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Forex Blog - European Market Update: German Unemployment Continues its Decline
┬Ě*** DATA ***
┬ĚGE July Unemployment Rate: 7.3% v 7.3% || Prior revised from 7.3% to 7.4%
┬ĚUK Aug Nationwide House Prices: M/M -1.9% v -1.5%e || Prior revised from -1.7%
to -1.5% |||| Y/Y -10.5% v -9.6%e
┬ĚSP Aug Preliminary Harmonized CPI Y/Y; 4.9% v 5.2%e
┬ĚSP June House Transactions Y/Y: -29.6% v -34.3% prior
┬ĚSP June Mortgages on Houses Y/Y; -37.7% v -36.2% prior
┬ĚSP June Mortgages-Capital Loaned: -37.0% v -36.5% prior
┬ĚSZ Q2 Employment Level: 2.4% v 2.1%e
┬ĚSW Jul Retail Sales: M/M -0.5% v -0.5%e || Y/Y 1.3% v 1.4%e
┬ĚIT July PPI: M/M 0.5% v 0.5%e || Y/Y 8.3% v 8.4%e
┬ĚEU July M3 Y/Y: 9.3% v 9. 0%e
┬ĚEU July M3 3-Month Average: 9.6% v 9.5%e
┬ĚBE Aug CPI: M/M -0.61% v 0.53% prior || Y/Y 5.39% v 5.91% prior
┬Ě*** SPEAKERS/FIXED INCOME/FX/COMMODITIES/ERRATUM ***
┬ĚAhold [AH.NV] reported Q2 net income from continuing operations of ÔéČ177M above
estimates of ÔéČ169M, and operating income of ÔéČ235M, below the ÔéČ247M consensus.
Revenue of ÔéČ5.8B, was just above the ÔéČ5.74B estimate. Ahold guided their FY08
operating margin at 4.8%-5.3%. [Shares were -4.4% in early trading]. Accor
[AC.FR] reported 1H net income of ÔéČ310M, above the ÔéČ275M consensus, and pretax
of ÔéČ393M, just below the ÔéČ398.6M consensus. Accor guided FY08 pretax of
ÔéČ910-ÔéČ930M, below the ÔéČ943.5M consensus. [Shares were -3.2% in early trading].
Credit Agricole [ACA.FR] reported a Q2 operating loss of ÔéČ263M, down from a
profit of ÔéČ1.52B a year ago. Net income of ÔéČ76M was below the ÔéČ126M consensus,
while revenue of ÔéČ3.15B was down from ÔéČ5.27B a year ago. Credit Agricole noted
a H1 monoline impact of ÔéČ1.34B on net income. At June 30th the company's Tier 1
ratio of was 8.9%, while the Core Tier 1 ratio was 6.5%. [Shares were -0.5% in
early trading]. Swiss Life Holding [SLHN. SZ] reported 1H net income of
CHF1.64B, below the CHF1.84B consensus. Swiss Life had net earned premiums of
CHF8.56B, up from CHF8.4B a year ago, and gross premiums of CHF10.9B, down from
CHF12.3B a year ago. Swiss Life said that it will not meet its FY09 EPS target
without a buyback. [Shares were - 9.4% in early trading]. GFK [GFK.GE] reported
Q2 net income of ÔéČ22.2M v ÔéČ19.3M a year ago, and revenue of ÔéČ321.6M, above the
ÔéČ292.4M consensus. GFK raised its FY08 revenue growth forecast to 6% from 5%.
[Shares were +1.7% in early trading]. Casino Guichard Perrachon [CO.FR]
reported 1H net income of ÔéČ229M, above estimates of ÔéČ215M, operating income of
ÔéČ525M, below estimates of ÔéČ542Me, EBITDA of ÔéČ863M in line with the ÔéČ864M consensus,
and revenue of ÔéČ13.8B, in line with estimates. Casino confirmed its FY08
targets. [Shares were -0.3% in early trading]. Carillion [CLLN.UK] reported 1H
net income of ┬ú53.6M, up from the ┬ú33.7M a year ago, pretax of ┬ú27M, up from
the ┬ú19M a year ago, and revenue of ┬ú2.4B, above the sole estimate of ┬ú2.24Be.
Carillion reaffirmed their FY08 guidance, and noted that it will have
materially enhanced earnings in 2009. [Shares were +0.8% in early trading].
