LONDON (MNI) – The Bank of England cut its 2012 growth forecast
dramatically and have pencilled in another small fall in GDP in the
second quarter, according to figures calculated by Market News.

The detailed figures released today show that the BOE is expecting
GDP to fall by 0.2% on the quarter in Q2 before bouncing back sharply by
1.2% in Q3 and then rising by 0.2% in Q4.

The MPC publishes a “backcast” of growth which revealed it believes
Q1 growth was a little stronger than the -0.2% decline reported in the
official data. The implied Q1 growth rate was for unchanged output on
the quarter.

For 2012, growth is now expected to rise just 0.7% compared with
2011, a large downward revision on the 1% or so expected three months
ago.

Growth is then expected to rise to 2.1% in 2013 and 2.6% in 2014.

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

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

FRANKFURT (MNI) – The European Central Bank has established a task
force for the event of a possible worsening of the Greek crisis, German
weekly Die Zeit reported on Wednesday.

The paper, citing unnamed sources, said ECB Executive Board member
Joerg Asmussen was at the head of the task force.

According to “insiders,” the ECB can be expected to react with new
anti-crisis measures should the financial market situation deteriorate,
the paper reported.

–Frankfurt bureau tel.: +49 69 72 01 42. Email: dbarwick@marketnews.com

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

They led the recovery off fresh year’s lows of 1.2615 (EBS). 

There’s also a barrier at 1.2600 with likely stops just beneath ahead of more sell stops through 1.2580

We’re presently sitting at 1.2640

–BOE MPC Miles Continues To Back Stg25bn QE Boost
–BOE MPC: As Good A Chance Inflation Above As Below Tgt In M-T
–BOE MPC: Several Members Saw Decision On QE ‘Finely Balanced’
–BOE MPC: EZ Risks Recently Resurfaced – Could Weigh Confidence
–Sterling Rise, Oil Price Fall To Moderate Price Pressures
–MPC To Monitor Outlook Each Month, More Stimulus If Outlook Warrants

LONDON (MNI) – The Bank of England Monetary Policy Committee
remained split 8-1 on the decision to leave the stock of official asset
purchases unchanged in May at stg325bn, the minutes of the May meeting
showed today.

Only David Miles backed a stg25bn boost to QE, but the committee
conceded that there was a case to add further monetary stimulus even if
the ‘best collective view’ was that inflation was as likely to be
above as below the 2% target in the medium term.

Several members admitted that the decision to leave QE unchanged
was ‘finely balanced’ and the MPC said that it would continue to review
the situation month by month and would add more stimulus if the outlook
warranted.

“For most members, there was not a sufficient reason to change
either Bank Rate or the stock of asset purchases…The Committee noted
that the existing stock of asset purchases, together with the low level
of Bank Rate, would continue to impart a substantial monetary stimulus
to the economy for some time to come”.

It continued:

“For several members, the decision not to expand the asset purchase
programme at this meeting was finely balanced. The Committee would
continue to monitor the outlook each month and further monetary
stimulus could be added if the outlook warranted it…”

The committee also touched on the recent climb in sterling’s
exchange rate, saying this development, along with the fall observed in
oil prices could help moderate external price pressures.

“…Sterling had strengthened and it was possible it would rise
further. Together with the recent fall in world oil prices, that would
help moderate external price pressures”.

The minutes add to other indications that the balance of the
debate on QE could easily shift in coming months. Adam Posen has
already signaled that he is now feeling more pessimistic about the
health of the UK recovery and could easily push for more QE at the June
meeting.

Recent weak data flow as well as the worsening situation in the
euro zone could persuade others on the MPC who are ‘finely balanced’ to
also back extra QE.

–London newsroom: Tel: +44 207 862 7492; e-mail: dthomas@marketnews.com

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

-Apr Retail Sales -2.3% m/m; -1.1% y/y; median -1% m/m; +0.5% y/y
-Apr Retail Sales ex fuel -1% m/m; -0.3% y/y; median -0.7% m/m;-0.6%y/y

LONDON (MNI) – Retail sales fell at their fastest pace for more
than two years in April as clothing and footwear volumes plummeted due
to the poor weather and fuel sales declined, figures from National
Statistics showed Wednesday.

The headline decline in sales was hit by special factors which
exaggerate the weakness in the sector, although even stripping these out
sales were down in April and have been pretty much flat since October
2011.

Retail sales including auto fuel plummeted 2.3% on the month in
April and were down 1.1% on the year, well below the median for a
monthly decline of 1% and rise on the year of 0.5% and the largest
monthly drop since January 2010.

