After sharp risk aversion triggered by disastrous German bond sale yesterday, sentiments recovered today on news that China is starting to loosen up credit conditions. It's confirmed that PBoC has lowered the reserve requirement ratio for six rural banks in Zhejiang province by 50 bps, effective Friday. In addition, there are now speculations that China could cut reserve requirements for all banks in Q1 of 2012. Asian equities opened sharply lower following the -2.05% fall in DOW overnight. But major Asian indices pared most losses as the day went all. Also, traders are squaring off positions ahead of thanksgiving holiday in US today. Dollar retreats mildly from yesterday's high against major currencies and stays in tight range so far.
A Singapore-based director of S&P ratings, Takahira Ogawa, said in an interview that Japan's finances are getting worse even though the deterioration has been gradual so far. Ogawa noted that the rating agency is "closer to a downgrade" of Japan's AA- rating. He urged Japan to have a "comprehensive approach" to contain it's debt burden, which would exceed USD 13T this fiscal year.
EC President Barroso outlined his proposal for Eurobond and tighter controls over member's fiscal budget yesterday. Three options were included in his paper. The first approach, the most "ambitious" one, is to convert all national government bond issues to a common Eurobond that's backed by all 17 eurozone member countries. The second option is for countries to issue common eurobonds up to a certain limit, such as 60%, of their annual GDP. And, beyond that level, individual governments are required to back up their own bonds. The third option would have countries provide some guarantees on newly issued bonds without combining the liabilities or getting rid of national bonds, i.e., it's similar to EFSF bonds. But in any case, Barroso emphasized that the Eurozone member stats need to "their game when it comes to implementing their commitments to structural reforms, as well as embrace deeper integration for the euro area".
However, as usual, Germany expressed strong opposition to the idea of Eurobonds. Chancellor Merkel said it's "extraordinarily inappropriate the Commission is suggesting various options for euro bonds" as they can "overcome the shortcomings of the currency union's structure by collectivizing debt". Merkel said bluntly that "this is precisely what will not work". However, yesterday's poor bond sales might start to change Germany's position. It's perceived that German's opposition was mainly due to it's ability to tap into the funding market on it own. But the situation now is that investors are starting to lose confidence in Germany too.
On the data front, New Zealand trade deficit came in narrower than expected at NZD -282m in October. German Q3 GDP is finalized at 0.5% qoq. German IFO, UK Q3 GDP revision will be the main focus today.
A Singapore-based director of S&P ratings, Takahira Ogawa, said in an interview that Japan's finances are getting worse even though the deterioration has been gradual so far. Ogawa noted that the rating agency is "closer to a downgrade" of Japan's AA- rating. He urged Japan to have a "comprehensive approach" to contain it's debt burden, which would exceed USD 13T this fiscal year.
EC President Barroso outlined his proposal for Eurobond and tighter controls over member's fiscal budget yesterday. Three options were included in his paper. The first approach, the most "ambitious" one, is to convert all national government bond issues to a common Eurobond that's backed by all 17 eurozone member countries. The second option is for countries to issue common eurobonds up to a certain limit, such as 60%, of their annual GDP. And, beyond that level, individual governments are required to back up their own bonds. The third option would have countries provide some guarantees on newly issued bonds without combining the liabilities or getting rid of national bonds, i.e., it's similar to EFSF bonds. But in any case, Barroso emphasized that the Eurozone member stats need to "their game when it comes to implementing their commitments to structural reforms, as well as embrace deeper integration for the euro area".
However, as usual, Germany expressed strong opposition to the idea of Eurobonds. Chancellor Merkel said it's "extraordinarily inappropriate the Commission is suggesting various options for euro bonds" as they can "overcome the shortcomings of the currency union's structure by collectivizing debt". Merkel said bluntly that "this is precisely what will not work". However, yesterday's poor bond sales might start to change Germany's position. It's perceived that German's opposition was mainly due to it's ability to tap into the funding market on it own. But the situation now is that investors are starting to lose confidence in Germany too.
On the data front, New Zealand trade deficit came in narrower than expected at NZD -282m in October. German Q3 GDP is finalized at 0.5% qoq. German IFO, UK Q3 GDP revision will be the main focus today.