Global

BIS Says Central Banks Must Stop Supporting Economy. The Bank for International Settlements (BIS) says banks have done their bit to help economic recovery and governments must do more. The Basel-based organisation - usually dubbed  the "central banks' central bank" says it is time for them to stop pumping funds into their economies. Markets are already bracing themselves for a world without central bank help. Last week the US central bank said it planned to stop pumping money into the economy, sparking market volatility. In its annual report, the BIS said the world's central banks had done their bit to offset the worst effects of the sixyear long global credit crisis. The BIS said it was now the turn of governments to oil the economic wheels. (BBC)

Investors Pull More Money From EM Funds. Outflows from emerging market debt funds have accelerated for a third week running as investors grow increasingly concerned that the US Federal Reserve is preparing to end its bond buying and erode demand for developing country assets. Emerging market debt-dedicated funds monitored by EPFR Global, a data provider, suffered investor redemptions of $2.6bn in the week ending June 19 -  even before the Fed set out a plan to scale back "quantitative easing" and triggered turmoil in markets on Thursday. The average four-week outflow is now $1.73bn, the largest on record UniCredit analysts noted. (Financial Times)

Asia 

World’s Biggest Pension Fund Doubts BOJ Can Achieve 2% Inflation. Japan’s central bank probably promised too much when it set a goal of lifting inflation to 2 % within two years, according to Takahiro Mitani, president of the country’s public pension fund. History is against the Bank of Japan as it undertakes unprecedented asset purchases in pursuit of a pledge to overcome 15 years of deflation, Mitani, the 64-year-old head of the 112 trillion yen ($1.14 trillion) Government Pension Investment Fund, said in a Tokyo interview June 21. The BOJ has pledged to double the monetary base by the end of next year while Prime Minister Shinzo Abe is promising public spending, tax reform and freer markets to reinvigorate Japan’s economy. It’s been 21 years since annual inflation in Japan exceeded 2 %, according to the World Bank. (Bloomberg)

China Money-Market Turmoil Poses Test For New Leaders. China’s cash squeeze over the past two weeks is testing the management skills of new Communist Party leaders saddled with risks from a record credit expansion under their predecessors. The one-day repurchase rate touched an unprecedented high of 13.91 % yesterday, prompting speculation the central bank was forced to pump liquidity, before diving today by the most since 2007. Premier Li Keqiang signaled determination to stamp out speculation funded by cheap money with a June 19 State Council statement saying banks must make better use of existing credit and step up efforts to contain financial risks. Any prolonged constriction of interbank liquidity risks triggering a broader credit crunch, further depressing an economy that’s already slowing. (Bloomberg)

North America

Canada Inflation, Retail Sales Advance Less Than Forecast. Canada’s inflation rate accelerated less than economists forecast in May as a jump in natural gas prices was partly offset by a drop in transportation costs, while retail sales for April also rose less than expected, adding to evidence consumers are less able to drive growth. The consumer price index rose 0.7 % in May from a year ago, following a 0.4 % April gain that was the slowest since October 2009, Statistics Canada said today from Ottawa. The core rate, which excludes eight volatile products, advanced at a 1.1 % pace for a second month. Economists surveyed by Bloomberg forecast that total inflation would be 0.9 % and the core rate would be 1.2 %. In a separate report, Statistics Canada said that retail sales rose 0.1 % in April to C$39.5 billion ($38.1 billion). Economists forecast a 0.2 % gain in a Bloomberg survey with 23 responses.  (Bloomberg)

Europe

EU Split On Future Bank Bailouts. EU finance ministers have failed to agree on how to rescue troubled banks in any future crisis. After almost 20 hours of talks on Saturday, ministers are still split on whether savers should bear any of the cost of a bailout. The impasse will now be debated at a meeting of EU heads of government on Wednesday. "I have no doubt we will reach a deal," French Finance Minister Pierre Moscovici said. Talks in Luxembourg on Saturday were centred on new rules determining the order in which investors and creditors would have to pay for bank  bailouts. Countries were divided on whether the Cyprus rescue should be a template for future bailouts, or whether losses be limited to banks' creditors. The UK is reported to be one of the countries that does not want to be bound by EU rules, preferring to have some flexibility over whether to charge depositors in the case of future bailouts. (BBC)

EU Agrees Euro Rescue Fund Guidelines For Banks. Eurozone finance ministers have agreed guidelines  on how the eurozone's emergency bailout fund can inject money directly into struggling banks. Enabling the 500bn euro ($660bn; £427bn) European Stability Mechanism to directly help banks is seen as a key move in stabilising the eurozone area. The ESM will be able to inject a total of 60bn euros into troubled lenders. But the bank's national government, and its lenders and depositors, will still have to share the burden of any rescue. (BBC)

