EFTA02349438.pdf

From: Ens, Amanda Sent: Tuesday, July 30, 2013 4:08 PM To: Epstein, Jeffrey (jeevacation@gmail.com) Cc: Barrett Team Subject: Euros in account Jeffrey, The euro has had a nice pop recently (1.3260). You're still long EUR 837,388 in Southern Financial. Would you like to continue holding or convert to USD? The euro is marginally stronger against the USD this morning ahead of this week's ECB policy meeting. Euro area consumer confidence improved for a third month in July (as expected), reaching the highest in 15 months and adding to indications the 17-nation currency bloc is emerging from a record-long recession. Manufacturing in the euro-zone expanded this month for the first time in two years as economists estimated gross domestic product stopped shrinking in the three months leading up to July. Near term, month-end flows, FOMC, Thursday's ECB meeting and Friday payrolls should drive price action. Thanks, Amanda Amanda Ens I Vice President I Global Investment Opportunities I J.P.Morgan I NMLS ID: 853443 Europe Economic Research Euro area economic sentiment improved for the third straight month EFTA_R1_01325279 EFTA02349438 If this email does not display properly, click here to view. <http://emaillink.jpmorgan.com/t/ACVAALqqA/AAXTeg/QZtKRA/CnU/ACZfgw/AQ/XOjf> - Economic sentiment improved in line with the PMI - Quarterly survey shows higher capacity use and better perceptions about the export market After the large increase in the Euro area composite PMI seen last week, a significant rise in the EC economic sentiment indicator was expected today, which is exactly what happened. The EC sentiment indicator increased 1.2pts to 92.5 in July, and both surveys (the PMI and the EC survey) are now signalling that the Euro area economy is emerging from recession. The details of the EC survey furthermore showed that the July improvement was broad based, which was another source content: the manufacturing surveys rose 0.6pts to -10.6; the services component increased 1.8pts to -7.8; the retail sector gained 0.9pts to -13.7; and consumer confidence reached -17.4 after a 1.4pts increase. The only downside in July was the 1.1pts decline in the construction survey. But this discrepancy between the construction sector and the other sectors is not new. Since the beginning of the year, the construction sector only rose 0.4pts while the gain was 3.2pts in the manufacturing sector, 2.0pts in the services sector, and even 8.9pts for consumer confidence. The European Commission also released the results of its quarterly survey. The 2Q12 level of capacity use in the manufacturing sector rose a fair amount (+0.8pts to 78.1%) but the survey still remains 3.2pts away from its historical average of 81.3%. New orders in the manufacturing sector had a significant swing up of 9.2pts to -5.4, and the export volume expectation indicator rose 2.1pts to 6.8. This was complemented by an improvement in the perception of competitive position of the Euro area manufacturing industry outside the European Union. Thus the tone of the quarterly release was overall positive. 2 EFTA_R1_01325280 EFTA02349439 Source: European Commission Raphael Brun-Aguerre <http://emaillink.jpmorgan.com/t/AQ/AALqqA/AAXTeg/QZtKRA/CnU/ABP7WQ/AQ/zVlv> JPMorgan Chase Bank N.A, London Branch If you no longer wish to receive these e-mails then click here to unsubscribe <http://emaillink.jpmorgan.com/t/AQ/AALqqA/AAXTeg/QZtKFtA/CnU/ABYTYA/AQ/D2pB> www.jpmorganmarkets.com <http://emaillink.jramorgan.com/t/AQ/AALqqA/AAXTeg/CatKRA/CnU/ABPnzg/AOJ+R+4> The research analyst(s) denoted by an "AC" in this report individually certifies, with respect to each security or issuer that the research analyst covers in this research, that: (1) all of the views expressed in this report accurately reflect his or her personal views about any and all of the subject securities or issuers; and (2) no part of any of the research analyst's compensation was, is, or will be directly or indirectly related to the specific recommendations or views expressed by the research analyst(s) in this report. 3 EFTA_R1_01325281 EFTA02349440 Company-Specific Disclosures: Important disclosures, including price charts, are available for compendium reports and all J.P. Morgan—covered companies by visiting https://mm.jpmorgan.com/disclosures/company <http://emaillink.jpmorgan.com/t/ACVAALqqA/AAXTeg/QZtKRA/CnU/CQc/AQ/6sUe> , calling 1-800.477-0406, or e- mailing research.disclosure.inquiries@jpmorgan.com chttp://emaillink.jpmorgan.com/t/AQ/AALqqA/AAXTeg/QZtKRA/CnU/8tA/AO/F5Qq> with your request. J.P. Morgan's Strategy, Technical, and Quantitative Research teams may screen companies not covered by J.P. Morgan. For important disclosures for these companies, please call 1-800-477-0406 or e-mail research.disclosure.inquiries@jpmorgan.com <http://emaillink.jpmorgan.com/t/AQ/AALqqA/AAXTeg/CatKRA/CnU/8tA/AO/F5Qq> . Confidentiality and Security Notice: This transmission may contain information that is privileged, confidential, legally privileged, and/or exempt from disclosure under applicable law. If you are not the intended recipient, you are hereby notified that any disclosure, copying, distribution, or use of the information contained herein (including any reliance thereon) is STRICTLY PROHIBITED. Although this transmission and any attachments are believed to be free of any virus or other defect that might affect any computer system into which it is received and opened, it is the responsibility of the recipient to ensure that it is virus free and no responsibility is accepted by JPMorgan Chase & Co., its subsidiaries and affiliates, as applicable, for any loss or damage arising in any way from its use. If you received this transmission in error, please immediately contact the sender and destroy the material in its entirety, whether in electronic or hard copy format. Europe Economic Research ECB to stick with its guidance If this email does not display properly, click here to