by 0.9% in 2013, rather than
grow by 0.5% as it predicted in November. Its 2012 forecast of -3.2% was
unchanged from November.

“Deep fiscal consolidation, bank deleveraging and weak external
demand will leave the economy in recession until mid-2013, and the
unemployment rate is set to rise to around 16%,” the OECD said.

Although Portugal has been strictly implementing the budget
consolidation measures required by its bailout, the OECD said it deficit
would amount to 4.6% of GDP this year and 3.5% in 2013, narrowly missing
its targets of 4.5% and 3%.

Hitting its official targets “will require consolidation measures
beyond those in the programme,” the OECD said.

–Paris newsroom, +33142715540; jduffy@marketnews.com

[TOPICS: M$$CR$,M$X$$$,M$S$$$,M$P$$$,MT$$$$,MGX$$$]

FRANKFURT (MNI) – The Italian economy slipped back into recession
and is expected to contract well into next year, which could necessitate
further action to eliminate the deficit by 2014, the Organisation for
Economic Cooperation and Development said on Tuesday.

“Some additional fiscal action may be needed, given the projected
recession, but prudent government assumptions about revenues from anti-
tax-evasion measures provide a safety margin,” the OECD said in its
latest Economic Outlook.

As it stands, the deficit is expected to fall to 1.7% of GDP this
year and reach 0.6% in 2013 before disappearing the following year,
thanks in part to planned spending cuts and tax hikes, the OECD said.

Government gross debt is forecast to peak at 123.1% of GDP this
year and slip to 122.5% in 2013, the OECD said.

Italian GDP growth was revised downwards and is now expected to
stay negative on average through 2013. For this year, economic activity
is forecast to shrink by 1.7%, revised down from -0.5%, and contract by
0.4% next year (+0.5%).

“Some positive effects on growth may be visible by 2013 thanks to
export growth picking up as foreign demand improves,” the OECD said.
“However, the damping effect of fiscal tightening and falling household
real incomes following a second increase in VAT will persist, with no
recovery in investment expected.”

Highlighting Rome’s “clear intention to continue fiscal
consolidation”, the OECD nevertheless outlined a number of risks,
including higher interest rates on government debt due to “contagion
effects related to euro area weakness.” Further downside risks would
stem from tensions within the country’s banking sector, which “could
also accentuate the credit squeeze and further damp growth,” the OECD
report added.

“There is upside risk as well,” the OECD noted. “The major
improvements in the orientation of structural policies could improve
confidence, investment and labour market performance earlier, and a
further fall in the household saving rate could boost demand
significantly more than projected.”

– Frankfurt bureau: +49 69 720 142; email: frankfurt@marketnews.com –

[TOPICS: M$I$$$,MT$$$$,M$X$$$,M$$CR$,MGX$$$]