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FOREX-Euro sees little reprieve in holiday trade, Aussie eyes rate call

September 02, 2014 - reuters.com

* Euro struggles near one-year lows vs USD in light trade * U.S. holiday dampens market activity * Aussie resilient, RBA seen keeping steady policy stance By Ian Chua SYDNEY, Sept 2 (Reuters) - The euro languished at one-year lows early on Tuesday, following an aimless session overnight with market activity severely hampered by a holiday in the United States. The common currency last traded at $1.3129 EUR= , having drifted in a slim $1.3119/1.3146 range for all of Monday. That helped keep the dollar index near a 13-1/2 month peak of 82.804 .DXY . Against the yen, the greenback held just below a one-week high of 104.36 JPY= . The euro dithered at 136.94 EURJPY=R , not far from a two-week low of 136.42 set last Thursday. The deepening crisis in Ukraine and the risk of an imminent policy easing by the European Central Bank (ECB) have combined to pin the euro down. ID:nL5N0R21FQ Data on Monday showed euro zone factories barely increased prices last month, and manufacturing activity in France fell at the fastest pace in 15 months. A separate report confirmed the German economy contracted for the first time in over a year in the second quarter. ID:nL9N0O502E ID:nL5N0R20NX That should keep alive the possibility of fresh stimulus from the ECB as early as Thursday. French President Francois Hollande and ECB President Mario Draghi agreed on Monday that deflation and weak growth were threatening the European Union's economy, an official in the president's office said. ID:nL5N0R24H3 Indeed, persistent speculation the ECB will have to embark on a bond-buying program in the footsteps of the Fed and Bank of Japan have seen euro zone bond yields fall sharply. Both German and French 2-year yields DE2YT=RR FR2YT=RR are now below zero percent. In the local trading session, a policy review by the Reserve Bank of Australia will take centre stage, although no one expects the central bank to adjust the current interest rate setting. "A mention of the improved investment outlook could be warranted, and may provide some support for the AUD," said Emma Lawson, senior currency strategist at National Australia Bank. "The RBA Governor was relatively comfortable about the on-hold outlook at the Government Economics Committee hearing last month, and it would be a surprise for there to be much new information at today's meeting and statement." The Aussie last traded at $0.9333 AUD=D4 , just off last week's three-week peak of $0.9374. It has been surprisingly resilient in light of disappointing surveys that showed growth in its largest trading partner, China, may be faltering again. ID:nL3N0R21CD The ISM report on the U.S. manufacturing sector due later in the day is shaping up to be the next major focus. There is a good chance that it would further highlight the diverging monetary policy pathway between the United States and euro zone. ECONUS (Editing by Richard Pullin) ((ian.chua@thomsonreuters.com; +61 2 9373 1871; RM: ian.chua.thomsonreuters.com@reuters.net)) Keywords: MARKETS FOREX/

UPDATE 2-Dutch name emerges for EU post amid doubt about his chances

September 01, 2014 - reuters.com

* Timmermans reportedly to discuss candidacy with Juncker on Tuesday * No official comment but doubt about chances for big job AMSTERDAM, Sept 1 (Reuters) - Dutch Foreign Minister Frans Timmermans was due to meet the president of the European Commission on Tuesday about a senior role in the European Union's executive body, Dutch public broadcaster NOS reported on Monday. The Netherlands hoped that by sending Timmermans, a long-serving diplomat who has worked in the European Commission before, the Netherlands could secure a big portfolio. NSO and other Dutch media said. Each of the EU's 28 member states delegates one public servant into the college of commissioners, meaning competition for weighty portfolios is intense. The reports said the Netherlands hoped Timmermans might be named the commision's first vice-president. The Netherlands is seeking a vice president commission post with for Timmermans, de Volkskrant daily said earlier on Monday, citing unnamed sources in Brussels. Dutch officials declined to comment. Analysts said it was far from certain the Dutch will succeed in gaining a top position after waiting so long to put forward a candidate. Jeroen Dijsselbloem, who heads the Eurogroup of euro zone finance ministers, had been mentioned earlier as a possible candidate but failed to gain support. The name of Trade and Development Minister Lilianne Ploumen has also come up, but she has less foreign experience. She and Timmermans are both from the Labour Party, which is expected to get the seat after several conservative politicians. Incoming European Commission President Jean-Claude Juncker has said he wants nine of the 28 commissioners in his new team to be women, so nominating a man could weaken Dutch chances. "The Dutch never had a formal candidate and didn't play their cards very well," said Louise van Schaik of the Clingendael think tank. "This doesn't have much chance of succeeding, especially because Juncker is having a problem finding enough female candidates." Van Schaik said Timmermans, a fluent Russian speaker, is highly suited for a new eastern policy "super commissioner" position. But he would rank second after the newly appointed EU foreign policy chief, Italian Foreign Minister Federica Mogherini, who will also hold a commission vice president seat. Timmermans gained international prominence with the widely-admired and emotional speech he gave at the United Nations following the July 17 shooting down over Ukraine of Malaysian Airlines flight MH17, which had 196 Dutch nationals on board. The speech was widely credited with swinging many European Union countries round to favour tougher sanctions against Russia, which is believed to have been shot down by Russian-backed separatists. His office could not immediately be reached for comment. (Reporting By Anthony Deutsch and Thomas Escritt, Editing by Angus MacSwan) ((anthony.deutsch@thomsonreuters.com)(+31205045003)) Keywords: EU COMMISSION/TIMMERMANS

FOREX-Euro stuck near lows, hurt by ECB easing prospects and Ukraine

September 01, 2014 - reuters.com

(Updates prices, adds detail on Latin American currencies) * Speculators add to huge bets against euro * EU threatens Russia with new trade sanctions * SNB head says bank ready to intervene to defend cap By Anirban Nag LONDON, Sept 1 (Reuters) - The euro hit a year-low versus the dollar on Monday, as investors added to bets against the single currency before the European Central Bank's monthly policy meeting this week. Worries about the impact on the euro zone's fragile recovery of the crisis in Ukraine also weighed on the currency, which fell as far as $1.3119 EUR= in Asia, lows not seen since Sept. 2013. It last traded at $1.3130, flat on the day. The euro also hit a five-week low against the British pound of 78.92 pence EURGBP=D4 before recovering after softer-than-expected UK factory data. Trading volumes dwindled later as U.S. markets were closed for the Labor Day holiday. In Latin America, the biggest mover was the Chilean peso CLP= , which weakened 0.6 percent against the dollar after the country's central bank said it considered cutting interest rates by more than it actually did last month. ID:nL1N0R20GW Data on Monday showed factory activity across the euro zone cooled in August as the conflict between Russia and Ukraine took its toll. The PMI survey for Germany, Russia's biggest trade partner in the European Union, fell to an 11-month low, while the index for France fell further below the 50 mark that separates expansion from contraction. Ukrainian President Petro Poroshenko warned a "full-scale war" was imminent if Russian troops continued an advance in support of pro-Moscow rebels as Europe and the United States threatened Russia with new sanctions. ID:nL5N0R10FR Analysts said the risk to euro zone growth posed by the Ukraine conflict and stubbornly low inflation should keep pressure on the European Central Bank to provide further stimulus at some stage, if not this week. ID:nL5N0QZ1Z4 "There are many reasons to continue selling the euro," said Lutz Karpowitz, currency strategist at Commerzbank. "First of all, the escalating situation in Ukraine, which might lead to further sanctions, thus increasing the risk of the euro zone economy being affected by the crisis. Even more important is the ECB rate meeting." While Commerzbank does not expect the ECB to announce asset purchases, or quantitative easing, when the governing council meets on Thursday, the uncertainty about further policy action is likely to keep the euro on the defensive, Karpowitz added. HUGE BEARISH BETS The euro started September on a subdued note after posting its second straight month of losses versus the greenback in August, when it slid 1.9 percent following a 2.2 percent drop in July. Speculators' short positions against the euro are near their highest in two years. IMM/FX Analysts at Barclays said it was too soon for the ECB to announce new policy measures, given that the two most powerful policies announced in June - new long-term loans for banks and asset-backed securities purchases - have not yet been deployed. "But a minority expect new policy at this week's meeting. As a result, inaction may be greeted by temporary relief from euro depreciation, but we would see any short-term rallies as a selling opportunity," they wrote in a note. The euro held steady above a near two-year low versus the Swiss franc after the head of the Swiss National Bank (SNB), Thomas Jordan said it stood ready to intervene in the currency market to defend its cap on the franc. The euro was at 1.2071 francs EURCHF=R , staying above last week's low of 1.2049 on trading platform EBS, its lowest versus the Swiss franc since late 2012. The SNB introduced a 1.20 per euro cap in 2011 to prevent the franc's strong appreciation from hurting the economy, although it has not had to defend the cap for the last two years. ID:nL5N0R107M The Swedish crown fell to a three-week low against the euro EURSEK=D4 after Sweden's manufacturing sector PMI fell more than expected in August. The Riksbank meets later this week, but is unlikely to do much, having lowered the repo rate by 50 basis points in July. Despite the political tension, there was no meaningful safe-haven bid for the yen, which saw the dollar edge up 0.2 percent to about 104.28 yen JPY= . (Additional reporting by Walter Brandimarte in Rio de Janeiro; Editing by Catherine Evans and Cynthia Osterman) ((anirban.nag@thomsonreuters.com; +44-20 7542 8399; Reuters Messaging: anirban.nag.thomsonreuters.com@reuters.net)) Keywords: MARKETS FOREX/

