• Not a good idea to directly capitalize banks in trouble
• Important to get transparency in Spain back again
• Moody’s downgrades were expected
• German banks have significant exposure to Spain, but “don’t have to fear” the situation in Spain
• Governments need to take right steps to improve the crisi situation
• Idea of a banking union is good in the long-term, but won’t help solve the current crisis

Comments made by the BDB chief in an interview  with Bloomberg

Jun MNI analysts survey May Apr
median range
————————————————————————
Business sentiment: 105.3 105.4 103.0 – 106.6 106.9 109.9
Current conditions 113.9 112.0 100.4 – 113.1 113.2 117.5
Six-month outlook: 97.3 99.7 99.0 – 100.5 100.8 102.7
–

FRANKFURT (MNI) – Business sentiment in Germany fell in June to
105.3, its lowest level since March 2010, on declines in manufacturing
and wholesaling and a deterioration in expectations, the Ifo institute
reported Friday.

The index roughly matched expectations of a drop to 105.4,
according to MNI’s poll of economists, and marks the second straight
sharp drop after holding above 108 from January to April this year.

The business situation index rose to 113.9 from a downwardly
revised 113.2 (113.3) in May, though it remains down sharply after
averaging 117.4 from February to April. Expectations dropped to 97.3,
the lowest level since December, and down from a downwardly revised
100.8 (100.9) in May.

“The recent surge in uncertainty in the Eurozone is impacting the
German economy,” Ifo President Hans-Werner Sinn said in a press release.

Though down sharply the past two months, Sinn noted the business
situation remains above its long-term average, even if companies
“expressed greater pessimism about their business outlook.”

By sector, the manufacturing index dropped to 5.0 from 10.5 in May
and wholesaling fell to 5.0 from 7.9. Construction improved to -4.6 on
the month from -5.2, while retailing turned mildly positive to 0.3 from
-3.7.

The services index meanwhile fell in June to 21.3, the lowest level
since December and down from 24.8 the previous month.

Ifo’s sentiment barometer, which reached a nine-month high in
April, had been sending more positive signals than the PMI polls in past
months. With the downturn in May and the sharper drop this month, Ifo’s
indicator is now moving more into line with the composite PMI, which
fell to a three-year low (48.5) in June.

“While an impending ‘Drachmageddon’ scenario has been avoided,
there nonetheless seems a deepening consensus among German businesses
that the euro area turbulence has already damaged their growth prospects
for the latter half of 2012,” said Markit senior economist Tim Moore.

Investors polled in this month’s ZEW survey were pessimistic as
well, as the market sentiment indicator dropped to its lowest point
since August.

“The financial market experts’ expectations are a strong warning
against a too optimistic assessment of Germany’s economic perspectives
in the remainder of this year,” warned ZEW President Wolfgang Franz.

Hard and soft data suggest that 2Q is unlikely to see anything
similar to 1Q’s 0.5% jump in economic activity, as a slowing global
economy and a debt crisis continue to weigh on demand and morale.

The Bundesbank has warned that uncertainty surrounding economic
prospects had increased “notably” in recent weeks. “It still has to be
seen to what extent the latest exacerbation of the debt crisis and signs
of a slowing global economy will weigh on Germany’s economic outlook,”
the central bank said.

One bright spot, however, would be the recent downward trend in oil
prices, which helped to push German CPI below 2% in May for the first
time since December 2010 and led to easing price pressures for companies
in June.

A potential rate cut from the European Central Bank could also help
underpin sentiment.

“Cutting rates is certainly an option as far as our monetary policy
is concerned,” ECB Executive Board member Benoit Coeure said in a recent
interview. “It was discussed at the last Governing Council meeting and I
would expect the next Council to discuss it again,” he said, adding, “We
are in a situation where there is no threat to medium-term price
stability.”

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

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

Up 13 bps on the day.

Italian 5 year credit default swaps rise 10 bps to 518 bps.

That ain’t gonna help the consumer confidence any

EUR/USD edges up to 1.2545, seemingly unperturbed. Go figure.

–Government Eyeing 2% Minimum Wage Increase: Press

PARIS (MNI) – French monthly base salaries rose 0.9% in 1Q and
hourly wages were up 1.0% after 4Q gains of 0.3% for both, the Labor
Ministry said Friday, confirming its initial estimates.

Annual base pay gains slowed from 2.3% to 2.2% for salaries and
were steady at 2.3% for wages.

Nominal pay increases tend to be larger at the start of the year
and the 1Q gains also reflect a catch-up with high inflation rates,
which had been undermining real purchasing power. The pick-up in wages
follows a back-to-back hike in the minimum wage by 2.1% in December and
another 0.3% in January.

As consumer prices (excluding tobacco) rose by 0.9% over the course
of 1Q, real base pay gains were negligible both on the quarter and the
year.

