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UPDATE 1-South Korea warns against rapid won appreciation

September 03, 2014 - reuters.com

(Adds new details, market rates, trader's comment) SEOUL, Sept 3 (Reuters) - South Korea warned against the won's rapid rise, especially against the yen, as the firmer won put an extra burden on a trade-reliant economy already hit by sustained weakness in consumer spending. Vice Finance Minister Joo Hyung-hwan said the foreign exchange market's stability was "very important" and that the authorities were closely watching the market, a phrase frequently used to send a warning of possible intervention. "Stability of the foreign exchange market is very important for the recovery of the economy," Joo said during a scheduled meeting of senior economic and financial officials, adding the authorities are closely watching the market, including yen/won JPYKRW=R transactions. Traders in Seoul said there was already a sense of caution about possible government intervention, noting Joo's remarks reinforced that possibility. "The likelihood of intervention will grow very high especially when the dollar/won's movement deviates very much from the dollar/yen's," said a foreign bank dealer. South Korea's economy suffered its worst growth in more than a year during the second quarter and key companies such as Samsung Electronics 005930.KS and Hyundai Motor 005380.KS have cited the stronger won for their falling earnings. The won's continued appreciation against the dollar while the yen weakened has pushed the won sharply higher against the yen. South Korea and Japan are close rivals in export markets for a variety of products. Yen/won ended Tuesday's session at 9.72, the lowest closing level since ending at 9.60 on Aug. 25, 2008, central bank data showed. The rate is calculated from each currency's movements against the dollar. (Reporting by Lee Shin-hyung; Additional reporting by Yena Park; Writing by Choonsik Yoo; Editing by Michael Perry and Eric Meijer) ((choonsik.yoo@thomsonreuters.com; +822 3704 5580; Reuters Messaging: choonsik.yoo.thomsonreuters.com@reuters.net)) Keywords: SOUTHKOREA ECONOMY/FOREX

Golf-American Mahan seeking Ryder Cup redemption for 2010

September 03, 2014 - reuters.com

NEW YORK, Sept 2 (Reuters) - The three American Ryder Cup wildcard picks will all be seeking redemption when they travel to Scotland later this month, and none more so than Hunter Mahan. The 32-year-old lost the singles match to Graeme McDowell that clinched the Ryder Cup for Europe in Wales in 2010 - a loss made more painful because Mahan duffed a chip shot at the 17th hole that effectively sealed his fate. The memory of that moment and the subsequent journey back to the Celtic Manor clubhouse still stings four years later. "I remember walking off that green and all the fans rushing on to Europe and Graeme and having a big party," Mahan said after being announced by captain Tom Watson as a wildcard selection on Tuesday. "I felt like I was walking by myself for 600 yards back to the clubhouse and it's a very lonely feeling. I want to get rid of that." Mahan has already been on a winning Ryder Cup team, in 2008, but remembers the 2010 experience more vividly. In tears at the U.S. team press conference afterwards, he struggled for words until Phil Mickelson compassionately took over the microphone. "Winning is great but for some reason losing lingers," Mahan continued. "It hangs with you. I think redemption is going to be a strong word amongst all the players. Europe has flat out kicked our butt the last 10 or 15 years and that's just the way it is. "We have a great challenge ahead of us but we're extremely motivated and we have a lot to prove among each player." Fellow wildcard pick Keegan Bradley also spoke of redemption after making his Ryder Cup debut in the defeat at Medinah two years ago. "We've got a big majority of the guys on the team that were there. To think that I wouldn't have a chance in Scotland would have been really tough," he said. "When he (Watson) told me I was picked it was years of emotion that came out. It was one of the best moments of my career, because it was scary. "We play all year for all this money and all this fame and all these amazing trophies but the Ryder Cup has such a force to it." The other wild card selection, Webb Simpson, revealed he had received a phone call from Watson with the news in the early hours of Tuesday morning. "It was one of the greatest phone calls I've ever gotten," said the 2012 U.S. Open champion, who was on the losing Ryder Cup team later the same year. "It felt like we were going to win," Simpson recalled. "It was a shock Sunday afternoon. "I'll never forget the feeling I had watching the other team celebrate. They were all smiles, laughter and having fun and we had our heads down. It wasn't a good feeling." (Reporting By Andrew Both in Cary, North Carolina) ((andrew.both@thomsonreuters.com; 1 919 6336697; Reuters Messaging: andrew.both.thomsonreuters.com@reuters.net)) Keywords: GOLF RYDER/US REACTION

FOREX-Dollar powers up as yen, sterling flag; euro off lows

September 03, 2014 - reuters.com

* Dollar index rises to 14-month highs * Yen broadly weaker, sterling also under pressure * Euro off lows ahead of ECB policy review By Ian Chua SYDNEY, Sept 3 (Reuters) - The dollar hovered at 14-month highs against a basket of major currencies early on Wednesday, underpinned by upbeat U.S. data and further supported by a selloff in the yen and sterling. The dollar index .DXY rose as far as 83.039, reaching levels not seen since July 2013 after data showed manufacturing activity hit a near 3-1/2-year high last month and construction spending rebounded strongly in July. ID:nL1N0R30RO "This only reinforces our bullish USD view premised on a relative pick-up in the U.S. economy, some more front-end rate support for the USD...as rates re-price to the Fed's own forecasts," analysts at JPMorgan wrote in a note to clients. They added that other regional dynamics including low euro zone inflation and the risk of a more activist European Central Bank (ECB) further supported their upbeat dollar view. U.S. two-year Treasury yields US2YT=RR jumped to a one-month high of 0.528 percent in the wake of the data, which in turn helped the greenback race to an eight-month high on the yen at 105.22 JPY= . The dollar scaled a five-month perk on sterling, which skidded 0.8 percent to $1.6469 GBP=D4 - its biggest one-day fall since late January. Commodity currencies such as the Australian and New Zealand dollars AUD=D4 NZD=D4 also lost ground against their U.S. peer. But the euro, which briefly plumbed a one-year low of $1.3110 EUR= , staged a modest recovery to $1.3135 led by a 0.8 percent rally in euro/yen. The common currency hit a seven-week high of 138.10 yen EURJPY=R , posting its biggest one-day rise in over five months as the Japanese currency crumbled. The broad selloff in the yen coincided with renewed market chatter about the highly anticipated portfolio change in Japan's behemoth public pension fund. Due to be announced in the weeks ahead, the asset allocation overhaul is expected to see the fund move into riskier assets including stocks and foreign bonds. The spike in intra-day volatility marked an end to the summer lull and should provide a welcome relief to traders. But euro bulls are likely to tread cautiously as the ECB meeting looms, with the market still split on whether the bank will take more stimulus steps. French President Francois Hollande and ECB chief Mario Draghi agreed on Monday that low inflation and weak growth were threatening the European Union's economy, an official in the president's office said. ID:nL5N0R24H3 Ahead of the ECB meeting, Australia's second quarter gross domestic product; a speech by the head of Australia's central bank; a survey on China's services sector and the Bank of Canada's (BOC) policy review will take centre stage. Weak growth in business investment and exports, as well as concerns about the risks of low inflation are expected to keep the BOC stuck on the sidelines until the second half of next year, a Reuters poll found. ID:nL1N0QV0W9 (Editing by Eric Meijer) ((ian.chua@thomsonreuters.com; +61 2 9373 1871; RM: ian.chua.thomsonreuters.com@reuters.net)) Keywords: MARKETS FOREX/