Ghana's currency steadies after falling nearly 40 pct this year

September 01, 2014 - reuters.com

By Kwasi Kpodo ACCRA, Sept 1 (Reuters) - Ghana's cedi currency GHS= is holding its ground against the dollar for the first time this year, traders and analysts said on Monday, after falling some 40 percent in the last eight months. The government's decision last month to go to the International Monetary Fund for an assistance programme to tackle Ghana's fiscal woes has boosted capital inflows, traders said. Central bank support and sales by local mines have also supported the cedi. At the same time, a seasonal slowdown in commerce has reduced demand for dollars - an effect that could buoy the cedi in the weeks ahead, they said. Currency stability could help the government tackle fiscal woes including rising inflation and a stubborn budget deficit, which have taken the shine off an economy that had been growing strongly on the back of exports of gold, cocoa and oil. It could also boost small- and medium-sized businesses, which have long complained that their expansion is limited by high interest rates. "The cedi has been helped by improved (market) sentiment ... and a developing risk-on posture as the market looks positively to the IMF programme, the Eurobond and cocoa flows," said one analyst who declined to be named. The currency traded on Monday near 3.8000 to the dollar, up from a record low of above 3.9000 in June. Interbank trading, which has been dormant since February, sprang to life on Friday due to improved liquidity, analysts said. "The various segments of the market (local and offshore) appear to be synched at the moment. The local currency has had a fairly good run over the past week .... We think USD/GHS could drop below the 3.8000 brink by mid-week," said Michael Akpakli, a currency trader at Barclays Bank Ghana. Senior Ghanaian officials are in Europe and the United States ahead of the launch of Ghana's third Eurobond, which may come next week, with Standard Chartered, Deutsche and Barclays as lead banks. The industry regulator Cocobod is due to sign an agreement on an annual syndicated loan from international banks of up to $2 billion on Sept. 11 for next season's cocoa crop purchases, which begin in October. (Reporting by Kwasi Kpodo; Editing by Kevin Liffey) ((kwasi.kpodo@thomsonreuters.com ; +233244696990; Reuters Messaging: Kwasi.Kpodo.thomsonreuters.com@reuters.net)) Keywords: GHANA CURRENCY

Argentina assessing 2015 LNG demand, no tender soon -YPF source

September 01, 2014 - reuters.com

By Oleg Vukmanovic MILAN, Sept 1 (Reuters) - Argentina's state-controlled YPF YPFD.BA is evaluating the scale of national demand for liquefied natural gas (LNG) imports in 2015 and, with ample stocks at hand, does not expect to issue a tender soon, a company official said. "We are already covered for the next six months at least, and so we are not in a rush to launch any kind of tender for next year," the Buenos Aires-based official who asked not to be named told Reuters on Monday. Over the past month, LNG traders have been expecting Argentina to tap the market for supplies for 2015 and even 2016 as well as possibly the fourth-quarter of this year, hoping that such a deal would cement a nascent recovery in spot prices for the fuel. The source said that YPF had no intention of launching a tender last month and that it was still only gauging demand for 2015, adding that a tender for 2016 supply may be further off. Some traders said no tender had emerged due to low demand and high stocks at Argentina's two terminals, Escobar and Bahia Blanca. The company source confirmed that abnormally mild weather in Argentina's southern hemisphere winter, with temperatures in Buenos Aires currently around 20 degrees Celsius, has complicated the demand outlook and reduced any urgency to secure additional LNG cargoes. "We are moving step by step (towards a tender), and there are many steps in state-owned companies," he said, adding that politicians were "keeping their noses out" of the process. Argentina's latest debt default in July and its scrabble for reserves in dollars has so far not impeded its ability to buy dollar-denominated LNG, the YPF source and traders said. Pre-payment terms agreed with Argentina's LNG suppliers last year have eased concerns over the impact of the latest crisis. In the new system, YPF pays for a quarter of a cargo's value before it is loaded onto a tanker and transfers the rest before the vessel enters its territorial waters, traders said. Argentina, which typically buys its LNG in annual tenders, refined its strategy last year by tapping markets for supply two years forward while leaving a portion of its demand unmet. (editing by Jane Baird) ((Oleg.Vukmanovic@thomsonreuters.com; 44 207 542 0014; Reuters Messaging: oleg.vukmanovic.thomsonreuters.com@reuters.net)) Keywords: ARGENTINA LNG/TENDER

Banks to get some preliminary ECB results a month early -document

September 01, 2014 - reuters.com

By Andreas Kröner FRANKFURT, Sept 1 (Reuters) - Banks will get preliminary information on how they have fared in the European Central Bank's landmark assessment of the sector a month early, so they can prepare a "market response", according to an ECB presentation obtained by Reuters. Investors are keenly awaiting the results of the ECB's unprecedented review, which will force lenders to come to terms with any lingering weaknesses, adjust capital buffers and write off soured loans to regain the trust of investors. The health checks started about six months ago and banks have so far been given little information about the outcome to prevent the chance of market sensitive information leaking out. According to the ECB presentation given to senior bank executives in Frankfurt last week, banks will be get partial, preliminary results to "allow them to prepare market response". This means banks will have about a month to get plans in place for any measures they will need to take when the final results are published. By classifying the results as preliminary, and not giving the full picture, the ECB ensures banks will not be obliged to disclose any shortfalls to markets under stock exchange rules - mirroring a tactic used in previous national stress tests. After the preliminary readouts, banks have 48 hours to submit written questions to the ECB or national regulators and can air issues at a series of 2-3 hour meetings with banks, national regulators and ECB experts, bankers were told. "(The) focus will be on the aspects of the Comprehensive Assessment that act as the key drivers to any capital shortfall," the presentation said. "The ECB will take into account comments at its own discretion," it said, hinting that banks could influence the outcome of the review about a month before the results are due. The ECB is open to receiving comments because it wants to avoid possible mistakes, which could undermine the credibility of the tests. The ECB declined to comment. The ECB is due to take over as the euro zone's banking regulator on Nov. 4 as part of a broader push for European financial integration to avoid a repeat of the financial crisis. Banks will get the final results of the ECB tests 48 hours before the official publication, for which the date has not yet been set. ID:nL6N0PK597 The ECB will publish the results on its website, at the same time as national regulators will disclose how their respective banks faired, the presentation said. (Writing by Eva Taylor; editing by David Clarke) ((eva.taylor@thomsonreuters.com; 49 69 75651244; Reuters Messaging: eva.taylor.thomsonreuters.com@reuters.net)) Keywords: BANKS TESTS/ECB

German eurosceptics chide Merkel after state surge

September 01, 2014 - reuters.com

By Stephen Brown BERLIN, Sept 1 (Reuters) - Riding a wave of momentum after a strong showing in a regional election, Germany's new anti-euro party said on Monday it was time for Chancellor Angela Merkel to wake up and accept it as a new conservative force in German politics. Like the UK Independence Party (UKIP) in Britain and the National Front in France, the Alternative for Germany (AfD) has tapped into a vein of discontent with career politicians and bureaucrats, carving out a niche to the right of the mainstream parties. On Sunday, it scored a surprise 9.7 percent in a state vote in Saxony, winning its first seats in a regional parliament and building domestic momentum following its entry into the European Parliament earlier this year. Merkel's CDU has dismissed the AfD as a fringe party with far-right leanings, but if it builds on its Saxony success and enters two more eastern state parliaments in Thuringia and Brandenburg later this month, it could present a serious challenge for the chancellor. Merkel's traditional partners on the right, the liberal Free Democrats (FDP), have virtually vanished from the German political landscape over the past year, narrowing the coalition options for her Christian Democrats (CDU). Some CDU conservatives have urged the party to reconsider its ban on cooperating with the AfD, but Merkel dismissed that out of hand on Monday. "My goal is to ensure they play a smaller role as soon as possible," she said. Frauke Petry, the 39-year-old businesswoman who headed the AfD's election campaign in Saxony, hailed the vote as "a sign that Frau Merkel should finally take the AfD seriously". The CDU won by a clear margin, with over 39 percent of votes, and Stanislaw Tillich is likely to remain state premier at the head of a right-left coalition. But it was the CDU's worst result since taking power in Saxony after German unification in 1990. Exit polls indicated that it had lost 35,000 voters to its upstart rival. The AfD's result beat all forecasts and put it fourth, behind the CDU, the Social Democrats (SPD) and the Left party. Overtaking the Greens, it knocked the FDP - Tillich's coalition partner in the state capital Dresden - and the far-right German National Democrats (NPD) out of the state assembly. Petry rejected suggestions by the CDU that her party had fished for NPD votes, saying its policies were "once classic CDU and FDP positions". "It's not the AfD that should ask itself where it stands, but the CDU that needs to ask whether it hasn't become a left-wing party," she said, a reference to Merkel's leftward tilt on social and economic policies. NEVER SAY NEVER Klaus Schroeder, a political analyst, said the AfD would not be fully established until it won national seats in the Bundestag, but added: "Any protest party is a risk if it takes away lots of voters - and nearly 10 percent is a lot of votes." The AfD won nearly as many seats as the Social Democrats (SPD), Germany's oldest political party and Merkel's current partner in Berlin. It has a chance of winning seats in both Thuringia and Brandenburg in two weeks' time. In Brandenburg, which surrounds Berlin, the SPD should keep power in a coalition with the Left. But in Thuringia, Merkel's CDU risks being booted out of office despite a lead in polls. Because of the FDP's weakness, some conservatives are wary of dismissing the AfD, which has joined the same parliamentary faction as Britain's Conservatives in the European Parliament. "Parties change. You should never say 'never' when it comes to coalitions," said Erika Steinbach, a right-wing CDU lawmaker. If CDU did warm to the AfD - unlikely for the time being - they might find common ground on issues such as immigration and crime. On Europe, however, the AfD is staunchly opposed to the euro zone bailouts that Merkel has helped to engineer and finance. "The CDU has to admit that its euro bailout policy is not working," said Petry. (Additional reporting by Noah Barkin; Writing by Stephen Brown; Editing by Kevin Liffey) ((stephen.brown@thomsonreuters.com; +49 30 2888 5216; Reuters Messaging: stephen.brown.reuters.com@reuters.net)) Keywords: GERMANY POLITICS/EU