view. chttp://emaillinksjpmorgan.com/t/AQ/AALqvQ/AAXTpA/QZv6Bw/Cgw/ACZgOg/AQ/Nich> ECB to stay on hold and to stick with its extended period guidance and its easing bias -- Guidance not yet being challenged by economic or monetary developments, or by markets 4 EFTA_R1_01325282 EFTA02349441 ECB has not dealt with Eonia normalisation issue and its thinking has become less clear on this The ECB is likely to stay on hold this week. It is also likely to stick with its "extended period" guidance and its explicit easing bias. This guidance is conditional on a subdued inflation outlook, which in turn is driven by an assessment of the economy and monetary developments. Neither is a big challenge at present, as the economy is only just emerging from recession (broadly in line with the ECB's forecast) and as the money and credit data weakened last week. Repeating the guidance will also help to ensure that money market rates remain low over the intended guidance period. Even if the guidance is not being challenged by the data in either direction, pressures could emerge over time. For example, a large move up in interest rate expectations, if driven by external factors, could require the ECB to strengthen its guidance by setting calendar dates or thresholds. Similarly, if the Euro area PMI continues to increase as expected, the ECB will need to stick to its new script on inflation. This emphasizes slower-moving "level" variables (e.g. weak demand, weak labor market conditions, and low capacity use) as drivers of inflation. In the past, the ECB has downplayed their significance and focused more on the momentum of growth and factors that tend to push inflation back to target (even when unemployment is high). If core inflation moves lower as we expect, it will be easier for the ECB to maintain its guidance but it may need to clarify its thinking. There are some other issues. First, the ECB has not dealt with the issue of LTRO repayments and changes in autonomous factors leading to lower levels of excess liquidity. As excess liquidity has now fallen from €800 billion to €230 billion, it is very close to the €100-200 billion range in which Eonia starts to gradually rise back to the middle of the ECB's interest rate corridor. Some view this as equivalent to a 40 basis point stealth rate hike. For a long time, the ECB has rejected this interpretation, arguing instead that LTRO repayments are a sign of banking sector healing and improvements in credit availability in the real economy. More recently, it has been less clear about this. In any case, it could dampen the effect of this Eonia normalization by narrowing its rate corridor or by injecting more liquidity through another LTRO. These options remain on the table, even if they are unlikely to be taken this week. Second, related to the first issue, it will be important to see what the ECB makes of the large declines in actual bank lending to non financial corporates over the past three months. This may relate to weak loan demand, but may nevertheless lead to some debate about further collateral and liquidity changes. We doubt that actual policy changes are imminent, especially because the joint work with the EIB is progressing slowly and because the ECB tweaked its collateral framework just two weeks ago. JPMorgan Chase Bank N.A, London Branch 5 EFTA_R1_01325283 EFTA02349442 If you no longer wish to receive these e-mails then click here to unsubscribe chttp://emaillink.jpmorgan.com/t/AQ/AALqvQ/AAXTpA/Q2v6Bw/Cgw/ABYTYA/AOJgG5r> www.jpmorganmarkets.com <http://emaillink.jpmorgan.com/t/AQ/AALqvQ/AAXTpA/QZv6Bw/Cgw/ABPnzg/AQ/E8V-> The research analyst(s) denoted by an "AC" in this report individually certifies, with respect to each security or issuer that the research analyst covers in this research, that: (1) all of the views expressed in this report accurately reflect his or her personal views about any and all of the subject securities or issuers; and (2) no part of any of the research analyst's compensation was, is, or will be directly or indirectly related to the specific recommendations or views expressed by the research analyst(s) in this report. Company-Specific Disclosures: Important disclosures, including price charts, are available for compendium reports and all J.P. Morgan—covered companies by visiting https://mm.jpmorgan.com/disclosures/company chttp://emaillink.jpmorgan.com/t/AQ/AALqvQ/AAXTpA/Q2v6Bw/Cgw/CQc/AO/R6ol> , calling 1.800.477.0406, or e- mailing research.disclosure.inquiries@jpmorgan.com chttp://emaillink.jpmorgan.com/t/AQ/AALqvQ/AAXTpA/QZv6Bw/Cgw/8tA/AQ/rZCT> with your request. J.P. Morgan's Strategy, Technical, and Quantitative Research teams may screen companies not covered by J.P. Morgan. For important disclosures for these companies, please call 1-800.477.0406 or e-mail research.disclosure.inquiries@jpmorgan.com <http://emaillink.jpmorgan.com/t/AOJAALqvQ/AAXTpA/QZv6Bw/Cgw/8tA/AQ/rZCT> . Confidentiality and Security Notice: This transmission may contain information that is privileged, confidential, legally privileged, and/or exempt from disclosure under applicable law. If you are not the intended recipient, you are hereby notified that any disclosure, copying, distribution, or use of the information contained herein (including any reliance thereon) is STRICTLY PROHIBITED. Although this transmission and any attachments are believed to be free of any virus or other defect that might affect any computer system into which it is received and opened, it is the responsibility of the recipient to ensure that it is virus free and no responsibility is accepted by JPMorgan Chase & Co., its subsidiaries and affiliates, as applicable, for any loss or damage arising in any way from its use. If you received this transmission in error, please immediately contact the sender and destroy the material in its entirety, whether in electronic or hard copy format. THIS IS NOT AN OFFICIAL CONFIRMATION 6 EFTA_R1_01325284 EFTA02349443 For informational purposes only. 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