UK Government Borrowing Rose In 2012-13, ONS Figures Show. Government borrowing rose slightly in 2012-13 compared with the previous year, figures from the Office for National Statistics show. Underlying public sector borrowing was £118.8bn, up from £118.5bn in 2011-12. The rise comes as a result of the ONS revising down its 2011-12 borrowing figure by £2.4bn to £118.5bn. The figures could make uncomfortable reading for Chancellor George Osborne, who had previously said annual borrowing was coming down. However, the latest monthly figures showed that borrowing fell to £12.7bn in May, down from £15.6bn a year earlier. (BBC)

U.K. Budget Gap Narrows On Spending Drop, Swiss Deal. Britain’s budget deficit narrowed in May as government spending fell and the Treasury got a 3.2 billion-pound ($5 billion) boost from a deal with Switzerland to fight tax evasion. Net borrowing excluding temporary support for banks was 12.7 billion pounds compared with 15.6 billion pounds a year earlier,  the Office for National Statistics said in London today. The figures exclude the receipt of 3.9 billion pounds of coupon cash from the Bank of England’s gilt holdings. The report comes as Chancellor of the Exchequer George Osborne prepares to outline 11.5 billion pounds of cuts to government departments’ budgets for the 2015-16 fiscal year after weaker-than-forecast growth forced him to prolong his austerity program beyond the 2015 general election. (Bloomberg)

Nabiullina Seeks Growth Options With Russia Economy Losing Steam. Russia’s central bank will embrace new approaches to fostering economic growth, including by improving access to credit, Elvira Nabiullina said as she takes over the chairmanship from Sergey Ignatiev today. Weakening the ruble or succumbing to calls for lower interest rates as a quick  fix to boost demand are “dangerous” options, Nabiullina said. The central bank is already contributing to the goal of promoting growth by reducing inflation and developing financial markets and shouldn’t cave in to “temporary changes or political factors” when making interest rate decisions, she said. (Bloomberg)

Currencies

UK And China In £21bn Currency Swap Deal. The Bank of England and its Chinese counterpart have signed a deal likely to boost trade between the UK and China in the yuan. The Bank and the People's Bank of China have signed a three-year currency swap arrangement worth 200bn yuan (£21bn, $33bn), the UK central bank confirmed. The UK is looking to become a centre for the Chinese currency, also known as the renminbi. British banks hold 35bn yuan worth of deposits in the Chinese currency.  Currencyswap agreements allow central banks to swap currencies and can be used by firms to settle trade in local currencies rather than in US dollars, as happens now, since China's currency is not fully convertible to other currencies. (BBC) 

Dollar Rallies Third Day Of Fed-Inspired Gains. The U.S. dollar rallied for a third consecutive day on Friday, ending the week on a broadly positive note two days after Federal Reserve Chairman Ben Bernanke signaled that the central bank could begin to cut back the flow of monetary stimulus later this year. The ICE dollar index, which tracks the U.S. currency against six rivals, rose to 82.302, up from 81.823 late Thursday in North America. The British pound traded at $1.5428 in recent action, down from $1.5492 Thursday, while the Australian dollar, which was hammered earlier this week, bounced back to 92.45 cents on apparent short covering, up from around 92 cents late Thursday. A rebound by the  euro lost steam with the shared currency falling to $1.3138 from late Thursday’s $1.3221 after earlier rising to $1.3254. The Japanese yen was also under pressure, with the U.S. currency rising to ¥97.73 from ¥97.38 late Thursday. (Market Watch)

Commodities

Brent Stays Above $102, But Set For Biggest Weekly Drop In 2 Months. Brent futures held above $102 a barrel on Friday as the steep fall in the previous session gave investors an opportunity to buy, but a cross-market rout triggered by Fed Chairman Ben Bernanke's comments on winding down stimulus capped gains. Brent crude slipped to as low as $101.88 a barrel and traded 33 cents higher at $102.48 by 0256 GMT. It settled down $3.97 on Thursday in its biggest daily drop since November. U.S. oil was up 16 cents at $95.30. Both benchmarks were headed for their steepest weekly loss in two months. (Reuters)

Gold Heads For Biggest Weekly Drop In Nearly 2 Years. Gold recovered some ground to trade more than 1 % higher on Friday after earlier hitting near-three-year lows, but stayed on track for its biggest weekly drop in almost two years after the U.S. Federal Reserve signalled an end to easy money.  Spot gold was up 1.3 % at $1,294.76 an ounce at 1350 GMT, having earlier hit its lowest since September 2010 at $1,268.89 an ounce.  Silver also dropped to its lowest since September 2010 at $19.35, before recovering to $19.92 an ounce, up 2 %. Spot platinum was up 0.2 % at $1,359.74 an ounce, while spot palladium was the biggest riser, up 1.3 % at $669.75 an ounce. (Reuters)