Chile's Bachelet announces extra public spending to lift economy

September 01, 2014 - reuters.com

SANTIAGO, Sept 1 (Reuters) - Chile's President Michelle Bachelet said the government will increase public spending by $500 million through the remainder of the year to help counter a stagnating economic growth and a drop in investment. The economy of the world's top copper producer grew at its weakest pace since 2009 in the second quarter as investment waned and a previously rapid expansion in consumer spending slowed. ID:nL2N0QO0K4 "It's clear that we can't waste time nor wait until 2015 ... this plan is meant to inject dynamism into our economy in the short term," Bachelet said in a televised event from the Moneda presidential palace. The additional $500 million represents a 12 percent increase over currently budgeted public spending. Bachelet, in her second term in office, is pursuing ambitious tax and education reforms aimed at reducing Chile's steep income inequality. She said measures would be announced at a later date to help reactivate the economy, which would "address the problems that our economy has and the issues we haven't historically dealt with adequately," she said. The government would also look to help small- and medium-sized exporters by easing bureaucracy and financing, she said, as businesses seek to take advantage of a weaker peso. Chile's peso currency CLP=CL has weakened over 10 percent versus the dollar this year, making exports more competitive abroad. (Reporting by Anthony Esposito Editing by W Simon) ((anthony.esposito@thomsonreuters.com)(Twitter: @ReutersChile)(; +562-2370-4253; Reuters Messaging: anthony.esposito.thomsonreuters.com@reuters.net)) Keywords: CHILE BUDGET/EXTRA

South Africa's rand treads narrow path, weak economy a strain

September 01, 2014 - reuters.com

JOHANNESBURG, Sept 1 (Reuters) - South Africa's rand traded largely flat against the dollar in a lacklustre Monday session due to a holiday in the United States, with weak domestic economic fundamentals likely to keep the currency under pressure. A political crisis in neighbouring Lesotho, while not directly impacting the rand, could also send out an investor-negative signal about stability in the region, traders said. ID:nL5N0R222V The local unit ZAR=D3 drifted in a narrow 10.6460/6845 range during the session, and was at 10.6775 per dollar by 1600 GMT, 0.1 percent off Friday's close in New York. In fixed income, yields on the 2026 benchmark ZAR186= and the paper due next year ZAR157= added 1 basis point to 7.995 percent and 2 basis points to 6.62 percent respectively. Vehicle trading data for August confirmed that Africa's most advanced economy remains in dire straits despite narrowly avoiding a recession in the second quarter, with new car sales shrinking 1.4 percent year-on-year. ID:nJ8N0OC04G "The economy is not in recession but is plodding along very slowly and that's not encouraging from an investor perspective," Bidvest Bank chief dealer Ion de Vleeschauwer said. The rand could weaken if the European Central Bank and the Bank of England signal policy easing and if jobs data from the U.S. confirms a recovery is on track in the world's biggest economy. "It looks like U.S. fundamentals are quite strong and interest rates will inevitably go up there sooner rather than later and its going to be tough for the rand," de Vleeschauwer said. (Reporting by Stella Mapenzauswa; Editing by Ed Cropley) ((stella.mapenzauswa@thomsonreuters.com; +27117753161; Reuters Messaging: stella.mapenzauswa.thomsonreuters.com@reuters.net)) Keywords: MARKETS SAFRICA/CURRENCY

Turkish markets firm on allocation of new cabinet portfolios

September 01, 2014 - reuters.com

ISTANBUL, Sept 1 (Reuters) - Turkish assets rose on Monday, supported by confirmation that Deputy Prime Minister Ali Babacan would continue to oversee economic management in the new cabinet. ID:nL5N0R20SD The news eased concerns felt in the market on Friday when Numan Kurtulmus, head of economic affairs in the ruling AK party, was announced as another deputy prime minister, prompting uncertainty over whether Babacan would continue to lead the management of the economy. Istanbul's main share index .XU100 closed up 0.64 percent to 80,424.72 points on Monday, outpacing the 0.42 percent rise in the broader emerging markets index .MSCIEF . The benchmark 10-year government bond yield tTR200324T0=IS fell slightly to 9.12 percent from 9.13 percent on Friday. The lira slipped to 2.1588 against the dollar by 1441 GMT from 2.1596 late on Friday. (Reporting by Dasha Afanasieva; Editing by Robin Pomeroy) ((dasha.afanasieva@thomsonreuters.com; +90 212 350 7051)) Keywords: MARKETS TURKEY/

France's Moscovici set for EU economy role, under supervision

September 01, 2014 - reuters.com

* New European Commission line-up expected next week * Gender balance still in question, most candidates male BRUSSELS, Sept 1 (Reuters) - Former French finance minister Pierre Moscovici has a "good chance" of being named to the European Commission's top economic and monetary job, a French diplomatic source said on Monday, as attention turned to the line-up of the next EU executive. EU leaders on Saturday appointed Polish Prime Minister Donald Tusk as the next president of the European Council, chairing and preparing policymaking EU summits, and Italian Foreign Minister Federica Mogherini as foreign policy chief. European Commission President-elect Jean-Claude Juncker, who was chosen in July, is expected to unveil the new EU executive team early next week, a Commission source said. Juncker is still battling member states to get more women nominees to avert a possible clash with the European Parliament. One of his most sensitive choices is over the position of economic and monetary affairs commissioner, responsible for overseeing national budgets. Paris has been pushing Moscovici, a Keynesian Socialist dropped from President Francois Hollande's government in a reshuffle in April, for the key role as part of its campaign along with Italy for a greater emphasis on promoting growth and more flexibility in reducing deficits. Moscovici has said he believes it is crucial for Europe to refocus on growth and jobs via higher investments. However, Germany has voiced reservations about France's interest in the powerful role. The French diplomatic talked up Moscovici's chances after Hollande talked to Juncker on the sidelines of Saturday's EU summit in Brussels. The Commission source said a compromise may be to give Moscovici the portfolio but place him under the supervision of a Commission vice-president in overall charge of economic policy such as former Finnish Prime Minister Jyrki Katainen, a stickler for fiscal discipline. Moscovici was President Francois Hollande's campaign manager in the 2012 presidential election before becoming finance minister. SEARCH FOR WOMEN Juncker so far has been given an overwhelmingly male line-up by member states with just five women nominees. European Parliament President Martin Schulz warned in July that if fewer than the current nine out of 28 commissioners were female, lawmakers could reject the whole team. The president-elect is pressing governments that have not yet put forward a candidate to offer women nominees. Slovenia appears to have heeded his call. Juncker is to meet former Slovenian Prime Minister Alenka Bratusek, who resigned earlier this year, later this week, the Slovenian news agency quoted Juncker's spokeswoman as saying. Poland is also set to put forward a woman, with Polish media and a senior political source saying Deputy Prime Minister and Infrastructure Minister Elzbieta Bienkowska, in charge of disbursing EU regional funds, is being prepared for Brussels. However, a Dutch newspaper said the Netherlands had put forward its male foreign minister, Frans Timmermans, for the Commission after failing to find support for Finance Minister Jeroen Dijsselbloem, who infuriated Juncker earlier this year by saying he had drunk heavily during euro zone meetings. Romania may also send a woman commissioner after initially proposing to renew agriculture commissioner Dacian Ciolos' term. Prime Minister Victor Ponta said at the weekend he had offered Juncker two candidates including Ciolos and a woman. A senior Romanian lawmaker said the alternative candidate was three-term European Parliament member Corina Cretu. (Reporting by Julien Ponthus in Paris, Anthony Deutsch in Amsterdam, Matthias Williams in Bucharest, Marja Novak in Ljubljana and Robin Emmott and Jan Strupczewski in Brussels; Writing by Paul Taylor; editing by Robin Emmott and Martin Santa) ((paul.taylor@thomsonreuters.com; +331 49495187; Reuters Messaging: paul.taylor.thomsonreuters.com@reuters.net)) Keywords: EU COMMISSION/

POLONIA Rate falls 0.11 pp.