UPDATE 1-ECB bank review will need large capital demand to be credible -survey

September 03, 2014 - reuters.com

(Adds details on survey findings, background on financial health of euro-zone banks) Sept 2 (Reuters) - The European Central Bank's landmark review of euro-zone banks will have to ask lenders to raise an additional 51 billion euros to be credible with markets, a Goldman Sachs survey of large institutional investors has found. The survey of 125 institutional investors from across the globe also found that nine of the 130 banks being tested were expected to fail, with capital shortfalls most likely at Italian, German and Austrian banks, according to a document circulated by Goldman Sachs on Tuesday night. The ECB is examining whether banks have properly recognised losses in a bid to finally draw a line under doubts about euro zone banks' balance sheets before it becomes their supervisor on Nov. 4. Results are expected around Oct. 17. Producing a result that is in line with market expectations is key for the ECB, since previous rounds of EU bank tests in 2010 and 2011 were roundly discredited for capital demands and failure rates that were far less than what investors deemed reasonable. Investors' average expected capital demand is 23 billion euros higher than a previous Goldman survey in October 2013. The 51 billion euros is for capital needs that are outstanding after capital that banks have already raised, including 47 billion euros they have raised since October. Expectations of an "extreme" outcome that would require banks to raise over 100 million euros fell sharply from 18 percent in October to 8 percent now. The exercise's credibility amongst investors has improved since then, the survey found, with 89 percent of investors now expecting the tests to be credible, up from 70 percent in October. Three quarters of investors surveyed said they expected the exercise to be positive for bank valuations, with banks set to "outperform" the broader equities market once the results are announced. Euro-zone banks have traded at lower valuations than their U.S. peers in recent years. The large listed banks seen by investors as most likely to have capital shortfalls include Italy's Monte dei Paschi BMPS.MI , Germany's Commerzbank CBKG.DE and Portugal's BCP BCP.LS . Three Greek banks - Piraeus BOPr.AT , Eurobank EURBr.AT and Alpha Bank ACBr.AT - are also among identified by investors as most likely to need capital. (Reporting by Laura Noonan in London; Editing by Leslie Adler) ((laura.noonan@thomsonreuters.com; 44 207 542 8793; Reuters Messaging: laura.noonan.thomsonreuters.com@reuters.net)) Keywords: BANKS GOLDMAN/SURVEY

ECB bank review will need large capital demand to be credible -survey

September 03, 2014 - reuters.com

Sept 2 (Reuters) - The European Central Bank's landmark review of euro-zone banks will have to produce a capital demand of 51 billion euros ($66.98 billion) to be credible, a Goldman Sachs survey of large institutional investors has found. The survey of 125 institutional investors from across the globe also found that nine banks were expected to fail the review, with capital shortfalls most likely at Italian, German and Austrian banks. Investors' average expected capital demand is 23 billion euros higher than a previous Goldman survey in October 2013. The exercise's credibility amongst investors has improved since then, the survey found. The ECB is examining whether banks have properly recognised losses in a bid to finally draw a line under doubts about euro zone banks' balance sheets that have persisted for six years of financial crisis. Results are expected around Oct. 17. ($1 = 0.7614 Euros) (Reporting by Laura Noonan in London; Editing by Leslie Adler) ((laura.noonan@thomsonreuters.com; 44 207 542 8793; Reuters Messaging: laura.noonan.thomsonreuters.com@reuters.net)) Keywords: BANKS GOLDMAN/SURVEY

Venezuelan bonds close down ahead of expected cabinet shuffle

September 03, 2014 - reuters.com

CARACAS, Sept 2 (Reuters) - Venezuelan bonds fell on Tuesday as investors expected President Nicolas Maduro to shuffle the cabinet and make economic announcements. The benchmark 2027 bond VENGLB27=RR dropped 2.2 percent to close at a five-month low of 76.992, according to Thomson Reuters data. Socialist Maduro has said he is seeking to bolster administrative efficiency amid surging inflation and shortages of some basic goods. Analysts will be watching for potential changes at the helm of the South American OPEC country's economy, and indications about whether long-expected reforms are likely to see the light. Maduro was scheduled to speak around 5 pm local time (930 GMT). (Reporting by Eyanir Chinea; Editing by Diane Craft) ((alexandra.ulmer@thomsonreuters.com)(Twitter: @ReutersVzla, @AlexandraUlmer)(+58 212 655 2656)(Reuters Messaging: alexandra.ulmer.thomsonreuters.com@reuters.net)) Keywords: VENEZUELA BONDS

Goldcorp suspends Mexico mine operations on pit wall instability

September 03, 2014 - reuters.com

Sept 2 (Reuters) - Goldcorp Inc G.TO has suspended mining at its El Sauzal mine in Mexico as a safety precaution after instability in the pit wall, the Canadian-based gold mining company said on Tuesday. The mine, which is in its final year of active mine life, is experiencing movement in the highwall slope of the Trini pit, Goldcorp said. A geotechnical team is assessing the impact of the movement on the mine, which had been expected to produce around 105,000 ounces of gold this year. (Reporting by Nicole Mordant in Vancouver, editing by G Crosse) ((nicole.mordant@thomsonreuters.com; +1-604-664-7315; Reuters Messaging: nicole.mordant.thomsonreuters.com@reuters.net)) Keywords: GOLDCORP MEXICO/

RPT-Dairy prices fall, volumes increase at auction -NZ's Fonterra

September 02, 2014 - reuters.com

(Repeats with no changes) Sept 2 (Reuters) - International milk prices fell while volumes increased in this month's first auction held by New Zealand's Fonterra Co-operative Group, the world's biggest dairy exporter. Fonterra's GDT Price Index dipped 6 percent, with an average selling price of $2,787 per tonne, in the auction held on Tuesday. The index fell 0.6 pct at the previous sale, said Fonterra, which is known for brands such as Anchor, Anlene and Fresh n' Fruity. A total of 57,010 tonnes was sold at the latest auction, an increase of 22.9 percent from the previous one, the cooperative said on its website (www.globaldairytrade.info). The auctions are held twice a month, with the next one scheduled for September 16. The auction results can affect the New Zealand dollar NZD= as the dairy sector generates more than 7 percent of the nation's gross domestic product. The New Zealand milk co-operative, which is owned by about 10,500 farmers, controls nearly a third of the world dairy trade. (Bangalore Commodities desk) (( BLRCEEditorial@thomsonreuters.com ; within U.S. +1 651 848 5832; outside U.S. +91 80 6749 1298; Reuters Messaging: rmchat://room/reuters.com/Bangalore-CE-News )) (Reporting by Naomi Tajitsu) ((naomi.tajitsu@thomsonreuters.com; +6448027979; Reuters Messaging: naomi.tajitsu.thomsonreuters.com@reuters.net)) Keywords: FONTERRA AUCTION/RESULTS

