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German Finance Ministry says It Would be Wrong to Soften Globally agreed Regulatory Standards in Times of Expansive Monetary

GERMAN FINANCE MINISTRY SAYS IT WOULD BE WRONG TO SOFTEN GLOBALLY AGREED REGULATORY STANDARDS IN TIMES OF EXPANSIVE MONETARY POLICIESThe material has been provided by InstaForex Company – www.instaforex.com

The post German Finance Ministry says It Would be Wrong to Soften Globally agreed Regulatory Standards in Times of Expansive Monetary appeared first on forexnewstoday.net.



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Bahrain prevents ‘terrorists’ fleeing to Iran

Bahrain said today that it had foiled an attempt by “terrorist fugitives” wanted in connection with a January prison break to flee by sea to Iran. Security forces foiled the “trafficking” attempt in a dawn operation, a statement published on the interior ministry’s Twitter account said. Security forces in joint operation foiled at dawn today the trafficking ofterrorist fugitives involved in jailbreak on 1 Jan 2017 — Ministry of Interior (@moi_bahrain) February 9, 2017 “Preliminary joint investigation indicates the fugitive boat was heading to Iran,” a further message said, adding further details would be announced later. The ministry said in January that one policeman was killed when armed men attacked the Al-Jau prison in Bahrain, freeing several convicted inmates, describing […]


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Bahrain prevents ‘terrorists’ fleeing to Iran

Bahrain said today that it had foiled an attempt by “terrorist fugitives” wanted in connection with a January prison break to flee by sea to Iran. Security forces foiled the “trafficking” attempt in a dawn operation, a statement published on the interior ministry’s Twitter account said. Security forces in joint operation foiled at dawn today the trafficking ofterrorist fugitives involved in jailbreak on 1 Jan 2017 — Ministry of Interior (@moi_bahrain) February 9, 2017 “Preliminary joint investigation indicates the fugitive boat was heading to Iran,” a further message said, adding further details would be announced later. The ministry said in January that one policeman was killed when armed men attacked the Al-Jau prison in Bahrain, freeing several convicted inmates, describing […]


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Asian Stocks Hit 18 Month High; Europe, US Futures Bounce As Dollar Rises

Asian stocks hit their highest level in 18 months, with positive momentum lifting European shares which were helped by Societe Generale earnings. Yields fell on some of the euro zone’s battered low-rated bonds as investors put aside the political risks that have dominated markets this week. After trading flat, S&P futures bounced as US traders walked boosted by a spike in the USDJPY, ahead of earnings reports from Coca-Cola, Reynolds American, CVS Health, Nvidia and Twitter.

Rising oil prices pushed energy company shares higher in Europe on a busy day of corporate earnings while Asian stocks hit their highest in one and a  half years. “The stabilization of the oil price after its recent wobbles, together with solid earnings, for example, Soc Gen today, is driving the positive sentiment,” said Andy Sullivan, portfolio manager with GL Asset Management UK in London.

The Euro STOXX 600 index rose 0.4 percent. Bank shares also rose after French lender Societe Generale reported lower fourth-quarter net income that nonetheless beat analysts forecasts. MSCI’s broadest index of Asia-Pacific shares outside Japan gained 0.3 percent to their highest since July 2015 with Hong Kong, Taiwan and China among the region’s best performing markets. Japanese shares, however, fell 0.5 percent, hit by earlier yen strength the day before Japan’s Prime Minister Shinzo Abe meets U.S. President Donald Trump.

“We have some relief with investors shrugging off some of their concerns with a feeling that things went too far, too fast,” said Martin Van Vliet, senior rates strategist at ING.

With much attention recently on global rates, yields on Spanish and Italian 10-year government bonds fell. Earlier this week, concern over the impact of elections this year in countries including France and Germany saw investors sell bonds of lower-rated euro zone countries. Spanish 10-year yields fell 4 basis points to 1.66 percent while Italian equivalents fell 3 bps to 2.2 percent. French yields dipped 1 bps to 1.01 percent. The premium investors demand to hold French rather than German debt hit its highest in four years on Wednesday, three months before the final round of a presidential election expected to include far-right, anti-euro candidate Marine Le Pen. Yields on German 10-year bonds, seen as among the world’s safest assets, rose 0.5 bps to 0.31 percent.

