FRANKFURT (MNI) – The European Central Bank said Wednesday that it
has allotted $1.544 billion in its 7-day USD liquidity providing
operation.

The central bank said it received 4 bids.

Today’s operation was carried out at a fixed rate of 0.66%. The
Euro/USD rate was set at 1.2498.

–Frankfurt Bureau tel.: +49-69-720 142, email: frankfurt@marketnews.com

[TOPICS: MT$$$$,M$$EC$,M$$FI$,M$X$$$,MGX$$$]

1Q GDP: flat q/q, -0.1% y/y (revised from flat y/y)
4Q GDP: -0.3% q/q, +0.7% y/y
3Q GDP: +0.1% q/q, +1.3% y/y
2Q GDP: +0.1% q/q, +1.6% y/y
-

PARIS (MNI) – Foreign trade lent another boost to Eurozone economic
activity in 1Q, offsetting the weakness in domestic demand and a further
drag from inventory changes, Eurostat said Wednesday, confirming its
flash estimate of zero GDP growth.

On the expenditure side, private consumption stabilized in 1Q after
a half-point drop in 4Q. Retail sales edged up 0.1% in 1Q, but car sales
skidded lower in most markets. Government spending recovered by 0.2%
after two quarters of contraction. Both private and public consumption
had a negligible impact on 1Q GDP growth.

More worrisome, gross fixed-capital investment plunged 1.4% in 1Q,
deepening the slide during the previous year and amputating 0.3 point
from GDP growth.

Exports bounced back 1.0% on the quarter after a 0.7% dive in 4Q.
Amid anemic domestic demand, imports managed only a 0.1% upturn from a
1.7% plunge. As a result, foreign trade added 0.4 point to GDP growth,
just as in 4Q.

A further drawdown in inventories, linked to the inertia of
imports, trimmed 0.2 point from GDP after a 0.3-point drag in 4Q and 3Q.

On the production side, manufacturing slipped another 0.1% after
-1.5% in 4Q. Construction tumbled 1.1% after three quarters of decline,
shaving 0.1 point from GDP. All other sectors, including agriculture and
the services had no significant impact on growth.

The 0.5% quarterly GDP rebound in Germany and the dynamism of some
smaller economies was just enough to offset another 0.3% contraction in
Spain, a 0.8% dive in Italy, a 0.2% fall in the Netherlands, a 0.1% dip
in Portugal and a 0.3% fall in Cyprus. Activity in France was stagnant.
GDP gains were also registered in Belgium (+0.3%), Austria (+0.2%),
Finland (+0.8%), Estonia (+0.5%), Slovenia (+0.2%) and Slovakia (+0.7%).

Leading indicators have since deteriorated to such an extent that a
downturn starting in 2Q appears inevitable. In hindsight, the flat GDP
reading in 1Q appears more like a temporary pause in a recession that
began in 4Q and was interrupted by the rebound in exports.

The Eurozone composite PMI fell to a near three-year low of 46.0 in
May, driving all the larger economies into contraction territory. With
new orders also falling at the fastest pace in nearly three years, the
slump can only continue.

Fiscal tightening, rising unemployment and subdued wage gains amid
still high inflation are a recipe for anemic consumption ahead. Among
the larger economies, only in Germany are consumers likely to be better
off by July, which would accentuate the growing divergence across
Eurozone economies.

Extended recessions can be expected throughout most of the southern
flank, which will drag down the overall performance of the Eurozone.

Last month the European Commission revised down its Eurozone
projections to show a full-year contraction in GDP of 0.3%, with
negative growth in seven of 17 member states, including the Netherlands
(-0.9%). Greece would suffer most (-4.7%), followed by Portugal (-3.3%)
and Spain (-1.8%) — all countries where break-neck budget consolidation
is taking its toll.

In the core countries, growth would be subdued, the Commission
predicted, as Germany (+0.7%) faces waning export demand from its
neighbors and France (+0.5%) could see its consumption motor stall amid
high unemployment and budget tightening.

“Going forward, based on the assumption that the euro area will
successfully handle crisis-related challenges, a return of confidence
over the course of 2012 is expected,” the Commission said bravely. “The
positive impact on domestic demand components is expected to become
strong enough to pull the economy out of recession later in 2012.”