FOREX-Euro hits 1-year low vs dollar on ECB bets, pound falls

September 02, 2014 - reuters.com

* Euro falls to one-year lows vs USD on QE speculation * Dollar breaks above 105 yen for first time since January * Dollar index highest since July 2013 as U.S. yields rise * Growing support for Scotland "yes" vote hurts sterling (Updates market action, adds quotes) By Richard Leong NEW YORK, Sept 2 (Reuters) - The euro dipped on Tuesday to fresh one-year lows against the dollar on bets the European Central Bank will do more to help a wobbly euro zone economy, while the pound fell to a near five-month low versus the greenback on worries about Scottish secession. The dollar rose against a basket of major currencies .DXY , rising 0.3 percent to 82.99 and hitting its highest since July 2013. It traded above 105 yen JPY= for the first time in eight months on signs of relative strength in the world's biggest economy. The ECB will hold a policy meeting on Thursday and traders will watch for signs President Mario Draghi is moving towards quantitative easing, which would pump more cash into the economy in a bid to stimulate lending and spending. Such a move, however, would hurt the euro, which has declined 3.5 percent against the dollar in the past three months and 0.9 percent against the yen. "For the ECB, expectations for further stimulus are being restrained by the need to see a full implementation of measures announced in June, as well as some concerns about the lack of political support for more aggressive stimulus at this time," said Eric Theoret, Scotia Bank's currency strategist in Toronto. Monday's disappointing regional economic data stoked speculation on the ECB adopting QE later this week. ID:nL9N0O502E ID:nL5N0R20NX Some, however, said the market might be expecting too much from Thursday's ECB meeting, even if further easing might be announced later down the line. The euro hit a trough of $1.3110 EUR=EBS on trading platform EBS on Tuesday, its lowest since September 2013, before recovering to $1.3127 in U.S. trading, a slim 0.01 percent fall from Monday's close. U.S. financial markets were closed on Monday for the Labor Day holiday. The greenback also gained against other major currencies as benchmark U.S. yields posted its biggest daily rise in a month to 2.418 percent US10YT=RR on data that supported the view the U.S. economy continues to expand at a modest pace. ID:nL1N0R30LY The Institute for Supply Management said its U.S. manufacturing activity index rose to 59.0 in August, the strongest since March 2011. July construction spending was at its highest level in over 5-1/2 years. ID:nL1N0R30RO The dollar hit its highest since November against the Swiss franc, rising as high as 0.9212 franc CHF= after data showed the Swiss economy stalled in the second quarter. ID:nL5N0R30KG <^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^ Graphics: U.S. construction spending http://link.reuters.com/vus72w U.S. ISM factory data http://link.reuters.com/xek62w U.S. Markit PMI http://link.reuters.com/geg47v ^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^> STERLING WEAKENS The British pound sank on a poll that showed support growing for the "yes" vote in a referendum later this month that could see Scotland splitting from the rest of the UK. ID:nL5N0R310X The pound fell 0.8 percent to $1.6475 GBP=D4 , its lowest level in about five months. "The sterling has taken it on the chin," said Lane Newman, director of foreign exchange at ING Capital Markets in New York. One-month sterling/dollar implied volatility rose to 6.312 percent GBP1MO=R , its highest in five months. ID:nL5N0R31YB (Additional reporting by Jemima Kelly in London, Lisa Twaronite in Tokyo and Ian Chua in Sydney; Editing by Alison Williams, Susan Fenton, Meredith Mazzilli and Nick Zieminski) ((richard.leong@thomsonreuters.com; +1 646 303 6313; Reuters Messaging: richard.leong.thomsonreuters.com@thomsonreuters.net; Twitter @RichardLeong2)) Keywords: MARKETS FOREX/

Nicaragua abandons search for missing miners trapped by landslide

September 02, 2014 - reuters.com

MANAGUA, Sept 2 (Reuters) - Nicaragua has called off work to find at least seven miners trapped in a gold mine by a landslide after rescuers decided there was no hope of reaching them, the government said on Tuesday. At least 29 miners were trapped on Thursday after heavy rains sparked a landslide at the mine in the Bonanza project, about 260 miles (420 km) northeast of Managua, which was closed around four years ago after being deemed unsafe. By Saturday, 22 of the miners had been rescued. However, by late Monday the rescue crews had decided there was no way of continuing the search and called off their efforts, said government spokeswoman Rosario Murillo, the wife of Nicaraguan President Daniel Ortega. The mine was seriously affected by seasonal rains in the past, with another landslide two months ago killing two miners, according to Mineros S.A. MAS.CN , the Colombian parent company of Nicaraguan miner Hemco, which operated the mine. Although operations were ended, informal miners continued to work the mine against the orders of Hemco, the firm said. (Reporting by Leslie Nicolas Lacayo and Noe Torres) ((dave.graham@thomsonreuters.com; +52 1 55 5282 7146; Reuters Messaging: dave.graham.thomsonreuters.com@reuters.net)) Keywords: NICARAGUA MINE/

An independent Scotland couldn't rejoin EU if it kept pound -British minister

September 02, 2014 - reuters.com

LONDON, Sept 2 (Reuters) - An independent Scotland could not rejoin the European Union if it used the pound informally, a senior British minister will say on Tuesday, citing a former top EU official, less than three weeks before a historic breakaway referendum. In a move he hopes will persuade Scots to spurn independence, Danny Alexander, the second most senior figure in Britain's finance ministry and a Scot himself, will cast serious doubt on Scottish nationalists' plan to keep the pound. "An independent Scotland would face a simple choice - using the pound like Panama uses the dollar, or joining the EU. It can't have both," Alexander, a member of the Liberal Democrats, the junior partner in Britain's coalition, will say. "This shows yet again the nationalists failure to put forward a credible currency plan and the dangers it poses to the people of Scotland," he will tell an audience at the Chatham House think tank in London according to a text released by his office in advance. Scots vote on whether to end their 307-year union with England and break up the United Kingdom on Sept. 18 with the issue of which currency an independent state would use dominating much of the debate. After months of opinion polls showing Scots nationalists are heading for defeat in the Sept. 18 referendum, a YouGov poll on Tuesday showed the anti-independence camp's lead had shrunk to 6 percentage points from 22 a month ago. ID:nL5N0R33HP The pro-independence side has said it believes what would be left of Britain in the event of a "Yes" vote would agree to a currency union and allow the new state to use the pound, something Britain's three main political parties have rejected. It has held out the possibility that an independent Scotland could informally use the pound if a currency union didn't happen, however, an arrangement that would be known as "sterlingisation". Another option would be to have Scotland's own currency. Alex Salmond, the leader of the pro-independence Scottish National Party, has also said he wants Scotland to rejoin the EU. However, Alexander on Tuesday published advice he said he had received from Olli Rehn, the outgoing European Commissioner for Economic and Monetary Affairs, which casts Salmond's plans into doubt. "As to the question (of) whether 'sterlingisation' were compatible with EU membership, the answer is that this would simply not be possible, since that would obviously imply a situation where the candidate country concerned would not have a monetary authority of its own and thus no necessary instruments of the Economic and Monetary Union," Rehn said in a letter with Tuesday's date. (Reporting By Andrew Osborn and Kylie MacLellan; Editing by Andrew Osborn) ((andrew.osborn@thomsonreuters.com)(+442072195389)(Reuters Messaging: andrew.osborn.thomsonreuters.com@thomsonreuters.net)) Keywords: SCOTLAND INDEPENDENCE/CURRENCY

UPDATE 1-Ireland to require smaller budget cuts as tax take soars

September 02, 2014 - reuters.com

* Tax take 4.1 pct higher than expected, spending on target * Buoyant income tax, VAT bode well for domestic economy * Run of positive economic data in contrast to euro zone (Adds detail, economist quote) DUBLIN, Sept 2 (Reuters) - Ireland will need significantly less in spending cuts and tax hikes in next month's budget than originally forecast after the government's tax take rose sharply in August, its finance minister said on Tuesday. Michael Noonan went much further than a month ago, when he said cuts would be "somewhat less" than the 2 billion euros ($2.6 billion) planned. ID:nS8N0OE01K The government has been hoping buoyant tax revenues and an economic rebound would take the sting out of the last in a long line of austerity budgets following an economic crisis. Tax revenue for the first eight months of the year was 4.1 percent above target while spending by government departments was broadly as expected, leaving the budget deficit 1.3 billion euros ahead of profile, the finance department said on Tuesday. "The Exchequer figures to the end of August and in particular the strong performance of income and consumption taxes are further evidence that the recovery is strengthening as the year progresses," Noonan said in a statement. "In Budget 2015, we will target a reduction in deficit to below 3 percent. It is clear from that the level of adjustment through tax and expenditure cuts required to achieve this will be significantly less than forecast at the start of the year." With unemployment down for eight straight quarters, exports rebounding and consumer beginning to spend again, Ireland's economy is now expected to grow by over 3 percent this year, bucking the trend within the struggling euro zone. ID:nL5N0R223X ID:nL5N0QX42U The recent barrage of positive economic data was reflected in Tuesday's figures that showed the government collected 25 billion euros in tax in the first eight months of the year, 2 billion more than a year ago and 1 billion more than expected. Much of the outperformance was driven by forecast-beating increases in income tax, sales tax and stamp duty on property - an encouraging sign for an economy slowly recovering from Ireland's financial crisis and subsequent years of austerity. Spending by government departments was 0.4 percent ahead of profile at the end of last month - driven by a 350 million euro overspend in health - and just 0.1 percent above target when deeper than forecast cuts to capital spending were included. "I think they will really strengthen the argument of those who say the government should implement a very modest adjustment - if any - in budget 2015," Investec Ireland chief economist Philip O'Sullivan said. "But it is important to remember there is still a pretty large deficit. Any fiscal wiggle room is likely to be limited. While today's release shows it won't be as limited as we thought, there is certainly no pot of gold for the minister of finance to dispense." Noonan will meet the heads of Europe's central bank, bailout fund and group of finance ministers next week to seek approval from the European Union to refinance its bailout loans from the International Monetary Fund. ID:nL5N0R34BC ($1 = 0.7621 Euros) (Reporting by Padraic Halpin and Conor Humphries; Editing by Catherine Evans) ((padraic.halpin@thomsonreuters.com)(+353 1 500 1529)(Reuters Messaging: padraic.halpin.thomsonreuters.com@reuters.net)) Keywords: IRELAND ECONOMY/BUDGET

