Interview in Dutch Magazine Elsevier

• ECB can’t keep increasing risks on its’ balance sheet
• There’s a limit to how much risk ECB can take
• SMP to remain ‘fast asleep’

 but ……-1.7% y/y falling  sharply from expectations of -0.8%

April  retails sales also revised sharply lower to -1.4m/m, -3.4% y/y , from prev -1.0%m/m. -2.5% y/y 

EUR/USD’s surprisingly holding up despite the poor numbers  around 1.2585

BRUSSELS (MNI) – Sweden’s central bank, the Riksbank, opted for a
wait-and-see strategy Wednesday, holding its key interest rate steady at
1.5%, despite concerns about spillover effects from the Eurozone crisis
and tentative signs of slowing economic activity.

“Following a bright start to the year, the unease in Europe is now
casting a shadow over the Swedish economy,” the Riksbank said.

“The Executive Board of the Riksbank has decided to hold the repo
rate unchanged at 1.50 per cent to support economic activity and ensure
that inflation is in line with the target of 2 per cent. The repo rate
is expected to remain at this low level for just over a year,” the bank
said.

Sweden’s central bank took a cautiously positive view of recent
efforts by the countries that use the euro currency to address their
problems. “The work on rectifying the problems is continuing but a lot
of work remains before long-run sustainable solutions have been
implemented,” the bank said.

“The weak developments in the euro area subdue Swedish exports and
the increased unease affects sentiment among households and companies.
GDP growth is therefore expected to be weak for some time to come, and
unemployment is expected to rise slightly,” the Riksbank warned.

According to the Riksbank, unemployment will reach 7.6% this year,
compared to 7.5% last year, and remain at that level in 2013 before
falling to 7.0% in 2014.

GDP growth since the start of the year has been stronger than
expected, but both business and consumer sentiment indicators have begun
to hint at slower growth since the Riksbank board last reviewed rates in
April.

Swedish GDP grew 0.8% in the first three months of this year
compared to the previous three months, about twice the 0.4% rate
expected by the Riksbank. But after a 0.6 point drop in July, the
Swedish manufacturing PMI is now at 48.4, its lowest level since
November 2011, pointing to weaker growth ahead.

The Riksbank raised from 0.4% to 0.6% its GDP growth forecast for
this year, but lowered its 2013 forecast to 1.7%, from 1.9%.

Citing the poorer external outlook, Sweden’s central bank decided
to lower its projected repo-rate path. The Riksbank said it now foresaw
an average rate of 1.4% for the fourth quarter of 2012, down from the
1.5% it foresaw in April this year. The average rate in the third
quarter of 2013 will likely be 1.6%, compared to its previous forecast
of 1.8%, the bank said.

As with the decision to hold rates steady back in April, the
Riksbank board was divided on the rate call announced today. Deputy
governors Karolina Ekholm and Lars Svensson again called for a 50 basis
point rate cut to 1.0% and a lowering of the repo rate path.

The two governors called for a different repo rate path. Ekholm
argued the repo-rate should stay at 1% through the third quarter of 2013
and then rise to 2.6% at the end of the forecast period. Svensson said
he thought the repo-rate path should stay at 0.75% from the fourth
quarter of 2012 through the fourth quarter of 2013 and then rise to 2%
by the end of the forecast period.

On inflation, the Riksbank said that pressures were low at present
“mainly due to cost pressures being low and the krona having
strengthened.”

The bank cut its CPI and CPIF inflation forecast for this year by
0.1 percentage point to 1.1% and 1%.

Developments in the economic situation of the euro area will weigh
heavily on future decisions, the Riksbank suggested.

“There is considerable uncertainty concerning economic
developments. The situation in the euro area is problematic and could
worsen, which could have further negative effects on the Swedish
economy. In this situation, the repo rate may need to be lower,” the
central bank said.

“However, it is also possible that confidence in economic
developments could return sooner than expected, which could lead to
higher demand in the Swedish economy. This would justify a higher
repo-rate path,” the Riksbank said.

–Brussels newsroom: +324-9522-8374; pkoh@marketnews.com

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

Down from 53.3 in May and below Reuters’ median forecast of 52.8.

