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European Market Update: UK PPI Input Blows Out Expectations *** ECONOMIC DATA ***
Â· GE Oct Trade Balance: â‚¬18.7B v â‚¬16.8Be
Â· GE Oct Current Account: â‚¬13.7B v â‚¬14.2Be
Â· GE Oct Imports: 0.2% v 2.4%e
Â· GE Oct Exports: 0.6% v 0.0%e
Â· FR Oct Industrial Production: M/M 2.1% v 0.5%e || Prior revised from -1.1% to -1.2% |||| Y/Y 4.0% v 2.1%e [highest since June 2004]
Â· FR Oct Manufacturing Production: M/M 1.9% v 0.6%e || Prior revised from -1.3% to -1.4% |||| Y/Y 3.7% v 2.1%e || Prior revised from 1. 4% to 1.3%
Â· SW Oct Industrial Production: M/M -0.3% v 0.3%e || Prior revised from -0.6% to -0.8% |||| Y/Y 1.0% v 2.9%e || Prior revised from 1.1% to 1.2%
Â· SW Oct Industrial Orders: M/M -4.4% (no ests.) || Prior revised from 5.8% to 5.6% |||| Y/Y 6.2% (no ests.) || Prior revised from 1.7% to 1.5%
Â· SW Oct Activity Index Level: 123.1 (no ests.) || Prior revised from 121.4 to 122.5
Â· IT Oct Industrial Production: M/M -0.3% v 0.4%e || Prior revised from -1.09% v -1.2% || Y/Y - 1.5% v 0.6%e
Â· IT Oct Industrial Production nsa: 1.1% v 2. 6%e
Â· NO CPI: M/M 1.6% v 0.6%e [highest since January 2003] || Y/Y 1. 5% v 0.6%e
Â· NO CPI Underlying: M/M 0.3% v 0.2%e || Y/Y 1.5% v 1. 5%e
Â· UK Nov PPI Input: M/M 1.7% v 1.4%e || Y/Y 10.3% v 9.2%e || Prior Y/Y revised from 8.6% to 8.5%
Â· UK Nov PPI Output: M/M 0.5% v 0.4%e || Y/Y 4.5% v 4.2%e || Prior revised from 3.8% to 3.9%
Â· UK Nov PPI Output Core: M/M 0.1% v 0.2%e || Y/Y 2.2% v 2.4%e
Â· UK Oct DCLG House Prices: 11.3% v 10.8%e
Â· EU Dec Sentix Investor Confidence: 11.9 v 12.3e
Â· *** SPEAKERS/COMMENTS ***
Â· ECB Stark: ECB will act in a timely manner if necessary
Â· ECB Stark: Sees inflation remaining elevated into 2009
Â· ECB Stark: Disagrees with staff inflation outlook for 2009
Â· EU Almunia: The Euro needs more political support
Â· EU Almunia: Expects more bad news for the US economy
Â· EU Almunia: The US slowdown will damage European growth
Â· EU Almunia: Energy and raw materials prices are boosting inflation risks
Â· ECB's Liikanen: Market turbulence may deepen and extend
Â· ECB's Liikanen: Sees upside risks to price stability over the medium term
Â· ECB's Liikanen: Higher raw material costs are pushing up inflation
Â· ECB's Liikanen: Market turmoil has increased downside risks,
Â· ECB's Liikanen: ECB to act to counter 2nd round inflation effects if necessary
Â· *** FIXED INCOME/FX/COMMODITIES/ERRATUM ***
Â· Fixed income futures have been trending lower since the open, coming under downside pressure following comments from the ECB's Stark and the ECB's Liikanen. Both ECB members reiterated the view that the EBC will act in a timely manner in order to fight off second round inflation effects if necessary. Additionally the ECB's Stark pointed out that some ECB members disagree with the staff inflation forecasts, noting that some ECB members expect a more inflationary environment in 2008/09. Despite Stark's comments, the ECB's Liikanen added that 2008 inflation is seen lower if rsks from oil, food, and higher wages do not materialize. Over in the UK long-gilt futures were slightly higher in the session following the BOE's interest rate cut last week, and were relatively unaffected by the stronger than expected reading on November PPI data.
Â· On the equity front the indices opened in the red today, but gained upside momentum following a stronger than expected reading on PPI input data for the month of November in the UK. The big equity story overnight was UBS. The company confirmed that it will write down $10B in subprime holdings. The company also announced the issuance of CHF13B in new capital to two unnamed investors. On the M&A front, over in the UK Carillion made an offer to acquire Alfred McAlpine for 558p/share in cash and stock in a Â£572B deal. In US M&A MGI Pharma announced that it will be acquired by Japan's Eisai for $41/share in cash in a $3.9B deal.
Â· On the commodity front crude oil futures have been rather boring below the $90 level, with little news to push them around. Spot gold is slightly higher in the session on the back of a slightly weaker Dollar, while the rest of the metals are mixed.
Â· Regarding today's economic data, French industrial and manufacturing production was stronger than expected but failed to make any notable impact on markets. The stronger than expected reading on Norwegian CPI put a bid of strength into the Krone. The stronger than expected PPI input data in the UK seemed lend some steam to lower markets as indices moved into positive territory following the release.
Â· On the currency front the US dollar is weaker as a result of continued inflation concerns in the Euro-Zone following comments from the ECB members Stark and Liikanen, which follow comments from the OECD last week. The Yen is softer as UBS speculates that we may have seen the worst of subprime in November. The commodity currencies are slightly firmer on the back of slightly stronger gold prices.
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GVI Trading. Potential Price Risk Scale
Tue 31 July 2018
AA: Major, A: High, B: Medium
AA JP- Bank of Japan
A 06:00 DE- Retail Sales
A 09:00 EZ- flash HICP/GDP
AA 12:30 US- Core PCE Deflator
A 14:00 US- CB Consumer Confidence
Wed 1 Aug 2018
A Final Mfg PMIs
AA 12:15 US- ADP Private Payrolls
A 15:00 US- EIA Crude
AA 18:00 US- Federal Reserve Decision
Thu 2 Aug 2018
AA 11:00 GB- Bank of England Decision
A 13:30 US- Weekly Jobless
Fri 3 Aug 2018
A Final Services PMIs
AA 12:30 US- Employment
A 12:30 US/CA- Trade
John M. Bland, MBA
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