South Africa's rand falls to three-week lows in risk-averse trade

September 02, 2014 - reuters.com

JOHANNESBURG, Sept 2 (Reuters) - South Africa's rand traded at its weakest in more than three weeks against the dollar on Tuesday, as political tensions between Russia and Ukraine dented appetite for riskier emerging market assets. Yields on longer dated government bonds rose after demand for debt at the higher end of the curve came in much lower at the latest weekly auction, compared with previous sales. The yield for on the 2026 benchmark ZAR186= jumped 12 basis points to 8.115 percent, its highest in nearly a week, while the instrument maturing next year ZAR157= edged up 1 basis point to 6.63 percent. The rand ZAR=D3 touched a session low of 10.7510, the softest it has been since Aug. 8, and was down 0.6 percent on the day at 10.7425 by 1552 GMT. "There appears to be a general risk-off sentiment when looking across the EMEA space at present," Tradition Analytics said in a market note. "Russia sanction risks are still the main driver of sentiment." (Reporting by Stella Mapenzauswa; editing by David Dolan) ((stella.mapenzauswa@thomsonreuters.com)(+27117753161)(Reuters Messaging: stella.mapenzauswa.thomsonreuters.com@reuters.net)) Keywords: MARKETS SAFRICA/CURRENCY

EU's new leadership trio may surprise on upside

September 02, 2014 - reuters.com

By Paul Taylor and Robin Emmott PARIS/BRUSSELS, Sept 2 (Reuters) - At first sight, the European Union's new leadership team looks like a missed opportunity. Jean-Claude Juncker, Donald Tusk and Federica Mogherini seem a less than ideal crew to tackle the EU's biggest challenges - dynamising a stagnant economy, standing up to Russia over Ukraine and preventing Britain from drifting away from Europe. Yet each may surprise their detractors on the upside. The former Luxembourg prime minister, current Polish prime minister and Italian foreign minister bring a combination of wily west European compromise building, stolid central European determination and youthful Mediterranean exuberance to the task. They tick the requisite boxes of political balance between left and right, north and south, east and west, men and women, and big and small states. Whether they have the leadership and communication skills, and in Mogherini's case the diplomatic experience, to restore confidence in the EU and command respect abroad remains to be seen. This was the year when the 28-nation bloc had an opportunity to choose a new set of top officials after many voters expressed their disenchantment with the EU through mass abstention and big protest votes in European Parliament elections in May. But rather than reach for the most talented statesmen and women - EU luminaries like France's Pascal Lamy, Italy's Mario Monti or Sweden's Carl Bildt - national leaders preferred to play safe by picking a trio of relatively low-profile figures unlikely to threaten their own dominance of European policy. None of the newcomers has the stature of a Jacques Delors, the greatest European Commission president, nor of European Central Bank President Mario Draghi. Yet they have the potential to grow into their roles provided member states do not sap their authority or continue to blame "Brussels" for their own poor decision-making and in Juncker the EU has a consummate deal-maker who knows how to navigate the bloc's tortuous corridors of power. GERMAN HAND The appointments reflect the ascendancy of Germany and its Chancellor Angela Merkel since the euro zone crisis began in 2010, making Berlin the indispensable power in Europe. Juncker, 59, a veteran broker of Franco-German deals in economic and monetary affairs, was the leading candidate of Merkel's centre-right group in the European elections and long a protege of her political mentor, former Chancellor Helmut Kohl. He brings a quarter century of experience, mostly behind closed doors, to the European Commission presidency. He can be irritable with the media and secretive in dealings with his peers. Tusk, 57, who speaks German but basic English and no French - the EU's main working languages - has presided over a historic rapprochement between Poland and Germany. He has long been Merkel's preferred candidate for a top European job. Tusk has led his nation of 40 million through seven years of economic growth and rising political and diplomatic influence in central Europe and the EU. Critics say he has shied away from bold economic reforms and slowed Warsaw's path towards joining the euro out of electoral timidity. His last year in office has been marred by political scandals. Janis Emmanouilidis, chief political analyst at the European Policy Centre in Brussels, dismissed media criticism of Tusk's linguistic shortcomings. "If Chancellor Merkel, who does not address the public in English, wanted to become president of the European Council, would we have doubted her ability?" he told Reuters. "President (Jose Manuel) Barroso speaks many languages. Did that make him the strongest of Commission presidents?" The most controversial choice was Mogherini, 41, who has only six months' government experience and was criticised by several central European countries as being too soft on Russia over its destabilisation of eastern Ukraine. A veteran former EU official said he feared Russian Foreign Minister Sergei Lavrov would "eat her for breakfast". Some EU governments and many strategic analysts would have preferred Polish Foreign Minister Radislaw Sikorski, a strategic thinker and fine orator, to give EU foreign policy a stronger profile. But Berlin and Paris saw him as too provocative towards Russia - and in terms of the box-ticking, he suffered the dual handicap of being neither a socialist nor a woman. Outspoken Lithuanian President Dalia Grybauskaite opposed Mogherini in July, saying she would not support a person who lacked experience and was "pro-Kremlin". She made it known she had not voted for the Italian on Saturday. "She is just too new in the business, being foreign minister for only a few months, not having a personal network of foreign policy contacts," Emmanouilidis said. "Member states chose her and not others because they do not want someone who would create problems." Here too, Merkel's hand was visible. By backing the Italian novice for the foreign policy job, the chancellor was able to throw a bone to socialist Italian Prime Minister Matteo Renzi without yielding to his campaign to ease tight budget austerity. The Socialists, runners-up in the pan-European elections, ended up with two lesser positions - foreign policy chief and European Parliament president - while conservatives took the two top posts, running the EU executive that proposes and enforces community laws, and chairing the bloc's policymaking summits. NO HONEYMOON All three incoming officials have only limited scope to make EU policies more effective, partly because of the inherent difficulty of getting 28 sovereign states to agree, but also due to a widespread desire to avoid changing the bloc's governing treaty for fear of losing referendums. The new EU leadership will have no honeymoon with the euro zone economy in the doldrums, unemployment high, the conflict in eastern Ukraine degenerating rapidly and rampant Euroscepticism gaining political ground in Britain. The outgoing tandem of Barroso and European Council President Herman Van Rompuy battled hard to save the euro in the debt crisis. But they were seen as uninspiring leaders and made convenient scapegoats for Europe's unpopularity. Outgoing foreign policy chief Catherine Ashton got the job almost by accident in 2009 with scant international experience. The media-shy Briton had some successes in the Balkans and in handling nuclear talks with Iran but she has not built a global role for European foreign policy, partly because the big member states don't want to hand that role to Brussels. Mogherini gave a self-assured performance at the European Parliament's foreign affairs committee on Tuesday, supporting tougher EU sanctions against Russia over its military presence in Ukraine. "We need to respond in the strongest possible way," she said, adding that Moscow had wrecked its "strategic partnership" with Europe through its own actions. Tusk made clear in his acceptance speech that he would work to keep Britain in the EU by negotiating reforms to meet some of London's concerns. Juncker, who has also sounded conciliatory towards London despite British Prime Minister David Cameron's shrill campaign to block his appointment, has suggested he will shift the EU's economic policy mix somewhat from austerity towards investment. (Editing by Mike Peacock) ((paul.taylor@thomsonreuters.com; +331 49495187; Reuters Messaging: paul.taylor.thomsonreuters.com@reuters.net)) Keywords: EU LEADERSHIP/

