Morning Forex Fundamental

EUR

The 'markets are telling us that they're unconvinced by the bank bailout and that the next step is that the government will have to concede, capitulate, and go for a sovereign loan' - James Stewart, head of macro research at AX Markets

Spanish yields rise

Impact high

Yields on 10-year Spanish government securities rose on Thursday to the highest level since the creation of the single currency union. Yields climbed to 6.91 per cent at the close of the trading session.

The 'markets are telling us that they're unconvinced by the bank bailout and that the next step is that the government will have to concede, capitulate, and go for a sovereign loan,' James Stewart, head of macro research at AX Markets in London, said.

'That seems to me quite likely, and even now I think it's moving on from Spain to Italy.'

European stocks extended losses the same day. The Stoxx Europe 600 Index erased 0.30 per cent to 241.84. Germany's DAX Index declined 0.23 per cent and France's CAC 40 Index lost 0.08 per cent

USD

'We've seen some disappointing employment reports in May. The labor market is just kind of mediocre right now, not gaining much traction' - Bricklin Dwyer, an economist at BNP Paribas

U.S. jobless claims climb

Impact High

The number of Americans claiming for unemployment benefits rose to 386,000 in the week ended June 9 from 377,000 the week before, said the Department of Labor on Thursday.

'This is a bit of a notch-shift higher with jobless claims,' said Bricklin Dwyer, an economist at BNP Paribas in New York. 'We've seen some disappointing employment reports in May. The labor market is just kind of mediocre right now, not gaining much traction.'

Also Tuesday, a Labor Department report showed core prices, excluding volatile fuel and food, rose 0.2 per cent.

'With inflation seemingly in check, the Fed appears well-positioned to revisit discussions of additional policy action [at its meeting] next week,' said Jim Bair, chief investment strategist for Plante Moran Financial Advisers, an independent advisory firm.

'The increasingly apparent slowdown in the already weak expansion should make these conversations more approachable.'

GBP

'The big news obviously is Spain is ticking up, so the question is how long can they sustain this before having to go back for more funds' - Chris Beauchamp, a market analyst at IG Index

U.K. stocks closed in red on Thursday

Impact High

U.K. stocks declined on Thursday.

The benchmark FTSE 100 Index lost 0.31%, or 16.76 points, to 5,467.05. The FTSE All-Share Index declined 0.22%, or 6.19 points, to 2,831.47.

'The big news obviously is Spain is ticking up, so the question is how long can they sustain this before having to go back for more funds,' said Chris Beauchamp, a market analyst at IG Index in London.

'It's the rising yields and then you factor in the Italian yields and then obviously you have the Greek elections so you've got a perfect storm brewing.'

CHF

'Our advice is to sell any rally as long as the macro backdrop doesn't improve' - Emanuel Cau, a strategist at JPMorgan

Swiss stocks break winning streak

Impact: Medium

Swiss stocks edged lower for the first time in a week on Thursday as the Swiss National Bank said Credit Suisse Group AG and UBS AG need to raise additional capital this year.

The Swiss blue-chip index SMI, a measure of the largest and most actively traded companies, fell 0.61%, or 36.18 points, to 5,908.51. The broader Swiss Performance Index erased 0.66%, or 36.48 points, to 5,495.71.

'The SNB's comments on Credit Suisse only added to the uncertainties on the market that have been and will be present until we see the outcome of the Greek new elections,' said Christoph Riniker, head of strategy research at Julius Baer Group Ltd. in Zurich.

'Hence investors will be on the sell side in the short term. We need to see some confirmations before we'll see a calming of the markets.'

JPY

'Europe is sliding further into a recession and the global and U.S. economies are still slowing down, and so I think this is a soft patch' - Shane Oliver, Sydney-based head of investment strategy at AMP Capital Investors Ltd.

Japanese stocks fell on Thursday

Impact: Medium

Japanese stocks declined on Thursday, as European and U.S. data added to signs the global economic outlook is deteriorating.

The Nikkei 225 Stock Average retreated 0.22 per cent, or 18.95 points, to 8,568.89. The broader Topix Index lost 0.11 per cent, or 0.78, to 725.66.

'Europe is sliding further into a recession and the global and U.S. economies are still slowing down, and so I think this is a soft patch,' said Shane Oliver, Sydney-based head of investment strategy at AMP Capital Investors Ltd.

'It's still the time for caution on the short-term view. There's a lot of event risk around.'

Press Review

Europe

After risks over Greece leaving Eurozone faded, Spain remained in focus, driving the market volatility. The Spanish financial sector requires financial aid, which the national government cannot afford. Therefore, the EZ member states have to agree on the common measures to address the issue.

Greek pro-bailout parties are leading in polls ahead of Parliament elections, which are going to take place on June 17.

German minister rejects plans to pool eurozone debt

http://www.bbc.co.uk/news/business-18438402

Germany's deputy finance minister has ruled out "eurobond-lite" plans to pool part of eurozone countries' debt.

Banking reform could signal increase in cost of mortgages and bank services

http://www.guardian.co.uk/money/2012/jun/14/banking-reform-increase-cost-mortgages

Government plans to protect taxpayers, by separating banks' retail and investment banking arms, could mean rise in charges.

USA

After the release of the latest US unemployment figures, some members of the Federal Open Market Committee stated that the Fed might weigh an option of launching the third round of quantitative easing to sustain the US economic recovery.

The International Monetary Fund rose U.S. economic growth forecast to 2.1 from 1.8 per cent in 2012.

Obama says election will determine course of economy

http://www.reuters.com/article/2012/06/14/us-usa-campaign-obama-idUSBRE85C05O20120614

President Barack Obama cast his re-election battle with Mitt Romney as a clash between starkly contrasting philosophies and charged that his Republican rival would hollow out the middle class in a high-stakes speech on Thursday that could set the tone for months of intense campaigning.

Fed Easing: What Market Wants vs What May Happen

http://www.cnbc.com/id/47814463

Investors with precious little to cheer about these days appear to be hanging their hopes on a last refuge: another round of stimulus from the Federal Reserve that may not come—at least not yet.

Asia & Pacific

China is suffering a major economic slowdown, as growth flags in the country's real estate, construction, steel, and other sectors. As a part of fiscal opening policy, China will allow direct Yen-Yuan trades.

Japan has published a shrinking trade surplus in March after a record deficit in January.

Bank of Japan holds policy moves before Greek vote

http://www.marketwatch.com/story/bank-of-japan-holds-policy-moves-before-greek-vote-2012-06-14-231033418

The Bank of Japan on Friday left its benchmark interest rate unchanged in a range between 0% and 0.1% and also didn't announce any fresh monetary stimulus, avoiding further policy action ahead of the weekend elections in Greece.

Asian Stocks Rise As Stimulus Hopes Offset Europe Concern

http://www.bloomberg.com/news/2012-06-15/asia-stocks-rise-on-reports-policy-makers-may-spur-growth.html

Asian stocks gained, with the regional benchmark index heading for its biggest weekly advance in almost five months, as optimism that central banks from China to the U.S. will act to stimulate economic growth tempered concerns Europe's debt crisis will worsen.