September 01, 2014 - reuters.com

WARSAW, Sep 1 (Reuters) - POLONIA the reference rate for Overnight deposits amounted to 2.46 percent. The volume of transactions concluded till 16:30 by banks participating in POLONIA fixing amounted to 3,010 mln PLN. Note: Description of reference rate at: http://www.acipolska.pl/ ((warsaw.newsroom@reuters.com))

Nigerian naira gains on dollar sale by Shell

September 01, 2014 - reuters.com

LAGOS, Sept 1 (Reuters) - The Nigerian naira NGN=D1 firmed against the U.S. dollar on Monday, supported by dollar sales by the local unit of Royal Dutch Shell RDSa.L , dealers said. The local unit closed at 162.40 naira to the dollar, firmer than 162.55 naira it closed at on Friday. Shell sold an undisclosed amount on Monday, increasing dollar liquidity on the interbank. The naira has traded around 161.70-162.55 last week on the back of dollar flows from energy companies and some offshore investors buying local debt in the wake of inclusion of Nigeria's 2024 bond NG10YT=RR in the JP Morgan index. "We expect more dollar sales from some oil firms, including NNPC (state-owned oil firm) and offshore investors in the coming day to boost the naira," one dealer said. (Reporting by Oludare Mayowa; Editing by Tom Heneghan) ((oludare.mayowa@thomsonreuters.com; +234 803 3964 138;)) Keywords: NIGERIA NAIRA/

PRECIOUS-Palladium hits 13-1/2 year high of $910/oz on Ukraine worries

September 01, 2014 - reuters.com

* Palladium set for 4th session of gains * Markets watch for any further Western sanctions on Russia * U.S. markets closed for Labor Day holiday (Updates prices, adds comment) By Clara Denina LONDON, Sept 1 (Reuters) - Palladium rose to a 13-1/2-year high of $910 an ounce on Monday on fears that possible Western sanctions against Russia over the Ukraine crisis could hit supply from the world's top producer of the metal, while gold nudged higher. Ukrainian President Petro Poroshenko warned a "full-scale war" was imminent if Russian troops continued an advance in support of pro-Moscow rebels as Europe and the United States threatened Russia with new sanctions. ID:nL5N0R10FR Russian President Vladimir Putin called on Sunday for immediate talks on the "statehood" of southern and eastern Ukraine and his Foreign Minister Sergei Lavrov gave a strong hint on Monday that Russia would retaliate to European sanctions with its own measures. ID:nL5N0R20LI Spot palladium XPD= rose as high as $910 an ounce, the highest since February 2001, and was up 1 percent at $907.97 by 1449 GMT, heading for its fourth straight session of gains on worries the escalation of tensions over Ukraine could result in an extension of sanctions to include palladium producers. Russia accounted for more than 40 percent of global palladium supply last year, with mining output at around 2.7 million ounces. "Palladium could go higher... towards the $1,000 mark ...it is not going to go there in one quick move but the metal has a got a strong technical picture and a couple of fundamental reasons why it's performing well," Credit Suisse analyst Tom Kendall said. "People are thinking there is a sort of a tail risk, if the situation in Ukraine really does get much worse, that the whole commerce with large Russian entities could be constrained although I don't think it is a realistic prospect." The metal, mostly used in autocatalysts to clean up exhaust emissions, was also supported by strong demand prospects from the automotive sector. It has gained 27 percent since the start of the year, making it the best performing precious metal. <^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^ For a 24-hour gold chart analysis: http://graphics.thomsonreuters.com/F/1/20142508091147.jpg ^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^> GOLD STEADIES Gold failed to benefit strongly from warnings that Russia's conflict with Ukraine was sliding out of control, which would usually increase demand for assets perceived as safer. Spot gold XAU= was unchanged on the day at $1,286.90 an ounce, tentatively extending a small gain posted in the previous week. Liquidity was low as U.S. markets are closed for the Labor Day holiday. The dollar was flat against a basket of currencies but was still trading near a 13-month high, while European equities were also little changed. MKTS/GLOB "The focus this week will be on the U.S. August nonfarm payrolls due on Friday, while remaining sensitive to headlines relating to geopolitical risks," UBS said in a note. "Price action is likely to be choppy heading into the key data release." Holdings of the SPDR Gold Trust GLD , the world's largest gold-backed exchange-traded fund and a gauge of investor demand, fell 0.6 tonnes to 795 tonnes on Friday. GOL/ETF Hedge funds and money managers decreased their bullish futures and option bets in gold for a second consecutive week as a rally in U.S. equities sapped demand for the safe-haven metal, data from the Commodity Futures Trading Commission showed on Friday. ID:nL1N0QZ24B Physical demand for bullion remained subdued in August, with the U.S. Mint seeing a 17 percent month-on-month drop in sales of American Eagle gold coins. ID:nL1N0QZ2K1 Spot silver XAG= was flat at $19.44 an ounce, while spot platinum XPT= lost 0.1 percent to $1,418.25 an ounce. (Additional reporting by A. Ananthalakshmi in Singapore; Editing by Michael Urquhart and David Evans) ((clara.denina@thomsonreuters.com)(+44 207 542 9420)(Reuters Messaging: clara.denina.thomsonreuters.com@reuters.net)) Keywords: MARKETS PRECIOUS/

Sterling holds above $1.66 after UK manufacturing data miss forecasts

September 01, 2014 - reuters.com

* Sterling retreats from five-week high against euro * Forecast-missing factory data weigh moderately on pound * Eyes on construction and services PMIs later in week By Jemima Kelly LONDON, Sept 1 (Reuters) - Sterling edged away from a five-week high against the euro but held above $1.66 on Monday after data showed British manufacturing had slowed more than expected in August. Factory orders from rose at the slowest pace in more than a year, according to the Markit/CIPS UK Manufacturing Purchasing Managers Index (PMI), which fell to its lowest level since June 2013. ID:nL5N0R21QU Separate data showed signs the housing market was cooling, too: British mortgage approvals fell slightly in July. ID:nL9N0KU01N The pound hit a 10-day high of $1.6645 GBP=D4 before the data, before retreating to trade at $1.6621, still up 0.2 percent on the day. "The difficulty for sterling is that we went a year where we got consistent upside surprises on numbers, and now we seem to be getting a reasonably consistent run of downside surprises," said Daragh Maher, a currency strategist at HSBC in London. "But it is significant that it's still been able to hold above $1.66 despite the (PMI) number - that points to a suggestion that, for now, the main part of the price adjustment for sterling from the market's perspective is complete." From a technical viewpoint, the 14-day relative strength indicator showed that sterling was edging back from oversold territory - a sign that the recent weakness might be over. Indeed, data from the CFTC showed speculators were starting to add to net long positions on the pound. IMM/FX The manufacturing data will be followed by a construction PM on Tuesday and one for services on Wednesday. An earlier PMI from the euro zone also showed manufacturing growth slowed more than thought in August as new orders dwindled and factories suffered amid worries over Ukraine. ID:nL9N0O502E That helped the common currency hit a five-week low of 78.92 pence before the UK data EURGBP=D4 . But the euro then pared losses to trade at 79.025 pence, down 0.1 percent on the day. BOE MEETING The Bank of England's Monetary Policy Committee will meet on Wednesday but markets will have to wait another two weeks to see whether there has been any further dissent from its decision to keep interest rates at their record lows. So far, just two of the MPC's nine members - Martin Weale and Ian McCafferty - have voted in favour of an immediate rate hike. No one is expected to join them this month. "I think they may end up being on their own for a little while. I wouldn't expect any dissenters (in September), particularly if we see further declines in PMIs in the services sector," said Kathleen Brooks, research director at Forex.com. British government bond prices slipped and underperformed against German and U.S. debt, as investors awaited the sale of a new five-year conventional gilt on Tuesday. The benchmark five-year gilt GB5YT=RR was one of the worst performers compared with other maturities before Tuesday's auction. As of 1400 GMT, it yielded 1.73 percent, up 2 basis points on the day. (Additional reporting by Andy Bruce; Editing by Larry King) Keywords: MARKETS STERLING/CLOSE

London gold 1500 fix - Sept 1 - 1286.50 dlrs

September 01, 2014 - reuters.com

London platinum/palladium 1400 fix - Sept 1

September 01, 2014 - reuters.com

UPDATE 1-India's balance of payments rises on robust dollar inflows

September 01, 2014 - reuters.com

(Updates to add details, quotes, background) By Suvashree Choudhury and Neha Dasgupta MUMBAI, Sept 1 (Reuters) - India's balance of payments was in surplus for a third straight quarter in April-June, even though the current account deficit INCURA=ECI widened sharply from the previous quarter due to rising imports, data showed on Monday. The balance of payments was boosted by strong dollar inflows. India has seen a surge in short-term dollar inflows, widely known as portfolio flows, this year as investor confidence improved after the current account gap narrowed and on expectations of a stable government led by industry-friendly Narendra Modi. He was elected prime minister in May. The balance of payments INBOP=ECI registered a surplus of $11.2 billion during April-June, up from $7.1 billion in the January-March quarter, data from the Reserve Bank of India (RBI) showed. A year ago the balance of payments was $300 million in deficit. The current account deficit for April-June stood at $7.8 billion, sharply higher than $1.3 billion in January-March but narrowing from $21.8 billion a year ago, according to the RBI data. "It is hard to say how much the non-oil, non-gold imports will go up once recovery picks up," said Indranil Pan, chief economist at Kotak Mahindra Bank. "Also global risk aversions could put pressure on these portfolio inflows which are fickle in nature. So overall one has to have a relative caution on the current account deficit." Foreign portfolio inflows into India have totalled $30 billion so far this year, compared with just $12 billion for the whole of 2013 when the Indian currency had plunged to a record low on concerns about the wide current account deficit and sluggish economic growth. In the April-June quarter of 2014, portfolio inflows stood at $12.4 billion compared with an outflow of $200 million a year ago. India's current account deficit touched a record high of around $88 billion in 2012/13, driven by a massive surge in gold imports. Gold imports rose to $7 billion in the April-June period of 2014, from $5.3 billion in the previous quarter, but were less than half imports totalling $16.5 billion in the June quarter a year ago. The trade deficit INTRDQ=ECI in the April-June period widened to $34.6 billion, from $30.7 billion a quarter ago but was still sharply lower than $50.5 billion in the same quarter of last year. (Editing by Susan Fenton) ((suvashree.dchoudhury@thomsonreuters.com)(+91-22-61807223)(Reu ters Messaging: suvashree.dchoudhury.thomsonreuters.com@reuters.net)) Keywords: INDIA CURRENTACCOUNT/

