*** SPEAKERS/FIXED INCOME/FX/COMMODITIES/ERRATUM ***
***Notes/Observations***
- Moody’s cut 15 global banks between 1 to 3 notches
- German president grants high court request to delay ESM signing
- IMF chief Lagarde: Acknowledges the acute stress under which the euro currency is suffering
- ECB set to issue new mortgage security rules that would loosen collateral; Spain threshold seen lowered to BBB- (lowest level of investment grade)
- German IFO Survey mixed but shows it is no longer immune to the troubles
- France, Spain, Italy and Germany leaders meet today in Rome to prepare for the Jun 28-29th EU Leaders Summit
***Equities***
Indices: FTSE 100 -1% at 5510, DAX -1% at 6278, CAC-40 -0.90% at 3087, IBEX-35 +0.80% at 6826, FTSE MIB -0.30% at 13,709, SMI -0.30% at 5991, S&P 500 Futures +0.30% at 1322.75

- European equity indices opened the session broadly lower, tracking the losses in Asia and the US. Spanish equities have outperformed, amid gains in the banking sector. Independent auditors have estimated that the capital needed by Spain’s banks is €16-20B under the baseline scenario and €51-62B in the adverse scenario. The estimates are below the up to €100B in funds which EU officials have made available for Spanish banks. European banks are trading mixed. As expected, Moody’s announced its downgrades of various global banks including Credit Suisse, UBS Morgan Stanley, Goldman Sachs, Barclays, RBS, Lloyds, Deutsche Bank, BNP, SocGen and Credit Agricole. On the macro-economic front, weaker than expected data was released out of Germany and Italy (GERMANY JUN IFO BUSINESS CLIMATE: 105.3 V 105.6E, ITALY JUN CONSUMER CONFIDENCE INDEX: 85.3 V 86.0E).
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In Norway, shares of large polysilicon company REC [REC.NO] have lost over 20%, as the company disclosed plans to raise capital. Also, REC announced an impairment charge related to factors including lower prices. Amid the losses in shares of REC, German-based polysilicon company Wacker Chemie [WCH.DE] has lost ~1.5%. Deutsche Bank [DBK.DE] has traded lower by ~0.5%, as the firm was one of the banks which was downgraded by Moody’s. Also, there was press speculation that the firm is considering additional cost cuts. In Switzerland, specialty chemicals firm Clariant [CLN.CH] is lower by over 2.5%, as the company announced its 2015 targets. Following the commentary from Clariant, most of the European chemical makers are declining (BASF -2%, Linde -1.5%, Lanxess -3.5%). Credit Suisse [CSGN.CH] is lower by ~1% and is underperforming most of its European peers as the firm’s’ credit rating was cut by 3-nothes at Moody’s. In Amsterdam, KPN [KPN.NL] has lost over 2%, following reports that Carlos Slim has further raised his stake in the company. In the past, KPN has said that Slim’s approach had undervalued the firm.

