ASIA



JGBs inched up overnight, supported by bargain hunting, but superlongs underperformed the market on expectations that increased debt sales to finance post-quake rebuilding will push up JGB yields. JGBs were trading at 142.20 (+0.08) at 0534BST. (RTRS)



Japan’s government cut its economic growth forecast for the current fiscal year to 0.5% from 1.5% to reflect the slump in factory output after a magnitude 9.0 earthquake, tsunami and nuclear meltdown in March, the Cabinet said. Japan’s recovery from natural disaster faces growing risks from an uncertain global economic outlook and rising JPY, nevertheless, the government expects the economy to grow 2.7% – 2.9% next fiscal year. Japan will aim to keep its ceiling for new borrowing unchanged next fiscal year, the government said. (RTRS)



Japanese banking minister Jimi declined to comment on whether the country would bolster its short-selling restrictions, following a move to ban short-selling in financial stocks in some European countries. (RTRS)



Japanese Industrial Production (Jul F) M/M 3.8% vs. Prev. 3.9%, Y/Y -1.7% vs. Prev. -1.6%

Japanese Capacity Utilisation (Jun) M/M 5.2% vs. Prev. 12.8% (RTRS)



The China Banking Regulatory Commission have told banks to tighten lending for real estate on concern credit risks will increase as the impact of government curbs deepens in the next three to five months, a person familiar with the matter said. (Sources)



GLOBAL



China is concerned about new challenges facing European countries in the next two months and urged the block as well as the US to keep a lid on government debt, Commerce Minister Chen Deming said. (RTRS)



S&P doesn’t expect another recession in developed markets, Kim Eng Tan, an analyst in the ratings company said. (Sources)



US



T-notes finished the session in negative territory, pushing yields up from near record lows, after the unexpected weak demand at the US auction of 30y notes. At the pit close t-notes settled at 129.070 down 30 ticks. DJIA closed up 3.94% at 11142.78, S&P 500 closed up 4.63% at 1172.63 and NASDAQ 100 closed up 4.53% at 2167.07. At 0617BST T-Notes were trading up 6+ ticks as Japanese investors looked for safe havens following the cut in Japan’s GDP forecast.



Fed’s balance sheet expanded to USD 2.856tln in the week ended Aug 10th from USD 2.851tln in the week ended Aug 3rd. Also, foreign central banks’ holding of US marketable securities at the Fed rose USD 3.823bln in the week ended Aug 10th to stand at USD 3.476tln. (RTRS)



Results of USD 16bln 30y note auction; yield 3.750% vs. Exp. 3.622%, B/c 2.08 vs. Avg. 2.74 (Prev. 2.80), Indirect 12.2% vs. Avg. 39.39% (Prev. 37.69%), and the allotted at high 41.74%. (Sources)



EUROPE



A ban on short-selling financial stocks in four European countries including France takes effect today, a co-ordinated attempt to restore confidence in a market hit by rumours and higher borrowing costs. France, Italy, Spain, Belgium imposed a ban which will vary in detail depending on the country, the European Securities and Markets Authority (ESMA) said. (RTRS/Sources) France will ban short-selling on 11 financial stocks for 15 days, Spain will protect 16 stocks for 15 days, while Belgium will ban short-selling for 4 financial stocks for an indefinite period. Details of the Italian ban are not immediately clear. Banks listed included France’s BNP Paribas, and Societe Generale and Spain’s Santander and BBVA. Meanwhile, financial markets are overreacting to concerns that French banks might suffer from exposure to their nation’s sovereign debt, Institute of International Finance managing director Charles Dallara said.



Senior officials in Brussels are preparing to fast-track funding for a EUR 20bln Greek bond buy-back after realising the EUR 440bln Eurozone rescue scheme will not be ready in time. (FT - More)



With only 10 days left until a team from the International Monetary Fund, the European Central Bank and the European Commission arrives in Athens to check how Greece is progressing with its economic reforms ahead of receiving an 8-billion-euro loan tranche next month, the government is facing a battle with civil servants that could hamper its effort to make changes. (Ekathimerini) Civil servants’ union ADEDY made it clear this week that its members would strike in September if their wages are cut further. ADEDY also said that it would attempt to block the effort to sell state assets.



Financial markets are overreacting to concerns that French banks might suffer from exposure to their nation’s sovereign debt, Institute of International Finance managing director Charles Dallara said. (Sources)



French GDP (Q2 P) Q/Q 0.0% vs. Exp. 0.3% (Prev. 0.9%), Y/Y 1.6% vs. Exp. 1.6% vs. Exp. 2.0% (Prev. 2.2%, Rev. to 2.1%)

French CPI (Jul) M/M -0.4% vs. Exp. -0.3% (Prev. 0.1%), Y/Y 1.9% vs. Exp. 2.2% (Prev. 2.1%) (RTRS)



FX



Japanese finance minister Noda said he will consider various options if one-sided moves in JPY continue. Noda also told he needed to look at current trends in the exchange market for a bit longer to judge if last week’s JPY selling intervention was effective. (RTRS/Sources) Noda says want to cope with JPY rise with sense of urgency and may consider steps to cope with JPY rise in 3rd extra budget. Noda added that the G-7 is to take needed actions in coming weeks.



Chinese Commerce Minister Chen says he is concerned about the excess liquidity from previous global stimulus packages and China will stick to gradual, steady currency reform. (RTRS)



GEOPOLITICAL



Syrian forced killed at least 19 people in raids near the Lebanon border and in the country’s Sunni tribal heartland, activists said. Washington said sanctions were needed on Syria’s oil industry. European states warned of tougher UN response, however, Russia, and China opposed UN sanctions against Assad.



Libyan rebels said they had captured part of oil town of Brega while their forces in the West pushed toward Zawiyah, trying to get within striking distance of Gaddafi’s capital. (RTRS)



COMMODITIES



WTI and Brent crude futures traded lower overnight as the USD strengthened and demand concerns from industrialised nations weighed on prices. WTI crude futures were trading at USD 84.78, down USD 0.94, at 0640BST. (RTRS)

