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European Market Update: UK PPI Data Soars in March European Market
Update: UK PPI Data Soars in March
¬∑ *** ECONOMIC DATA ***
¬∑ FR Mar Bank of France
Sentiment: 105 v 106e || Prior revised from 107 to 106
¬∑ SW Mar CPI:
M/M 0.9% v 0.7%e || Y/Y 3.4% v 3.2%e
¬∑ SW Mar Underlying CPI: M/M 0.
9% v 0.5%e || Y/Y 2.3% v 2.1%e
¬∑ UK Mar PPI Input: M/M 1.8% v 1.9%e
|| Prior revised from 1.7% to 1.9% |||| Y/Y 20.6% v 19.3%e || Prior revised
from 19.4% to 19.7%
¬∑ UK Mar PPI Output: M/M 0.9% v 0.5%e || Prior
revised from 0.3% to 0.5%e |||| Y/Y 5.6% v 6.2%e || Prior revised from 5.7%
¬∑ UK Mar PPI Output Core: M/M 0.3% v 0.4%e |||| Y/Y 3.1% v 3.
0%e || Prior revised from 3.0% to 3.1%
¬∑ EU Feb Industrial
Production: M/M 0.3% v 0.2%e || Prior revised from 0.9% to 0.6% |||| Y/Y 3.
1% v 2.9%e || Prior revised from 3.8% to 3.3%
¬∑ ECB's Quaden: Inflation in the euro zone was
not likely to fall into the central bank's target range any time soon ||
Current monetary policy stance and interest rates appropriate || Unclear if
inflation will slow down if growth slows down
¬∑ ECB's Liikanen: Real
risk wage deals will add to inflation pressure || Euro area growth ongoing,
but risks to the downside
¬∑ ECB's Wellink: No leeway for rate cut,
must watch 2nd round effects || Not sure slower growth to help ease price
¬∑ ECB's Mersch: Cannot rule out upward revision for ECB
inflation forecast || Sees no room for rate cuts
¬∑ ECB's Gonzalez-
Paramo: ECB tools working well, short-term rates stabilized
¬∑ SNB's Roth: Vigilance is need on European inflation || Swiss
inflation to remain relatively high || Inflation rates are a temporary
phenomenon || Optimistic on inflation falling below 2% in H2.
Swiss Economic Minister: IMF Swiss GDP forecast is very pessimistic || Sees
no reason to lower 2008 GDP forecast
¬∑ EU The Spanish government to
spend ‚ā¨10B per year on an economic stimulus package || Of the ‚ā¨10B, ‚ā¨6B
will be used on ‚ā¨400 rebates for tax payers || Funds will also be used to
help finance small and medium-sized firms and guarantees for banks that
extend loans to those buying subsidized housing. [The Guardian]
Finance Minister: To meet with representatives of the Kuwait Investment
Authority at the end of May || The meeting is reportedly to clear up
misunderstandings as sovereign wealth funds are viewed with caution in
Germany. [Der Spiegel]
¬∑ Deutsche Bank is seeking to sell as much as
$20B of LBO related debt to a group of investors || The report follows
press speculation of LBO debt sales by Goldman and Citigroup
¬∑ FR Economy Minister Lagarde: Regarding G7's FX stance, says
we are all concerned by the current, brutal fluctuations as they are bad
for growth || Bankers at G7 admitted their collective responsibility for
the credit crisis
¬∑ *** FIXED INCOME/FX/COMMODITIES/ERRATUM
¬∑ In equities news overnight M&A activity along with poor
earnings results were the focus of the session. Royal Philips Electronics
reported a 75% y/y decline in first-quarter net income, falling well below
analysts' estimates. Sales results fell slightly below estimates, however
the company did reaffirm its 2010 EBITDA margin target of 10%-11%. Groupe
Danone opened lower in the session, but pushed higher on the back of a 18.