8-month low 

Quick, quick, increase that QE!!!

Markit says UK PMI surveys point to overall GDP dip of 0.1% in Q2.    Happy Dayz 

What a load of old cack. Yer, that’s right I’m feckin moaning again…..

EUR/USD down 12 pips from the 1.2590 which greeted me.

European stocks have seen some slippage,  euro stoxx off -0.6%.

Talk of sell stops now through 1.2570 and more through 1.2540.

I’d hazard a little guess the ones through 40 are lumpier than the ones through 70.

Up from 46.7 May and flash  reading of 46.8

Final Composite PMI  up to 46.4 from  flash and May’s reading of 46.0

Final services PMI output  falls to 46.8  from 49.0 in May and flash of 46.9

Final composite  employment PMI down to 48.3  from 48.5 in May (flash 48.1)

All points towards expectations of  a rate cut from the ECB tomorrow

–Adds Comments To Version That Ran At 1702 GMT/1302 ET Tuesday

FRANKFURT (MNI) – Italian Prime Minister Mario Monti said he
recognizes that growth cannot come at the expense of fiscal discipline,
according to an interview with the German daily Frankfurter Allgemeine
Zeitung, published Wednesday.

Monti reiterated that his government is taking the necessary
measures to improve Italy’s economic prospects but that much depends on
“these steps being recognized abroad and giving Italy trust.” Each month
the country is coming closer to the goal of political stability and
becoming more economically attractive, he said.

“I hope that my government can bring Italy out of the financial
crisis and onto a path toward growth,” he added.

Monti played down his differences with German Chancellor Angela
Merkel at the EU Summit last week, during which the two leaders
reportedly clashed over proposals for the European EFSF/ESM firewalls to
buy sovereign debt.

While Italy has pushed for more growth, it has always recognized
this should not come “at the expense of fiscal discipline,” Monti said,
adding that he pushed the Brussels summit to take steps “for growth and
financial stability.”

“Angela plus Monti equals a step forward for European economic
policy,” the prime minister told the newspaper.

Monti reiterated that Italy was not requesting any financial
assistance or Eurobonds. “Italy is doing everything that is required for
stronger growth,” he said, noting major pension reforms and market
deregulation in the country. “To request financial help means actually
to hide the problems,” he added.

The head of the Italian government also said that he shared the
view of many Germans that bailing out insolvent countries or banks that
engage in excessively risky behaviour could contribute to moral hazard.

“We need to move closer to supra-national controls in Europe,”
Monti said, giving as an example the kind of centralized bank
supervision that leaders agreed to at their summit last Friday.

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

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

‘Giant leap’, should have been cutting months ago.

Behind the curve, or what?

Lower than May’s 51.8 reading and flash of  50.3

June  final Composite PMI index  down to 48.1  from 49.3 in May and flash of 48.1

Business expectations  falls sharply to 49.1 from 55.9 in May. Largest m/m fall  since Nov 2002 

Up to 3 month highs from final May reading of 45.1 and flash 47.3

Composite rises to 47.3  from final May reading of 44.6 and flash 46.7

Up from 42.8 in May and above forecasts of 42.5, but still the 13th continuous month of contraction

June employment sub index fell to 47.1 from 48.1 in May

Bet ya’ll glad you voted for them Socialists 

PARIS (MNI) – The new French government intends to hike taxes by
more than E7 billion in the mid-year budget revision to be presented in
cabinet Wednesday, according to the French press.

The business daily Les Echos put the cumulative tax increases at
close to E7.5 billion – towards the lower end of the E6-10 billion
revenue shortfall projected by the Audit Court in view of this year’s
public deficit target of 4.5% of GDP.

The largest hikes aim at reversing the fiscal favors of the
previous government, notably for individual assets and tax-free overtime
hours for firms with more than 20 employees.

“The measures to be adopted in cabinet today are precisely the
demonstration that the time of a certain number of privileges is behind
us,” Interior Minister Manuel Valls explained in a radio interview.

The increase in taxation of stock options begun by the previous
government will be accelerated to lift the rate from 14% to 30% for
employers and from 8% to 10% for employees. Firms will also have to pay
3% on distributed dividends.