In addition to political worries, bond investors are contemplating the impact of the ECB eventually winding down its bond-buying stimulus scheme, which has driven down borrowing costs in the bloc for the past two years. ECB President Mario Draghi and German Chancellor Angela Merkel, bidding for re-election later this year, meet on Thursday. A number of German officials have called on the ECB to unwind its monetary stimulus.

The euro steadied just below $1.07 after falling on Wednesday to a two-week low of $1.0640. The yen fell 0.3 percent to 112.39 per dollar, having earlier traded as strong as 111.70. The dollar index was unchanged.

In the US, 10Y yields fell to their lowest since mid-January on Wednesday as investors re-assess how many interest rate rises can be expected from the Federal Reserve and look for clarity over whether Trump will make good on his campaign pledges for tax cuts and infrastructure spending. Ten-year Treasuries yielded 2.36% in European trade on Thursday, up 1.2 bps.

Oil prices rose after an unexpected draw down in U.S. gasoline inventories. Brent crude, the international benchmark, rose 51 cents a barrel, or 0.9 percent, to $55.63. In a sign that political risks are still on the radar, gold held close to three-month highs touched on Wednesday. Spot gold rose 0.1 percent to $1,243 an ounce, compared with from Wednesday’s high of $1,244.67.

Bulletin Headline Summary from RanSquawk

  • Major European indices trade positively this morning and general sentiment leans toward risk on
  • The USD continues to trade in limbo, and while traders continue to look across the spectrum of major counterparts, we see there is reluctance to reinstate the US reflation trade, with USD/JPY notably restricted
  • Highlights include Initial Jobless Claims, Speakers include: BoE Govenor Carney, Feds Evans, and Feds Bullard

Market Snapshot

  • S&P 500 futures up 0.2% to 2,295
  • Brent Futures up 0.9% to $55.62/bbl
  • Gold spot up 0.1% to $1,243.30
  • U.S. Dollar Index down 0.2% to 100.12
  • STOXX Europe 600 up 0.3% to 364.95
  • German 10Y yield rose 1.2 bps to 0.308%
  • Euro up 0.07% to 1.0705 per US$
  • Brent Futures up 0.9% to $55.62/bbl
  • Italian 10Y yield fell 12.1 bps to 2.246%
  • Spanish 10Y yield fell 6.7 bps to 1.629%
  • MXAP down 0.2% to 143.03
  • MXAPJ up 0.4% to 459.43
  • Nikkei down 0.5% to 18,907.67
  • Topix down 0.7% to 1,513.55
  • Hang Seng Index up 0.2% to 23,525.14
  • Shanghai Composite up 0.5% to 3,183.18
  • Sensex up 0.1% to 28,330.91
  • Australia S&P/ASX 200 up 0.2% to 5,664.62
  • Kospi up 0.04% to 2,065.88

Top BBG News

  • Anthem Inc.’s $48 billion deal to buy Cigna Corp. was blocked by a federal judge, putting an end to the second of two massive mergers that would have reshaped the U.S. health-care landscape
  • Deutsche Bank AG is shutting down its U.S. swaps-clearing business as part of an overhaul of its investment bank to improve profitability, according to a person briefed on the decision
  • The Senate confirmed one of its own, Jeff Sessions, as attorney general after more than a day of contentious debate that took an unusual turn when Republicans silenced Democratic Senator Elizabeth Warren
  • President Donald Trump is injecting himself into the daily business of U.S. companies to an unprecedented extent, spurring investors and executives to weigh their exposure to his wrath when making decisions
  • SoftBank Group Corp. is aiming to close the first round of investment in its planned $100 billion technology fund by the end of this month, giving Chief Executive Officer Masayoshi Son an enormous war chest to go on the hunt for deals, according to people familiar with the matter
  • Boeing Co. is the front-runner as Singapore Airlines Ltd. closes in on an order for at least 35 wide-body aircraft amid a battle with Chinese and Middle Eastern carriers, people familiar with the matter said
  • The global oil market’s march to equilibrium won’t be deterred by the increasing volume of crude being poured into U.S. storage tanks, according to Goldman Sachs Group Inc.