Speakers:
- Germany Govt Spokesperson: No decision to be made at the informal meeting today in Rome between Merkel, Hollande, Monti and Rajoy and would only be to exchange views ahead of next week Leader Summit
- Swiss Central bank (SNB) issued its quarterly bulletin which reiterated its stance to defend EUR/CHF floor with utmost determination and was prepared to take further action at any time. The SNB reiterates that it would buy currencies of unlimited quantities as the CHF currency remained at high levels. It stressed that further appreciation would have serious impact
- IMF Lipton commented that emerging market economies might slow as advanced economies stagnate
- The Ecofin meeting was held in Brussels this session and the ministers were handy to provide commentary
- German Fin Min commented that the Ecofin would look at an enhanced cooperation on Financial Transaction Tax (FTT)
- Spain Fin Min De Guindos commented that they now have a roadmap to solve the region’s banking crisis and that banking union was a possibility. He added that direct injection of funds into Spain banks was still possible
- Sweden Fin Min Borg commented that the region require more monetary expansion from the ECB. Spanish banks concerns were causing uncertainty and the issue must be solved before addressing banking union
- Austria Fin Min Fekter commented that nine states supported enhanced cooperation on financial Transaction Tax and she would not let this issue be buried
- Luxembourg Fin Min Frieden commented that Spain might submit aid request within hours
- EU ministers were said to keep the Greek situation on review and that the oil embargo on Iran to start as planned on July 1st
- Slovakia parliament ratified the European Stability Mechanism (ESM)
- Hungary Audit Office: Hungary 2013 budget deficit target is achievable but main risk seen from export growth
- German BDB Banking Group official Kemmer commented that it was not a good idea to directly capitalize banks but added that the Spanish banking sector should be capitalized through the EFSF. He noted that Germany had significant exposure to Spain but did not have to fear the situation. The concept of a banking union was not a bad one and would be good in the long run
- Japan Cabinet issued its June economic report which maintained its economic assessment. The Govt reiterated that the Japanese economy was on the way to recovery at a moderate pace. It raises view on capital spending for the first time in three months and raised its view on Capex, housing and imports.
- Over three dozen Ozawa backers said to be prepared to leave the Ruling DPJ to reaffirm their opposition to tax and social security reform legislation. Ozawa stated that he planned to leave the DPJ Party and form a new political party after he votes against the bills (Scheduled for early next week)
- India Oil Min Reddy stated that he was upset that decline in INR currency (Rupee) was offsetting any benefits from lower oil prices. He confirmed receipt of the RBI letter asking oil companies to purchase 50% of USD demand from State-run bank
- German VDA commented that 2012 global truck market was seen rising 5% y/y with growth in US, Russia, Japan and India. VDA forecasted China truck market down 3% in 2012 and European truck market down between 2-4%, It noted that momentum would be better in 2013 if crisis is resolved
- Netherlands Bureau for Economic Policy Analysis (CPB): April global trade volume Y/Y: -0.8% vs. -0.2% prior. Decline in trade volumes was more widespread than in March with exports from and imports to most regions falling (except Japan)
- Fitch commented on China that the country’s current economic slowdown was not yet comparable to one back in 2008but could lead to a milder policy response

Currencies:
- The EUR/USD continued to face headwinds as the German economy seems no longer immune to the troubles impacting its neighbors. The price action suggested that a relief rally could occur after the Thursday sell-off in the pair. However dealers did note that the makeup of various order books had completely changed over the last 24 hours from one of a balance Euro book to one comprised mostly of offers (no precise levels provided). The EUR/USD was slightly positive ahead of the NY morning trading at 1.2555
- The CHF saw little reaction the SNB quarterly bulletin that reiterated the defense of the 1.2000 floor in the EUR/CHF cross.
- The INR currency (Rupee) continued to hit fresh record lows against USD as the pair tested 57.33. India Central Bank (RBI) was again suspected of FX currency intervention to support INR in the session.