S&P raises Los Angeles GO bonds outlook to positive

September 02, 2014 - reuters.com

Sept 2 (Reuters) - Standard & Poor's raised its outlook on Los Angeles, California's general obligation (GO) bonds to "positive" from "stable", citing the city's improved economic metrics. The ratings agency also affirmed its 'AA minus' long-term rating and underlying rating (SPUR) on the city's GO bonds. "The positive outlook reflects our view of the city's improved economic metrics, including unemployment, which is below 10 percent and continues to fall, and the city's improving financial position, as demonstrated by a large surplus in fiscal 2013," said Standard & Poor's analyst Jen Hansen. Standard & Poor's also affirmed its 'A plus' long-term rating and SPUR on the city's appropriation-backed debt outstanding. (http://bit.ly/1qXJueg) The ratings agency assigned 'A plus' rating to Municipal Improvement Corporation of Los Angeles' series 2014-A and 2014-B lease revenue bonds, issued for the city. (Reporting By Tanvi Mehta in Bangalore; Editing by Sriraj Kalluvila) ((tanvi.mehta@thomsonreuters.com; +1 646 223 8780 Extn 4756)(from the U.S.)(; +91 80 67494756)(Direct)(; Reuters Messaging: Reuters Messaging: tanvi.mehta.thomsonreuters.com@reuters.net)) Keywords: S&P RATINGS/

UPDATE 2-Ukraine may need bigger bailout if conflict continues in 2015 -IMF

September 02, 2014 - reuters.com

(Adds details, background) By Anna Yukhananov WASHINGTON, Sept 2 (Reuters) - Ukraine may need as much as $19 billion in additional funds from donors if its conflict with pro-Russian separatists continues during 2015, the International Monetary Fund warned on Tuesday. Even under Kiev's current $17 billion IMF bailout, the Fund said Ukraine will not be able to meet all of its targets due to the ongoing fighting and an intensified gas dispute with Russia, which supplies the bulk of Ukraine's natural gas needs. Nevertheless, it said the money planned under the program is largely sufficient for now as long as the fighting between the government in Kiev and the rebels in the eastern part of the country subsides in the "coming months." The momentum in the five-month war shifted last week decisively in favor of the rebels, who are now advancing on a major port as they seek to throw off rule from Kiev. Western countries accuse Moscow of sending troops into Ukraine, a charge Russia denies. ID:nL5N0R33QY Kiev will now face a $3.5 billion funding shortfall for this year and next due to the fighting, but the IMF said the government should be able to cover most of it with planned debt issues and an expected $900 million in further donor support. In a detailed review of Ukraine's progress and the state of its economy, the IMF painted a dire picture of a country trying to reform everything from banking management to the legal system, while also boosting spending on fighting in the eastern regions of Donetsk and Luhansk. Those regions together accounted for 23 percent of Ukraine's industrial production and 14.5 percent of its retail trade in the first quarter. The IMF said it expects gross domestic product in eastern Ukraine to decline by 15 to 20 percent this year, compared to a 6.5 percent decline for the country as a whole. But outside analysts predict Ukraine's economy may contract by up to 8 percent this year, and are starting to brace for some form of debt restructuring on Ukrainian bonds. ID:nL5N0QY4H1 The Fund, which provided a bailout to Kiev as part of an overall $27 billion international rescue, said it would relax some conditions for Ukraine going forward, including for the government's budget deficit and the level of central bank reserves. In return, Kiev would have to make up for the shortfall elsewhere, including by doing a better job of collecting payments for Naftogaz, the state-run oil and gas company. The IMF also predicted the government would have to spend more money to restructure the banking sector and support Naftogaz, adding to government debt. In addition, it warned that Ukraine's reforms may become more difficult if the country calls early elections. The Fund on Friday confirmed Kiev was on track with most of the loan's conditions so far, allowing the disbursement of $1.7 billion. It said the next disbursement, of about $2.7 billion, would come in mid-December if Kiev complies with the loan conditions. ID:nL5N0QZ4Z2 (Reporting by Anna Yukhananov; Editing by Paul Simao) ((anna.yukhananov@thomsonreuters.com)(+1-202-310-5691)(Reuters Messaging: anna.yukhananov.thomsonreuters.com@reuters.net))

Keywords: UKRAINE CRISIS/IMF

New Austrian finance minister vows tax reform, less bureaucracy

September 02, 2014 - reuters.com

By Michael Shields VIENNA, Sept 2 (Reuters) - Austria needs "tax reform - not tax cuts" to help eliminate its structural deficit in 2016, new Finance Minister Hans Joerg Schelling said on Tuesday, less than a week after his predecessor quit in a row over tax. Addressing parliament for the first time in his new role, Schelling vowed to start dismantling the country's bloated bureaucracy and simplify state finances as a way to free up resources badly needed to boost a flagging economy. The millionaire businessman did not detail steps he might take but stuck to a timetable to draw up proposals that could be adopted by next March. Former finance minister Michael Spindelegger stepped down last week, accusing his conservative People's Party (OVP) of failing to back him in refusing to lower tax rates unless the state could do so without raising other levies. That put him at odds with the Social Democrats who lead the government coalition and with some of the OVP's powerful regional heads who favour stimulus over austerity. Schelling, 60, said the main issue now was finding ways to whip finances into shape without prejudging how to do so. "Reform is a matter of simplifying, clearing out and (tax) relief, not just relief," he said, adding much work lay ahead on the spending side to promote a leaner, more efficient state that is closer to citizens. Schelling, an independent-minded reformer who once ran two home-furnishing chains, took aim at the size of the state. "With all my power I will stand for what we have promised citizens for many years, if not decades: tackling administrative reforms," he said. "It is exactly these reform steps that will create the leeway we need for the topic of tax reform." Austria's budget deficit is projected to rise to 2.7 percent of gross domestic product this year and debt to nearly 80 percent of GDP thanks to the costs of winding down stricken nationalised lender Hypo Alpe Adria HAABI.UL . ID:nL6N0NL3GE The economy, which grew just 0.2 percent in the second quarter, is struggling. The central bank last week cut its forecast for 2014 GDP growth to 0.9 percent from 1.6 percent, citing lower-than-expected investment, weak domestic demand and subdued exports amid a downturn in key trading partner Germany. ID:nL5N0QY6N1 Big euro zone banks are about to undergo tests of their ability to withstand shocks, and partly nationalised lender Volksbanken OTVVp.VI is likely to need more capital, sources close to the matter have told Reuters. ID:nL5N0QZ2OO Schelling, who quit as Volksbanken chairman after being appointed to the finance ministry, did not address the bank in his speech. OVP leader and Economy Minister Reinhold Mitterlehner was earlier non-committal about giving further aid to Volksbanken, a step Spindelegger had ruled out. Volksbanken has already got 1.35 billion euros in support from taxpayers. ID:nL5N0R30ZI (Additonal reporting by Shadia Nasralla; Editing by Catherine Evans) ((Michael.Shields@thomsonreuters.com; +43 1 531 12 258; Reuters Messaging: michael.shields.thomsonreuters.com@reuters.net)) Keywords: EUROZONE ECONOMY/AUSTRIA