Taxes on financial transactions and systemic risks will be doubled
to 0.2% and 0.5%, respectively, according to Les Echos. An exceptional
4% will be levied on oil stocks. There will also be tighter controls on
large groups that manipulate their financial reports to limit taxes on
profits. Individuals who seek tax shelter abroad will see their domestic
property taxed by 15.5%.

Firms with more than E250 million turnover will pay an exceptional
advance of 5% on their results at the end of the year, according to the
daily Le Figaro.

Company profit-sharing and savings schemes will see their taxation
jump from 8% to 20% for an expected revenue gain of more than half a
million this year and E2.2 billion next year, Les Echos said, noting
that the receipts will be earmarked to the social security deficit
projected at close to E15 billion this year.

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

[TOPICS: MFFBU$,M$F$$$,M$X$$$,MGX$$$,MFX$$$,MT$$$$,M$$CR$]

 an improvement from 41.8 in May and well above forecasts of 41.5, but the 12th consecutive month showing a contraction

New business index rose to 43.1 from 41.5 in May

OK OK I know it’s a fortnight old, but it made me chuckle 

-34 in 35 Analysts Expect More QE In July; 29 Expect Stg50 bln
-Five Out of 35 Analysts Predict Stg75 billion of Further QE

LONDON (MNI), July 3 – Analysts are near united in the belief the
Bank of England Monetary Policy Committee will sanction fresh
quantitative easing at this week’s meeting, with the debate centred on
whether it will be Stg50 billion or Stg75 billion.

An MNI survey found 34 out of 35 economists predicting further QE,
with five forecasting Stg75 billion and 29 predicting Stg50 billion.
With four of the nine MPC members, including Governor Mervyn King,
voting for more QE at the June meeting and markets assuming it is near
inevitable, analysts do not see the MPC delaying the launch of the third
wave of QE.

Kevin Daly, senior economist at Goldman Sachs, is one of those
expecting the MPC to sanction Stg75 billion of fresh QE. He cites the
deterioration in the global economic outlook and says the MPC has put
itself on the path of further stimulus.

Several analysts, however, see perfectly good reasons for the MPC
to hold off from QE3 this month but they do not believe the committee
will actually do so.

David Owen, Chief European Financial Economist at Jefferies, was in
a minority of one in this survey in predicting the MPC will delay QE3
until August.

Owen points out that financial markets conditions are markedly
better now than they were when five MPC members voted against more QE at
the July meeting.

Credit spreads, led by financials, have tightened and equities have
rallied since the EU leaders June 29 agreement to use the Eurozone’s
planned bailout fund to directly support banks, if needed. Germany’s
DAX, for example, is up some 6.5% from its pre-EU leaders summit level
and the iTraxx Xover credit default swap index almost 10% tighter.

RBS economist Richard Barwell says in a research note that, even
setting aside the impact of the EU leaders summit, the MPC has another
good reason for delay. This is that the joint BOE/Treasury Funding for
Lending scheme, designed to bolster bank lending, is set to be launched
in a matter of weeks and the MPC would be justified waiting for the full
details to help correctly calibrate the amount of fresh QE required.

Certainly, some on the MPC see the new bank funding and
accompanying liquidity easing initiatives championed by the BOE as, at
least a partial, replacement for more QE.

MPC member Ben Broadbent is one of those who voted for unchanged
policy in June.

Broadbent told the Treasury Select Committee on June 26 that when
he became “aware of the possibility of these other (BOE) policies, it
… gave me pause, because to some degree at least one can regard them,
if not as a substitute, as having similar effects (to QE).”

Analysts point out that the vote at the June meeting in favour of
more QE is unlikely to be unanimous. Not only could there well be
divisions over the amount of QE, in part reflecting the uncertainty over
the impact of the new credit easing initiatives, but there could even be
opposition to any more QE at all.

BOE Chief Economist Spencer Dale has aired his doubts over the case
for more QE, highlighting concerns over the weakness of the supply side
of the economy and he believes the BOE’s credit easing policies could be
a better way to support the economy.

In his evidence to the TSC Dale said: “I would like to explore the
possibility that some of the support be provided by measures designed to
improve the flow of bank credit”.