7% y/y rise in first-quarter sales, along with its FY08 revenue growth
forecast of 8%-10% and its EPS growth forecast of 15% or more. M&A news
overnight included was varied. Titian Europe elaborated on news circulating
this weekend. Titan Europe announced that it was in preliminary talks for
the US-based Titan International to acquire the rest of the shares that it
does not already own in the company in an all share deal. According to the
preliminary terms, the Titan Europe shareholders would receive 1 Titan
International share for every 8 Titan Europe shares they own. UK-based
industrial holding company Enodis announced overnight that it will be
acquired by the US-based Manitowoc for 260p/share, in a deal valued at
¬£948M. Under the terms of the Offer, Enodis Shareholders will receive 258
pence in cash for each Enodis Share. In addition, prior to the Scheme
becoming effective, Enodis will pay a dividend of 2 pence per Enodis Share
in lieu of an interim dividend in respect of the financial year ending 30
September 2008. Manitowoc expects that the deal will be accretive to
earnings in FY09. Finally, what is, thus far, likely to be the talk of the
morning, Blockbuster announced that, in a letter to the Circuit City
chairman sent on February 17th, it offered to acquire the company in an all
cash merger with a price range of $6.00/share to $8.00/share. Blockbuster
noted that Circuit City has failed to provide the due diligence necessary
for Blockbuster to make a definitive proposal. Blockbuster announced that
by releasing this news it believes the shareholders of Circuit City should
have the opportunity to participate in determining the destiny of the
¬∑ Following this weekend's G7 meeting there was a large
handful of central bank speakers on the wires overnight. While much of the
commentary from ECB members was in line with recent ECB rhetoric, some of
the ‚Äúless hawkish‚ÄĚ members were ‚Äústepping it up‚ÄĚ. The ECB's Mersch said
that he sees no room for rate cuts, adding that upward revisions to the
ECB's inflation forecast cannot be ruled out. Similarly, the ECB's Wellink
said that there is no leeway for interest rate cuts, while the ECB's Quaden
said that Euro-Zone inflation is not likely to fall into the central bank's
target range anytime soon. Elsewhere the Swiss National Bank's Roth said
overnight that vigilance is needed on European inflation, adding that Swiss
inflation is seen remaining relatively high, but is expected to fall below
2.0% during the second half of the year. Once again, the commentary all
follows the G7 meeting this past weekend, where G7 changed its verbal
stance on currencies for the first time in around four years. While the new
statement was equally as vague as the previous statement, it did have a
more aggressive, definitive tone. Recall additionally that prior to the
meeting, the German Finance Minister said on Friday that the Euro at $1.60
massively impacts Germany's economic interest. While this commentary has
been heard and heard again in France, this is one of the first comments of
this nature from a ranking German official. All in all, an ECB rate cut is
looking less and less likely in 2008, but perhaps some hard-line currency
intervention is in the works.
¬∑ Fixed income futures opened higher
in the session on the back of weaker equity markets, but slowly drifted
lower throughout the early session. The most movement was seen in long-
gilts, which were quickly knocked into negative territory following the
release of stronger than expected PPI data for the month of March. There
was no new supply in the UK, nor in the Euro-Zone overnight, however the
Greek PDMA head did deny the imminent 10-year launch. France, Italy, and
Germany will collectively supply ‚ā¨17.5B this week. The Italian auctions are
scheduled for Tuesday, with an aggregate ‚ā¨4.0B in 2013 BTPs and 2014 BTPs.
Germany will sell up to ‚ā¨7.0B in 2010 schatzs on Wednesday. In France, the
AFT will sell ‚ā¨5.0B to ‚ā¨5.5B in 2010 BTAN, and 2013 BTAN, as well as ‚ā¨1.0B
to ‚ā¨1.5B in 2013 OATi and 2020 OATei. In the UK, the DMO will sell ¬£2.25B
in 2042 bonds in Thursday's session.