Portugal bond yields rise as 15-year sale adds to supply glut

September 02, 2014 - reuters.com

* Portugal adds to hefty primary supply * 15-year sale set to test market confidence * Bunds rise after US ISM release * Investors pare back hopes for ECB meeting (Recasts and writes through) By John Geddie and Emelia Sithole-Matarise LONDON, Sept 2 (Reuters) - Portuguese bond yields rose on Tuesday as the country prepared to sell debt for the first time since it was forced to bail out Banco Espirito Santo, once its largest listed lender. The 15-year bond, which will be sold on Wednesday via a syndicate of banks, comes on top of scheduled auctions from France and Spain on Thursday, prompting some investors and bank dealers to sell outstanding bonds in order to make room for the new supply. While this has created some temporary disturbance in markets, strategists say the deal is a significant milestone for Portugal, which emerged from its EU/IMF bailout in May this year and has been plagued by troubles in its banking sector. The deal will be the longest bond sold by Portugal since 2006. Long-dated bonds tend to be held by stable but conservative investors like pension funds and insurers, while hedge funds and other trading accounts favour shorter bonds. "It's the ultimate sign of market normality," said Michael Michaelides, a strategist at RBS. Portuguese 10-year yields rose 5 basis points to 3.25 percent, underperforming many of their peripheral peers, as IFR reported details of the new bond. ID:nIFR4bxNQj Spanish and Italian equivalents were 2 and 3 bps higher on the day, respectively, at 2.28 and 2.46 percent. ES10YT=TWEB IT10YT=TWEB Michaelides said that demand for Portugal's deal will be a truer reflection of investor demand for the country, as a bond of that length is unlikely to be included in any future European Central Bank asset-purchase programme. Market anticipation of such a programme, known as quantitative easing, has reached fever pitch in recent weeks - sending yields on most euro zone bonds to record lows - after ECB president Mario Draghi dropped hints of such a scheme at a speech in Jackson Hole, Wyoming on Aug. 22. However, some investors started to book profits from the market's rally on Tuesday, in a sign they were paring back expectations that the ECB would announce any further stimulus measures when it meets on Thursday. "We've had one heck of a rally following (ECB President Mario) Draghi's speech in Jackson Hole and we might be just seeing a bit of a pause for breath," said Nick Stamenkovic, a strategist at RIA Capital Markets in Edinburgh. "Even if Draghi doesn't announce rate cuts or QE (asset purchases), I think he will open doors to further significant action further down the road and that should be enough to support the market at least for now." Sources from within the central bank told Reuters last week that new action on Thursday was unlikely but not impossible, and that the barrier to QE was still "very high". ID:nL5N0R30CK Having edged up steadily all day, German borrowing costs - the benchmark for the euro zone - hit a day's high after data showed the US manufacturing sector grew at its fastest rate since 2011. ID:nZON009900 Despite the grim outlook in the euro zone that has kept the ECB policy ultra-easy, the contrasting recovery in the world's biggest economy heightens the prospect that the U.S. Federal Reserve may soon start to raise rates - a move that would reverberate across global markets. German 10-year yields rose 6 basis points to 0.944 percent after the U.S. ISM data release, while equivalent yields in other core euro zone countries such as France and the Netherlands rose by a similar amount. DE10YT=TWEB FR10YT=TWEB NL10YT=TWEB (Editing by Alison Williams and Susan Fenton) ((emelia.sithole@thomsonreuters.com; +44 207 542 6752; Reuters Messaging: emelia.sithole.thomsonreuters.com@reuters.net))

Keywords: MARKETS BONDS/EURO

Scottish independence uncertainty drags sterling to 5-mth lows

September 02, 2014 - reuters.com

(Updates sterling prices show drop to 5-month low) By Anirban Nag LONDON, Sept 2 (Reuters) - Sterling fell to five-month lows and the cost of hedging against sharp currency swings jumped by its greatest rate in three years on Tuesday after a poll showed record support for Scottish independence just two weeks before a referendum. The YouGov poll indicated support for the pro-independence "Yes" campaign had risen to 47 percent, a four-point gain since mid-August and up eight points since the start of the month. The lead held by the "No" campaign to reject independence has slumped to 6 points from 22 points at the start of August. ID:nL5N0R32Q3 The currency is centre-stage in the heated Scottish referendum debate. Pro-independence leader Alex Salmond says Scotland will share the pound while Westminster has been sceptical about such a deal, leading to some uncertainty about the currency, debt and sharing of North Sea oil revenues. So far, most investors, including those buying Scotland-based stocks, have been sanguine, factoring in only a slight chance that Scotland will leave the three-century-old union. But with the latest poll leaving the union on a knife edge, investors are growing jittery. "The currency market is where it will be most acutely felt," said George Godber, manager of the CF Miton UK Value Opportunities Fund. Sterling shed 0.7 percent to $1.6492 GBP=D4 , on track for its biggest daily loss since Aug. 19 and its lowest since March 25. It was also hurt by a strong dollar which got a boost from better-than-expected U.S. data in late afternoon trade. Even the euro, which has been struggling on expectations of further monetary easing from the European Central Bank, rose 0.6 percent to 79.50 pence EURGBP=D4 . Traders said sterling is likely to come under more pressure and could lose as much as 5 percent if Scotland leaves the union in a referendum to be held on Sept. 18. "A Scottish 'Yes' to independence poses far more questions than it answers but my best guess is that a 'Yes' would trigger a 3-5 percent fall by sterling as an initial reaction," said Kit Juckes, currency analyst at Societe Generale. COST OF HEDGING RISES Britain's stock market .FTSE has so far shrugged off the impact of a potential break-up, but analysts warn that a "yes" vote could mean big changes for some Scottish-based companies with a global presence. Banks such as Royal Bank of Scotland RBS.L and Lloyds LLOY.L have already said that an independent Scotland could have a significant impact on compliance costs, taxes and credit ratings. Scotland's asset-management industry would also be exposed. Independence might also leave a bitter taste for top whisky producer Diageo DGE.L. , as Scotch whisky is Scotland's second-largest export industry after oil and gas, according to Barclays. ^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^ http://fingfx.thomsonreuters.com/2014/08/29/11394256b8.htm ^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^ In the currency market, though, the cost of hedging against near term uncertainty jumped. The one-month implied volatility for sterling/dollar was on track for its biggest one-day rise in three years. The implied volatility rose to around 6.40 percent GBP1MO=R , its highest level since in five-months, from around 5.1 percent on Monday. One-month risk reversals GBP1MRR=ICAP , a gauge of demand for options on a currency rising or falling, showed their greatest bias for sterling weakness in almost year. Part of the reason for bearish bets is a slight unwinding of interest rate hike expectations in recent weeks. Data has shown that economic activity is moderating in the United Kingdom and is likely to further cool expectations of rate hikes. But traders also cited demand for sterling puts - or bets the currency will fall - as the Scottish referendum nears. (Additional reporting by Tricia Wright; Editing by Mark Heinrich) ((anirban.nag@thomsonreuters.com; +44 20 7542 8399 ; Reuters Messaging: anirban.nag.thomsonreuters.com@reuters.net)) Keywords: MARKETS UK/SCOTLAND

POLONIA Rate rises 0.01 pp.

September 02, 2014 - reuters.com

WARSAW, Sep 2 (Reuters) - POLONIA the reference rate for Overnight deposits amounted to 2.47 percent. The volume of transactions concluded till 16:30 by banks participating in POLONIA fixing amounted to 3,510 mln PLN. Note: Description of reference rate at: http://www.acipolska.pl/ ((warsaw.newsroom@reuters.com))

UPDATE 1-Poland's Tusk may step down as early as Sept-spokeswoman

September 02, 2014 - reuters.com

* Local daily says deeper changes in government possible * Daily says PM's top aide could replace FinMin Szczurek * PM's top aide Bielecki says hopes Szczurek stays in post (Adds comment from PM's advisor) WARSAW, Sept 2 (Reuters) - Poland's Donald Tusk may resign as prime minister as early as this month to take up the job of European Council president, a government spokeswoman said on Tuesday. "I think that it will be possible even in September," Malgorzata Kidawa-Blonska told private radio station PiN, when asked about Tusk's resignation. Ewa Kopacz, the speaker of parliament and second in command of the ruling Civic Platform party, has emerged as clear favourite to be the next prime minister after Tusk's departure to Brussels. ID:nL5N0R10FS Tusk will assume the post from December 1 this year. Initailly he was reported to have set his sights on winning an unprecedented third term as Polish leader in a general election next year. Supporters say he brings with him a reputation as a skilled mediator between the competing political camps and personalities within his conservative Civic Platform party, a talent that may stand him in good stead as he tries to marshal consensus among the 28 leaders of the EU member states. Polish daily newspaper Gazeta Wyborcza said on Tuesday the new government may have a different finance minister and regional development minister. According to the newspaper, Finance Minister Mateusz Szczurek may be replaced by Tusk's top adviser, former prime minister Jan Krzysztof Bielecki, who heads the prime minister's Economic Council. Bielecki said later on Tuesday he hoped Szczurek will be finance minister for many years to come, though he said it was up to the next prime minister to form a Cabinet. "The government which is to step down has a very good finance minister, from the young generation," Bielecki told TVN BiS broadcaster. "I hope that he will still be excellent for many years to come." Asked about the possible replacement of the finance minister, Kidawa-Blonska told Reuters: "It is the president who names the prime minister and it is the new prime minister who assembles the new government, so it is difficult to expect him or her to be hostage to the old prime minister." Regional development minister Elzbieta Bienkowska, who is also a deputy prime minister, may in turn leave for a post in Brussels as a European commissioner, Gazeta Wyborcza said. (Reporting by Marcin Goclowski and Marcin Goettig; Editing by Christian Lowe and Angus MacSwan) ((marcin.goclowski@thomsonreuters.com; +48 22 6539724; Reuters Messaging: marcin.goclowski.reuters.com@thomsonreuters.net)) Keywords: POLAND GOVERNMENT/TUSK