Asia equity markets continued its recent choppy trade following a mixed lead from the US where stocks closed mostly higher, although the DJIA underperformed amid weakness in financials. ASX 200 (+0.2%) pared opening losses and finished marginally higher as gains in defensive stocks overshadowed weakness in mining names, while Nikkei 225 (-0.5%) was dampened by recent JPY strength although the index finished off worse levels alongside a recovery in USD/JPY. Chinese markets ignored the absence of a PBoC’s liquidity injection for the 5th consecutive day as Shanghai Comp. (+0.5%) and Hang Seng (+0.1%) traded positive with the latter led by financials and gambling names. 10yr JGBs were uneventful with prices relatively flat throughout the session, while today’s 30yr JGB auction failed to inspire as b/c, prices and the tail-in price deteriorated from the prior month. PBoC refrained from open markets operations for the 5th consecutive day due to high liquidity conditions, which brings the total amount of funds drained so far this week to CNY 715bn.

Top Asia News

  • Nissan Operating Profit Falls 15% on Rise in U.S. Incentives
  • Philippines Holds Benchmark Rate as Inflation Pressure Mounts
  • China Car Sales Decline 9.8% After Tax Increase, Lunar New Year
  • China H Shares Rally to 14-Month High as Autos, Financials Climb
  • Banks in Some Chinese Cities Said to Increase Mortgage Rates
  • MTN Close to Buying Stake in Iranian State Internet Provider
  • India’s Jan. Passenger Vehicle Sales Rise 14.4% to 265,320 Units

In Europe this morning, major indices trade positively and general sentiment leans toward risk on. In terms of sectors, healthcare is the best performing up 1.1% with materials retracing some of yesterday’s gains. Energy names started off on the front foot after Total posted a strong set of results better than those seen by BP earlier on in the week and in the financial sector Commerzbank also reported well but subsequently shares have fallen and are now trading lower by around 3%. In Fixed income markets, UST are in demand due to geopolitical risks hitting the belly with 5YR yield eyeing 180bps and 10 YR yield struggling around 235bps. German paper still in demand due to the internal EU demand away from periphery. Interestingly the GE/FR spread has tightened to 66bps a move of 14bps over the last two day. In terms of this morning’s Gilt auction, the line provided a solid bid/cover and smaller tail than previous, although failed to sway Gilts.

Top European News

  • SocGen Posts Net That Tops Estimates, Plans Car-Leasing IPO
  • Mediobanca Rises After Second-Quarter Profit Almost Doubles
  • MiFID II Market-Rule Overhaul Faces Crucial Parliament Vote
  • HSBC Said to Seek Wealth Management Asset Acquisitions This Year
  • Bank of Tokyo-Mitsubishi Fined by U.K. for Failing to Be Open
  • Draghi Meets Merkel as Populist Concerns Trump ECB Criticism

In currencies, the USD continues to trade in limbo, and while traders continue to look across the spectrum of major counterparts, we see there is reluctance to reinstate the US reflation trade, with USDJPY notably restricted. As such, geopolitical risk dominates, and the lead (risk on) trade maintains a tight range below 112.50. EURUSD has also managed to brush off the EU wide political risks weighing on the single unit. This comes with the Bund spreads (with France) narrowing, but through 1.0700, we are seeing plenty of supply coming in with initial resistance at 1.0715-20 holding. The big move in Asia was NZD on the back of the exchange rate related comments from the central bank, but after a series of losses which saw 0.7200 eventually taken out, we have seen some moderation since as the USD continues to flounder. Comments from RBA gov Lowe was a little more non committal on the AUD exchange rate, saying it is hard to say whether the AUD is overvalued or not, and this gave the spot rate some support and saw a modest, but tentative move higher through 0.7650. Some modest outperformance in GBP, as EURGBP is pressed back down to 0.8500, and given the above flow, Cable through 1.2550. Resistance in the latter seen ahead of 1.2600, allies with real money and tech based demand in the cross rate below the above mentioned figure level.