The fall in headline sales was driven by a 13.2% drop in auto fuel
sales. Following the threat of a fuel tanker strike in March, many
motorists had brought forward purchases which boosted the March data and
also there was evidence that many petrol retailers were out of stock
throughout part of April.

Excluding auto-fuel, sales fell 1% on the month and were down 0.3%
on the year. This was still a little weaker than the median for a -0.7%
fall on the month and 0.6% drop on the year.

Again, though, the data should be viewed with some caution in
gauging underlying trends as record poor weather in April hit sales of
clothing and footwear retailers hard. Volumes in this sector were down
5.2% on the month, the largest decline since June 2008.

National Statistics said that stripping out both fuel and clothing
would still have left retail sales down on the month.

Sales at other stores fared badly as well with volumes down 3.1% on
the month.

Non-specialised sales, which is mainly department stores, were up
1.9% on the month. Household goods stores sales rose 2.1%.

Overall food stores sales fell 0.6% on the month in April, while
sales at predominantly non-food stores were down 1.7%.

In order to try and combat low volume sales, stores have been
pricing aggressively in recent months. The overall retail sales deflator
fell to 1.7% in April from 2.6% in March, the lowest since November
2009. Ex-auto fuel, the deflator fell to 1.4%, the lowest since July
2010.

-London bureau: +44 20 7862 7491; email: puglow@marketnews.com

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

–BOE MPC Miles Continues To Back Stg25bn QE Boost
–BOE MPC: As Good A Chance Inflation Above As Below Tgt In M-T
–BOE MPC: Several Members Saw Decision On QE ‘Finely Balanced’
–BOE MPC: EZ Risks Recently Resurfaced – Could Weigh Confidence
–Sterling Rise, Oil Price Fall To Moderate Price Pressures
–MPC To Monitor Outlook Each Month, More Stimulus If Outlook Warrants

LONDON (MNI) – The Bank of England Monetary Policy Committee
remained split 8-1 on the decision to leave the stock of official asset
purchases unchanged in May at stg325bn, the minutes of the May meeting
showed today.

Only David Miles backed a stg25bn boost to QE, but the committee
conceded that there was a case to add further monetary stimulus even if
the ‘best collective view’ was that inflation was as likely to be
above as below the 2% target in the medium term.

Several members admitted that the decision to leave QE unchanged
was ‘finely balanced’ and the MPC said that it would continue to review
the situation month by month and would add more stimulus if the outlook
warranted.

“For most members, there was not a sufficient reason to change
either Bank Rate or the stock of asset purchases…The Committee noted
that the existing stock of asset purchases, together with the low level
of Bank Rate, would continue to impart a substantial monetary stimulus
to the economy for some time to come”.

It continued:

“For several members, the decision not to expand the asset purchase
programme at this meeting was finely balanced. The Committee would
continue to monitor the outlook each month and further monetary
stimulus could be added if the outlook warranted it…”

The committee also touched on the recent climb in sterling’s
exchange rate, saying this development, along with the fall observed in
oil prices could help moderate external price pressures.

–London newsroom: Tel: +44 207 862 7492; e-mail: dthomas@marketnews.com

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

UK DATA: Apr Retail Sales -2.3% m/m; -1.1% y/y; median -1% m/m;0.5% y/y
-Apr Retail Sales ex fuel -1% m/m; -0.3% y/y; median -0.7% m/m;-0.6%y/y
————————————————————————
Retail sales fell at their fastest pace for more than 2 yrs in Apr
as clothing and footwear volumes plummeted due to the poor weather and
fuel sales declined. The headline decline in sales was hit by special
factors – although even stripping these out sales were down in Apr and
have been pretty much flat since Oct. The fall in sales was driven by a
13.2% drop in auto fuel sales. Following the threat of a fuel tanker
strike in March, motorists brought forward purchases which boosted the
March data and also there was evidence that many petrol retailers were
out of stock throughout part of April. Excluding auto-fuel, sales fell
1% on the month and were down 0.3% on the year. This was still a little
weaker than the median for a -0.7% fall on the month and 0.6% drop on
the year. Clothing sales fell 5.2% m/m due to the poor weather.

• BOE’s Miles continues to be the sole advocate of a £25 bln boost
• Decision to leave QE unchanged was finely balanced
• Equal saw CPI above/below target in medium term

Expectations were for -0.8%m/m, +1.0 % y/y…   so much weaker than expected, but market had basically started to move ahead of the release . GBP/USD dipped to  further to 1.5677 lows be3fore bouncing back to 1.5700

April retail sales ex fuel came in at -1% m/m, -0.3% y/y

PARIS (MNI) – Without a pick-up in economic activity, France will
be unable to eliminate its public deficit by 2017, Prime Minister
Jean-Marc Ayrault said Wednesday.