FOREX-Euro hits 1-year low vs dollar on ECB bets; sterling falls

September 02, 2014 - reuters.com

* Euro falls to one-year lows vs USD on QE speculation * Dollar breaks above 105 yen for first time since January * Dollar index highest since July 2013 as U.S. yields rise * Sterling hit by growing support for Scotland "yes" vote (Updates market action, changes dateline, previous LONDON) By Richard Leong NEW YORK, Sept 2 (Reuters) - The euro sagged on Tuesday to fresh one-year lows against the dollar on bets the European Central Bank will do more to help a wobbly euro zone economy, while the pound fell to a near five-month low versus the greenback on worries about a Scottish secession. The dollar rose against a basket of major currencies .DXY , hitting its highest since July 2013. It traded above 105 yen JPY= for the first time in eight months on signs of relative strength in the world's biggest economy. The ECB will hold a policy meeting on Thursday and traders will watch for signs President Mario Draghi is moving towards quantitative easing, which would pump more cash into the economy in a bid to stimulate lending and spending. Such a move however would hurt the euro, which has declined 3.4 percent against the dollar in the past three months and 1.1 percent against the yen. "For the ECB, expectations for further stimulus are being restrained by the need to see a full implementation of measures announced in June, as well as some concerns about the lack of political support for more aggressive stimulus at this time," said Eric Theoret, Scotia Bank's currency strategist in Toronto. Monday's disappointing regional economic data stoked speculation on the ECB adopting QE later this week. ID:nL9N0O502E ID:nL5N0R20NX Some, however, said the market might be expecting too much from Thursday's ECB meeting, even if further easing might be announced later down the line. The euro hit a trough of $1.3110 EUR=EBS on trading platform EBS on Tuesday, its lowest since September 2013, before recovering to $1.3128 in early U.S. trading, little changed from Monday's close. U.S. financial markets were closed on Monday for the Labor Day holiday. The greenback also gained against other major currencies as U.S. yields rose and Wall Street stock prices opened higher. US/ .N Data supported the view the U.S. economy continues to expand at a modest pace. The Institute for Supply Management said its U.S. manufacturing activity index rose to 59.0 in August, the strongest since March 2011. July construction spending posted its highest level in over 5-1/2 years. ID:nZON009900 ID:nLNN2KEA0K The dollar hit its highest since November against the Swiss franc, rising to 0.9200 franc CHF= after data showed the Swiss economy stalled in the second quarter. ID:nL5N0R30KG <^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^ Graphics: U.S. construction spending http://link.reuters.com/vus72w U.S. ISM factory data http://link.reuters.com/xek62w U.S. Markit PMI http://link.reuters.com/geg47v ^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^> STERLING WEAKENS The British pound sank on a poll that showed support growing for the "yes" vote in a referendum later this month that could see Scotland splitting from the rest of the UK. ID:nL5N0R310X The pound fell almost a cent to as low as $1.6510 GBP=D4 , close to a five-month low of $1.6501. One-month sterling/dollar implied volatility rose to 6.125 percent GBP1MO=R , its highest in five months. ID:nL5N0R31YB (Additional reporting by Jemima Kelly in London, Lisa Twaronite in Tokyo and Ian Chua in Sydney; Editing by Alison Williams, Susan Fenton and Meredith Mazzilli) ((richard.leong@thomsonreuters.com; +1 646 303 6313; Reuters Messaging: richard.leong.thomsonreuters.com@thomsonreuters.net; Twitter @RichardLeong2)) Keywords: MARKETS FOREX

Scottish independence uncertainty drags sterling to near 5-mth lows

September 02, 2014 - reuters.com

By Anirban Nag LONDON, Sept 2 (Reuters) - Sterling fell to near five-month lows and the cost of hedging against sharp currency swings jumped by its most in three years on Tuesday after a poll showed record support for Scottish independence just two weeks before a referendum. The YouGov poll showed support for the pro-independence "Yes" campaign had risen to 47 percent, a four-point gain since mid-August and up eight points since the start of the month. The lead held by the "No" campaign to reject independence has slumped to 6 points from 22 points at the start of August. The currency is centre-stage in the heated Scottish referendum debate. Pro-independence leader Alex Salmond says Scotland will share the pound while Westminster has been sceptical about such a deal, leading to some uncertainty about the currency, debt and sharing of North Sea oil revenues. So far, most investors, including those buying Scotland-based stocks, have been sanguine, factoring in only a slight chance that Scotland will leave the three-century-old union. But with the latest poll leaving the union on a knife edge, investors are growing jittery. "The currency market is where it will be most acutely felt," said George Godber, manager of the CF Miton UK Value Opportunities Fund. Sterling fell 0.6 percent to $1.6510 GBP=D4 , on track for its biggest daily loss since Aug.19 and not far from a five-month low of $1.6501 struck late in August. Even the euro, which has been struggling on expectations of further monetary easing from the European Central Bank, rose 0.55 percent to 79.48 pence EURGBP=D4 . Traders said sterling is likely to come under more pressure and could lose as much as 5 percent if Scotland leaves the union in a referendum to be held on Sept. 18. "A Scottish 'Yes' to independence poses far more questions than it answers but my best guess is that a 'Yes' would trigger a 3-5 percent fall by sterling as an initial reaction," said Kit Juckes, currency analyst at Societe Generale. COST OF HEDGING RISES Britain's stock market .FTSE has so far shrugged off the impact of a potential break-up, but analysts warn that a "yes" vote could mean big changes for some Scottish-based companies with a global presence. Banks such as Royal Bank of Scotland RBS.L and Lloyds LLOY.L have already said that an independent Scotland could have a significant impact on compliance costs, taxes and credit ratings. Scotland's asset-management industry would also be exposed. Independence might also leave a bitter taste for top whisky producer Diageo DGE.L. , as Scotch whisky is Scotland's second-largest export industry after oil and gas, according to Barclays. ^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^ http://fingfx.thomsonreuters.com/2014/08/29/11394256b8.htm ^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^ In the currency market, though, the cost of hedging against near term uncertainty jumped. The one-month implied volatility for sterling/dollar was on track for its biggest one-day rise in three years. The implied volatility rose to around 6.40 percent GBP1MO=R , its highest level since in five-months, from around 5.1 percent on Monday. One-month risk reversals GBP1MRR=ICAP , a gauge of demand for options on a currency rising or falling, showed their greatest bias for sterling weakness in almost year. Part of the reason for bearish bets is also due to a slight unwinding of interest rate hike expectations in recent weeks. Data has shown that economic activity is moderating in the United Kingdom and is likely to cool expectations of rate hikes further. But traders also cited demand for sterling puts - or bets the currency will fall - as the Scottish referendum nears. (Additional reporting by Tricia Wright; Editing by Catherine Evans and Angus MacSwan) ((anirban.nag@thomsonreuters.com; +44 20 7542 8399 ; Reuters Messaging: anirban.nag.thomsonreuters.com@reuters.net)) Keywords: MARKETS UK/SCOTLAND