¬∑ On the data front the Bank
of France business sentiment fell shy of estimates overnight, accompanied
by a downward revision to the back month reading. Both headline and core
CPI data exceeded expectations in Sweden overnight. March PPI data was
mixed in the UK. PPI put beat out estimates reaching its highest y/y level
since March of 1980. Similarly, PPI output beat out estimates posting its
highest y/y read since March of 1991. PPI output core was mixed; the y/y
reading edged out estimates, while the m/m reading fell slightly below. In
the Euro-Zone, February industrial production data was slightly ahead of
estimates, however there were some heavy downward revisions to January's
readings. Finally, Portuguese CPI data for March was slightly ahead of
expectations on both headline and harmonized bases, seeming to further
confirm the ECB's inflationary outlook.
¬∑ In energy related news
overnight OPEC's head of petroleum market analysis said that diverging
trends within the global oil markets may start to play out during coming
months, which could undermine oil prices. The OPEC representative added
that the recent oil price gains are more related to the weak USD.
Statoilhydro announces gas discovery in Norwegian Sea; the discovery has an
estimated 1.5 BCM of recoverable gas.
¬∑ In currencies, the EUR/USD
drifted higher during the European session aided by continued by hawkish
ECB inflation talk. Although G7 did amend its wording its forex portion of
the communiqu√©, noting that it would not watch USD continue to weaken,
dealers seemed keen to test USD downside to see where G7 would actually act.
The JPY was initially firmer as renewed concerns over the financial market
crisis resurfaced ahead of earning seasons. WSJ reported that Deutsche Bank
is seeking to sell as much as $20B of LBO related debt to a group of
investors. Wachovia moved up its earnings, prompting chatter of a possible
writedown. The JPY was retracing its gains as equity markets recovered from
their worst levels in the session.
¬∑ As it stands now, the European
indices are in negative territory, but are off of their worst levels of the
session, and could see positive territory if they continue to follow their
current path. Fixed income futures are in the lower end of their respective
session ranges, however are back in positive territory. The European yield
curves are relatively flat, while swap spreads have posted a modest rise.
Looking ahead, focus is likely to fall upon March advanced retail sales,
and February business inventories in the States, as well as comments from
the Fed's Warsh, and the ECB's Trichet, both of whom are expected to speak
in New York later today.
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Amazing Trader EVENT RISK Calendar:
Mon 16 Oct /ul>
01:30 CN- CPI
21:45 NZ- CPI
Tue 17 Oct
08:30 GB- CPI
09:00 DE- ZEW Survey
09:00 EZ- Final HICP
Wed 18 Oct
12:30 US- Housing Starts & Permits
14:30 US- EIA Crude
Thu 19 Oct
01:30 AU- Employment
08:30 GB- Retail Sales
12:30 US- Weekly Jobless
Fri 20 Oct
12:30 CA- Retail Sales & CPI
14:00 US- Existing Homes Sales
John M. Bland, MBA
- POTENTIAL PRICE RISK: HIGH Tue-- 08:30 GMT GB- CPI top tier confirmation of Inflation.
- POTENTIAL PRICE RISK: Medium Tue-- 09:00 GMT DE- ZEW Survey second most important German monthly Survey.
- POTENTIAL PRICE RISK: Medium Tue-- 09:00 GMT EZ- final HICP revision to flash report. Revisions are usually minor.
- POTENTIAL PRICE RISK: Medium Tue-- 13:15 GMT US- Industrial Production. Top output indicator.
- POTENTIAL PRICE RISK: Medium Wed-- 12:30 GMT US- Housing Starts and Permits revision to flash report. Useful housing leading indicator.
- POTENTIAL PRICE RISK: Medium Wed-- 14:30 GMT US- EIA Crude. Top WTI inventory measure.
co-founding Partner, Global-View.com
EXCLUSIVE: Global-View Daily Trading Chart Points Updated
EXCLUSIVE: Global-View Free Forex Database updated
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