Forex Blog - European Market Update: Competitive devaluation concerns rise in currencies; Equities recover from opening level weakness on vague chatter that US Treasury has 'secured' additional capita
European Market Update: Competitive
devaluation concerns rise in currencies; Equities recover from opening level
weakness on vague chatter that US Treasury has 'secured' additional capital to
inject into banks
*** ECONOMIC DATA ***
(JP) BOJ keeps interest unchanged at 0.3%, as expected; To accept wider range
of collateral for money market operations
- (NO) Norway Q4 Consumer Confidence: -13.3 v 5.5e
- (SZ) Swiss Nov CPI M/M: -0.7% v -0.2%e; Y/Y: 1.5% v 2.0%e
- (BZ) Brazil Nov FIPE CPI - Monthly: 0.39% v 0.50%e;
- (SP) Spanish Unemployment Rate: 171.2K v 170ke
- (UK) Nov PMI Construction: 31.8 v 33.5e, lowest reading on record
- (EU) Euro-Zone Oct PPI M/M: -0.8% v -0.3%e; Y/Y: 6.3% v 7.0%e
- (BZ) Brazil Oct Industrial Production M/M: 0.8% v 3.5%e; Y/Y: -1.7% v 0.0%e
-Equities: Swiss Life [SLHN.SZ] Provided interim management statement in which
it announced that it would focus on international life and pension market. It
stated that it reduced its balance sheet risk and would publish new targets at
end of Q1. The company reiterated it would not reach its previously announced
2008 or 2009 targets but assured its liquidity position was comfortable. Its
AWD Unit targeted sales of â‚¬1B by 2012 and an EBIT of â‚¬130M by the same
period.|| BMW [BMW.GE] Names Friedrich Eichiner as CFO, effective immediately
|| Euler Hermes [ELE.FR] Revised its FY08 Net forecast to â‚¬100-110M versus
consens estimates of â‚¬197.3M. It cited that its current environment was
deteriorating|| GDF Suez [GSZ.FR] CEO stated that future projects could be
delayed due to current financial conditions and cited the difficulty in
obtaining credit. He added that the environment was not changing plans to
invest â‚¬30B over three years
|| Intertek [ITRK.UK] Acquired Eko-laboratory for PLN15.1M (Â£3.3M) || Vedanta
[VED.UK] Announced $250M share buyback (10% of the market cap) || Tesco
[TSCO.UK] Reported Q3 UK SSS ex gas +2% v +1.6%e; maintaining strong
businesses. Company stated it would cut CAPEX below Â£4B in 2009. It noted that
the firm could comfortably cover financing needs in 2009 adding that ther are
no significant bond maturities in that time frame. It remained on track for
substantial program of international openings. The CFO noted that good volume
growth has been seen; discount brands have driven deflation into industry. The
executive noted that customers have been very cautious since Sept || Thomas
Cook [TCG.UK] Reported FY08 Op Profit Â£365.9M versus estimates of Â£391.1M. It
revenues wrere Â£8.8B below the consensus estimates Â£10.44B. The CEO noted that
current trading is in line with our expectations. Recent research and the high
load factors we are currently experiencing give us confidence that consumers
remain intent on taking their holidays. || Game Group [GMG.UK] Reported YTD (44
week) Revenues were up27.4% y/y, while like-for-like sales were 11.2% higer
compared to levels a year ago. || Alcatel [ALU.FR] Signed contract for
modernization projects of CDMA network with China Telecom valued at â‚¬230M ||
Wavecom [AVM.FR] Sierra Wireless Agreed to Acquire Wavecom in Friendly Deal
with an all cash offer of â‚¬8.50 per ordinary share of Wavecom || Man Group
[EMG.UK] CEO stated that he expected current volatility levels to remain high
and added that the future looked 'quite bleak' for some fund-of-funds. He did
see capital returning to hedge funds beginning in Q2 2009 but the industry
would manage less money in 2009 compared to levels a year ago. Bank
deleveraging continues to be largest driver of equity declines
- Speakers: BOJ's Shirakawa stated that the BOJ was mindful of risks of
additional rate cuts which could hinder money markets but added that the Japan
financial markets were more stable relative to those in the US and Europe. The
decline in economic conditions are less severe compared to the Asian crisis of
1997-98 period. He anticipated BOJ ability to provide Â¥3T in new commercial
paper operations by end 2008 and noted the new measures would help corporate
financing as financial conditions have become less accommodative. Thus new
measures announced at BOJ meeting earlier today will increase market liquidity.