TABLE-MCX-SX Currency Futures traded on Sep 1

September 01, 2014 - reuters.com

Bracing for debt troubles as Ukraine gloom deepens

September 01, 2014 - reuters.com

By Sujata Rao and Alessandra Prentice LONDON/KIEV Sept 1 (Reuters) - Global investors' view of Ukrainian bonds as a relatively safe bet anchored by Western support is taking a battering as the country's economic gloom deepens, with many starting to brace for some form of debt restructuring. Fund managers, among whom Templeton's Michael Hasenstab is prominent, have until now figured that Ukraine would avert all-out war with Russia, allowing its economy to recover. Second, they have reckoned the International Monetary Fund, which has pledged a $17 billion loan deal, has Ukraine's back. For these reasons Ukrainian bonds have traded not far off their launch prices, levels many analysts consider astonishing given the level of economic distress the country is suffering. But recent days have shattered investors' faith, as Russian troop moves have effectively ruled out any speedy peace deal or economic rebound. Analysts predict Ukraine's economy may contract by up to 8 percent in 2014 and by 5 percent in 2015. And crucially, IMF comments last week are being interpreted by some as bringing Ukraine closer to debt restructuring. The fund released more cash but said that if Ukraine's situation worsened, "the programme would need to be significantly recalibrated, including potentially the financing". "There's two ways you can read last week's IMF statement on Ukraine. One is, don't worry there is more money coming. Or second, there is more money coming but you guys (investors) will need to contribute," said Gabriel Sterne, head of global macro at consultancy Oxford Economics. He was referring to "bail-ins" that force private sector creditors to bear some of the rescue burden by restructuring debt or reprofiling it by extending debt maturities. With little debt this year, many see the latter option as more likely. For a TABLE on maturing Eurobonds click ID:L5N0R22ZP IMF programmes by themselves don't exclude default, Sterne notes, citing Greece which was on a fund lifeline for two years before forcing investors to take a 70 percent debt write-down. Possibly chastised by the Greek experience, a 2013 IMF paper said future restructurings should be timely, without "allowing an unsustainable debt situation to fester". It also wants to stop using its resources "to simply bail out private creditors." For sure, Kiev has a far lower debt ratio than Greece at just half its annual economic output (GDP). And the West, locked in a political standoff with Russia, is unlikely to let Ukraine sink. But lenders may want to rope in private creditors if they find themselves increasing the size of the aid. "Ukraine need a bigger programme, and reading between the lines, they haven't decided whether they need to reprofile or not. I think the temptation will be to reprofile," Sterne said. Bond prices fell 8-12 cents on the dollar over August, and the cost of insuring exposure to Ukraine via credit default swaps has risen steadily. One-year CDS now cost more than 5-year swaps, data from Markit shows, a sign of short-term debt stress. JPMorgan advised clients to cut Ukraine holdings. It doesn't see a crash on the bonds as imminent, but says the "likelihood of eventual restructuring in 2015 has increased significantly". OVER-OPTIMISTIC Original economic recovery assumptions for Ukraine have turned out way too optimistic. As recently as end-2013, the IMF had assumed a 1 percent growth rate for this year. But the economy shrank 4.7 percent in the second quarter compared with the same year-ago period while industrial output plummeted 12 percent in July. Tax revenues from the heavily industrialised eastern provinces have fallen, even as Kiev is forced to up military spending. ID:nL6N0Q52PM ID:nL5N0QO26E In July, President Petro Poroshenko estimated Ukraine was spending $6 million a day on the conflict, but this will have risen since then, as fighting has intensified. The hryvnia currency, meanwhile, is approaching the 14 per dollar UAH= mark - at the start of the year it traded at 8. The relentlessly depreciating currency is shrinking domestic GDP in dollar terms while making it costlier to service debt, 70 percent of which is in hard currency, says Steve Ellis, a fund manager at Fidelity, calling it "a vicious downward spiral." "We know Ukraine is strategic but the IMF don't disburse money in a deteriorating situation and when you see debt-GDP going above 60 percent, the IMF will be running just to stand still," Ellis said. "Bond prices have not deteriorated because investors always believed there will be an official backstop but the reality is this backstop will probably not be sufficient." Debt ratios are 45 percent of GDP, versus 36 percent in 2012. The IMF's baseline forecast was for the 60-percent mark to be hit in 2018 but many now expect it by 2015, enabling Russia to demand immediate payment on a $3 billion bond it holds. But because ratios are still fairly low, the Fund may prefer a debt reprofiling to restructuring - extending the time for repayment but without marking down the value of the debt. Extending the 2017 bond, for instance, to 2020, would change the profile of the yield curve and give Kiev more time to pay. HASENSTAB PUT, HIGH YIELDS Surveys suggest investors are underweight Ukraine, meaning average holdings are less than its weight in bond indexes. But its high yields - yield premia to U.S. Treasuries are more than triple the emerging markets average - have kept many hanging on. Also of comfort to investors is the presence among their ranks of Hasenstab, the Templeton fund manager who has made his name with contrarian - and ultimately lucrative - bets such as Hungary. At last count, Templeton held almost a third of Ukraine's outstanding sovereign Eurobonds across its funds. Angus Halkett, a fund manager at Stone Harbor Investments, says he is no fan of Ukraine but finds it hard to avoid the high-yielding asset. Then there is the Templeton factor. "(Templeton's) presence absolutely makes a difference to everyone, the price of our position essentially depends on them, they are pricemakers," Halkett added. Hasenstab argued in a June interview with Morningstar that Ukraine faced a liquidity, rather than solvency, problem and Western aid would help it overcome that. He said he was looking past short-term volatility into a three- to five-year horizon. If debt reprofiling allows Ukraine to sort out its finances, Hasenstab may yet come out on top, as it would enable investors like him to clip 8-9 percent coupons for a few years more. (Additional reporting by Carolyn Cohn in London; Editing by Giles Elgood) ((sujata.rao@thomsonreuters.com)(44 20 7542 6176)(Reuters Messaging: sujata.rao.thomsonreuters.com@thomsonreuters.net)) Keywords: UKRAINE CRISIS/BONDS

TABLE-NSE Currency Futures traded on Sep 1

September 01, 2014 - reuters.com

SNAPSHOT-India stocks, bonds, rupee, swaps, call at close

September 01, 2014 - reuters.com

STOCKS .BSESN .NSEI ----------------------- The BSE index ended up 0.86 percent and the broader NSE index rose 0.92 percent, with both hitting record highs. The NSE index surged past the psychologically important 8,000 level for the first time as blue-chips such as ICICI Bank gained after better-than-expected quarterly economic growth data. .BO GOVERNMENT BONDS IN084024G=CC -------------------------------- India's benchmark 10-year bond ended down 1 basis point at 8.55 percent after data showed the economy grew faster than expected in the June quarter and on ample liquidity, but broader gains were capped by the fact that foreign institutional investors have almost exhausted their entire allocation of debt. IN/ RUPEE INR=D2 -------------- The partially convertible rupee ended little-changed at 60.5250/5350 per dollar against Thursday's close of 60.4950/5050, in the absence of any fresh domestic triggers, with traders awaiting the outcome of the European Central Bank's policy meeting this week for near-term direction. INR/ INTEREST RATE SWAPS INROIS MIOIS= ------------------------------------- The benchmark five-year swap rate ended 2 bps lower at 8.02 percent and the one-year rate ended steady at 8.45 percent. CALL MONEY INROND= --------------------- India's cash rate ended lower at 7.00/7.05 percent against Thursday's close of 8.50/8.60 percent on ample liquidity. ---------------------- Double click on codes in <> Reuters MIOR/MIBOR MIBR= NSE MIBID/MIBOR MIBR=NS Reuters Corporate Bond Yield/Spread 0#AAAINBMK= For Reuters Benchmarks IN/BENCH (Compiled by Dipika Lalwani) ((dipika.lalwani@thomsonreuters.com; +91-22-61807098; Reuters Messaging: dipika.lalwani.thomsonreuters.com@reuters.net)) Keywords: INDIA SNAPSHOT/

