• Delay for ESM will mean ‘strong’ yield rises

Official speaking at Constitutional Court in Karlsruhe,

Bloomberg reporting.

Hardly surprising…

Manufacturing Output falls 3.1% y/y from -2.3% in April

KARLSRUHE (MNI) – Germany’s Constitutional Court will not be able
to make any final decisions Tuesday about the constitutionality of
Europe’s newly agreed European Stability Mechanism, the chair of the
court said.

Opening a hearing into the ESM and Fiscal Compact, the court’s
President, Andreas Vosskuhle, said he recognized that judges face a
tough decision over whether to grant a temporary injunction — which
would prevent the ESM from taking immediate effect — or allow the
treaty to take effect at the risk that it can no longer be halted if
ruled unconstitutional at a later date.

Vosskuhle emphasized that the court could only hold a hearing over
the injunction itself Tuesday, and would not discuss the broad
constitutional questions stemming from the ESM and Fiscal Compact, which
were both approved last month by Germany’s parliament.

“It is clear that this constitutional court cannot hold a full
substantive, but rather a summary examination, given the tight time
constraints” of the temporary injunction requests, Vosskuhle said. “That
means that a final decision can not be taken in this hearing today about
the constitutionality of the ESM, the Fiscal Pact and its accompanying
laws.”

Vosskuhle did not give any insights in his opening statement into
what kind of decision the court is prepared to make after oral arguments
Tuesday, which are expected to last through most of the day.

Opposition demands for a temporary injunction have already stopped
the ESM from taking effect on July 1 as originally planned. The
Constitutional Court had earlier asked Germany’s president not to sign
the ESM and Fiscal Compact into law until it could rule on the
injunctions.

Opponents have argued the ESM and Fiscal Compact permanently curb
the German parliament’s budgetary powers, and would therefore require a
change of the constitution to be approved. German Finance Minister
Wolfgang Schaeuble and Bundesbank President Jens Weidmann were set to
appear before the court later Tuesday.

A final decision on the constitutionality of the ESM and Fiscal
Compact is not expected until 2013.

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

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

Offers are sitting up around 1.5540/50 (Fri high 1.5552) which is so far halting the rally after the stronger IP data and narrowing trade data. A break through 1.5550 will likely trip some stops ahead of next resistance up around 1.5600/20

 EUR/GBP’s still comatose in the mid/high 0.7920′s, but pressure may start building on the downside with  barriers targeted at 0.7900 and 0.7890 and talk that  the 0.7900 level holds part of a large  DNT  which expires on July 13th

Cable’s presently around 1.5540 with EUR/GBP around 0.7925

Italian 10 year govt bond yield off 15 bps at 5.95%.

-May Global Goods Trade Deficit Stg8.363bn vs Stg9.709bn Apr
-May Total Trade Deficit Stg2.717bn vs Stg4.088bn Apr

LONDON (MNI) – The UK’s trade deficit in goods narrowed sharply in
May as exports rose sharply following a large fall in April, figures
released Tuesday by National Statistics showed.

April’s plunge in exports looked suspicious and May’s bounceback
suggests that the deterioration in global economic growth wasn’t
responsible for April’s weakness. The picture, though, is clouded, as an
extra working day in May might have helped flatter the trade position
although this is not quantifiable.

The global trade in goods deficit narrowed to Stg8.363 billion
in May from Stg9.709 billion in April, below the median for a Stg9.1
billion shortfall.

Exports rose 7.8% on the month while imports rose 1.5%.

–London newsroom: 44 20 7862 7491; email: puglow@marketnews.com

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

-May manufacturing output +1.2% m/m; -1.7% y/y
-May industrial production +1.0% m/m; -1.6% y/y

LONDON (MNI) – Manufacturing output rose sharply during May as
production was boosted by an extra working day, according to figures
released Tuesday by National Statistics.

While moving the usual late May Bank Holiday to June this year
provided an extra filip to output, historical precedence suggests we’ll
see a very sharp fall in June as two working days were lost that month
due to the Jubilee celebrations. This make gauging the underlying
strength in the sector very difficult.