In commodities, oil rose 1.2 percent to $52.94 per barrel. The global oil market’s march to equilibrium won’t be deterred by the increasing volume of crude being poured into U.S. storage tanks, according to Goldman Sachs. Copper three-month forwards fell 0.4 percent. The metal jumped 1.7 percent Wednesday after workers at the biggest mine in Chile vowed to strike. Goldman Sachs Group Inc. forecast what would be the first deficit of the metal since 2011. Gold was flat at $1,241.93 an ounce, after touching the highest level since November on Wednesday. Oil prices are back to the fore as the significant rise in inventory (Cushing) caused a moderate sell off in WTI in relative terms, with the latest rise potentially signalling the longer term impacts of the OPEC agreements on supply made last year. WTI tested towards USD53.00 earlier today, but this just puts us back into the middle of the near term range. Natural Gas higher though due to US seasonal factors. Elsewhere, base and precious metals all modestly higher in response to USD caution.

Looking at the day ahead, the calendar continues to remain fairly sparse for the most part today. The highlight this morning in Europe is likely to be the December trade data in Germany, where exports declined by -3.3%, well below the -1.10% expected (down from +3.9%) while over in the US the only data of note is the latest weekly initial jobless claims reading and the December wholesale trade and inventories report. Away from the data we are due to hear from the Fed’s Bullard and the Fed’s Evans. BoE Governor Carney is also scheduled to speak in London this evening at 6.30pm GMT. Finally on the earnings front we’ve got 27 S&P 500 companies due to report including Coca-Cola and CVS Health Corp.

US Event Calendar

  • 8:30am: Initial Jobless Claims, est. 249,000, prior 246,000; Continuing Claims, est. 2.06m, prior 2.06m
  • 9:05am: Fed’s Bullard Speaks in St. Louis
    9:45am: Bloomberg Consumer Comfort, prior 46.6
  • 10am: Wholesale Trade Sales MoM, prior 0.4%; Wholesale Inventories MoM, est. 1.0%, prior 1.0%
  • 10am: Freddie Mac mortgage rates
  • 10:30am: EIA natural-gas storage change
  • 12pm: Monthly World Agriculture Supply and Demand Estimates
  • 1:10pm: Fed’s Evans Speaks on Economy and Policy in Chicago

DB’s Jim Reid concludes the overnight wrap

Yesterday saw a big rally in global bonds especially in the European periphery and France. Indeed 10y OAT’s finished the day 10.8bps lower in yield at 0.998%, the strongest day in fact since September 2015. In the periphery we also saw yields in Italy (-11.7bps), Spain (-7.2bps) and Portugal (-12.8bps) finish sharply lower while 10y Bunds (-5.5bps) – while underperforming – closed below 0.300% for the first time since January 10th. That meant the OAT-Bund spread eased back to 71bps from the recent 77bps wide mark. The rally really kicked into the gear straight from the open and steadily continued over much of the session. While much of the suggestion was that it was just an unwinding of some of the recent selloff, boosted also by strong auction demand in Germany and Portugal, there was a story also doing the rounds on Bloomberg concerning an internal ECB meeting in which Draghi supposedly said that he sees the ECB maintaining an accommodative policy until the end of his mandate in 2019. Given the imminent taper is a big part of the recent sovereign underperformance then one can see why markets responded to this.

The positive momentum for bonds kicked on into the US session too and we saw 10y Treasury yields end the day 5.7bps lower at 2.336%, despite a temporary move higher following a soft 10y auction which seemed to be overshadowed by comments from Larry Fink after he said that there’s a rising chance of 10y yields going back below 2% given that fiscal stimulus policies won’t be in place until 2018. Yesterday’s closing level means Treasury yields are nearly 13bps lower this week alone and are only just above the YTD low made intraday on the 17th January of 2.306%. Yields have also fallen for 4 days in a  row now which is the longest run since June last year.