Indian rupee weakens marginally; ECB meet in focus

September 01, 2014 - reuters.com

* Rupee ends at 60.5250/5350 per dlr vs 60.4950/5050 on Thurs * Traders say mkt awaiting ECB meeting outcome for direction * Volumes lower on account of U.S. Labour Day holiday By Swati Bhat MUMBAI, Sept 1 (Reuters) - The Indian rupee weakened marginally on Monday in the absence of any fresh domestic triggers, with traders waiting for the outcome of the European Central Bank's policy meeting this week for near-term direction. Traders said volumes in the currency market were low on account of the U.S. Labour Day holiday and following a long-weekend back at home. The euro hit a fresh one-year low, as heightened worries about the crisis in Ukraine kept the currency on the defensive ahead of a European Central Bank policy meeting later this week. USD/ Traders say foreign fund flows into the stock and debt markets will remain crucial for direction in the near-term. Although foreign investors have remained buyers of Indian shares and bonds through the year, some concerns are emerging about whether the trend can continue, especially since they have now almost reached their purchasing limit in debt markets. "The ECB meeting will be watched to see if there is any further liquidity provided. The rupee is likely to hold in a 60.20-60.80 range this week," said Vikas Babu Chittiprolu, a senior foreign exchange dealer with state-run Andhra Bank. The partially convertible rupee INR=D2 closed slightly weaker at 60.5250/5350 versus Thursday's close of 60.4950/5050. Financial markets were closed on Friday for a local holiday. Asian shares edged higher on Monday, with investors wary of a deepening crisis in Ukraine and a downbeat China manufacturing survey. ID:nL3N0R201O Traders said the better-than-expected growth data released on Friday aided sentiment for the rupee, limiting further losses. Gross domestic product grew a faster-than-expected 5.7 percent year-on-year, government data showed on Friday, sharply higher than a provisional 4.6 percent expansion in the previous three months. ID:nL3N0QZ3WN The ECB meeting on Sept. 4 will be the next key trigger. Accommodative policies from global central banks have led to a surge of inflows into emerging markets, with foreign investors buying a net $17.1 billion in debt in India and $12.95 billion in equities so far in 2014. In the offshore non-deliverable forwards PNDF , the one-month contract was at 60.90 while the three-month was at 61.48. FACTORS TO WATCH * Euro hits fresh one-yr low, hamstrung by Ukraine turmoil FRX/ * IDR cuts losses after trade surplus, Asia ccys gain EMRG/FRX * Asian shares cautiously push higher MKTS/GLOB * Foreign institutional investor flows INFII INFII01 * For data on currency futures INRFUTURES DIARIES & DATA: Indian Data Watch ECONIN European diary WEU/EQTY2 Indian diary IN/DIARY US Diary US/DIARY (Editing by Subhranshu Sahu) ((swati.bhat@thomsonreuters.com)(+91-22-61807353)(Reuters Messaging: swati.bhat.thomsonreuters.com@reuters.net)) Keywords: MARKETS INDIA FOREX/

FOREX-Euro stuck near lows, hurt by ECB easing prospects and Ukraine

September 01, 2014 - reuters.com

(Adds quote, details about euro zone PMIs) * Speculators add to huge bets against euro * EU threatens Russia with new trade sanctions * SNB head says bank ready to intervene to defend cap By Anirban Nag LONDON, Sept 1 (Reuters) - The euro hit a year-low versus the dollar on Monday, as investors added to bets against the single currency before the European Central Bank's monthly policy meeting this week. Worries about the impact on the euro zone's fragile recovery of the crisis in Ukraine also weighed on the currency, which fell as far as $1.3119 EUR= in Asia, lows not seen since Sept. 2013. It last traded at $1.3134, flat on the day. The euro also hit a five-week low against the British pound of 78.92 pence EURGBP=D4 before recovering after softer-than-expected UK factory data. Trading volumes are expected to ease off later given the Labor Day holiday in the United States. Data on Monday showed factory activity across the euro zone cooled in August as the conflict between Russia and Ukraine took its toll. The PMI survey for Germany, Russia's biggest trade partner in the European Union, fell to an 11-month low, while the index for France fell further below the 50 mark that separates expansion from contraction. Ukrainian President Petro Poroshenko warned a "full-scale war" was imminent if Russian troops continued an advance in support of pro-Moscow rebels as Europe and the United States threatened Russia with new sanctions. ID:nL5N0R10FR Analysts said the risk to euro zone growth posed by the Ukraine conflict and stubbornly low inflation should keep pressure on the European Central Bank to provide further stimulus at some stage, if not this week. ID:nL5N0QZ1Z4 "There are a many reasons to continue selling the euro," said Lutz Karpowitz, currency strategist at Commerzbank. "First of all, the escalating situation in Ukraine, which might lead to further sanctions, thus increasing the risk of the euro zone economy being affected by the crisis. Even more important is the ECB rate meeting." While Commerzbank does not expect the ECB to announce asset purchases, or quantitative easing, when the governing council meets on Thursday, the uncertainty about further policy action is likely to keep the euro on the defensive, Karpowitz added. HUGE BEARISH BETS The euro started September on a subdued note after posting its second straight month of losses versus the greenback in August, when it slid 1.9 percent following a 2.2 percent drop in July. Speculators' short positions against the euro are near their highest in two years. IMM/FX Analysts at Barclays said it was too soon for the ECB to announce new policy measures, given that the two most powerful policies announced in June - new long-term loans for banks and asset-backed securities purchases - have not yet been deployed. "But a minority expect new policy at this week's meeting. As a result, inaction may be greeted by temporary relief from euro depreciation, but we would see any short-term rallies as a selling opportunity," they wrote in a note. The euro held steady above a near two-year low versus the Swiss franc after the head of the Swiss National Bank (SNB), Thomas Jordan said it stood ready to intervene in the currency market to defend its cap on the franc. The euro was at 1.2065 francs EURCHF=R , staying above last week's low of 1.2049 on trading platform EBS, its lowest versus the Swiss franc since late 2012. The SNB introduced a 1.20 per euro cap in 2011 to prevent the franc's strong appreciation from hurting the economy, although it has not had to defend the cap for the last two years. ID:nL5N0R107M The Swedish crown fell to a three-week low against the euro EURSEK=D4 after Sweden's manufacturing sector PMI fell more than expected in August. The Riksbank meets later this week, but is unlikely to do much, having lowered the repo rate by 50 basis points in July. Despite the political tension, there was no meaningful safe-haven bid for the yen. That saw the dollar edge up 0.2 percent to about 104.25 yen JPY= . (Editing by Catherine Evans) ((anirban.nag@thomsonreuters.com; +44-20 7542 8399; Reuters Messaging: anirban.nag.thomsonreuters.com@reuters.net)) Keywords: MARKETS FOREX/

RPT-COLUMN-Indonesia plays winning hand with global miners: Russell

September 01, 2014 - reuters.com

(Repeats with no changes to text) --Clyde Russell is a Reuters columnist. The views expressed are his own.-- By Clyde Russell LAUNCESTON, Australia, Sept 1 (Reuters) - In the high-stakes poker game being played between the Indonesian government and mining companies, it has come as a bit of a surprise that Jakarta appears to be playing the winning hand. So far the Indonesian government has successfully stared down two U.S. mining giants, imposed a ban on exporting some raw metal ores and is deaf to the squeals of the beleaguered coal industry as it tightens rules on what had been a cowboy sector. When the government started down the path of changing the laws and regulations in order to ensure a greater share of the Southeast Asian nation's mineral wealth stayed at home, it was widely assumed that it would lack the resolve and the ability to stand up to the powerful mining industry. Previous attempts had resulted in compromises that favoured miners and the government was widely viewed as inefficient, inconsistent and largely ineffectual. But in recent weeks the government has been shown to be holding a stronger hand than its opponents, and it has been willing to call their bluffs. First, U.S. mining major Freeport McMoRan FCX.N signed a memorandum of understanding with the outgoing administration of President Susilo Bambang Yudhoyono that should result in the government getting what it wanted, without giving up much in return. The deal allows Freeport, which operates Grasberg, the world's second-largest open-cut copper mine, to resume exports of copper ore after providing a $115 million bond for the building of a smelter with partners. Freeport also agreed to higher royalties, an export tax and to divest 30 percent of its Indonesian unit, while in return the government committed to providing the U.S. company with a mining licence between 2019 and 2021 to allow it to continue operations until 2035. This was important for Freeport, as the Grasberg site is believed to contain large deposits of copper and gold, but will need exploration and other investments to develop. Newmont Mining Corp NEM.N , which like Freeport had halted copper ore shipments earlier this year in dispute over the government's hike to export taxes, had taken a different path to Freeport in attempting to force Indonesia to international arbitration. However, the Denver, Colorado-based group withdrew the claim last week, almost immediately leading to a breakthrough in its seven-month dispute with Jakarta. Newmont will resume copper exports next week after agreeing to pay increased royalties, a government official said on Monday. ID:nL3N0R21JQ . It could be argued that Freeport's more conciliatory approach worked better than Newmont's now abandoned hardline stance, but that ignores the two companies had different priorities with their Indonesian assets. Freeport's Grasberg is a world-scale mine sitting on vast potential untapped reserves, and is thus a strategic asset for the company, giving it more incentive to negotiate a deal to ensure it remains with the company's portfolio. Newmont's Batu Hijau mine is considerably smaller than Grasberg and may not be worked much longer than the 2030 expiry date of the existing licence. This meant Newmont had less incentive to re-negotiate a contract that it believed the government would be forced to honour had the case proceeded to arbitration. It may also be the case that the Freeport deal helped Newmont realise that compromise was possible, or put another way, once the first domino fell it was always going to be easier for the government to get other companies to fall into line. NEW GOVERNMENT, SAME POLICIES No doubt the incoming government of President-elect Joko "Jokowi" Widodo, which takes office next month, will be keen to get off to a good start with the mining industry. But that doesn't mean the government will be stepping back from its plans to extract more from the resource sector. Coal miners are also feeling the pinch, saying some will go under if the government pushes ahead with rules to force them to register with a central authority and pay export royalties in advance. The new rules aim to stamp out illegal mining, which is estimated at about 50 million tonnes per annum, or about one-seventh of forecast legal exports in 2014. The coal industry says it can't afford to pay royalties in advance, but the government appears unconvinced. ID:nL3N0QW24E If past patterns are repeated, it's likely the authorities may well stick to their plans, having already shown they are prepared to take the pain of loss of revenue from lower exports of metal ores if they believe the long-term gains are worth it. While the Indonesian government has so far played better poker, their strategy isn't without risks. The main problem the authorities are likely to face is declining investment in mining, as the rules become more burdensome and the expected returns lower. This will ultimately have a negative impact on production as existing reserves are mined and not replaced by new projects. After all, if you are too good a poker player, the other players may decide to go to another table and try their luck there. (Editing by Himani Sarkar) ((clyde.russell@thomsonreuters.com)(+61 437 622 448)(Reuters Messaging: clyde.russell.thomsonreuters.com@reuters.net)) Keywords: COLUMN RUSSELL/INDONESIA MINING

