As yesterday’s poll target of 1.2550 was quickly reached and breached, it must be time for another poll

We sit at 1.2507.

What’ll we see first, 1.2400 or 1.2600?

Reasoning/s for choice always welcome, but not obligatory.

-Apr manufacturing output -0.7% m/m; -0.3% y/y
-Apr industrial production unch. m/m; -1.0% y/y

LONDON (MNI) – Manufacturing output fell sharply on the month in
April, increasing the likelihood that the sector will remain in
recession for a further quarter, figures released by National Statistics
showed Tuesday.

The figures, which show output down on the year for the fourth
consecutive month, will add to pressure on the Bank of England to
ease monetary policy further.

Manufacturing output fell 0.7% on the month and was down 0.3% on
the year, significantly below the median forecast for a monthly fall of
0.1% and an annual rise of 0.3%. The latest decline followed an
unrevised 0.9% increase in March on the month but output in the three
months to April was still down 0.6% compared with the previous three
months.

Evidence from the CIPS’ May manufacturing survey showed the sector
appearing to fall off a cliff, with the headline index dropping to 45.9
in May from 50.2 in April. While some economists have suggested the
CIPS data may exaggerate the poor state of manufacturing, it does
suggest continued weakness in the official data next month.

The manufacturing output figures showed a poor start to Q2, but a
boost from utilities output meant that the wider measure of industrial
production fared better and was flat on the month and down 1% on the
year. This was broadly in line with the median forecast for a monthly
increase of 0.1% and fall of 0.8% on the year. This will help to
minimise the potential hit on GDP from the slump in manufacturing.

Output of electricity, gas, steam and air conditioning rose 13.6%
on the month following a 6.4% decline in March, as the coldest April
since 1989 boosted use of gas and electricity.

Partially offsetting this was a 6.4% decline in oil and gas
extraction, mainly due to the closure of the Elgin oil and gas platform
in the North Sea which is owned by Total which accounts for 5% of total
oil production.

On the year oil and gas output was down 18.2%, the weakest since
January 2012.

-London newsroom 4420 7862 7491 email: puglow@marketnews.com

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

UK DATA: Apr manufacturing output -0.7% m/m; -0.3% y/y
–Apr industrial production unchanged m/m; -1.0% y/y
————————————————————————
Manufacturing output fell sharply on the month in April, adding to
pressure on the BOE to ease monetary policy. Manufacturing output fell
0.7% m/m and was down 0.3% y/y, significantly below the median forecast
for a monthly fall of 0.1% and an annual rise of 0.3%. Evidence from the
CIPS’ May manufacturing survey showed the sector appearing to fall off a
cliff, which suggests further weakness next month in the official
numbers. A boost from utilities output meant that the wider measure of
industrial production fared better and was flat on the month and down
1% on the year due to higher utilities output. This was broadly in line
with the median forecast for a monthly increase of 0.1% and fall of 0.8%
on the year. This will help to minimise the potential hit on GDP from
the slump in manufacturing.

Pretty much in line with expectations of  +0.1% m/m, -1.0% y/y,  smallest fall since June last year

From -0.3% m/m and -2.6% y/y in March

April Mfg output fell -0.7% m/m, (exp unchanged m/m), -0.3% y/y

Sold Eur 1.65 bln of  Jan 15 2.5%  2033 DSL, yield 2.342% (from 2.736%),

Improved yields on the reopening, but failed to take up the full Eur 2.5 bln targeted

• Spain banks will not need full 100 bln euros

Heard the Reserve Bk of India has been seen in recent trade offering GBP/USD around the 1.5515 level.

Just logged a day’s high of 1.5522 and currently trade  around 1.5505

• Swiss industry, tourism struggling with franc

Up at 6.58% from the 6.46% I jotted down first thing

Italian 10 year govt bond yield up at 6.14% from 6.00% first thing.

Spanish 5 year CDS up 10 bps at 605 bps.

Italian 5 year CDS up 11 bps at 561 bps.

FRANKFURT (MNI) – German Bundesbank Vice President Sabine
Lautenschlaeger Tuesday said an EU or Eurozone-wide banking union was
not a short-term solution to the debt crisis and would have to include
fiscal union.

In a speech at a Bundesbank conference here on banking regulation,
Lautenschlaeger said while there were positives to a banking union —
including joint deposit guarantees and a EU-wide bailout fund — there
were also potential negatives and many details to be sorted through,
including whether it would apply just to the Eurozone as opposed to the
whole EU, and whether it would target all banks or only the larger,
cross-border ones.

“The creation of these three ‘institutions’ is not the instrument
for a short-term crisis solution,” Lautenschlaeger said, as it would
also involve treaty changes and presumably national constitutional
changes to allow for an additional surrender of sovereignty.

But Lautenschlaeger said the key question involves whether — as a
counterbalance to any joint guarantees – such a banking union would
allow the EU to directly intervene in problematic national banking
sectors.

“For this reason, a banking union can only function in my opinion
if it is accompanied by a fiscal union,” Lautenschlaeger said.

“Such a fiscal union does not have to mean that national
parliaments completely surrender their budgetary powers; (but) a
partial-surrender with clear, strict European budget rules and above all
automatic, European intervention powers in cases of repeated rule
breaking, would be indispensable,” she said.

A banking union without fiscal union would benefit banks from
countries with high refinancing costs. If banks used the opportunity to
buy the sovereign bonds of peripheral countries, Lautenschlaeger said
this would not only ease necessary market discipline but create an
EU-wide bond guarantee “through the back door,” without the necessary
controls and protections of a fiscal union.

