No?, well how about 6.5%

• ECB has acted with ‘largesse’ to Spain
• Spain benefitted most from 3 year operations
• Spain must persevere with reforms
• Spanish govt GDP forecast is realistic

LONDON (MNI) – Bank of England Chief Economist Spencer Dale seems
to have cast doubt on whether doing more quantitative easing would be an
appropriate response to the UK’s economic weakness.

The comments confirm the suspicion that Dale remains at the hawkish
end of the Monetary Policy Committee and is not one of the members of
the committee who are ‘finely balanced’ on the question of whether to do
more asset purchases or not.

In an interview with The Sunday Times, Dale noted that growth in
supply has been weak as well as growth in demand. Pumping more money
into the economy in this case may not be the correct policy approach:

“A feature of the past two to three years has been weak growth in
demand but also weak growth in supply, which we see in the productivity
figures. Some people say we can just pump more into the economy with QE,
but if weak growth reflects problems on the supply side of the economy
that may not be appropriate.”

Dale also says that the euro crisis would cast a pall over the UK
economy for years.

“I’d expect the uncertainty to continue for the next few years,
even if some of the worst outcomes are avoided. It will continue to act
as a drag on our economy.”

Dale blames economic weakness on high inflation. While he remained
confident that inflation would come down, this would be a “test”, he
said.

“I said last year that the fall in inflation from 5% to 3% was
‘baked in the cake’ but that the real test would be getting from 3% to
the 2% target.”

“The story so far is good but there is a long way to go.”

–London newsroom: 4420 7862 7499; email: ukeditorial@marketnews.com

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

Highest since November.

Spain/German 10 year govt bond yield spread widens out to 508 bps.

Spain’s IBEX markedly under-performing other European stockmarkets, presently down -0.75% compared to euro stoxx 50 which is up +0.6%.

ITALY DATA: Italy May sa manufacturing morale 86.2 5 vs Apr 89.1: ISTAT

Ughhh

Weaker than median forecast of 88.7.

Lowest read since December 2009.

From the 494 I jotted down first thing.  There was an initial narrowing of the spread this morning, but this has been turned round.

Spanish banking woes remain to the fore.

Shares in Bankia down -26.75% when trading resumed this morning. Trading in the bank’s shares was  suspended Friday.

DAX up +1.3%.

EUR/USD steady at firmer levels in slow trade, presently at 1.2612.   Fact it’s a  U.S. holiday (Memorial Day) won’t be helping matters any.

Stops through 1.2620 have been tripped.  More seen gathered up in 1.2625/30 area.

Bringing back the punt 

Been as high as 1.2609,  presently at 1.2602.

Greek poll news and talk of a European rescue fund for distressed banks are a couple of factors lending the single currency some support.

Sell orders have been well-documented in recent sessions in the 1.2600/20 area, and here we are!!

Buys stops reportedly through both 1.2620 and 1.2625 (take your pick, what’s 5 pips between friends)  Sean overnight reported more through 1.2655.

Financial bookies see FTSE opening up as much as +0.3%, DAX up as much as +0.4% and CAC 40 up as much as +0.7%.

‘Support in the Netherlands for the five parties that back budget cuts to meet EU targets has fallen sharply over the past month.’

‘Chancellor Angela Merkel’s conservatives saw their lead over the main centre-left opposition party crumble in the sharpest one-week shift in German voter sentiment in seven years, an opinion poll showed on Sunday.’

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

JAPAN DATA: Japan’s output gap indicating the degree of oversupply
and slack demand narrowed to -2.2%, or about Y10 trillion, in the
January-March quarter, improving from -3.0% in October-December 2011,
the Cabinet Office said. The latest figure showed the smallest gap since
-2.1% marked in Q4 of 2010.

TOKYO (MNI) – Japan’s output gap indicating the degree of
oversupply and slack demand narrowed to -2.2%, or about Y10 trillion, in
the January-March quarter, improving from -3.0% in October-December
2011, the Cabinet Office said on Monday.