British government says it has no contingency plans for possible Scottish breakaway

September 01, 2014 - reuters.com

LONDON, Sept 1 (Reuters) - The British government said on Monday it was not drawing up contingency plans for a surprise vote in favour of Scottish independence, less than three weeks before Scotland holds a referendum on whether to leave the United Kingdom. Voters in Scotland will decide on Sept. 18 whether they want to form an independent state with opinion polls showing Scots are likely to vote to keep their 307-union with England intact. However, one survey last week showed the anti-independence campaign's lead had halved following a televised debate and experts say that the unique nature of the vote - the first of its kind in British history - makes it unusually difficult to predict. ID:nL5N0QY64N ID:nL5N0QY6OA The debate has raised big questions such as what currency an independent Scotland would use and what would happen to Britain's Scotland-based nuclear submarines. But the government on Monday refused to discuss how it would handle a split. "No such work (is being) undertaken," Prime Minister David Cameron's official spokesman told reporters when asked if the government had drawn up contingency plans for a "Yes" vote. "The government's entire focus is on making the case for the UK staying together." (Reporting by William James; Editing by Andrew Osborn) ((william.james@thomsonreuters.com)(+44 207 542 3374)(Reuters Messaging: william.james.thomsonreuters.com@reuters.net)) Keywords: SCOTLAND INDEPENDENCE/CONTINGENCY

India fwd/annualised dlr premia-(closing)-Sep 1

September 01, 2014 - reuters.com

GLOBAL ECONOMY-Factory activity in Europe, Asia cools; demand lull a concern

September 01, 2014 - reuters.com

* Escalating crisis in Ukraine, patchy Chinese recovery weigh * China's official PMI for Aug 51.1, HSBC PMI slows to 50.2 * Euro zone factory PMI falls to 13-month low * Barely raised euro zone factory prices highlight deflation risk By Sumanta Dey and Wayne Cole BANGALORE/SYDNEY, Sept 1 (Reuters) - Factory activity in Europe and Asia cooled in August after a strong July, as new orders dwindled in the face of escalating tensions in Ukraine and a patchy recovery in China, purchasing managers indexes showed. Despite euro zone manufacturers barely raising their prices, growth in the region slowed slightly more than initially thought, and activity in China's vast factory sector slackened on weak foreign and domestic demand, stoking speculation that further policy stimulus would be needed. "A concerted slowdown in the China, euro zone and UK manufacturing PMIs as the second quarter gets under way raises alarm bells about global demand conditions," said Lena Komileva, chief economist at G+ Economics in London. "This raises serious questions about the ability of major economies such as the U.S. and the UK, to weather higher interest rates, or in the case of the euro zone to withstand deflationary pressures without further stimulus." Euro zone factories stumbled with the final August PMI at 50.7, the lowest in over a year, as new orders slowed amidst rising tensions over Ukraine that have triggered sanctions from the West and countermeasures from Russia. ID:nL5N0R10FR Still, that was the 14th month the index has been above the 50 line that separates growth from contraction. The factory PMI for Germany, Russia's biggest trade partner in the European Union, fell to an 11-month low while in the bloc's second-largest economy France it dropped further below the breakeven mark. The drop in euro zone manufacturing activity came despite factories barely increasing prices and, with inflation dropping to a fresh five year low of 0.3 percent in August, that raises risks of the region slipping into deflation. Both data come just days ahead of a European Central Bank meeting. Although fresh policy action is thought unlikely, the slowdown in growth coupled with rising risks of deflation will increase the pressure for more stimulus. ECB/INT "It reinforces the case for the ECB to keep policy easy. The ECB will likely maintain a dovish tone at this meeting without any action but we expect some details on its plans to implement an asset purchase programme in the coming months," said Philip Shaw, economist at Investec. In contrast, the Bank of England and U.S. Federal Reserve are widely expected to begin raising interest rates next year with Britain tipped by analysts as the first mover. BOE/INT But slowing economic activity, smaller price rises and weak pay growth mean those plans are not cast in stone. The latest CIPS/Markit data for Britain showed factory activity grew at its slowest pace in 14 months despite muted price pressures. "The survey provided a worrying sign that the manufacturing sector's recovery is struggling to maintain its momentum," wrote Paul Hollingsworth, UK economist at Capital Economics. "In addition, the output balance, which has a fairly good relationship with the official measure of manufacturing output, fell." Britain's main manufacturing trade body on Monday cut its growth forecast for 2014 after its members reported a big drop in export orders. ID:nL3N0QZ4CD A survey due on Tuesday is likely to show U.S. factory activity also cooled in August but much will also depend on jobs data due on Friday. U.S. employers are expected to have added 220,000 new jobs in August, 11,000 more than in July. MIXED ASIAN BAG China's official manufacturing PMI fell from a 27-month high to 51.1 in August, while the HSBC/Markit PMI eased to 50.2. The fall in overall activity was also driven by job cuts for the 24th consecutive month and highlights the still patchy recovery, increasing speculation of further policy easing. The People's Bank of China has so far refrained from cutting interest rates, preferring instead to ease liquidity for some banks to free funds for lending. Beijing in turn has tried to ease conditions in the property market. But China's housing market, which accounts for 15 percent of output, is at the start of what many fear will be a punishing downturn. Future robust economic growth will depend on that downturn being contained. There were some bright spots in Asia, however. In India, factory growth eased a touch but chalked up its tenth month of expansion. Last week data showed economic growth quickened to an annual 5.7 percent in the second quarter. Taiwan's manufacturers reported the strongest expansion in new orders in over three-and-a-half years, much of it for export, lifting the PMI to 56.1 in August. But South Korea suffered as its exports to China fell in August for a fourth month running, the longest such losing streak in two years, and Indonesia's PMI survey showed activity contracted for the first time in a year. <^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^ European factory PMI momentum: http://link.reuters.com/har72w Euro zone manufacturing PMIs: http://link.reuters.com/zuz47s Asia manufacturing PMIs: http://link.reuters.com/baq77s ^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^> (Additional reporting by Jonathan Cable in London; Koh Gui Qing in Beijing and Deepti Govind in Bangalore; Editing by Ross Finley and John Stonestreet) ((sumanta.dey@thomsonreuters.com)(+91 80 6749 4836)(Reuters Messaging: sumanta.dey.thomsonreuters.com@reuters.net)) Keywords: GLOBAL ECONOMY

