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EUROPEAN OPENING NEWS INCLUDING: ECB's Nowotny says sees no danger of double-dip for Europe
ASIA
JGB’s traded lower for the majority of the session on the back of minor strength in Nikkei and as the market looks ahead to key US jobs data later in the day. JGBs were trading at 141.97 (-0.24) at 0621 BST. (RANsquawk)
The Bank of Japan is expected to hold off on easing monetary policy next week but is gearing up for further action in October as the strong JPY threatens to derail its forecast of a moderate economic recovery, according to sources. (RTRS)
Japanese companies cut capital spending in April-June by a less than expected 1.7% from the same period last year, pointing to an upward revision of an anaemic preliminary reading for second-quarter GDP growth. (RTRS)
China’s state owned banks reported an increase in “special-mention” loans in the second quarter, raising concerns over asset quality despite declining bad loan ratios. (China Securities Journal/Sources)
Special-mention loans, referring to debt that could potentially turn sour, rose by CNY 54bln in total during the April-June period at China’s top five state lenders, and account for 3.91% of their total loan assets. However, PBOC’s vice governor, Yi Gang, said that China’s banking system is health in terms of lenders’ liquidity adequacy ratios.
US
T-notes finished the session lower after a combination of stronger than expected economic data, as well as the latest issuance sale announced by the US Treasury weighed on prices throughout the session. At the pit close T-notes finished down 8+ ticks at 124.170. At 0636BST UST's were trading up 2 ticks at 124.19+.
The White House stressed that no second economic stimulus package is being considered as part of new measures under review by President Obama’s team. (RTRS)
USD 10bln 10y TIPS auction received a b/c 2.80 vs. Avg. 2.77 (Prev. 2.88) and Indirects were 46.6% vs. Avg. 46.25% (Prev. 51.26%).The auction drew a yield of 1.019% with a total of 24.86% of issuance was allotted at the high. (RTRS)
EUROPEAN
ECB's Nowotny says sees no danger of double-dip for Europe. (Sources)
ECB’s Wellink said the transition to higher capital and liquidity standards for global banks is likely to have a modest impact on economic growth. He also said that higher bank capital standards will enhance long-term economic stability and that the system does not have the capacity for another round of bail outs for financial companies. (Sources)
FX
China offered a rare glimpse into its foreign exchange reserve, confirming that they are overwhelmingly allocated in USD, while a central banker said the mountain of cash could face depreciation risks. (China Securities Journal)
The Chinese government’s currency reserves, the world’s largest such stockpile at USD 2.45trl, are held roughly in line with what was described as the global average: 65% in USD, 26% in EUR, 5% in GBP and 3% in JPY.
Japan views probable US opposition to intervention in the foreign-exchange market to address the appreciating JPY as an obstacle to taking unilateral action, according to three Japanese government officials. (Sources)
One of three independent MPs, Bob Katter, needed by Australia’s PM Julia Gillard to form a minority government hinted on Friday he could negotiate on Labour’s mining profits tax he had previously opposed. (RTRS)
GEOPOLITICAL
Japan slapped additional sanctions on Iran over its disputed nuclear programme, following the US in pressuring Tehran despite Tokyo’s reliance on oil imports from the country. (RTRS)
The measures that go beyond requirements in a UN Security Council resolution inside restrictions such as banning financial activity with 15 designated Iranian banks that could contribute to nuclear activities – a step that could affect some Japanese major banks.
COMMODITIES
US crude fell overnight for the first day in three as traders awaited monthly US employment data, while Hurricane Earl approached the country’s east coast, fuelling concerns of disruptions to refineries and demand during the Labour Day long weekend. WTI crude futures were trading at USD 74.68, down USD 0.34, at 0621 BST. (RTRS)
Hurricane Earl raked North Carolina’s barrier islands with gusting winds, pounding surf and rain on Thursday as it took a swipe at the US East Coast on an offshore path towards New England and Canada. (RTRS)