The latest figure showed the smallest gap since -2.1% marked in Q4
of 2010.

The negative output gap narrows when gross domestic product rises
above the economy’s potential growth rate, which is estimated by the
Bank of Japan to be around 0.5%.

Japan’s economy expanded a real 4.1% at an annualized rate in the
first quarter of 2012, posting the highest gain since +7.6% in Q3 of
2011.

The output gap is believed to influence consumer prices with a lag
of six to 12 months.

Japan’s output gap has been improving gradually after hitting the
recent bottom of a revised -7.9% in Q1 of 2009 at the height of the
global financial crisis.

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

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

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

By Shigeo Kodama

TOKYO (MNI) – Retail sales in Japan will continue to mark solid
year-on-year growth in April, posting a fifth consecutive rise,
according to people working in the auto sector and at department stores
who cite the effects of government subsidies and a recovery of sentiment
from a year before.

But the pace of increase appears to have decelerated from the 10.3%
rise in March as low temperatures in early April dampened demand for
spring clothing, some retailers said.

Accounts by retailers also suggest that jitters about the global
economy and slumping stock markets — thus job creation and wages — may
be working as a boon for jewelry (now seen as a better investment than
equities) but as a bane for daily items such as food.

The Ministry of Economy Trade and Industry will release the data at
0850 JST on Tuesday (2350 GMT Monday).

Retail sales are expected to have risen around 6% on the year in
April, according to MNI’s own forecast based on sales of foodstuffs,
automobiles, consumer electronics as well as department store sales. The
average forecast by economists polled by MNI is also for +6.0%.

Retail sales showed a double-digit percentage gain in March,
rebounding from a sharp 8.3% drop a year before, when economic activity
was hindered by the earthquake disaster. This year-over-year boosting
effect will continue to support April figures.

Auto sales appeared to have led the April retail sales.

Industry data showed that sales of automobiles with engine
displacement of 660 cc or higher rose 92.0% on year in April, showing
gains for eight months in a row, after +78.2% in March and +31.9% in
February.

A spokesman at the Japan Automobile Dealers’ Association cited
government subsidies for buying greener cars, which were revived on Dec.
20, as “a primary factor for pushing up the April car sales.”

Department store sales are another factor supporting April retail
sales.

Department store sales rose 1.3% y/y in April, showing the second
consecutive gain after +14.1% in March.

It was partly due to brisk sales of jewelry and other luxury goods,
which were up 7.7% y/y in April, defying the old theory that spending on
luxury goods would rise only when the Nikkei stock average stayed above
Y10,000 (it’s been below the level since early April).

Also, visitors from overseas are returning to Japan after the
Fukushima nuclear meltdown scared them away last year. Before the
disaster, Chinese shoppers were saviors for department stores and
tourist spots.

Department store sales from visitors from other countries
quadrupled from year-earlier levels in April, the Japan Department
Stores Association said earlier this month.

A spokesman for Keio Department Store said, “It is possible” that
consumers are shifting their funds from financial assets to luxury items
as high returns cannot be expected from financial assets these days.

“Brighter prospects are now seen in corporate sales and profits,”
which may prompt consumers to buy high-end goods, a spokesman at
Takashimaya said. He added that there is pent-up demand among consumers
who were hesitant to spend last year in the aftermath of the disaster.

Meanwhile, slumping sales of food and beverages, which accounted
for about 32% of overall retail sales in fiscal 2011, are expected to
have hampered a higher growth in April retail sales.

Sales of food fell 2.7% in April, posting the second straight
year-on-year drop after -4.3% in March, according to supermarket sales
data.

Akio Masuda, a spokesman for the Japan Chain Stores Association
that represents supermarkets, said, “Consumers are reluctant to loosen
their purse strings” amid concerns about the European debt crisis, the
strong yen, weak share prices and the government’s plan to double the 5%
sales tax.