Manufacturing output rose 1.2% on the month and was down 1.7% on
the year. This was significantly above the median for a rise of 0.1% on
the month as most economists seem to have not taken into account the
workday effect during the month. The annual fall of 1.7% was broadly in
line with a forecast 1.8% decline.

The wider measure of industrial production rose 1% on the month and
was down 1.6% on the year, well below the median for a 0.3% monthly drop
and decline of 2.1% on the year.

The situation this year is comparable to Jubilee events ten years
ago in 2002 when output in May that year was initially reported to have
risen 0.7% on the month, before plunging 5.3% in June and then
recovering with a 4.9% monthly jump in July.

Given the effect of the Jubilee this year and the impact of the
Olympics we’re likely to see a very erratic pattern of output this year
as well.

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

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

UK DATA: May manufacturing output +1.2% m/m; -1.7% y/y
-May industrial production +1.0% m/m; -1.6% y/y
————————————————————————
Manufacturing output rose sharply during May as production was
boosted by an extra working day. While moving the usual late May Bank
Holiday to June this year provided an extra filling to output, historical
precedence suggests we’ll see a very sharp fall in June as two working
days were lost that month due to the Jubilee celebrations. This make
gauging the underlying strength in the sector very difficult.
Manufacturing rose 1.2% m/m, way above the 0.1% median as most
economists seem to have not taken into account the workday effect. The
situation this year is comparable to Jubilee events ten years ago in
2002 when output in May that year was initially reported to have risen
0.7% on the month, before plunging 5.3% in June and then recovering with
a 4.9% monthly jump in July.

• Supply constraints are dominent in French economy
• France remains largeley incapable of creating jobs
• Purely speculative banking activities should be sidelined
• Low rate climate is major asset for French finances
• Hope ECB rate cut will help revive interbank market
• Takes time for deposit rate cut to have impact
• SMP bond buying scheme helped relieve temporary tensions
• In long-term only states can resolve bond market problems
• France needs extra efforts in coming years to meet deficit targets
• Should focus on spending cuts for future deficit goals

from flat m/m  and well above forecasts of -0.2%.  Strongest rise since March 2010

Mfg output +1.2%m/m,  (expected unchanged at -0.7%) strongest  rise since May 2011

UK May Global goods balance  narrows to -£8.363 bln (expected -£9bln) after a revised -£9.709 in April

Cable spiked up 20 pips on the stronger data and is settling around 1.5530

• ECB hasn’t compromised goal of price stability
• ECB action has prevented paralysis of banking system
• ECB remains ready to act within its mandate
• ECB effectiveness depends on decisions of euro zone
• Credible euro-zone governanace is crucial
• Urgent to make ESM, EFSF fully operational
• Financial union should gradually take shape in coming years
• Possible to rapidly bring together bank supwervision systems
• ECB is best placed to take on supervision task
• Growth is an imperative more than ever
• Need fiscal consolidation, more competitiveness for growth
• Must reform job market, ensure financial stability for growth

Dow Jones reporting.

ITALY DATA: MAY ADJ INDUSTRIAL OUTPUT +0.8% M/M; WDA -6.9% Y/Y
– ITALY MAR-MAY SA IND OUTPUT 3-MM -1.9% VS DEC11-FEB12
– ITALY ISTAT: 22 WORKING DAYS IN MAY, SAME AS MAY 2011
– ITALY MAY SA WORKDAY ADJ. CONSUMER GOODS OUTPUT -0.6% M/M
– ITALY MAY SA WORKDAY ADJ CAPITAL GOODS OUTPUT +0.3% M/M
– ITALY MAY SA WORKDAY ADJ INTERMEDIATE GOODS OUTPUT +0.3% M/M
– ITALY MAY SA WORKDAY ADJ ENERGY GOODS OUTPUT +1.7% M/M
– See MNI MainWire for details

Sharp improvement  and well above Reuters consensus of -0.2%

May output working day adjusted -6.9% y/y (expected -8.2%) from revised -9.3% in April

– See Separate Tables for Details

TOKYO (MNI) – Economists expect slower near-term growth in Japan’s
consumer prices in the face of lower energy costs but have revised up
their GDP forecasts for the coming two years, the latest monthly survey
by the Japan Center for Economic Research released on Tuesday showed.