Next year, a recovery in consumption and investment and a boost
from exports are expected to lead to a GDP upturn of 1.0%.

The OECD is on the same wave-length, forecasting a GDP dip of just
0.1% this year but a weaker upturn of 0.9% next year. Again, the working
assumption is that activity will gradually recover in the second half of
this year – “provided that policy actions are sufficient to improve
confidence.”

“The scale of the simultaneous fiscal adjustment will be a
significant drag on demand growth,” the OECD conceded in its spring
Economic Outlook. “However, the fragility of confidence in public
finances of euro area countries, and a high and rising debt-to-GDP
ratio, warrant ongoing measures to bring the public finances onto a
sustainable path.”

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

[TOPICS: MT$$$$,M$X$$$,M$XDS$,MTABLE]

EMU DATA: 1q real GDP unrev unch q/q, rev -0.1% y/y (unch)-Eurostat
– EMU 1q private consumption unch q/q; 4q -0.5%; 3q +0.3%
– EMU 1q fixed capital formation -1.4% q/q; 4q -0.4%; 3q -0.3%
– EMU 1q government consumption +0.2% q/q; 4q -0.1%; 3q -0.3%
– EMU inventory change cut 0.2 pp from 1q GDP; 4q -0.3; 3q -0.3
– EMU net exports added 0.4 pp to 1q GDP; 4q +0.4; 3q +0.3
– EMU 1q exports +1.0% q/q; 4q -0.7%; 3q +1.5%; 2q +1.1%
– EMU 1q imports +0.1% q/q; 4q -1.7%; 3q +0.7%; 2q +0.6%
– See MNI MainWire for details

Y/Y revised fractionally lower at -0.1% from previous flat.

–Adds German Media Report About Precautionary Credit Line To Spain

BERLIN (MNI) – Spain needs to apply for financial aid from the
European bailout fund EFSF in order to prop up its ailing banks, Volker
Kauder, the parliamentary leader of Chancellor Angela Merkel’s CDU/CSU
bloc, said in a television interview Wednesday.

“I do think that Spain needs to tap the rescue fund – not because
of its state [finances] but because of its banks,” Kauder said.

The CDU/CSU parliamentary leader said that Germany still rejects
the idea of allowing the EFSF and the planned permanent ESM to lend
directly to the Spanish bank rescue fund or to the troubled banks
itself. On Tuesday, Kauder had said that any financial “aid has to be
requested by the concerned governments, as foreseen in the rules.”

Meanwhile, the German daily Die Welt reported in its Wednesday
edition that Spain may get a precautionary credit line from the EFSF,
which still had to be requested by the Spanish government itself.

The German weekly Der Spiegel reported over the weekend that Merkel
and Finance Minister Wolfgang Schaeuble had also urged Spain to apply
for financial aid from the EFSF, yet the Spanish government had resisted
this demand.

German government spokesman Steffen Seibert said on Monday that it
was up the Spanish government to decide whether to apply for aid from
the EFSF and accept the conditions tied to it.

“If there is the need for aid, everybody knows that Europe is
ready, that Europe is showing solidarity and that Europe has the tools
to help,” Seibert said. “But the decision on this – once the numbers [of
the capitalization need of Spanish banks] are available – lies solely
with the Spanish government.”

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

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

Awaiting results of audit to outline recapitalisation needs of banks.

LONDON (MNI) – The UK construction sector saw activity declerate
gently in May, with no echo of the collapse in activity seen in the
manufacturing sector last month, according to Markit/CIPS.

The data, the second of CIPS’ May triptych, showed construction
activity slowing to 54.4 from 55.8 in April, a three-month low. The
manufacturing PMI showed that sector contracting sharply in May, posting
its second steepest monthly fall in the survey’s 20-year history, but
these figures show the construction sector continuing to expand.

All eyes now will be on the CIPS data for the dominant services
sector, which are due out Thursday ahead of the Bank of England Monetary
Policy Committee’s monthly meeting. The BOE was handed the May services
data last week, according to Markit.

