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Bank deposits at the European Central Bank have more than doubled to a
5-month high this week as European financial firms seek the safety of cash in
response to the intensification of the Eurozone debt crisis.
The ECB said on Wednesday that on Tuesday banks put €104.9bn overnight on
deposit, the highest level since early February and up from €49.9bn on Friday.
As the ECB pays below market rates, the development suggests that banks are
hoarding funds rather than lending to each other.
The governing council of the ECB will meet in Frankfurt today and it's
expected that interest rates will be kept on hold.
Italian and Spanish benchmark borrowing costs fell slightly on Wednesday,
after both had hit euro-era record highs on Tuesday.
Silvio Berlusconi, Italy’s prime minister, in a speech to parliament, offered no
new plan in response to market pressures. “The country is economically and
financially solid,” he told MPs.
The Italian 10-year bond yield fell 3 basis points to 6.10%. The spread with
German bunds was little changed at 372 basis points or 3.72%. The yield on
10-year Spanish bonds also fell 3 points, to 6.26%. The Spanish spread dipped 4
points to 387 basis points.
The Japanese government intervened Thursday morning in currency
markets to stop the rise of the yen against the dollar, as it seeks to protect
the economic rebound following the March 11 devastating earthquake and tsunami.
The yen dropped, with the dollar rising from ¥77.13 to ¥78.20 and the euro from
¥110.72 to ¥111.80. Yoshihiko Noda, Japanese finance minister, said the
intervention was to counter what he calls "one-sided," "excessive" and
speculator-driven rises in the yen.
On Wednesday, the Swiss National Bank reduced interest rates close to zero to
slow capital inflows.
Billionaire Wilbur Ross: Investing in Ireland: Discussing Ireland's corporate tax rate advantage as well as its young, educated workforce, with Wilbur Ross, WL Ross chairman/CEO:
Services PMI indicates that sector remains weak: Conall Mac Coille, chief
economist at Davy, comments -- "The Irish services PMI for July was
published by Markit Economics this morning. The overall index fell slightly from
52.4 in June to 51.7 in July, remaining above the 50 'no change' level and
indicating that the sector expanded in July. However, the survey also indicated
that new business declined for the third consecutive month and service companies
The weakness of the domestic economy was evident in yesterday's Exchequer
returns data. The only major tax heading behind the government's expectations
was value added tax receipts, reflecting the weakness of consumer spending.
However, following a 7.6% shortfall, relative to expectations, corporation tax
receipts caught up with budgetary plans as payments expected earlier in the year
were made in July. This means corporation tax receipts are 6.0% ahead of
expectations in the first seven months of the year. So, overall, yesterday's
Exchequer returns were a further sign that the government's plans for the public
finances in 2011 remain on track (see our research report issued August 3rd).
The robustness of the Exchequer returns is welcome given the additional
turbulence in European markets. One small bright spot yesterday was the ADP
employment report in the United States, which indicated jobs growth in excess of
100,000 persons in July. However, the ADP report was a very poor guide to the
final payroll number in June, so markets will be wary of reading in too much
from yesterday's report. That said, if initial jobless claims released today
remain below 400,000, the market may become more optimistic about the potential
outcome of July's payroll numbers released on Friday."
Leading US stocks ended an eight-day losing streak on Wednesday.
The Dow Jones Industrial Average rose 30 points, or 0.3%, to finish at 11,896.
The Standard & Poor's 500-stock index gained 0.5% while the Nasdaq Composite
added 0.9% after falling briefly into negative territory for 2011.
The MSCI Asia Pacific Index fell
0.7% Thursday after a 2.2% slide on Wednesday.
Japan's Nikkei 225 rose 0.23%;
China's Shanghai Composite index rose 0.16%; Australia's S&P/ASX 200 lost
1.30% and the Bombay Stock Exchange's Sensex index rose 0.05% in Mumbai.
The margin between the US
benchmark WTI (West Texas Intermediate) used on the New York Mercantile Exchange
and Brent is over $21.
The US Energy department
recently said that growing volumes of Canadian crude oil imported into the
United States contributed to record-high
levels at Cushing, Oklahoma of over 41m barrels at the end of March 2011
(86% of working capacity at Cushing), and a price discount for WTI compared with
similar-quality world crudes such as Brent. A discount for WTI is expected to
persist until transportation bottlenecks impacting the movement of mid-continent
crude oil to the Gulf coast are relieved. Consequently, the projected US refiner
average acquisition cost of crude oil, which was about $2.70 per barrel below
WTI in 2010, is $1.60 per barrel above WTI in 2011 and $1.10 per barrel above
WTI in 2012.