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

[TOPICS: M$G$$$,M$X$$$,M$$EC$,MGX$$$]

BERLIN (MNI) – Frank-Walter Steinmeier, the parliamentary leader of
Germany’s largest opposition party, the center-left SPD, believes that
the EU fiscal compact can still be ratified in Germany before the
parliamentary summer break.

“It’s no end in itself to delay the vote until autumn,” Steinmeier
told the German ZDF public television in an interview aired Tuesday.

Since ratification of the fiscal compact in Germany requires a
two-thirds majority in the Bundestag, the lower house, and the
Bundesrat, the upper house representing the 16 states, Chancellor Angela
Merkel’s center-right CDU/CSU-FDP coalition government needs support
from the opposition.

The government wants to ratify the fiscal compact and the permanent
bailout fund European Stability Mechanism (ESM) together. The ESM bill
needs to be passed next month at the latest because the fund is to
become operative in July.

Merkel is to meet the opposition leaders on Wednesday for another
round of talks. The opposition is demanding that Germany lobby for a
financial transaction tax at the European level and that measures to
boost growth be decided along with to the fiscal compact.

The government also needs to cut a deal with the regional states in
order to assure a two-thirds majority in the upper house. The states
demand from the federal government a larger share of public revenue
because the fiscal compact sets tougher deficit rules than the German
“debt brake” law. Moreover, the states want the federal government to
come up for any sanction payments on its own if the deficit rules are
violated in Germany.

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

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

• Greek euro exit would make additional LTRO inevitable

• A formed banking union wouldn’t be a short term solution to the crisis

Presently up at 1.2510.

Sources report notable middle eastern sovereign buying in recent trade.

Just so the euro bears know the number of the lorry that just ran them over.

• Benefits seen in  keeping banking supervision close to  CB’s
• Any financial banking union should included banks of all sizes
• Single deposit  guarantee Fund  would eventaully be required to de- link bank and sovereign risk

Reuters headlines

BRUSSELS (MNI) – The EU should aim to create a ‘banking union’ as
soon as next year, the President of the European Commission has urged.

Jose Manuel Barroso’s call for fast action comes as EU leaders
prepare to meet in Brussels on June 28-29 to discuss a grand vision for
the future of the bloc, including plans for a banking union, also
championed by European Central Bank President Mario Draghi.

In an interview published in Tuesday’s Financial Times, Jose Manuel
Barroso said that one of the lessons from the sovereign debt crisis was
that Europe needed to take “a very big step” towards further
integration.

As part of a banking union, a single EU bank supervisor would have
power over all the bloc’s banks, a move which the UK has already said it
opposes. “It’s of course the British right to decide if they want or not
to join further steps of integration,” Barroso said. “If other countries
that are not in the euro area want to join us, I think Britain is going
to accept this.”

The other key pillars of a banking union would be a single EU-wide
bank deposit guarantee scheme, paid for by financial institutions, and a
single EU authority to wind down failing banks.

EU leaders have rejected less ambitious versions of such proposals
before but Barroso said that he believed that such proposals could prove
successful this time.

“I think now we have conditions to go further that, frankly, we did
not have before,” he said. “There is now a much clearer awareness among
European member states about the need to go further in terms of
integration, especially in the euro area. This is one of the lessons of
the crisis.”

Barroso said he believed his plans could be implemented, without
changing the EU treaty.

The Commission President said the banking union plan was part of
the EU’s longer term approach to the crisis but that EU authorities’
recent aid deal for Spain, showed they were also able to act quickly and
decisively.

Barroso said that he had urged Spain’s Prime Minister Mariano Rajoy
to accept the aid in a phone call last week.

“It was our position in the Commission, as it was when I spoke with
him last week, that a programme was necessary and it was both in the
interest of Spain and the euro area to have a decision,” Mr. Barroso
said. “The prime minister of Spain reacted extremely positive to this
idea.”

–Brussels bureau, +324-952-28374; pkoh@marketnews.com

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

FRANKFURT {MNI) – Former Greek Prime Minister Lukas Papademos
believes Greece has a better chance of healing its economy from within
the Eurozone than from the outside.

In an op-ed in the German business daily Handelsblatt published
Tuesday, Papademos said the consequences of exiting the currency zone
were “very negative” and stressed that Greece had already made “clear
improvements” in boosting competitiveness and cutting deficits in 2010
and 2011.

“That is why I believe that Greece can better heal itself from
within the Eurozone than from outside,” Papademos said.

Papademos said the two main risks to Greece’s economy stemmed from
even deeper spending cuts that would worsen the recession, but also a
further loss of market confidence in Greece’s ability to carry out its
existing reform plans.

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

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

Happy Dayz.

EUR/USD down at 1.2477.

• Euro-area break-up would be financially, politically damaging
• Strong political commitment to make euro-area work
• Eurozone sovereign ratings under strong downward pressure
• Sees continued ECB support for banks in debt countries
• Europe firewall provides some reassurance
• Too early to write off the ‘muddle through’ scenario
• Last minute eurozone debt decisions raising crisis costs
• If no light at the end of the tunnel soon, risk of break-up rises
• Huge uncertainty about what will happen in Greece
• Key concern if Greece exits euro is contagion
• Direct impact of Greek euro exit would be small
• Greek euro exit could lead to AAA countries’ downgrades

• Italy is a ‘solid’ economy, and has healthy fundamentals
• Spain’s bailout won’t impact on French public finances
• The issue of Eurobonds remains on the table
• Eurozone is getting ahead of the issues with the Spanish bailout
• Eur 100 bln is more than estimates of amount needed for Spain, but next few weeks will be ‘very important’ for the future of the euro

Comments made on Europe 1 Radio..

Zerohedge.