It will only take one MPC member, however, to flip to the
pro-stimulus camp and the odds on all five sticking to endorsing no
change look slim indeed.

The full analysts’ survey accompanies this piece.

For more information contact UK editorial on 44-20-7862 7491 or e-mail:
drobinson@marketnews.com

[TOPICS: M$$BE$]

-34 in 35 Analysts Expect More QE In July; 27 Expect Stg50 bln

LONDON (MNI), July 3 – The survey below shows analysts’
expectations for quantitative easing from the Bank of England Monetary
Policy Committee.

In all, 34 out of 35 economists expect fresh QE to be sanctioned at
the end of the MPC’s July 4 and 5 meeting, while 5 expect a further
Stg75 billion.

For more detail on analysts’ views please see the accompanying
piece.

Level Level Level Level Level Level
QE QE QE QE QE QE
End End End End End End
July Aug Sep Oct Nov Dec.
Meeting Meet. Meet. Meet. Meet. Meet.
stg stg stg stg stg stg
bln bln bln bln bln bln
————————————————————————
Median 375 375 375 375 375 375
High 400 400 425 425 425 425
Low 325 375 375 375 375 375
Number Responses 35 25 25 24 23 23
————————————————————————
4Cast 02-Jul 375 375 375 375 375 375
ABN Amro 29-Jun 375 n/a n/a n/a n/a n/a
Allied Irish Bank 03-Jul 375 n/a n/a n/a n/a n/a
Barclays Capital 29-Jun 375 n/a n/a n/a n/a n/a
Berenberg 29-Jun 375 375 375 375 375 375
BNP Paribas 28-Jun 375 n/a n/a n/a n/a n/a
BoA-ML 29-Jun 375 375 375 375 375 375
Capital Economics 29-Jun 375 375 375 375 375 375
Citi 29-Jun 400 n/a n/a n/a n/a n/a
Commerzbank 29-Jun 375 375 375 375 375 375
Daiwa 29-Jun 400 400 400 400 n/a n/a
Deutsche 25-Jun 375 375 375 375 375 375
Goldman 03-Jul 400 n/a n/a n/a n/a n/a
Henderson New Star 03-Jul 400 400 400 400 400 400
HSBC 02-Jul 375 375 375 375 375 375
IHS Global Insight 27-Jun 375 375 375 375 375 375
ING 29-Jun 375 375 375 375 375 375
Investec 29-Jun 375 375 375 375 375 375
Jeffries 03-Jul 325 n/a n/a n/a n/a n/a
JP Morgan 29-Jun 375 375 375 375 375 375
LBBW 29-Jun 375 375 375 375 375 375
Lloyds 29-Jun 375 375 375 375 375 375
Monument 03-Jul 375 n/a n/a n/a n/a n/a
Morgan Stanley 29-Jun 375 n/a n/a n/a n/a n/a
Natixis 29-Jun 375 375 375 375 375 375
NAB 03-Jul 375 375 375 375 425 425
Nomura 29-Jun 375 375 375 375 375 375
Oxford Economics 03-Jul 375 375 375 375 375 375
Rabobank 02-Jul 375 375 375 n/a n/a n/a
RBS 02-Jul 375 n/a n/a n/a n/a n/a
SEB 03-Jul 375 375 375 375 375 375
Societe Generale 29-Jun 375 375 375 375 375 375
Standard Chartered 29-Jun 375 375 375 375 375 375
UBS 29-Jun 400 400 400 400 400 400
Westpac 29-Jun 375 375 375 375 375 375
————————————————————————

For further information contact Sanjukta Moorthy, at Need To Know
News, on Tel: +44 207 862 7485 or David Robinson on 4420 7862 7491
e-mail: drobinson@marketnews.com.

[TOPICS: M$$BE$]

For the 1000NY/1400GMT cut…

EUR/USD: 1.2450, 1.2500, 1.2575, 1.2600, 1.2650, 1.2800

USD/JPY: 79.50, 79.55, 80.00.

EUR/GBP: 0.8060

AUD/USD: 1.0000, 1.0100

GBP/USD: 1.5630, 1.5670

:

Don’t hold back mate