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Forex Blog - European Market Update: European Inflation Data Continues to Edge Higher
┬Ě*** ECONOMIC DATA ***
┬ĚSZ July CPI: M/M -0.4% v -0.4%e; Y/Y 3.1% v 3.0%e
┬ĚGE June ILO Unemployment Rate: 7.3% v 7.4%e
┬ĚGE July Unemployment Change -15K v - 20Ke
┬ĚGE July Unemployment Rate: 7.8% v 7.8%e
┬ĚUK July Nationwide House Prices: M/M -1.7% v -1.2%e; Prior revised from -0.9% to -0. 8% |||| Y/Y -8.1% v -7.3%e
┬ĚSP July Preliminary CPI Harmonized Y/Y: 5.3% v 5.2%e
┬ĚSW July Consumer Confidence: -18.2 v -12.0e
┬ĚSW July Economic Confidence: 89.0 v 93.3 prior || Prior revised from 93.8 to 93.3
┬ĚSW Q2 Manufacturing Confidence: -9 v -1e
┬ĚIT May Large Company Employment: -0.1% v 0.0% prior
┬ĚIT July Preliminary CPI: M/M 0.5% v 0.4%e || Y/Y 4.1% v 3.9%e
┬ĚIT July Preliminary CPI Harmonized: M/M -0.5% v -0.4%e || Y/Y 4.1% v 4.2%e
┬ĚNO July Unemployment Rate: 1.8% v 1.8%e
┬ĚNO June Credit Growth Indicator Y/Y: 13.3% v 13.8%e
┬ĚEU July CPI Estimate: 4.1% v 5.1%e
┬ĚEU June Unemployment Rate: 7.3% v 7.2%e || Prior revised from 7.2% to 7. 3%
┬Ě*** SPEAKERS/FIXED INCOME/FX/COMMODITIES/ERRATUM ***
┬ĚOn the earnings front in Europe overnight Deutsche Post [DPW.GE] reported Q2 net income of ÔéČ254M, below the ÔéČ278M consensus, EBIT of ÔéČ862M above the ÔéČ776M consensus, and revenue of ÔéČ16.2B, above the ÔéČ16.0B consensus. The company said that it sees raising its dividend at an average annual pace of 10%. (Shares were -3.8% in early trading). Sanofi Aventis [SAN.FR] reported Q2 Net income of ÔéČ1.61B, below the ÔéČ1.79B consensus, and revenue of ÔéČ6.89B, below estimates of ÔéČ7.30Be. (Shares were -8.2% in early trading). Deutsche Bank [DBK.GE] reported Q2 net income of ÔéČ649M, well ahead of estimates of ÔéČ491M. Pretax of ÔéČ642M was below estimates of ÔéČ734Me. Net interest income was ÔéČ2.95B, above estimates of ÔéČ2.42B, while writedowns were ÔéČ2.3B above expectations of ÔéČ1.8Be. Deutsche Bank's Tier 1 capital ratio rose to 9.3% from 9.2% in Q1. (Shares were +0.6% in early trading). Metro AG [MEO.GE] reported a Q2 net loss of ÔéČ246M, better than the loss of ÔéČ431M expected. EBIT of ÔéČ329M was up from ÔéČ303M a year ago, while revenue of ÔéČ16.1B was slightly ahead of the ÔéČ16.0B consensus. Metro reaffirmed its FY08 revenue guidance for growth of 6%+ implying ÔéČ68.19B, below the ÔéČ68.49B consensus. (Shares were +1.0% in early trading). Wacker Chemie [WCH.GE] reported Q2 net income of ÔéČ152.8M, above the ÔéČ130M consensus, and EBIT of ÔéČ225M above the ÔéČ196M consensus. Revenue of ÔéČ1.12B was just above estimate of ÔéČ1.08B. Wacker Chemie reiterated its FY08 revenue growth forecast of 10%+ implying ÔéČ4.16B+ below estimates of ÔéČ4.3B. (Shares were +5.1% in early trading). Telefonica [TEF.SP] reported 1H net income of ÔéČ3.59B, above the ÔéČ3.33B consensus. OIBDA of ÔéČ11.12B exceeded estimates of ÔéČ10.9Be, while reveue of ÔéČ14.25B was roughly in line with estimates. Telefonica reiterated its FY08 revenue growth forecast of 6%-8% implying guidance of ÔéČ59.8-60.1B, above the ÔéČ58.5B consensus. (Shares were +1.0% in early trading). France Telecom [FTE.FR] reported 1H net income of ÔéČ2.67B, roughly in line with estimates, and revenue of ÔéČ26.3B, also in line with estimates. France Telecom confirmed that its FY08 dividend will exceed ÔéČ1.30/share, and also confirmed its like-for-like sales growth target of 2%-3%. (Shares were +2. 2% in early trading). Cap Gemini [CAP.FR] reported 1H net income of ÔéČ231M, above the ÔéČ181M consensus, and operating profit of ÔéČ288M, up from the ÔéČ228. 5M a year ago. 1H booking were +3.9% y/y atÔéČ4.3B +3.9% y/y. Cap Gemini maintained its FY08 operating margin target of 8.5%. (Shares were -3.0% in early trading). Solvay [SOLB.BE] reports 1H net income of ÔéČ351M, below the ÔéČ390.0M consensus, and revenue of ÔéČ4.73B, just below the ÔéČ4.78B consensus. Solvay forecasted FY08 results below FY07 levels. (Shares were -9.5% in early trading). BASF [BAS.GE] reported Q2 net income of ÔéČ1.3B, below the ÔéČ1. 