So while it was a busy day for bonds, it was once again another indifferent session for risk assets. In Europe the Stoxx 600 edged up +0.33%, meaning it is pretty much back to flat for the week, while European Banks (-0.77%) lagged with the move lower for bond yields. Meanwhile at the closing bell last night the S&P 500 finished +0.07%. Incredibly that’s yet another day where the index has moved up or down by less than 0.10%, taking the tally to 7 in the last 10 sessions. That isn’t the only remarkable stat however. Yesterday’s move means the index has now gone 82 sessions without falling more than 1% which is the longest streak since 2006. In addition, the index has now also gone 37 days in a row with an intraday range of less than 1% – the longest run that we can find. Needless to say then that equity vol stayed low again yesterday with the VIX at 11.45 (versus the 10.58 low at the end of January) and the VSTOXX at 16.83 (versus the recent low of 14.60). It was a similar story in credit too with the iTraxx Main just 0.5bps tighter despite the big moves in bonds, while CDX IG finished just over 1bp wider.

This morning in Asia we’ve seen a continuation of the bond rally for the most part. The most notable have been the moves for 10y yields in Australia (-5.6bps) and New Zealand (-9.5bps) with the latter outperforming after the RBNZ left rates on hold and the associated statement said that monetary policy would remain accommodative for some time. JGB’s are little changed but we’ve also seen yields fall in Hong Kong (-3.7bps), South Korea (-2.5pbs) and Singapore (-2.5bps). The Greenback is little changed as we go to print, as is Gold and Oil, while it’s been another fairly uninspiring session for risk assets. The Nikkei (-0.28%) and ASX (-0.11%) are a shade lower while the Hang Seng (+0.39%), Shanghai Comp (+0.37%) and Kospi (+0.20%) are up.

Truth be told there really wasn’t a great deal more that was interesting yesterday. Last night we got confirmation that MP’s in the House of Commons had voted overwhelmingly in favour of a draft law to trigger Article 50 by 494 votes to 122. The legislation now moves on to the House of Lords for further scrutiny with the FT highlighting that the peers are under big pressure to approve without any amendments.

Staying in Europe, yesterday we also got another political poll out of France, which largely confirmed some of the recent trends. The Elabe poll for BFMTV showed Le Pen coming out on top in the first round at 25.5-26% versus 22-23.5% for Macron, 17-18% for Fillon and 15-15.5% for Hamon. A second round vote between Le Pen and Macron had Macron coming out on top at 63% to 37% and a vote between Le Pen and Fillon showed the latter coming out on top at 56% to 44%.

Looking at the day ahead, the calendar continues to remain fairly sparse for the most part today. The highlight this morning in Europe is likely to be the December trade data in Germany while over in the US this afternoon the only data of note is the latest weekly initial jobless claims reading and the December wholesale trade and inventories report. Away from the data we are due to hear from the Fed’s Bullard at 2.05pm GMT and then the Fed’s Evans at 6.10pm GMT. BoE Governor Carney is also scheduled to speak in London this evening at 6.30pm GMT. Finally on the earnings front we’ve got 27 S&P 500 companies due to report including Coca-Cola and CVS Health Corp.

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Getting to the Core of Inflation

Deputy Governor Lawrence Schembri discusses the uses and measures of core inflation in the conduct of monetary policy.
The post Getting to the Core of Inflation appeared first on Central bank.


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Trump “Breaks Ice” With China’s Xi, Sends Thank You Letter Seeking “Constructive Relationship”

After a fiery start to his foreign policy overtures, Trump is gradually normalizing his approach to international diplomacy.

On the same day as relations with Mexico appeared to return to normal, following reports of a meeting scheduled with the country’s foreign minister, and days ahead of the much anticipated summit with Japan’s PM Abe, Trump “broke the ice” with Chinese President Xi Jinping in a letter that marked the US president’s first direct communication with the Chinese leader since he took office, in which he said he looked forward to working with him to develop relations.

Trump thanked Xi for a congratulatory letter and wished the Chinese people a happy Year of the Rooster, according to White House spokesman Sean Spicer.  “President Trump stated that he looks forward to working with President Xi to develop a constructive relationship that benefits both the United States and China,” Spicer said in a statement Wednesday night.

Still, while Trump has had phone calls with Vladimir Putin, Enrique Pena Nieto and Recep Tayyip Erdogan since he took office, some perceived the mere letter as a modest snub to the president of the world’s second biggest economy. Trump and Xi have yet to speak directly since Trump took office on Jan. 20, although they did talk soon after Trump won the U.S. presidential election in November.