Political/ In the Papers:
- Some regulators have raised concerns about the risk weighted assets of European banks. Some European banks have sought to raise their capital ratios by making changes to their risk weighted assets.
- Italy’s planned sale of public assets to state-owned entity could be an attempt to shift assets off of Rome’s balance sheet. It plans to sell 3 state-owned companies to state owned Cassa Depositi e Prestiti (postal savings bank) valued at about €10B. In recent months, the postal savings bank (CDP) has played a larger role in state asset sales.
- The financial press reported that there are concerns that sovereign downgrades of Spain could lead to much higher borrowing costs for corporations. If the ratings of certain Spanish companies are cut to levels near junk, then this could cause investment-grade bonds to sell their debt.
- The Telegraph’s Ambrose Evans-Pritchard commented on the declining levels of support for the reforms of Italian Prime Minister Monti. According to a top Italian official, the Italian is ‘desperate’ and reform fatigue is rising in the country. The main Left and Right parties, which had supported Monti’s measures, now have concerns about their electoral prospects if they give their support to additional austerity measures.
- In the E&Y summer forecast, Ireland is expected to go into recession this year, with reductions in forecast also seen for the following year and 2014. It sees GDP at an average of just 1% pa compared to the 2.2% forecasted in June by the IMF.
***Looking Ahead***
***All times listed for economic events are denominated in Eastern Standard Time (Add 4 hours for GMT equivalent)
- 6:00 (IC) Iceland to sell Bonds
- 6:10 (UK) DMO to sell combined £4.5B in 1-month, 3-month and 6-month Bills
- 6:30 (ES) EU’s Almunia to speak at Madrid Antitrust Conference
- 8:00 – (IT) Italy PM Monti to host German Chancellor Merkel, France President Hollande, and Spain PM Rajoy in Rome (Informal EU Leaders Summit to set the groundwork for the full Leaders Summit set to occur June 28-29)
- 8:00 (PT) Bank of Portugal releases Monthly Economic Indicators Report
- 8:30 (CA) Canada May Consumer Price Index M/M: 0.1%e v 0.4% prior; Y/Y: 1.5%e v 2.0% prior; CPI Index: No est v 122.122 prior
- 8:30 (CA) Canada May CPI Core M/M: 0.3%e v 0.4% prior; Y/Y: 1.9%e v 2.1% prior
- 8:30 (CA) Canada May CPI Seasonally ad M/M: -0.2%e v +0.2% prior; Core CPI Seasonally adj M/M: 0.2%e v 0.4% prior
- 9:00 (EU) EcoFin Council press conference
- 9:00 (BE) Belgium Jun Business Confidence: -12.0e v -11.2 prior
- 9:00 (MX) Mexico May Unemployment Rate: 4.8%e v 4.9% prior
- 9:30 (BR) Brazil May Current Account: -$3.3Be v -$5.4B prior; Foreign Direct Investment (FDI): $3.0Be v $4.7B prior
- 10:00 (MX) Mexico Central Bank Minutes
- 10:00 (US) API monthly report
- 11:00 (US) Fed to purchase $1.50-2.25B in Notes
- 13:00 (US) Fed’s Pianalto
14:00 (IT) Italy PM Monti , German Chancellor Merkel, France President Hollande, and Spain PM Rajoy press conference
- 14:00 (PT) Portugal Year-to-Date Budget Report
- 15:00 (AR) Argentina May Industrial Production M/M: -1.1%e v -0.5% prior; Y/Y: No est v -1.4% prior
- 15:00 (AR) Argentina Q1 Current Account: +$504Me v -$356M prior

Sat
18:00 (CH) Bank of International Settlements (BIS) holds Global Central Bank Meeting
***Economic Data***
- (RU) Russia Narrow Money Supply Narrow w/e Jun 18th (RUB): 7.13T v 7.03T prior
- (FR) France Q1 Final Wages Q/Q: 0.9% v 0.8%e
- (DK) Denmark May Retail Sales M/M: 0.2% v 0.1%e; Y/Y: -0.2 v -6.5% prior
- (GR) Greece Apr Current Account: -€0.9B v -€2.1B prior
- (AT) Austria Apr Industrial Production M/M: 0.3% v 1.6% prior; Y/Y: 0.4% v 0.8% prior
- (NL) Netherlands Apr Consumer Spending Y/Y: -2.0% v -2.1% prior
- (DE) Germany Jun IFO Business Climate: 105.3 v 105.6e; Current Assessment: 113.9 v 112.0e; Expectations Survey: 97.3 v 99.8e
- (IT) Italy Jun Consumer Confidence Index: 85.3 v 86.0e
- (TW) Taiwan May Industrial Production Y/Y: -0.2% v -2.5%e; Commercial Sales Y/Y: +2.0% v -2.0%e
- (MA) Malaysia May CPI Y/Y: 1.7% v 1.7%e

Fixed Income:
- (IN) India sold total INR150B vs. INR150B in 2020, 2024, 2027 and 2041 bonds
- (ZA) South Africa sold total ZAR800M in I/L 2022, 2028 and 2033 Bonds

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