Demand for clothing was also weak in April while sales of TVs and
other consumer electronics remained sluggish.

Sales at First Retailing, the holding company of the global casual
clothing chain Uniqlo, fell 6.8% on year in April, posting the first
drop in five months after rising 5.1% in March.

“Our sales were sluggish on low temperatures in April,” Daisuke
Fuse, spokesman for First Retailing, said, adding that sales of clothing
are influenced by weather conditions rather than business cycles.

Meanwhile, the Japan Department Stores Association said higher
temperatures in the second half of April boosted demand for spring
clothing and sales of casual business clothing for the summer also led
overall sales as peak-time power supply shortages are feared.

Sales at Edion, a major electronics discounter, fell 10.3% on year
in April, posting falls for nine months in a row after -25.4% in March.

Many consumers rushed to buy digital TVs before July 24, 2011, when
Japan terminated analogue broadcasting services.

The pullback in sales of TVs continues, said a spokesman for Edion.

Shipments of home electric appliances in the domestic market fell
8.7% on year to Y161.1 billion in April, posting the first year-on-year
drop in three months following +3.9% in March, the Japan Electrical
Manufacturers’ Association data showed.

Shipments of air conditioners, which account for the largest share
of overall shipments, fell 15.2% on year in April, also posting the
first decline in three months after +8.6% in March.

This was in payback for a 59.5% rise in April 2011, when demand for
air conditioners that require less power to operate surged in light of
electricity shortages caused by the shutdown of the Fukushima Dai-ichi
nuclear power plant.

skodama@marketnews.com
** MNI Tokyo Newsroom: 81-3-5403-4838 **

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

• BOJ Minutes: Must avoid policy which is seen as monetisation
• Japan April CSPI +0.2% YoY, compared with -0.2% last month
• EZ bank funding reports give EUR a lift
• Greek weekend polls show pro-bailout parties back in lead
• China industrial company profits -2.2% in April
• RBA Stevens: No doubt that Chinese data is on softer side
• EUR short positions seen at record levels
• Regional; stockmarkets fairly quiet with Tokyo and Shanghai flat, and HK +0.4%
• Gold $1575/oz, Oil $91.70/bbl

EUR and the risk trades like AUD and NZD opened higher in early interbank trade on the back of reports that EU banks were about to receive some extra bail-out possibilities and that the Greek pro-bail-out parties had regained control in the polls. CFTC reports on market positioning also suggested that the market might be ripe for a retracement or at least some consolidation.

EUR/USD closed in NY just above 1.2500 but has spent the entire session trading above 1.2550 after an opening gap higher. The Greek poll results when combined with reports of an EU bank rescue fund as well as further Spanish government measures to shore up their banks, all helped to improve the dire risk sentiment from last week. EUR/USD traded to 1.2580 early on, couldn’t break back below 1.2550 and then started to rally again. Ranges: 1.2530/98

AUD has performed very well on the improved risk sentiment and a bearish technical break in EUR/AUD also helped the Aussie. AUD/USD closed in NY at .9760 but opened above .9800 and hasn’t looked likely to dip much throughout todays session. Ranges: .9760/.9864, NZD/USD .7542/.7629

USD/JPY started the day near 79.70 and has gradually edged lower despite some short-covering in AUD/JPY. The BOJ minutes were again very cautious and this allied with corporate selling has kept the USD/JPY tone bearish. Ranges: 79.34/72, EUR/JPY 99.76/100.16

Cable 1.5656/1.5707, EUR/CHF 1.2010/32

Typical, Sovereigns join in to spoil the bulls party! Hearing that Asian central banks are looking to sell AUD/USD near .9880. If it does get there, that would be 1.5% higher than the NY closing level, and certainly would be a good opportunity for stale longs to start limiting any damage they may have suffered during the vertical falls of recent weeks.