The construction sector survey, however, showed some signs of
weakness at the detail.

Business confidence dropped sharply from April and new business
growth hit a four-month low, with the sharpest monthly fall since June
2010. CIPS said some firms said weaker economic confidence was acting as
a drag on growth.

“May’s survey highlighted a big fall-back in new business growth
following the large spurt of order gains seen during the spring. A
softer trend in new projects set the tone for the construction sector in
May,” Tim Moore, senior economist at Markit, said.

-London newsroom: +44 207 862 7491; email:drobinson@marketnews.com

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

Can I get back to you on that one?

It’s been an active enough morning in EUR/USD, but when all said and done we’re not really going anywhere.

EUR/USD sits at 1.2514, up a mere 12 pips from the 1.2502 which greeted me first thing.

We’ve been as high as 1.2528 in recent trade, but the sell orders mentioned in the earlier orderboard from 1.2520 up to 1.2550 area are proving a problem for the euro bulls at present.

We’ve got euro zone Q1 GDP data coming up at 09:00 GMT,  expected flat both q/q and y/y

Then at 10:00 GMT we’ve German industrial production for April expected -1.0% m/m, +0.9% y/y (wda)

Finally at 11:45 GMT we’ve ECB rate decsion.  I think I must be the only person who thinks they might ease policy.  Guess I’m gonna be wrong again

 Down from 55.8 in April, but marginally above  consensus of 54.2. Lowest reading in 3 months

With a little help from EUR/JPY which also saw some stop buying up through 99.00.   Recent day’s highs have been 79.28 and 99.30, but  offers now lie above  in the  79.30/50  and 99.40/50 regions. More buy stops are seen up through 99.50

Don’t blame me, it’s Banya’s idea

We sit at 79.18.

What’ll we see first,  78.00 or 80.00?

Reasoning/s always welcome, but not compulsory 

According to Dow Jones

“Barclays is waiting for better levels to sell EUR/USD,  hopefully in the 1.2570-1.2600 area after Friday’s bullish reversal day.

However,  the bank says  it would be comfortable selling a daily close below 1.2325, or a break below 1.2285, looking for a target near the 2010 low at 1.1875.”

• Yuan exchange rate  is close to equilibrium
• China’s FX regime is under-reformed
• China should allow more free flow of capital as part of  its FX reforms
• Yuan may become  the international reserve currency over the next 10-20 years

Dow Jones reporting

BERLIN (MNI) – Spain needs to apply for financial aid from the
European bailout fund EFSF in order to prop up its ailing banks, Volker
Kauder, the parliamentary leader of Chancellor Angela Merkel’s CDU/CSU
bloc, said in a television interview Wednesday.

“I do think that Spain needs to tap the rescue fund – not because
of its state [finances] but because of its banks,” Kauder said.

The CDU/CSU parliamentary leader reaffirmed that Germany still
rejects the idea of allowing the European bailout funds to lend directly
to troubled banks in the Eurozone.

The German weekly Der Spiegel reported over the weekend that Merkel
and Finance Minister Wolfgang Schaeuble had also urged Spain to apply
for financial aid from the EFSF.

German government spokesman Steffen Seibert said on Monday that it
was up the Spanish government to decide whether to apply for aid from
the EFSF and accept the conditions tied to it.

“If there is the need for aid, everybody knows that Europe is
ready, that Europe is showing solidarity and that Europe has the tools
to help,” Seibert said. “But the decision on this – once the numbers [of
the capitalization need of Spanish banks] are available – lies solely
with the Spanish government.”

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

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

Always nice to have choices

• Progress on Greek tax evasion made
• But long way to go on Greek tax evasion
• Tax evasion in Greece a cronic problem
• Crisis at ‘core of Europe’ with Spain

Doesn’t get any betta, does it?

Worse than forecast and from March’s reading of -7.5%

It isn’t us, it’s them………..

Pushed up to a day’s high of 1.5446 just now and into the  earlier mentioned offers.

A break through 1.5450 points up to 1.5500 and the May31 highs of 1.5526

EUR/GBP also helping the cause with a day’s low of 0.8086, but into tech support ahead of  0.8070/75