Last month the European Commission projected a slowdown in
full-year pay gains from 2.8% last year to 2.1% this year and 2.0% next
year, reflecting its forecast for a half-point rise in the jobless rate
this year and another 0.1-point increase next year.

However, future pay gains at the low end could prove somewhat
stronger, as the new government is eyeing a hike in the minimum wage of
1.5% to 2.5% this summer, the business daily Les Echos reported Friday,
The range reflects the government’s dilemma of fulfilling a campaign
promise of President Francois Hollande without further undermining the
cost-competitiveness of domestic producers.

If, as the newspaper reports, the final decision to be announced
Tuesday is likely to be for a minimum wage hike of around 2%, a large
part would be merely an advance on the regular adjustment for inflation
that will come next January. As consumer prices have already risen by
1.4% since the previous adjustment, the extra boost now would amount to
only 0.6%.

While such a hike would be too modest in the view of most union
leaders, one advisor to Labor Minister Michel Sapin has estimated that
the E27 monthly increase in the monthly minimum wage this would
represent could potentially cause job losses of 30,000 to 50,000, Les
Echos said.

Hollande had also pledged to add an economic growth increment
equivalent to half the real income gains of salaried workers to
cost-of-living adjustments in the minimum wage in the future.

With production slowing, the rise in French unit labor costs could
accelerate to 2.1% this year (+0.6% in real terms), then slow to 1.1%
next year (-0.6%) as the business cycle turns around, the Commission
forecast.

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

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

Italy June consumer confidence came in at 85.3, down from 86.5 in May and weaker than Reuters’ median forecast of 86.0.

Weaker than Reuters consensus of 105.9

June current conditions  up to 113.9 (exp 112.3) from 113.2, expectations  down to 97.3 (exp 99.8) from 100.8

All in all, a bit of a mixed bag…

EUR/USD’s static around 1.2538

Meanwhile

Dutch FinMin says remains opposed to financial transaction tax, as it would be very damaging for the Dutch economy.

I like it when everyone’s singing from the same hymn sheet

The EU always reminds me of trying to herd cats

Latest dip to 1.5586 was met with Asian sovereign demand  and bounced the pair back above 1.5600 to a day’s high of 1.5628.

Offers await a further run up around 1.5650/60

GBP’s around 1.5620

He’s good….

EUR/USD bounces from 1.2520 low, presently at 1.2540.

I guess the above is why there were buy orders clustered 1.2520/30, sell stops below

• Will defend Franc cap with “upmost deterrmination”
• Ready to buy currency at unlimited quantities
• Franc remains “high” at current levels
• Won’t tolerate further franc appreciation
• Uncertainty about future developments has increased
• Companies employemnt, investment plans remain cautious

All rather similar to comments made  last Thursday ….

…through 1.0025 to lows around  1.0008, but bids ahead of parity holding up for now . There’s  some sell stops through 1.0000 ahead of  tech support 0.9980/85 (see orderboard)

AUD’s since bounced a tad to 1.0016

BERLIN (MNI) – EU heads of states and governments at their summit
next week want to make the European Central Bank responsible for banking
supervision in Europe in the future, Germany’s daily Die Welt reported
Friday, citing a non-identified EU diplomat.

EU Council president Herman van Rompuy “has the agreement of the
27″ member states, the paper cited the EU source as saying.

According to Die Welt, the Council will assign the European
Commission to present a draft bill swiftly after the summer recess.

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

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

All a bit thin this morning, guess the market is a bit shell shocked or just tired but here goes..

EUR/USD: Bids 1.2520/30, sell stops below ahead of more bids 1.2500/10, sell stops below. Offers 1.2580/00, and 1.2610/20 with buy stops above

GBP/USD:  Bids 1.5575/85, tech supp 1.5550/55 (1.5552 21 day MA), offers 1.5650/60

EUR/GBP:  Bids 0.8025/30 and 0.7995/00. Offers 0.8055/60 and 0.8080/85

USD/JPY:  Buy stops up through 80.60, Bids 80.00/10 and 79.70/80

EUR/JPY:  Bids 100.50/60, tech supp 99.90/00 Offers 101.50/60 likely buy stops through 101.65

EUR/CHF: Bids 1.2000/10(SNB), Offers 1.2025/50 buy stops through 1.2055

USD/CHF:  Offers 0.9590/00, Bids 0.9500/10 (possibly officia|)

AUD/USD: Tech supp/bids 1.0030/40, sell stops through 1.0025 ahead of bids 1.0000/10,sell stops below ahead of tech sup 0.9980/85 (38.2% 0.9580/1.0225). Offers 60/70 (tech res 1.0075/80 (55 day MA @ 1.0078),

AUD/JPY:  Tech supp 80.35/40 and 80.20/25, Offers 81.00/10 tech res 81.55/60

EUR/AUD: Tech supp 1.2470 (61.8% of this year's rally), Bids 1.2435/45 and 1.2395/05, strong tech supp 1.2350/55

NZD/USD:  Bids 0.7830/40, sell stops through 0.7800

We sit at 80.45.