The BOJ wouldl watch Dec. Tankan and market response as indicator of economy's
performance|| German Fin Min Steinbrueck stated that the Euro Zone economy was
'in recession, not poised for collapse'. He did note that mistrust remains
dominant between banks. || Norges Bank stated that it would continue its
extraordinary measures and noted that the outlook for financial stability has
deteriorated. The central bank added that financial uncertainty remained
unusually high and that tighter bank credit could worsen economic downturn
||Thai Court reportedly says that the ruling PPP party is dissolved. The PPP is
the party of the PM. || Swedish Fin Min noted that its domestic economy is on
course for difficult time and that the EU needs to restore credit channels ||
Swedish Fin Min Borg noted that domestic economy was on course for difficult
times and that the EU needed to restore credit channels and rethink guarantees.
- In Currencies: Initially euro crosses adding weight on the USD pairings.
EUR/USD tested 1.2565 area after European indices followed the Asian market
equity market futures were also in the red early on, but have since recovered
losses to trade highs on vague chatter that the US
tsy may have 'secured' additional funding to inject into banks. EUR/USD
recovered the 1.2670 level. The CNY weakened foir a second straight session
against the USD prompting speculation that the PBoC might have amended its
currency stance. However, unconfirmed Chinese sources stated that the recent
Yuan FX weakness was not a shift in the policy and that currency stability was
needed during times of potential global recession. Dealers noting that US Tsy
Sec Paulson will visit Beijing
later this week and he will make the case for a strong CNY. UK
press all over the recent speculation that the UK
might re-join the EMU. The Telegraph summed it up as best to leave the Euro
currency to its own devices and that joining the Euro would make the UK
situation worse. Dealer chatter of notable knock-out optiuon building in the
USD/JPY at the 90.00 level.
- Fixed Income: Early strength in Bunds saw yields on comparable Italian BTP
and French OAT's reaching their widest levels over Bunds since 1999. In Gilts,
the 2y (1.943%) and 5y (2.964%) were at hit their lowest yields since 1992
ahead of the supply. The UK sold Â£2.25B of the 4.25% 2049 Long Gilts, with an
avg yield 4.74%, and a healthy bid-to-cover of 2.12
- Energy: Russia Oil Min: Russia Nov oil exports fell to 3.70M bpd v 4.21M bpd
m/m || Iran to reportedly hold a naval exercise in the Gulf of Oman starting on
- Commodities: pressure on commodities continued during the early portion of
the European morning as NYMEX crude tested $47.50 and gold dipped towards the
$760/oz area. Weakness was attributed to comments made on Monday that
'confirmation' that the U.S.
first entered a recession back in December 2007. Commodities were edging towards
the upper end of the session range as equity markets rebounded from opening
- Credit Crisis: WSJ reported that Goldman is now likely to report a net loss
of as much as $2B for its quarter ended Nov 28; The loss could be as much as
$5.00/share || JP Morgan analysts note that European equities offer 'best
potential in 2009' . The analyst noted that the 2009 US
recession could be as severe as those of 1973-75 and 1980-82 periods. Lastly
the analyst noted that next year could experience a deep global recession
- Equities rebounded from opening level lows in Europe.
Some vague chatter circulating that US Tsy Sec Paulson had secured an
additional $150B of capital to inject into banks. The Australian Central bank
cut more than expected at its policy meeting with a 100bps move to 4.25% (75bps
was expected). Market took notice of back-to-back daily limit declines in the
Chinese currency rate (CNY). However, an unnamed source noted that the PBoC has
not altered its policy at this time. However, Paulson will visit china later
this week. Australia
cut by 100bps, more than the 75bps expected. BOJ left rates unchanged at 0.3%
in their emergency meeting but widened the range of accepted collateral for
money market operations to ensure adequate liquidity needs into calendar and
fiscal year end.
- Looking Ahead:
- (SI) Singapore
Oct PMI. Consensus expectations are 44.0; The prior number was 45.8.
- (US) Nov
Total Vehicle Sales. Consensus expectations are 10.5M; The prior number was
- 11:30 (US) Treasury Sec Paulson to speak in Washington on U.S- China
Strategic Economic Dialogue
- 12:30 (US) Philadelphia Fed's Plosser to speak in Rochester
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