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Financial Markets: Headlines for June 21

June 21, 2011

EQ European stocks fell on Monday during the Ecofin meeting as leaders did not confirm disbursement of the next Greek aid tranche and said they are waiting for Greek politicians to approve the package of fiscal & privatization measures by 3 July; Euro Stoxx 50 lost 0.8% to 2748.01, having pared an earlier loss of as much as 1.9%; the Dow gained 0.6% to 12080.38, up for a third consecutive session; the CBOE VIX volatility index fell to 19.99 from 21.85 on Friday

FI US Treasuries gave back early gains to close little changed on the session, with the 2yr yield flat at 0.371% and the 10yr yield up 1bp to 2.954%; Bunds were higher in early European trade before stabilizing; the Sep’11 future closed up 8 ticks at 126.15 on Monday; Greek, Portuguese, and Irish government bonds underperformed; the Greek 2yr yield rose 30bps to 27.3%; Portugal +36bps to 12.8%; Ireland +13bps to 12.3%

FX EUR/USD remained above last week’s lows and ended flat at 1.430; EUR/CHF fell slightly in Monday’s Asian session but cut losses to finish the day flat versus Friday at 1.211; the franc was up modestly against most other major currencies; the US dollar index ended little changed at 75.02

OIL The Jul’11 WTI future hit a new 2011 intraday low of $91.14bbl on Monday ahead of today’s contract expiration, but ended the session up 0.3% at $93.27bbl; the Aug’11 Brent contract fell 1.5% to $111.5bbl, down 5.8% from a week ago

€ IMF Managing Director Lipsky: the IMF requires that the Greek authorities agree the package of measures in the aid programme before the next aid tranche can be distributed; the Eurogroup partners must assure the IMF that the programme is adequately financed; mid-course corrections in an aid programme are inevitable in situations like the Greek one

€ Eurogroup’s Juncker: the Greek parliament must approve the reform and austerity measures before 3 July, prior to another extraordinary Eurogroup meeting scheduled for 3 July; the details of the ESM were agreed on Monday and the mechanism "will not have preferred creditor status as regards countries that are already in a support programme…It will make it easier for them to come back to the market"; national ratification to begin soon so that the treaty can come into effect from end-2012; the effective lending capacity of the EFSF will be raised from €440bn to €780bn through higher guarantees

€ ECB’s Weidmann: the key to solving the Greek debt crisis lies within the country itself; there are still questions about potential success of private sector involvement in an aid package; "One should ask how necessary private sector participation is"; Greek banks, which are large holders of Greek debt, would likely need support

€ Standard & Poor’s head of European sovereign ratings: "Past experiences show that restructuring the debt of a country, whose creditworthiness is rated at CCC like Greece is currently, tend not to be voluntary and investors must sustain losses"

€ ECB’s Stark: interest rates are still accommodative and there are upside risks to price stability, signaling support for a rate hike in July; developments in individual countries can affect ECB monetary policy based on how they affect medium-term price stability across the Eurozone

£ BoE MPC member Posen: the euro will survive the debt crisis; the dollar will decline in relative importance and “God willing, the renminbi will be an important, more internationally traded, currency”; political and economic development in China will help to reduce global imbalances

€ Eurozone labour costs advanced at a faster pace for a second consecutive quarter, up 2.6%YoY in Q1 versus a revised gain of 1.5% in Q4 (originally +1.6%); the Q1 pace was broadly in line with the series average of 2.8% since 1996

€ German producer prices were flat in May for the first time since August, versus a gain of 1.0% in April; energy prices fell 0.5%, the first decline since August; consumer goods prices advanced at a steady pace of 0.5%, led by food (+0.5%)

€ Italian industrial orders dropped 6.4%MoM in April versus a revised increase of 8.0% in March (originally +8.1%); industrial sales rose for a fourth consecutive month, up 1.5% versus +2.0% previously

£ UK Rightmove house prices rose 0.6%MoM in June versus +1.3% in May; prices were up 1.1% from a year ago

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