What’ll we see first, 79.50 or 81.50

Reasoning/s for choice always welcome, but not obligatory

-Repeats Item Transmitted At 1724 GMT Thursday
-Not Sure QE Impact As Powerful As Some BOE Estimates
-Sterling May Need To Fall Further To Help Close Trade Gap

GUILDFORD (MNI) – The case for further quantitative easing in the
near term will be strengthened if the impact of the Bank Of England and
Treasury bank funding initiatives are slow to materialize, BOE Monetary
Policy Committee member Martin Weale said.

BOE Governor Mervyn King outlined in last week’s Mansion House
speech a joint BOE/Treasury plan to provide banks with cheap funding in
return for increased lending, along with new BOE liquidity injections of
six month money. Weale said the key reason he did not back for stimulus
at the June MPC meeting was he wanted to assess the likely impact of
these new schemes.

“Ahead of the next meeting I want to try and form a better view of
the likely effects of these measures (ECTR) in terms of demand. That
will then influence whether and, if so, by how much I think there should
be more asset purchases,” Weale told reporters.

The Funding-for-Lending scheme is still under development, although
King said it could be launched within weeks. The MPC may not have any
clear evidence of its impact for some time, but Weale said they would
try and predict its effect on market interest rates.

“We take account of what we think their effects may be, when we
expect them to happen. If some of the new policies are relatively slow
to have an effect then that would increase the case for further asset
purchases in advance of that,” Weale said.

In the question and answer session after his speech, Weale said the
trade gap needs to close and sterling may well need to fall further to
help it do so.

Weale said the trade gap was an important issue for him and that
sterling’s fall back in 2008 had had less impact on it than he had
expected, and that the currency may need to become more competitive
still.

“The depreciation that we had in 2008 I thought would do more to
close the trade deficit than so far it has, there may be a number of
explanations for that, the international trade environment hasn’t been
comfortable to say the least,” Weale said.

“The trade deficit will need to close further and sometimes I do
wonder whether the exchange rate might need to be more competitive than
it is at the moment in order to help with that,” he added.

Sterling fell sharply on its trade weighted index from very late
2007 through 2008, declining from 100.2 on its broad trade weighted index
on December 18 2007 to below 80 in December 2008.

In response to a question on the effectiveness of QE, Weale set out
the BOE’s view that it is working through driving down gilt yield and
subsequent portfolio effects, but he thought some BOE research may have
exaggerated its impact.

“I’m not sure that it has necessarily been as powerful as some of
the estimates from the bank have suggested,” Weale said.

He said the latest BOE and joint BOE/Treasury initiatives, the
Extended Collateral Term Repo auctions and the Funding for Lending plan,
should reach parts of the system that QE has not.

-London Bureau +20 7862 7491;
drobinson@marketnews.com/wwilkes@marketnews.com

[TOPICS: M$$BE$]

An anonymous government official has confirmed that the  Cypriot government have also approached Russia for a loan.

Russia’s deputy Fin MIn Storchak  earlier told reporters that no request had been received from Cyprus , but said that any request would be considered….

More..    ekathimerini

– Japan May Supermarket Sales -1.7% Y/Y Vs Apr -1.9%

TOKYO (MNI) – Sales at supermarkets in Japan open for at least a
year fell 1.7% in May from a year earlier to Y1.04 trillion, posting the
third straight y/y drop after -1.9% in April, an industry group said on
Friday.

Stormy weather conditions and low temperatures as well fewer public
holiday compared with May last year led to the sales decline, the Japan
Chain Stores Association said.

In February, supermarket sales marked the first y/y gain in seven
months on the leap-year effects and solid winter clothing sales.

The latest figures are based on the combined sales at 57
supermarket chains which together operate 7,784 outlets. The numbers
have been adjusted to facilitate comparison on a same-store basis.

Including sales at stores newly opened during the past year,
revenue fell 2.0% in May after falling 2.3% in April.

tokyo@marketnews.com
** MNI Tokyo Newsroom: 81-3-5403-4835 **

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

Financial bookies see FTSE down around -1%, DAX down around -0.9% and CAC 40 down around -0.8%.

I guess if you’d followed the adage “sell in May and go away” you’d be feeling pretty chuffed round about now…….

Frank-Walter Steinmeier, the opposition leader of the SDP in the Bundestag, tells Handelsblatt.

With the 1.2600 lower parameter of the latest poll having been reached and breached, it’s time for another.

Congratulations to all those who guessed 1.2600 before 1.2800.

We sit at 1.2553.

What’ll we see first, 1.2450 or 1.2650?

Reasoning/s always welcome, but not compulsory.