London gold 1030 fix - Sept 1 - 1287.25 dlrs

September 01, 2014 - reuters.com

London platinum/palladium 0945 fix - Sept 1

September 01, 2014 - reuters.com

COLUMN-Indonesia plays winning hand with global miners: Russell

September 01, 2014 - reuters.com

--Clyde Russell is a Reuters columnist. The views expressed are his own.-- By Clyde Russell LAUNCESTON, Australia, Sept 1 (Reuters) - In the high-stakes poker game being played between the Indonesian government and mining companies, it has come as a bit of a surprise that Jakarta appears to be playing the winning hand. So far the Indonesian government has successfully stared down two U.S. mining giants, imposed a ban on exporting some raw metal ores and is deaf to the squeals of the beleaguered coal industry as it tightens rules on what had been a cowboy sector. When the government started down the path of changing the laws and regulations in order to ensure a greater share of the Southeast Asian nation's mineral wealth stayed at home, it was widely assumed that it would lack the resolve and the ability to stand up to the powerful mining industry. Previous attempts had resulted in compromises that favoured miners and the government was widely viewed as inefficient, inconsistent and largely ineffectual. But in recent weeks the government has been shown to be holding a stronger hand than its opponents, and it has been willing to call their bluffs. First, U.S. mining major Freeport McMoRan FCX.N signed a memorandum of understanding with the outgoing administration of President Susilo Bambang Yudhoyono that should result in the government getting what it wanted, without giving up much in return. The deal allows Freeport, which operates Grasberg, the world's second-largest open-cut copper mine, to resume exports of copper ore after providing a $115 million bond for the building of a smelter with partners. Freeport also agreed to higher royalties, an export tax and to divest 30 percent of its Indonesian unit, while in return the government committed to providing the U.S. company with a mining licence between 2019 and 2021 to allow it to continue operations until 2035. This was important for Freeport, as the Grasberg site is believed to contain large deposits of copper and gold, but will need exploration and other investments to develop. Newmont Mining Corp NEM.N , which like Freeport had halted copper ore shipments earlier this year in dispute over the government's hike to export taxes, had taken a different path to Freeport in attempting to force Indonesia to international arbitration. However, the Denver, Colorado-based group withdrew the claim last week, almost immediately leading to a breakthrough in its seven-month dispute with Jakarta. Newmont will resume copper exports next week after agreeing to pay increased royalties, a government official said on Monday. ID:nL3N0R21JQ . It could be argued that Freeport's more conciliatory approach worked better than Newmont's now abandoned hardline stance, but that ignores the two companies had different priorities with their Indonesian assets. Freeport's Grasberg is a world-scale mine sitting on vast potential untapped reserves, and is thus a strategic asset for the company, giving it more incentive to negotiate a deal to ensure it remains with the company's portfolio. Newmont's Batu Hijau mine is considerably smaller than Grasberg and may not be worked much longer than the 2030 expiry date of the existing licence. This meant Newmont had less incentive to re-negotiate a contract that it believed the government would be forced to honour had the case proceeded to arbitration. It may also be the case that the Freeport deal helped Newmont realise that compromise was possible, or put another way, once the first domino fell it was always going to be easier for the government to get other companies to fall into line. NEW GOVERNMENT, SAME POLICIES No doubt the incoming government of President-elect Joko "Jokowi" Widodo, which takes office next month, will be keen to get off to a good start with the mining industry. But that doesn't mean the government will be stepping back from its plans to extract more from the resource sector. Coal miners are also feeling the pinch, saying some will go under if the government pushes ahead with rules to force them to register with a central authority and pay export royalties in advance. The new rules aim to stamp out illegal mining, which is estimated at about 50 million tonnes per annum, or about one-seventh of forecast legal exports in 2014. The coal industry says it can't afford to pay royalties in advance, but the government appears unconvinced. ID:nL3N0QW24E If past patterns are repeated, it's likely the authorities may well stick to their plans, having already shown they are prepared to take the pain of loss of revenue from lower exports of metal ores if they believe the long-term gains are worth it. While the Indonesian government has so far played better poker, their strategy isn't without risks. The main problem the authorities are likely to face is declining investment in mining, as the rules become more burdensome and the expected returns lower. This will ultimately have a negative impact on production as existing reserves are mined and not replaced by new projects. After all, if you are too good a poker player, the other players may decide to go to another table and try their luck there. (Editing by Himani Sarkar) ((clyde.russell@thomsonreuters.com)(+61 437 622 448)(Reuters Messaging: clyde.russell.thomsonreuters.com@reuters.net)) Keywords: COLUMN RUSSELL/INDONESIA MINING

MIDEAST STOCKS - Factors to watch - September 1

September 01, 2014 - reuters.com

DUBAI, Sept 1 (Reuters) - Here are some factors that may affect Middle East stock markets on Monday. Reuters has not verified the press reports and does not vouch of their accuracy. INTERNATIONAL/REGIONAL * GLOBAL MARKETS-Asian shares wobble in early trade, euro sinks MKTS/GLOB * Oil higher on Ukraine tensions, data, but posts second monthly fall O/R * Palladium extends winning streak to 4th session on supply fears GOL-RTRS * MIDEAST STOCKS-Dubai's Emaar surges ahead of unit's IPO; most markets rise MEAST-STX * KOGAS says starts commercial crude oil production in Iraq's Badra IQ-OILG * Israel claims W.Bank land for possible settlement use, draws U.S. rebuke IL-PS * Jubilant Iraqi forces break two-month siege of Amerli -officials IQ-SECUR * As Islamic State fighters begin to blend in, defeating them no easy matter MEAST-SECUR * Libya oil production rises to 700,000 barrels per day -state oil firm LY-OILG * Iran says possible response to new US sanctions could not be "pleasant" IR-NUCL-US TURKEY * Turkish deputy PM Babacan to maintain oversight of economy -officials TR-POL EGYPT * UAE to provide Egypt "about $9 bln" in oil products - Egypt oil ministry AE-EG-OILG * Egypt foreign reserves close to July level - central bank governor EG-CEN * Kellogg Co makes bid approach to Egypt's Bisco Misr-statement K.N BISM.CA * Egypt's Palm Hills Q2 net profit down 8.3 pct PHDC.CA SAUDI ARABIA * IFC confirms $100 mln investment in Saudi's ACWA Power IFK.UL IPO-ACWA.SE * Saudi Sahara says ethylene and propylene unit shuts plant for maintenance 2260.SE * Saudi Aramco sets September propane at $745/T,down $35 SDABO.UL * Saudi Sipchem affiliate shuts butanediol plant for upgrade 2310.SE * Saudi stocks richly valued but still attractive -funds SA-STX UNITED ARAB EMIRATES * Government of Sharjah names 5 for potential USD sukuk AE-SUK * Dubai retailer Marka appoints CEO IPO-MARK.DU * Dubai airport passenger traffic slips 2.9 pct in July on runway work AE-AIRL * Dubai's Emaar to launch long-awaited malls unit IPO in Sept EMAR.DU KUWAIT * Viva Kuwait says gets regulator's approval to list on bourse 7010.SE KW-TCOM QATAR * Qatar lender Al Khaliji names Khalifa as CEO KCBK.QA BAHRAIN * Head of Bahrain telecom operator's domestic unit resigns BTEL.BH * Bahrain Batelco says India ex-partner is bankrupt, seeks $212 mln owed BTEL.BH * Bahrain detains Shi'ite rights activist on arrival at airport BH-POL (Compiled by Dubai newsroom) ((dubai.newsroom@reuters.com)) Keywords: MIDEAST FACTORS

India Morning Call-Global Markets

September 01, 2014 - reuters.com

EQUITIES NEW YORK - U.S. stocks closed out a strong month on a quiet note on Friday, with the S&P 500 posting a modest gain to close at a record as the latest positive data helped extend a rally that had been briefly threatened by overseas concerns. Since falling to a near three-month low on Aug. 7, the S&P 500 has risen in 12 of the past 16 sessions. It is also closed out its fourth straight weekly advance and sixth positive month of the past seven. Friday's gains pushed the index to its latest record close of 2,003.37, its third finish above 2,000 this week. For a full report, click on .N - - - - LONDON - Britain's top share index ended slightly higher on Friday, with stronger pharmaceutical stocks on renewed merger and acquisition talks outpacing a sharp decline in retail stocks after another profit warning by Tesco TSCO.L . AstraZeneca AZN.L , which added the most points to the blue-chip FTSE 100 index .FTSE , rose 2 percent on talk of further takeover interest from Pfizer PFE.N following an abortive $118 billion takeover attempt in May. For a full report, click on .L - - - - TOKYO - Japanese shares edged up on Monday, led by gains in some mid- and small-cap stocks, but the advance was mostly capped on worries the Japanese economic recovery from a tax hike earlier this year may be weaker than initially thought. The Nikkei share average rose 0.2 percent .N225 to 15,455.44, reversing its fall last week from a high around 15,628, and taking heart from Wall Street's advance on Friday with the S&P 500 index .SPX closing at a record high ahead of Monday's Labor Day holiday. For a full report, click on .T - - - - HONG KONG - Hang Seng Index .HSI is up 0.12 percent. For a full report, click on .HK - - - - FOREIGN EXCHANGE SYDNEY - The euro slipped to a fresh one-year low early on Monday as the situation in Ukraine worsened, although a holiday in the United States and major central bank events later in the week will probably keep investors sidelined. The common currency fell as far as $1.3127 EUR= , from around $1.3140 late in New York on Friday, reaching lows not seen since early September 2013. It last traded at $1.3131. For a full report, click on USD/ - - - - TREASURIES NEW YORK - Treasuries were steady on Friday, pausing a week-long rally, as investors remained focused on next week's highly anticipated European Central Bank meeting. Comments by ECB President Mario Draghi last Friday were interpreted by some market participants as indicating that the central bank had changed forecasts on inflation lower, and that it may be more likely to embark on new quantitative easing to stave off a decline. For a full report, click on US/ - - - - COMMODITIES PALLADIUM SINGAPORE - Palladium rose for a fourth straight session on Monday to trade near a 13-1/2 year high on fears that supply from top producer Russia could be hit due to the Ukraine crisis, while gold dipped slightly on a stronger dollar. Palladium XPD= had climbed 0.6 percent to $904.75 an ounce by 0051 GMT, near a 13-1/2 year peak of $907 hit on Friday. For a full report, click on GOL/ - - - - BASE METALS SYDNEY - London copper edged down on Monday, after ending August with its biggest monthly drop since March on signs of fragility in the global economy, as markets awaited the release of a key manufacturing gauge in top metals user China. Three-month copper on the London Metal Exchange CMCU3 edged down 0.2 percent to $6,966 a tonne by 0044 GMT after posting a small gain in the previous session For a full report, click on MET/L - - - - OIL NEW YORK - Crude oil prices posted their second straight monthly losses, despite rising on Friday on worries that the intensifying Ukraine crisis may trigger more sanctions and as U.S. economic data portended strong demand in the world's largest oil consumer. U.S. crude oil rose for a fourth straight session after data showed consumer confidence rose in August to a seven-year high, although consumer spending dipped 0.1 percent For a full report, click on O/R (Compiled by Abhishek Vishnoi) ((abhishek.vishnoi@thomsonreuters.com; +91 22 61807225; Reuters Messaging: abhishek.vishnoi.thomsonreuters.com@reuters.net)) Keywords: MORNINGCALL INDIA/

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