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Forex Blog - European Market Update: Markets Look to Looming Earnings Reports for Direction
¬∑*** ECONOMIC DATA ***
¬∑GE June Final CPI: M/M 0.3% v 0.3%e || Y/Y 3.3% v 3.3%e
¬∑GE June Final CPI Harmonized: M/M 0.4% v 0.4%e || Y/Y 3.4% v 3.4%e
¬∑FR June CPI: M/M 0.4% v 0.4%e; Y/Y 3.6% v 3.6%e
¬∑FR June CPI Harmonized: M/M 0.4% v 0.4%e || Y/Y 4.0% v 4.0%e
¬∑FR June CPI Ex-Tobacco Index: 118.95 v 118.50 prior
¬∑SZ May Adjusted Real Retail Sales Y/Y: 7.4% v 3.8%e
¬∑UK June Claimant Count Rate: 2.6% v 2.6%e || Prior revised from 2.5% to 2.6%
¬∑UK June Jobless Claims Change: 15.5K v 10.0Ke || Prior revised from 9.0K to
¬∑UK May Avg. Earnings Inc. Bonus: 3.8% v 3.7%e || Prior revised from 3.8% to 3.
¬∑UK May Avg. Earnings Ex. Bonus: 3.8% v 3.9%e
¬∑UK May ILO Unemployment Rate: 5.2% v 5.3%e
¬∑EU June CPI: M/M 0.4% v 0.4%e || Y/Y 4.0% v 4.0%e || Core Y/Y 1.8% v 1.8%e
¬∑*** SPEAKERS/FIXED INCOME/FX/COMMODITIES/ERRATUM ***
¬∑In equity news overnight Wolseley [WOS.UK] reported overnight that 11-month
trading profit was -28% y/y, while pretax profit was -35% y/y. The company
suspended its dividend and announced the sale of three business units for ¬£18M.
Continental [CON.GE] confirmed overnight that it rejected Schaeffler's offer,
noting that the bid undervalued the company. Continental noted that they
supported Schaeffler taking a 20% stake in the company, bus said that Shaeffler
insisted on a sake of 30% or more. Shares of Natixis [KN.FP] were trading lower
on chatter of that the bank will need a capital increase. The Bank declined to
comment on the rumor.
¬∑In energy news overnight the Saudi King said in a newspaper interview that
speculation is the primary factor behind high oil prices. Adding that markets
did not respond to the recent output increases. A Norwegian ship was reportedly
attacked of the coast of Nigeria. No further details were available.
¬∑There was no new supply in Europe overnight. According to the Wall Street Journal the Euro-zone
could face a recession. The article mentions that a "hard landing" is
a possibility citing problems with the Spanish economy and the country's
property market. The article also looks at the recent Germany investor sentiment data. Elsewhere,
Barclays now sees the Fed on hold at 2. 00% in 2008. Barclays had previously
forecasted 2 rate hikes.
¬∑The USD was mixed in European trading as global equity markets retained some
composure to the recent wave of jitters, aided by steady oil prices. Dealers
noted that geopolitical concerns and financial sector unease could easily
return to drive trading sentiment. The EUR/USD is around 1.5930, pretty much
unchanged from opening levels seen in Tokyo. The JPY was broadly firmer against the
majors, despite cautious comments from the BOJ's monthly report. JPY price
movement appears to be more technical as the EUR/JPY continues to retreat from
recent all-time highs made earlier in the week. Dealers noted that additional
downside momentum in JPY related pairs (stronger JPY) appears highly probable
with some chatter of ripening conditions for central bank to increase verbal
intervention (or more). The EUR/JPY is around 165.75, lower by about 100 pips
and the USD/JPY near its 100-day moving average of 103.95.
¬∑On the speaker front French Finance Minister Lagarde said overnight that she
has not lowered her 2008 growth forecast. Lagarde said that she sees 2008
growth closer to 1.7% than 2.0%, adding that she expects inflation to ease
during Q3 of 2008. In the minutes from the July 3rd policy-setting meeting
Riksbank said that the MPC voted unanimously to raise rates to 4.50%. Three of
the central bank members were split on future path of interest rates, noting
that slower growth is expected to dampen future inflation expectations.
Furthermore Riksbank Governor Nyberg said that he is far from certain that two
more rate hikes are needed to bring inflation back to its target, adding that
he would not be surprised if weaker growth and jobs became the focus of future
¬∑*** NOTES ***
¬∑In was a relatively quite night in Europe, with little to report on the energy, fixed income, and equity
fronts. The European indices opened modestly higher in the session, but drifted
lower, weighed down by bank and carmakers as the session slowly progressed.
Economic data was dry; Euro-Zone CPI remained elevated as was widely expected.
Following yesterday's declines as well as the pessimism hovering over the
financial sector like a gray cloud, the chatter currently circulating is that
‚Äúwe have to make it though the week‚ÄĚ essentially implying that we have to
stabilize by Friday. If we do not stabilize some market participants speculate
that we could ‚Äútake a turn for the worse‚ÄĚ. Focus is likely to rest upon
earnings results as heavy hitters Blackrock (BLK), Coca-Cola (KO), Ford (F), JP
Morgan (JPM), Textron (TXT), United Technologies (UTX), Google (GOOG), IBM
(IBM), Honeywell (HON), and Slumberger (SLB) are all due to release earnings
before the week is over. ("Everything has been figured out except how to
live." - Jean-Paul Sartre)
¬∑Thank you for your e-mails/comments yesterday.
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