European Market Update: Euro-Zone Trade Balance Surprises to the Upside
European Market Update:
Euro-Zone Trade Balance Surprises to the Upside
Â· *** ECONOMIC DATA ***
Â· SZ Feb Adjusted Real Retail Sales Y/Y: 3.3% v 1. 6%e
Â· EU Feb Trade Balance: â‚¬800M v -â‚¬3.5Be || Prior revised from - â‚¬10.7B to
Â· EU Feb Trade Balance sa: â‚¬2.1B v -â‚¬2.1Be || Prior revised from -â‚¬2.0B to
Â· SZ Apr ZEW Expectations: -71.4 v -60.0e
Â· *** SPEAKERS/COMMENTS ***
Â· ECB April Monthly Report: Economic fundamentals are sound || Sees protracted
temporary period of high inflation || Market tensions may last longer than
initially expected || Sees upside risks in the medium-term || Uncertainty is
unusually high || Maintaining price stability is the ECB's primary goal ||
Current rates will help to achieve the ECB's inflation goal
Â· German Economic Institutes lower 2008 GDP outlook to 1.8% from 2.2% || See
shocks from Euro currency, oil and food prices and sub-prime fallout || German
economic indicators still at high levels || Sees 'high risk' that inflation
will drive wage demands || Assumes ECB will hold rates at 4.00% in 2008 ||
Assumes EUR/USD averaging $1.58 through 2009
Â· *** FIXED INCOME/FX/COMMODITIES/ERRATUM ***
Â· In equity news American Campus Communities (ACC) announced after the close a
4.5M shares secondary offering representing 16.7% of shares outstanding.
Ulticom (ULCM) said in a filing overnight that it is mulling strategic
alternatives, including sale of company. ViroPharma (VPHM) and Wyeth (WYE)
announced overnight the discontinuation of HCV-796 development. The companies cited
the previously announced safety issue that emerged in the ongoing Phase 2 trial
in patients with hepatitis C. ViroPharma also announced that ViroPharma and
Wyeth do not expect to continue to collaborate on future development of
hepatitis C treatment candidates. Expro International [EXR.UK] agreed to be
acquired by a Candover Investment-led consortium for 1,435p/share in cash
representing an 8.5% premium to yesterday's closing price. The total value of
the deal is ÂŁ1.61B. Roche [ROG.SZ] Reported first-quarter revenues of CHF10.8B
overnight, below estimates of CHF11.2Be. Munich Re's [MUV2.GE] CEO guided the
company's FY08 net in line with analyst estimates, but noted that first quarter
results would not be as good as they were in 2007.
Â· Looking at the newspapers, according to the Times RWE [RWE.GE] and Vattenfall
may partner to bid for British Energy [BGY.UK]. Recall that on 4/9the Financial
Times reported that RWE has made an indicative all-cash offer for British
Energy worth close to 700p/share. The Wall Street Journal wrote overnight that
Freddie Mac (FRE) is set to unveil an agreement with 3 major mortgage lenders
aimed at making more funds available for large home loans. The agreement is
reportedly with Wells Fargo (WFC), JP Morgan (JPM) and Citigroup (C) The
Guardian wrote overnight that Orange Orange plans to bid for Tiscali [TIS.IT]
According to an article in Seuddeutsche Zeitung Volkswagen (VOW.GE) supervisory
board chairman Piech foresees a good chance of acquiring and successfully
integrating the Italian motorcycle maker Ducati. In an interview with L'Hebdo
UBS's [UBSN.SZ] CEO Marcel Rohner said that UBS will not need another capital
injection, adding that circulating projections about pending job cuts are
Â· In energy news overnight the Financial Times wrote overnight that Nigeria is at risk of losing 1/3 of its oil
output by 2015. According to the article Nigeria needs to find ways to raise investment
in joint ventures. The article cites an internal report by President Adua's energy
adviser. According to the Ministry of Land and Resources, China added 1.21B tons of oil reserves in
2007. On the whole, the well that is energy news seems to have dried up for the
time being, while crude continues to push higher.
Â· On the data front, the Brazilian central bank raised interested rates by
50bps to 11.75% in a unanimous vote during Asian trading. The overall market
consensus was for a 25bps rate hike. The rate hike is the first in nearly three
years, and was executed in an attempt to help â€ścontain inflationâ€ť according to
the central bank. In its April monthly report, the ECB reiterated most of its
recent rhetoric, noting that economic fundamentals remain sound. The ECB
reiterated that they see a protracted temporary period of high inflation, and
added that upside risks are seen in the medium-term. Finally, the ECB
reiterated once again that it's primary goal is maintaining price stability.
The Euro-Zone trade balance for the month of February exceeded estimates by a
wide margin on both a normal and a seasonally adjusted basis. Exports to the US were flat from January's reading.
Â· In currencies the EUR/USD eked out a fresh all-time high of 1.5983 but
basically consolidated its recent gains throughout the European session as oil
and gold maintain their firm tone. Dealers note that good two-way transaction
flow continuing at the 1.5970/90 level. Dealers also note that Euro buy stops
orders building above the 1. 6030-area. The JPY maintained a soft tone
following the US, Japanese equity rallies as EUR/JPY
broke above the 162 area. Dealers have noted that a decent quantity of USD/JPY
102 option strikes expire on Friday.
Â· Looking ahead, earnings season is beginning to kick in with heavy earnings
flows before the open and after the close. Of note this morning will be Baxter
International (BAX), the Bank of New York Mellon Corp. (BK), Continental
Airlines (CAL), Harley-Davidson (HOG), Southwest Airlines (LUV), Marriott
International (MAR), Merrill Lynch (MER), Pfizer (PFE), Supervalu (SVU), and of
course United Technologies (UTX). Data is light in the US today, with initial jobless claims and
continuing claims due at , followed by March leading indicators,
and the April Philadelphia Fed index at . There are a series of Fed speakers
peppered here and about today, including Kohn, Prescott, Fisher, and Lacker.
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