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Financial Markets: Headlines for July 11

July 11, 2011

EQ US equities fell following disappointing figures on US payrolls, unemployment, and earnings which highlighted difficult economic and financial conditions for US households; the S&P 500 fell 0.7% to 1343.80 on Friday but pared some losses on the session to close up 0.3% on the week; Euro Stoxx 50 declined sharply after publication of the US labor market figures, down 1.9% on the session and -3.0% over the week; the main Italian and Spanish equity indices underperformed sharply, down 3.5% and 2.5% respectively led by financials

FI USTs surged after the disappointing labor market report and the yield on the 10yr benchmark fell back to the lowest since June28, down 11bps on Friday to 3.028%; the US 2yr yield fell 8bps to 0.393%; Bunds and Gilts followed suit and by the end of the European session the Sep’11 Bund future was up 150 ticks to 127.46; the UK 10yr cash yield fell 10bps to 3.192%; yields rose across the Italian and Spanish government bond curves, with the Italian 10yr yield up 9bps on Friday to 5.264%, up +39bps since the end of June

FX The Swiss franc and yen rose against major currencies on Friday following the US employment report, while the euro fell broadly amid concern about the potential for further spreading of the sovereign crisis in the Euro area; USD/JPY is down 0.9% since release of the nonfarm payrolls at 80.76; EUR/USD has fallen to the lowest since June27, down 1.2% at 1.419; EUR/CHF fell back below 1.20, down 1.9% to 1.189

OIL WTI crude for August delivery fell 2.4% on Friday to $96.38bbl, paring losses slightly at the end of the session, although prices resumed their decline in Monday’s Asian session

$ US President Obama met with Congressional leaders on Sunday but no breakthroughs were made in the debt ceiling/deficit-cutting negotiations; a press conference is scheduled today and talks are expected to continue daily this week

€ The IMF Executive Board approved on Friday the disbursement of the fifth aid trance (€3.2bn) for Greece

€ ECB’s Draghi: "I am sure, on the basis of our analysis, that Italy’s banks will pass the European stress tests by a significant margin, confirming the adequacy of their capitalisation"; he said the government’s austerity package approved by the cabinet last week is "an important step towards consolidating public finances" and make credible the goal of balancing the budget by 2014

€ EU’s Barroso: “there is a growing consensus about what we can do at a regulatory level about the rating agencies”; the Commission will come up with proposals this autumn

£ BoE’s Haldane expressed support for placing a “speed limit” on high frequency trading; "At times, the efficiency of financial markets and their systemic resilience need to be traded off”

$ US nonfarm payrolls were little changed in June, up 18k which disappointed versus all Bloomberg analyst forecasts; revisions sliced the May gain in half to +25k from +54k reported originally; private payrolls rose 57k, the smallest gain in over a year, versus a revised increase of 73k previously (originally +83k); business services added just 12k versus 45k in May; governments shed 39k versus -48k previously; manufacturing payrolls were slightly brighter, up +6k in June versus consensus at +5k following a decline of 2k in May

$ The US unemployment rate rose to 9.2% in June from 9.1% previously as the number of unemployed rose on the month and the size of the labor force declined; the labor force as a share of the total population fell to 64.1% from 64.2% in May, now at the lowest level since February 1984

$ US hourly earnings were flat in June versus a gain of 0.3% in May, up at a subdued and steady annual pace of 1.9%; average hours worked per week fell to 34.3 from 34.4 previously, in line with the 6-month moving average

$ US wholesale inventories jumped 1.8%MoM in May, surprising versus consensus at +0.7% and the April gain was revised up to 1.1% from 0.8% reported originally

€ The German trade balance rose to €14.8bn in May from €10.8bn in April, as exports jumped 4.3%MoM after a decline of 5.6% in April; imports rose 3.7% versus -2.5% previously; in the year-to-date, the trade balance is up 9%YoY

€ The Bank of France’s measure of business sentiment fell to 99 in June from 103 in May, hitting the lowest level since Nov’09

£ UK producer input prices rose 0.4%MoM in June versus a decline of 1.7% in May, up across most commodities; on an annual basis input prices were up 17% versus +16.1% previously; output prices rose 0.1%MoM versus +0.2% in May but the annual rate accelerated to a 32-month high of 5.7%; core output prices (ex-food, beverage, tobacco, and petroleum) rose at a steady monthly pace of 0.2%

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