Asked in a radio interview about the odds of cutting the public
deficit to 3% of GDP next year, Ayrault said, “That’s what we hope. The
primary objective is also to reach a balanced budget” by the end of the
legislative period.

“But at the same time, we said over and over that we won’t make it
without growth,” he reminded.

After the national Accounts Court has delivered an audit of the
current financial situation and the prospects for growth, some budget
adjustments may be necessary, Ayrault indicated.

The OECD said Tuesday that this year’s deficit target of 4.5%
appeared within reach, but the “real challenge” would be to hit 3% next
year. “The resolve of the new government will no doubt be quickly
tested,” it warned.

The OECD’s GDP growth forecast for next year of 1.6% is not too far
from the budget assumptions of the new government for 1.75%. The
European Commission is less confident, forecasting only 1.3% growth next
year.

Ahead of this evening’s informal EU summit, the new prime minister
acknowledged that France’s economic situation would also depend on the
European context, noting that the “main topic” of the discussion would
be measures to bolster growth. This applies for Greece as well, he
said.

“We must help Greece and Greece must also make an effort,” notably
via fiscal reforms to boost tax receipts from the rich, he said. By next
month’s parliamentary elections, Greek voters should have a clear vision
of what is expected of them, he said. “It is also up to us to lend a
hand” with additional support, for example from EU structural funds.

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

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

From Reuters consensus and previous months reading of 89.0

Sorry a bit late

Still investigating this sudden move down to 1.2625, but suspicions lie with the EUR/JPY which has just collapse to 100.30. There are sell stops  in that cross through 100.20 ands 100.00

Just chatting with a major US name who equally puzzled,  but the year’s low of 1.2624 is still intact.

UPDATE: Sell stops through 1.2620 and again through 1.2580 in the EUR/USD

EMU DATA: March direct+portfolio outflow E53.8bn; February inflow
E16.0bn, the European Central Bank reported on Wednesday
– EMU March direct invest outflow E18.4bn; February outflow E3.4bn
– EMU March portfolio invest outflow E35.4bn; February inflow E19.4bn
– EMU March equity invest inflow E13.4bn; February outflow E1.6bn
– EMU March bond/note invest outflow E25.6bn; February inflow E22.3bn
– EMU March money mkt invest outflow E23.2bn; February outflow E1.3bn
– EMU March sa current account +E9.1bn; February -E1.2bn(-E1.3bn)
– EMU March sa goods trade balance +E8.6bn; February +E1.4bn(+E1.5bn)
– EMU March nsa current acct +E7.5bn; February -E5.6bn(-E5.9bn)
– See MNI MainWire for details

ITALY DATA: May SA consumer confidence fell to 86.5 from 88.8 in
April, hitting the lowest level since the January 1996 series start
- Sentiment on the general economic climate dropped sharply and
confidence in the current and future climate declined.
- There was also a marked worsening in expectations for unemployment.
–Consumers’ sentiment on the economy fell to 64.4 from 71.6
- Confidence in the future outlook fell to 75.7 from 76.6
- Sentiment on the current climate dropped to 96.4 from 96.7

March non adjusted balance + Eur 7.5 bln  from -Eur 5.6 in Feb

March sa  goods balance +Eur8.6 bln from +Eur 1.4 bln in Feb

• No change to BOJ’s stance of powerful easing
• Unsuccessful bond buys are a result of  low yields, auction shows effects of easing are broadening
• Doesn’t see imemediate risk of BOJ meeting asset buying target
• European debt crisis is Japan’s biggest risk with yen strengthening
• Won’t comment on JGB yield levels

 Bit of a sea of red this morning as  market pares back part of the rally of the last couple of days ahead of the EU summit dinner tonight. 

FTSE, DAX, CAC STOXX and IBEX are all down around 1.25-1.5%

LONDON ((MNI) – The Bank Of England said Wednesday it was offering
an unlimited supply of U.S. dollars in both 7-day and 84-day operations.

The settlement date on the 7-day op was May 24 maturing May 31 2012.
The Bank said the repo would be at a fixed-rate, with the rate to
be set at 0.66%.

The settlement date on the 84-day op was May 24 maturing 16 August
2012. The Bank said the repo would be at a fixed-rate, with the rate to
be set at 0.66%.

–London Bureau; Tel: +442076341655; email: ukeditorial@marketnews.com

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

…..looking to sell up to Eur 5 bln  new zero coupon 2 year benchmark Schatz bonds

Results are expected  around 0930GMT

WTI Crude  for July delivery is off  around 80 cents from Asian highs, at $91.10

More…