The European Mess Strikes Again

EUR/USD

Germany rejected comments by French Prime Minister Francois Fillon that Chancellor Angela Merkel agreed to drop demands on investors to accept losses in any sovereign default, saying that International Monetary Fund rules will ensure private-sector involvement.“We only made it clear that the kind of PSI you had with Greece is an extreme case that won’t be repeated,” Steffen Seibert, Merkel’s chief spokesman, said by text message late yesterday. So-called collective action clauses “will stay, so the investors will only encounter risks in Europe that they already know from everywhere else in the world.”Merkel and French President Nicolas Sarkozy said after talks in Paris on Dec. 5 that they had agreed on enrolling private investors in the event of any euro-area government restructuring, with legal aspects being guided by IMF practice. Greece, where bondholders were pressed to accept write downs of 50 percent, was a “unique case” not to be repeated, they said. “There was a decision taken by the president and the chancellor yesterday that was absolutely fundamental and that wasn’t sufficiently explained,” Fillon said yesterday on France 2 television. It “is that Germany has agreed to let go of the participation of the private sector, of private investors in case of the restructuring of sovereign debt.”



GBP/USD

The U.K.’s FTSE 100 Index  closed little changed, halting a two-day rally, as gains in Wolseley Plc and Antofagasta Plc offset a selloff in retailers.Wolseley jumped 3.6 percent after the world’s largest supplier of heating and plumbing products reported an increase in earnings. Antofagasta advanced 2.1 percent as the copper producer said it will boost output next year. Marks & Spencer Group Plc dropped 4.3 percent after worse-than-forecast retail sales data. The FTSE 100 rose 0.76, or less than 0.1 percent, to 5,568.72 at the close in London after swinging between gains and losses at least 20 times today. The FTSE All-Share Index slid 0.1 percent and Ireland’s ISEQ Index declined 0.6 percent. Gains were limited after Standard & Poor’s warned late yesterday that Germany and France may lose their AAA credit ratings, depending on the result of the summit of European Union leaders on Dec. 9. The ratings company put a total of 15 euro nations on review for possible downgrade. “The stakes have been raised for this week’s EU summit   following the warning from S&P,” said Jonathan Sudaria, a trader at London Capital Group. “Any failure by policy makers to reach an agreement -- or if they produce another unsatisfactory plan -- could see swift action from the ratings agency.”The rating company also said today that the European Financial Stability Facility, the region’s so-called bailout fund, may lose its top credit rating if any of the guarantors have their own debt grade lowered.



USD/JPY

Japan, the world’s biggest corn importer, is “actively” seeking feed grain from nations other than the U.S., its biggest supplier, according to the U.K. Home-Grown Cereals Authority. Japan imported 16 million metric tons of corn in the 2009-10 marketing year, U.S. Department of Agriculture data show. About 14.6 million tons was from the U.S., according to the USDA. Japan, expected to take delivery of 16.1 million tons of the grain in 2011, bought 800,000 tons from Ukraine on Nov. 16. U.S. corn shipped to Japan will cost about $310 a ton for a 60,000-ton vessel, said David Eudall, an analyst at the U.K. cereals authority. Ukrainian corn can be shipped to Japan for about $290 a ton or less, he said by e-mail today. The Asian nation will probably purchase corn and feed wheat from countries that offer the best price, Eudall said. “Japan is actively in the feed grain market with a bias towards non-U.S. origins,” Eudall said. “Aussie feed wheat will come into play at some point as well. There’s plenty of grain in the world.”Corn futures have dropped 5.8 percent this year on the Chicago Board of Trade. It’s still the third-best performing grain behind rice and high-protein spring wheat traded in Minneapolis.U.S. Corn for export at ports near New Orleans was selling yesterday for about $6.465 a bushel, or $254.52 a metric ton. Russian inventories were selling for about $205 to $215 a ton at ports near Rostov and Asov, UkrAgroConsult said in a report today. Corn from Ukraine sold for about $235 a ton yesterday, according to the report.



USD/CAD

Canada’s dollar rose for a second day after Bank of Canada policy makers said growth in the domestic and U.S. economy is stronger than forecast, easing speculation the central bank would signal further monetary easing. Canada’s currency erased a decline after the central bank kept its main interest rate unchanged at 1 percent. Although Europe’s widening debt crisis is raising risks to the global economy, there is “considerable monetary stimulus” in Canada with interest rates near historic lows and the financial system “functioning well,” policy makers led by Governor Mark Carney said in a statement from Ottawa today. “There was an expectation in the market of a more dovish statement, but we got nearly a carbon copy of the last decision, which is supportive of the Canadian dollar,” said Stewart Hall, senior currency strategist at Royal Bank of Canada in Toronto. “The Canadian economy has been better than expected, and the domestic profile augurs for a policy leaning toward a neutral policy footing rather than one that continues monetary stimulus.”  Canada’s currency appreciated 0.6 percent to C$1.0100 per U.S. dollar at 5 p.m. in Toronto, after falling as much as 0.4 percent. One Canadian dollar buys 99.01 U.S. cents. All 26 economists surveyed by Bloomberg News predicted the central bank would hold rates steady. The loonie has been the second-best performer after the yen in the past month against the U.S. dollar among the most-traded currencies, gaining 0.3 percent, as investors sought refuge from the European crisis without the risk of U.S. budget deficits and political deadlock.