London gold 1500 fix - Sept 2 - 1267.00 dlrs

September 02, 2014 - reuters.com

London platinum/palladium 1400 fix - Sept 2

September 02, 2014 - reuters.com

Newmont agrees tentative deal with Indonesia in export dispute

September 02, 2014 - reuters.com

* No MoU yet, deal needs approval from many government officials * Newmont likely to resume copper concentrate exports this week * May ship up to 50,000 T to Japan, Thailand and Spain -Sukhyar By Wilda and Asmarini JAKARTA, Sept 2 (Reuters) - Newmont Mining Corp NEM.N has reached a tentative agreement with the Indonesian government on contract renegotiations, the CEO of the firm's local unit said, as both sides moved closer to ending an eight-month tax dispute that halted copper exports. U.S.-based Newmont has been in a dispute with the Indonesian government over an export tax imposed in January that the firm said conflicted with its mining contract. It declared force majeure at its Batu Hijau copper mine on the remote Sumbawa island in June and filed for international arbitration in July. But in a breakthrough to the increasingly acrimonious spat, Newmont withdrew its arbitration filing late last month and was expected to resume exports this week. ID:nL3N0R21JQ Discussions with Sukhyar, the director-general of coal and minerals at Indonesia's mining ministry, on the key issues being renegotiated have concluded, said Newmont's Indonesian Chief Executive Martiono Hadianto. "We have reached a deal," he said. The six points agreed in the renegotiations included royalties, size of mining and exploration area, domestic processing and divestment obligations and possible mining contract extension. Newmont has already agreed to pay an export tax, government officials have previously said. Although an agreement has been reached in principle, the deal still needs to be approved by several government officials, including Chief Economics Minister Chairul Tanjung, before a Memorandum of Understanding (MoU) is signed by both parties. Newmont is likely to resume exports this week by shipping up to 50,000 tonnes of copper concentrate to Japan, Thailand and Spain, Sukhyar said. Before Indonesia's new export rules kicked in, Newmont had forecast total copper concentrate output from its Indonesian mine at 110,000 tonnes to 125,000 tonnes this year. "I'll pray and hope we can sign an MoU tomorrow," Hadianto said. (Writing by Michael Taylor; Editing by Himani Sarkar) ((michael.taylor@thomsonreuters.com; +62)(0)(21 2992-7602; Reuters Messaging: michael.taylor.thomsonreuters.com@reuters.net)) Keywords: INDONESIA NEWMONT MINING/AGREEMENT

London gold 1030 fix - Sept 2 - 1277.75 dlrs

September 02, 2014 - reuters.com

Indian gold imports, premiums to jump on festive demand - top refiner

September 02, 2014 - reuters.com

MUMBAI, Sept 2 (Reuters) - Indian gold imports and premiums are likely to surge during the rest of the year as buying picks up for the wedding and festival season, the head of the country's biggest gold refiner said on Tuesday. Premiums could jump to $10-$12 an ounce over the global benchmark from the current levels of $4-$5, said MMTC-PAMP Managing Director Rajesh Khosla. Imports could climb to 60-70 tonnes per month for the rest of the year from about 40 tonnes in July, Khosla said, adding that August imports were probably around 63 tonnes. India has not yet released its trade figures for August. "Demand is expected to increase in the coming months as people start buying from September because of the festive season," Khosla said. India, the second biggest buyer of gold after China, will soon celebrate Dhanteras and Diwali festivals, when it is considered auspicious to buy gold. The wedding season is also boosting demand for the bullion. The precious metal forms an essential part of a bride's dowry in India, and is considered auspicious as a gift or offering at religious festivals. The expected increase in demand will squeeze supplies amid curbs on gold imports. Struggling with a high trade deficit, India raised its gold import duty to a record 10 percent last year and made it mandatory to export a fifth of all bullion imports. Gold is India's second-biggest expense on the import bill after oil. Imports slipped by a fifth in 2013 though demand remained strong, leading to high premiums and an increase in smuggling. (Reporting by Meenakshi Sharma; Editing by Subhranshu Sahu) ((ananthalakshmi.as@thomsonreuters.com; +65 6870 3726; Reuters Messaging: ananthalakshmi.as.thomsonreuters.com@reuters.net)) Keywords: GOLD INDIA/IMPORTS

London platinum/palladium 0945 fix - Sept 2

September 02, 2014 - reuters.com

INDICATORS - Kazakhstan - Sept 2

September 02, 2014 - reuters.com

India Morning Call-Global Markets

September 02, 2014 - reuters.com

EQUITIES NEW YORK - U.S. markets closed on Monday for Labor day. For a full report, click on .N - - - - LONDON - Britain's top equity index inched up on Monday, led by gains in broadcaster ITV ITV.L on talk of a takeover from Virgin Media owner Liberty Global LBTYA.O . ITV's shares hit their highest levels since January 2001, up 3.6 percent. The speculation was fuelled by a report in The Telegraph saying Liberty was canvassing support from major ITV shareholders following its acquisition of a 6.4 percent stake. ITV declined to comment on the rumours. For a full report, click on .L - - - - TOKYO - Japan's Nikkei share average rose to a 4-1/2-week high on Tuesday morning as the yen slipped to a seven-month low against the dollar, sending exporters higher on hopes of a boost to earnings. The Nikkei .N225 gained 1.1 percent to 15,639.72 in mid-morning trade, the highest level since July 31. For a full report, click on .T - - - - HONG KONG - Hang Seng Index .HSI is down 0.3 percent. For a full report, click on .HK - - - - FOREIGN EXCHANGE TOKYO - The dollar hit a seven-month peak against the yen on Tuesday, helped by expectations for further gains for the currency on diverging monetary policy paths. The dollar rose to as high as 104.64 JPY= , the highest since late-January, with gains by Tokyo shares denting the safe-haven appeal of the yen. For a full report, click on USD/ - - - - TREASURIES NEW YORK - U.S. markets closed on Monday for Labor day. For a full report, click on US/ - - - - COMMODITIES GOLD SINGAPORE - Gold held steady below $1,300 an ounce as investors eyed heightened tensions in Ukraine and awaited U.S. economic data, while palladium hovered near a 13-1/2 year high on fears that possible Western sanctions on Russia could hit supply. Spot gold XAU= was little changed at $1,286.60 an ounce by 0035 GMT. For a full report, click on GOL/ - - - - BASE METALS SYDNEY - London copper held near its recent low on Tuesday after surveys showed factory growth in China and Europe slowed in August, raising bets that central bankers will have to loosen policy which has kept a floor under prices. Three-month copper on the London Metal Exchange CMCU3 was little changed at $6,935.50 a tonne by 0037 GMT, after losses of 0.6 percent in the previous session when it fell near support at $6,913.25 at tonne, the trough from Aug. 28, which was its weakest since Aug. 20. For a full report, click on MET/L - - - - OIL LONDON - Brent crude oil prices dipped on Monday as manufacturing growth faltered in Europe and China at a time of ample supply, although the risk of production setbacks remained high in Libya where the government has lost control of most of the capital. Euro zone manufacturing growth slowed more than expected last month and factory activity in several key countries appeared to be stagnating. French factory output fell at its fastest in 15 months in August. 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/

INDONESIA PRESS-Agincourt H1 gold output at 134,937 ounces -Kontan

September 02, 2014 - reuters.com

PT Agincourt Resources, a unit of PT G-Resources' 1051.HK gold output in the first half reached 134,937 ounces, up slightly from 133,845 ounces a year earlier. The company's silver output jumped 67 percent to 1.05 million ounces from a year earlier. Agincourt posted revenue of $191.4 million in the first half, down about 12 percent from last year's $216.4 million, due to unstable international gold prices, said Chief Executive Peter Geoffrey Albert. (Kontan) Note: Reuters has not verified this story and does not vouch for its accuracy. (Compiled by Jakarta Newsroom; Editing by Anand Basu) ((fergus.jensen@thomsonreuters.com; +62 21 2992 7604; Reuters Messaging: fergus.jensen.thomsonreuters.com@reuters.net)) Keywords: INDONESIA PRESS/G RESOURCE

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