Morning Forex Fundamental

EUR

'We'll get a figure of around 70, 75 or 80 billion euros' - Francisco Gonzalez, BBVA's Chairman

Spain in bank bailout talks

Impact Medium

Spanish government is in talks with European Commission about the details of a new rescue plan. Up to 60 billion euros will be needed to bail out Spanish banks, the country's second biggest lender, BBVA, said on Friday. As nation's banking system needs recapitalization, money would, mostly, come from 100 billion euros Spanish bailout fund pledged by Eurozone finance ministers in June.

'We'll get a figure of around 70, 75 or 80 billion euros,' BBVA's Chairman Francisco Gonzalez said.

'[I] would not totally exclude that it gains traction over time,' the official said. 'It does not involve new money to be politically agreed on.'

The Stoxx Europe 600 Index added 0.47 per cent to 275.78. Germany’s DAX Index rose 0.84 per cent to 7,451.62, while France’s CAC 40 Index gained 0.59 per cent to 3,530.72.

USD

'We don't expect earnings growth to be the big driver going forward' - Andres Garcia-Amaya, global market strategist at J.P. Morgan Funds

U.S. stocks closed mixed on Friday

Impact High

U.S. stocks closed mixed on Friday after a late-afternoon selloff.

The Standard & Poor's 500 slid 0.01 per cent to 1,460.15. The Dow Jones Industrial Average erased 0.13 per cent to 13,579.47. The Nasdaq Composite edged higher 0.13 per cent to 3,179.96.

'A question that investors keep asking themselves is, 'Can this risk rally continue without the help of the European Central Bank and the Fed?’' said Andres Garcia-Amaya, global market strategist at J.P. Morgan Funds.

'We don't expect earnings growth to be the big driver going forward.'

GBP

'Today's figures show the government borrowed almost £7bn less last year than previously estimated' - David Gauke, Exchequer Secretary to the Treasury

U.K. public sector borrowing hits record high in August

Impact High

The U.K. public sector borrowed 14.4 billion pounds in August, posting record deficit since the records begun, the Office for National Statistics said Friday. Analysts had predicted U.K's public sector borrowing to rise 15.0 billion. Overall, public sector's net debt reached 1,039.5 billion Pounds, and composes 66.1% of the U.K. GDP.

'Today's figures show the government borrowed almost £7bn less last year than previously estimated. This is further evidence that we are dealing with our debts and getting the deficit down,' said David Gauke, Exchequer Secretary to the Treasury.

'Unless present trends are reversed in the next few months, we now expect total borrowing in 2012/13 as a whole to exceed the total predicted by the OBR at the time of the Budget by more than £20bn,' said David Kern, chief economist at the British Chambers of Commerce (BCC).

The FTSE 100 Index surrendered 0.03 per cent to 5,852.62. However, the broader FTSE All-Share Index appreciated by 0.01 per cent to 3,055.02.

CHF

'There’s market speculation of a bailout, though the official line is still that Spain won’t seek one' - Pierre Mouton, a portfolio manager at Notz Stucki & Cie.

Swiss stocks rose on Spain bailout speculation

Impact: Medium

Swiss stocks rose, after news that Spain is about to ask for international financial aid pushed market sentiment higher. Spain will have to make necessary reforms, like freezing pensions and increasing the retirement age as it races to cut spending in order to meet conditions of an expected international sovereign aid package.

The Swiss blue-chip index SMI, a measure of the largest and most actively traded companies advanced 0.75 per cent to 6,605.82. The broader Swiss Performance Index rose 0.66 per cent to 6,111.62.

'There is that news out of Europe, where they seem to be making more progress towards helping Spain out, so that is going to continue to kind of support us, for sure,' said Ken Polcari, Managing Director at ICAP Equities in New York.

'There’s market speculation of a bailout, though the official line is still that Spain won’t seek one. If the bond spreads widen again, that will accelerate a bailout process,' said Pierre Mouton, a portfolio manager at Notz Stucki & Cie. in Geneva.

JPY

'Economic data in Japan, Europe and China shows economies remain in bad shape' - Koichi Kurose, chief economist in Tokyo at Resona Bank Ltd.