5B consensus. Pretax of ÔéČ2.3B was ahead of estimates of ÔéČ2.05Be, while EBIT of ÔéČ2.36B was below estimates of ÔéČ2.88Be. Rev was strong at ÔéČ16.3B, notable ahead of the ÔéČ15.5B consensus. BASF expects to post a slight y/y rise in FY08 EBIT. (Shares were -0.5% in early trading). SolarWorld [SWV. GE] reported Q2 net income of ÔéČ51.8M, above the ÔéČ41.7M consensus, and EBIT of ÔéČ75.7M, above the ÔéČ62M consensus. Revenue of ÔéČ259.2M exceeded the ÔéČ229M forecast. SloarWorld expects to exceed previously issued sales forecasts for FY08. (Shares were +1.5% in early trading). Unilever [UNA.NV] reported Q2 net income of ÔéČ909M, just below the ÔéČ914.5M consensus. Pretax at ÔéČ1.35B was in line with estimates, while revenue of ÔéČ10.37B was below estimates of ÔéČ10.66B. Unilever expects to post FY08 growth in excess of the 3%-5% target, and noted that it lost market share to other brands in France and Spain in Q2. (Shares were -5.2% in early trading). Royal Dutch Shell [RDSA.UK] reported Q2 net income of $11.56B, well above the $8.38B consensus, while revenue of $131.4B, above the$114.3B seen in the prior quarter. (Shares were +1.1% in early trading). British American Tobacco [BATS.UK] reported Q2 net income of ┬ú650M, above the ┬ú622M consensus and operating profit of ┬ú917M, in line with estimates. Pretax of ┬ú967M was in line with estimates, while revenue of ┬ú2.92B, was above the ┬ú2.84B consensus. BATS noted that the company is not immune from the effects of an economic slowdown, but said that it can look ahead with more confidence than most companies. (Shares were +1.1% in early trading). Continental [CON.GE] reported Q2 net income of ÔéČ194.3M, above the ÔéČ160M consensus. Revenue of ÔéČ6.61B was roughly in line with the ÔéČ6.68B consensus, while EBITDA of ÔéČ890.8M was up from the ÔéČ650M a year ago. Continental said that its FY08 goals are firmly in sight but are becoming more difficult to achieve. The company maintained itsFY08 revenue target of ÔéČ26.4B, whish is below the ÔéČ26.7B consensus. (Shares were flat in early trading). TDK [6762.JP] offered to acquire Epcos [EPC. GE] for ÔéČ17.85/share in cash. The total value of the proposed deal is ÔéČ1.2B. The offer represents a 28.6% premium to yesterday's closing price. (Shares were +27.5% in early trading).
┬ĚThe USD started off the European session on a soft tone as Wednesday's crude oil rally slowly ebbed away recent bullish momentum. However, the USD steadied itself as both oil and gold retreated from their opening highs. FX dealers noted good Euro demand from Eastern European names in the early part of the European session. In the JPY related pairs, dealers noted that Japanese investors purchased notable amounts of AUD and NZD, yet those crosses were unable to capitalize on the flows.
┬ĚOn the speaker front the Bank of England's Besley said that once inflation is out of control it is very difficult to bring it back. Besley added that interest rates are mildly restrictive but are justifiable given the inflation outlook. Regarding his decision to vote for a rate hike at the previous policy-setting meeting Besley said that he sought to take pre-emptive action on rates in order to avoid sustained period of above target CPI. Besley said that he is pleased that oil prices have declined but added that we cannot breathe a mighty sigh of relief yet. The ECB's Quaden said overnight that medium-term inflation expectations are anchored around the ECB's targets. Quaden asserted that the Euro protects members against the financial crisis. The ECB's Wellink reiterated that the ECB must ensure that inflation expectations do not change. Wellink added that it must be clear that the ECB is on guard against rising inflation expectations. Swedish think tank NIER said overnight that Swedish GDP growth will be ÔÇťwell belowÔÇŁ 2.0% in 2009.
┬Ě*** NOTES ***
┬ĚAs one might expect the trend in economic data continued overnight. Swiss CPI rose to its highest y/y level since November of 1993. In Spain, preliminary harmonized CPI rose to its highest y/y level since the series began in January of 1997. The Euro-Zone CPI estimate was the highest since records began in November of 2001. Italian CPI rose to its highest Y/Y level since records began in January of 1997. Nationwide house prices in the UK declined to their lowest y/y level since records began in January of 1992. Swedish consumer confidence fell to its lowest level since May of 1995, while manufacturing confidence declined to its lowest level since Q2 of 2005. On a different note, but in similar fashion, ECB speakers maintained the trend guarding as they guarded the ECB's price stability mandate.
┬ĚÔÇťIt is always the same: once you are liberated, you are forced to ask who you areÔÇŁ - Jean Baudrillard
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