Pendragon [PDG.UK] reported 1H net income of ┬ú13M, down
form ┬ú28M a year ago, pretax of ┬ú21.1M, down from ┬ú33.5M a year ago, and
revenue of ┬ú2.48B down from ┬ú2.7B. [Shares were +2.9% in early trading]. Diageo
[DGE.UK] reported FY08 net income of ┬ú1.52B, in line with the ┬ú1.56B consensus.
Pretax was ┬ú2.09B, below the ┬ú2.19B consensus, while revenue of ┬ú8.09B was in
line with estimates of ┬ú8.05Be. Diageo guided FY09 operating profit growth of
7%-9%, and double digit reported EPS growth. [Shares were - 0.75% in early
trading]. AMEC [AMEC.UK] reported 1H pretax of ┬ú90.4M, up from ┬ú66.9M a year
ago, and revenue of ┬ú1.26B, up from ┬ú1.15B a year ago. AMEC guided their FY08
EBITDA margin at 6.5%. [Shares were +0.8% in early trading]. Premier Foods
[PFD.UK] reported 1H net income of ┬ú1.3M, up from the ┬ú10.2M a year ago, pretax
of ┬ú3.6M, up from ┬ú5.1M a year ago and revenue of ┬ú1.29B up from ┬ú899.1M a year
ago. Premier reiterated its FY08 outlook. [Shares were -3.3% in early trading].
┬ĚIn energy news overnight the Venezuelan Energy Minister said that OPEC should
cut production or maintain current output levels at the September meeting. The
UAE Central Bank Governor said overnight that he expects oil prices to fall as
the global economy slows.
┬ĚAccording to an article in the Financial Times Deutschland the Fed, the ECB and
other major central banks are seeking to make it easier to access liquidity
during times of emergency. The plan could allow European banks to have access
to funds from the Fed in return for securities denominated in euros as
currently, central banks only accept securities in their own currency.
┬ĚIn new supply overnight Italy sold ÔéČ4.0B in 4.25% 2011 bonds with an
average yield of 4. 51% and a bid-to-cover of 1.4x, as well as ÔéČ2.5B in 4.50%
2018 bonds with an average yield of 4.76% and a bid-to-cover of 1.5x, and ÔéČ2.0B
in 2015 floating rate notes with an average yield of 4.86% and a bid-to-cover
of 2. 04x. In fixed income related news overnight, S&P release a report
that said that the second quarter performance in the German RMBS market was
solid. The report said that "the overall performance of the German
residential mortgage-backed securities (RMBS) market has been broadly soundÔÇŁ.
The report noted however that, "despite this solid performance, some
transactions reported higher losses, or registered a loss for the first time.
Our total delinquency index remains at 3%; some strongly performing pools which
had significant weight in the index have recently been removed, following
regulatory calls related to the introduction of Basel II, and this has placed upward
pressure on the index. "
┬ĚIn currencies the USD was mildly softer during the European session as higher
oil prices weighed upon sentiment with tropical storm Gustav approaching the
Gulf of Mexico. Currency showed little reaction to German labor and M3 data,
which beat expectations. The GBP/USD rebounded from earlier lows of 1. 8325 as
UK Nationwide Housing data continued to suggest softness in the UK economy. Carry related crosses were
softer as Equity markets remained in negative territory.
┬ĚOn the speaker front the Norwegian stats agency raised their 2008 non-Oil GDP
growth forecast to 3.1% from 2.9% overnight, and cut its 2009 forecast to 1.7%
from 1.9%. The stats agency forecasted 2008 Core CPI 2.6%, up from its previous
forecast of 2.5%, and raised the 2009 forecast to 2.5% from 2.3%. Furthermore
the stats agency left its 2008 wage growth forecast unchanged at 6.0%, and
raised the 2009 forecast to 5. 0% from 4.8%. The stats agency said that
Norwegian interest rates have peaked, adding that they expected lower interest
rates in 2009.
┬Ě*** NOTES ***
┬ĚMuch of the focus overnight fell upon the Euro-Zone M3 money supply. Money
supply was above expectations, but declined from the prior month's readings,
which muted any major market reaction. The German unemployment rate, which
declined to its lowest level since May of 1992, also drew some attention
overnight. Despite the above, following yesterday's comments from a number of
ECB members, it appears that any chance of a rate hike in 2008 is off of the table.
As the ECB continues to focus on second round inflation effects, specifically
wages as oil prices have come off of recent highs, the question has become
'when will the ECB cut rates if they do in fact decide to do so?'
┬ĚÔÇťEven if what you're working on doesn't go anywhere, it will help you with the
next thing you're doing. Make yourself available for something to happen. Give
it a shot.ÔÇŁ - Cormac McCarthy
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