Trump, who has spoken with more than a dozen heads of state since taking office, is scheduled to speak on Thursday with the leaders of Afghanistan, Qatar, Kuwait and Iraq.

China Foreign Ministry spokesman Lu Kang responded in his daily briefing by saying “we highly appreciate President Trump’s holiday greetings to President Xi Jinping and the Chinese people.” Asked whether it was a snub that Trump had held calls with many other world leaders as president, but not Xi, Lu said: “This kind of remark is meaningless.”

He reiterated that China and the U.S. had maintained “close communication” since Trump took office and that cooperation was the “only correct choice”. “China is willing to work with the United States in adhering to the principles of non-confrontation, mutual respect and mutual benefit to promote cooperation, control disputes, and on a healthy and stable foundation, promote greater development in China-U.S. ties,” Lu said.

Diplomatic sources in Beijing say China has been nervous about Xi being left humiliated in the event a call with Trump goes wrong and the details are leaked to the U.S. media.

“That is the last thing China wants,” a source familiar with China’s thinking on relations with the United States told Reuters. “It would be incredibly embarrassing for President Xi and for Chinese people, who value the concept of face.” A senior non-U.S. Western diplomat said China was unlikely to be in a rush to set up such a call. “These things need to happen in a very controlled environment for China, and China can’t guarantee that with the unpredictable Trump,” the diplomat said.

“Trump also seems too distracted with other issues at the moment to give too much attention to China.”

As Bloomberg adds, :prior U.S. leaders have not always rushed to chat on the phone with their Chinese counterparts, even though Jiang Zemin’s visit to America in October 1997 led to an agreement on a hotline. Former President George W. Bush waited until July of his first term to speak with Jiang. By contrast, Barack Obama called Hu Jintao 11 days after his inauguration in 2009.”

Xi has reached out to Trump three times since his election win, including two congratulatory messages. They had a phone conversation on Nov. 14 in which Xi said cooperation was “the only correct choice” for ties. “It’s better than nothing, but it’s only a very small gesture,” said Shi Yinhong, a foreign affairs adviser to China’s cabinet and director of the Center on American Studies at Renmin University in Beijing, referring to Trump’s note. “Trump’s China policy hasn’t taken a clear shape yet, although all the signs so far point to a combative approach.”

China has repeatedly said it has smooth contacts with the Trump team. The Foreign Ministry in Beijing said last week the two countries were remaining “in close touch”. That contact has been led by China’s top diplomat, State Councillor Yang Jiechi, who outranks the foreign minister. Yang told Michael Flynn, Trump’s National Security Advisor, last week that China hopes it can work with the United States to manage and control disputes and sensitive problems.

The source familiar with China’s thinking said Trump’s administration was “very clear” about China’s position on Taiwan. Trump has yet to mention Taiwan since he took office.

Chinese state media has wondered whether Trump has a China policy at all. On Thursday, the widely read Global Times tabloid, published by the ruling Communist Party’s official People’s Daily, noted that Trump had not immediately confronted China as had been expected because he had realized upsetting Beijing would backfire badly.

“He has probably realized that real tough action against China would result in a complex chain reaction, even beyond his control,” the paper said in an editorial.

In a sign that Trump is gradually learning conventional diplomacy, Wang Yiwei, a professor of international relations at Beijing’s elite Renmin University, said the letter suggested the new U.S. administration wanted to signal the importance it attached to the U.S.-China relationship without risking being confronted on specific issues. “Trump has sent many messages that makes the world confused, like on the South China Sea and ‘One China’ policy, so if he makes a phone call President Xi will ask ‘what do you mean?’,” Wang said. “He wants to avoid this so he just sends a letter for the first step.”

It is the next steps, however, that worry China.

Beijing has sought both official and informal channels to boost communication with the new administration. Trump’s daughter Ivanka was invited to a Chinese lunar new year event on Feb. 1 in the embassy in Washington, and a White House official said Ambassador Cui Tiankai and Jared Kushner, Ivanka’s husband and a presidential adviser, have an ongoing dialogue. “The most worrying aspect about the new presidency is his temperament, not his policy,” said Wang Fan, director of China Foreign Affairs University’s Institute of International Relations. “We’re worried he’d go to the extreme.”

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