Japanese stocks fell on Monday

Impact: Medium

Japanese stocks edged lower on Monday on concerns the global economy is slowing.

The Nikkei 225 Stock Average retreated 0.45 per cent, or 40.71 points, to 9,069.29. The broader Topix Index erased 0.36 per cent, or 2.70, to 753.68

'There’s a sense of irritation about progress in Europe,' said Koichi Kurose, chief economist in Tokyo at Resona Bank Ltd.

'Economic data in Japan, Europe and China shows economies remain in bad shape. Investors are finding it difficult to change their positions. They don’t know yet whether the recent stimulus will work. On the other hand, if the economy gets worse, there’s an expectation for more stimulus, which will provide a boost to the market.'

Press Review

Europe

German Federal Constitutional Court cleared the way for Eurozone rescue fund on Wednesday, September 12. The European Stability Mechanism with total value amounting to 500 billion euros is aimed to provide assistance to Eurozone's countries in financial difficulty.

Eurozone’s policy makers agreed to an unlimited bond- purchase program to regain control of interest rates in the region. The ECB will target government bonds with maturities from one to three years, including longer-dated debt that has a residual maturity of that length.

Portugal backs down on social security tax rise

http://www.bbc.co.uk/news/business-19684712

The centre-right government in Portugal has agreed to look for alternatives to a social security tax rise a week after huge anti-austerity street protests.

European Leaders Struggle to Overcome Fresh Crisis Stalemate

http://www.businessweek.com/news/2012-09-23/euro-leaders-seek-end-to-stalemate-as-discord-mounts-on-crisis#r=bloomberg

European leaders are struggling to overcome a crisis-fighting stalemate as they face discord over a banking union, Greece’s ongoing debate on how to meet bailout commitments and foot-dragging by Spain and Italy on financial aid requests.

USA

The Federal Reserve announced a fresh round of quantitative easing to shore up U.S. economic growth. On Thursday, September 13, the Fed said that it would buy $40 billion of mortgage-backed securities every month until the labour market improves.

U.S. consumer prices rose more than expected in August, as gasoline prices soared 9%, the Labor Department said Friday. U.S.CPI jumped 0.6%, after no change in the prior month. Analysts had expected U.S. inflation rate to be at 0.5% last month.

Wall Street Week Ahead: Stocks face earnings and data hurdles

http://www.reuters.com/article/2012/09/23/us-usa-stocks-weekahead-idUSBRE88L01220120923

Stocks could struggle to stay close to nearly five-year highs this week as worries mount about third-quarter earnings and the market appears primed for a pullback from recent stimulus-driven gains.

Romney Plans Full Slate in Latest Reboot

http://online.wsj.com/article/SB10000872396390444083304578014743957324304.html?mod=WSJUK_hpp_MIDDLEFourthNews

Romney will pick up the pace of his campaigning this week and stress policy proposals that he believes would put more Americans back to work, such as cracking down on Chinese trade practices, pursuing more free-trade agreements and increasing domestic oil and gas production.

Asia & Pacific

Chinese trade balance rose more than expected in August, the National Bureau of Statistics of China reported on Monday. Nation’s trade surplus widened to $26.661B versus expectations of $19.75B, up from 25.10B in the prior month.

Japan’s industrial production showed signs of recovery, posting a final reading of -1.0% in August, up from -1.2% in the preceding month. Analysts had predicted Japanese industrial output to fall 1.2% last month.

Asian Stocks, Commodities Decline on Europe Woes; Aussie Weakens

http://www.bloomberg.com/news/2012-09-24/asia-stocks-fall-as-australian-dollar-kiwi-weaken-gold-drops.html

Asian stocks retreated from near a four-month high, the Australian dollar weakened and commodities fell on concern renewed discord among European leaders will hinder resolution to the debt crisis.

US-China Trade Spat Has 'More Bark Than Bite': Lamy

http://www.cnbc.com/id/49143288

A dispute between the U.S. and China over illegal trade practices, which has sparked worries over a potential trade war between the world’s two largest economies, has 'more bark than bite,' according to the World Trade Organization’s (WTO) Director General Pascal Lamy.