The association polled 40 economists and research institutes from
June 26 to July 3 for its ESP Forecast Survey, and 40 answered on the
growth and inflation outlook and 36 on the BOJ’s monetary policy stance.

The previous survey was conducted from May 25 to June 1.

In the near term, economists expect GDP for the April-June quarter
of 2012 to post an annualized gain of a real 1.87%, a slight downward
revision from their previous average forecast for a 1.89% rise.

Amid global economic and financial uncertainties, the average GDP
forecast for the July-September quarter was also revised down further to
+1.52% from +1.88% in the previous survey.

But for fiscal 2012 ending March 31, 2013, economists on average
forecast GDP will grow 2.32%, revised up further from +2.27% forecast in
the previous survey.

Economists on average project a 1.59% rise in GDP in fiscal 2013,
revised up from +1.50% projected the previous month.

The survey showed that the average forecast for core CPI (excluding
perishables) in fiscal 2012 was for +0.06%, down from +0.11% in the
previous survey. It would be the first annual increase in four years
since +1.2% in fiscal 2008.

Economists on average expect consumer prices to show a 0.20% rise
in fiscal 2013, unchanged from the previous month.

The forecasts showed that consumer price rises for the next two
years will remain far below the Bank of Japan’s longer-term goal of
achieving 1% annual inflation.

The survey also showed that 25 economists predict further monetary
easing by the Bank of Japan in coming months, mostly in July, down from
29 last month.

Meanwhile, 11 economists expect the BOJ to start unwinding its
monetary easing, mostly in about a year ahead, down from nine in the
previous survey.

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

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

Pushing down sharply through 81.00 this morning, with the move intitially triggered by concerns over slowing Chinese growth, but recent sales from model names now adding to the mix and weighing down on USD/JPY and EUR/JPY which have now triggered sell stops through 79.30 and 97.50 respectively.

AUD/JPY’s just posted a session low around  80.67 and is heading for sell stops on a break down of 80.50.

Been told they were behind the dip over the last hour to session lows around  79.36 which is just about where we are now.  Sell stops are set on a break of 79.30 ahead of  a host of bids in the 79.00/20 region from Japanese postal funds, option names and semi-officials.

 78.99 is also the current  200 day MA which should also lend support, but the levels could well get tested should EUR/JPY break 97.50 and trigger some sell stops, 

USD/JPY’s at 79.38 with the EUR/JPY sitting around 97.58

We’ve broken up through an hourly descending trendline from last Friday’s spike high  in Asia, but the overall trend remains heavy on the daily charts and to be honest trying to find the base in this cross looks  a dangerous game to play at the moment.

I ‘d be inclined to continue to  sell rallies for the moment unless we get a clear break through the daily trend line descending  from around 1.3030 seen on May16.

There’s some bids sitting down  in the 1.2050 area ahead of the all time low around 1.2003 and a break there is likely to trigger a sharp stop sell off towards 1.1960.  Initial topside resistance  lies at 1.2090/00 and 1.2170.

EUR/AUD’s sitting around 1.2075

EUR/USD up at 1.2300 from the 1.2285 which greeted me.

Sources report the Big German has been a notable buyer in the low 90′s.

Sell orders now reported clustered 1.2300/20, buy stops above there.

Summertime and the living is easy,  fish are jumpin and the cotton is high……….

FRANCE DATA: May industry output -1.9% m/m; April +1.4% m/m (+1.5%)
– Below expected; MNI analysts survey median forecast -1.0% m/m
– April-May industry output flat vs 1Q avg; 1Q -0.4% q/q
– May mfg output -1.0% m/m after April -0.9% m/m (-0.7%)
– See MNI MainWire for details

Weaker than Reuter’s median forecast of -0.9%.

April’s data also revised marginally lower, to +1.4% from previous +1.5%.