Forex Blog - European Market Update: Thinning conditions continue to give rise to fresh volatility in currencies; Honda wants Japan to halt JPY appreciation; S&P downgrades 12 major banking institutio
European Market Update: Thinning
conditions continue to give rise to fresh volatility in currencies; Honda wants
Japan to halt JPY appreciation; S&P downgrades 12 major banking
institutions long term debt ratings
*** ECONOMIC DATA ***
- (DE) Danish Central Bank cuts rates by 50bps to 3.75%, Not Expected
- (VN) Vietnam Central Bank cut interest rates by 150bps to 8.5%, not expected
- In equities: S&P downgraded 12 major banking institutions debt to to AA-
from AA including GS, MS, C, WFC, BAC, UBSN.SZ, HSBA.UK, RBS.UK, DBK.GE || UBS
[UBSN.SZ] Swiss national Bank (SNB) took over the first trance of assets from
UBS for stabilization fund valued at $16.4B as of Sept 30. The SNB noted that
assets mainly comprised of US and European residential and commercial backed
mortgage securities || ABB [ABBN.SZ] ABBN.SZ: Remains in strong financial
position and reaffirms FY08 targets despite lower order intake in Q. It saw a
lower order intake for October and November reflects weak market, lack of
funding, volatile commodity prices and reduction of CAPEX expenditures by the
customers. Spokesperson stated that it could not rule out the possibility of
job cuts; have not seen significant order cancellations || Roche [ROG.SZ] Phase
III Study Showed Rituxan Decreased the Progression of Joint Damage in Patients
with Early Rheumatoid Arthritis. Secondary endpoints showed a significantly
higher proportion of patients with a substantial improvement in RA signs and
symptoms || UCB [UCB.BE] Received FDA complete response letter for NEUPRO to
treat advanced Parkinson's disease. FDA concluded that there was substantial
evidence of effectiveness of Neupro in patients with advanced Parkinson's
disease and in patients with RLS. However, UCB needs to first resolve the issue
of crystal formation in the patches. || Arpida [ARPN.SZ] Published top-line
data of phase II data for oral iclaprim || Antisoma [ASM.UK] Receives FDA
approval for oral fludarabine, plans commercialization deal to bring drug to US
patients || Thales [HO.FR] Dassault Aviation signed a definitive deal to
acquire Alcatel-Lucent stake in company || ASM Intl [ASMI] Signed Licensing
Agreement with Tokyo Electron For Atomic Layer Deposition Technology || Hunting
[HTG.UK] Guided FY results in line with previous expectations || Natixis
[KN.FR] Firm cutting 840 positions (4% of global workforce). It would
accelerate restructuring and cost cutting operations but added it would not
break up firm or make alterations to current board of directors || Bang &
Olufsen [BOB.DC] Guided its FY08/09 Pretax loss DKK 260-380M compared to
expectations of a profit DKK115.2M. Revenues were guided lower to a range of
DKK3.1-3.3B versus consensus expiations of DKK3.74B. Company noted that revenue
expectation not meet in Nov to Dec period. And would implement a cost cutting
program. || Husqvarna [HUSQB.SW] Sated that it saw Q4 earnings substantially
lower y/y due to lower volumes and sales. The company noted that it would Deepens
its planned job cuts citings costs and weakened demand. It now plans to
eliminate 960 job cuts (6.4% of workforce) above the 850 previously announced
|| RWE [RWE.GE] To invest â‚¬2.8B in 1000 MW in off-shore wind park off German
North Sea Coast || Enel [ENEL.IT] Italian press Reports that company is to
receive â‚¬1.5B in grid sale from Terna || Lanxess [LXS.GE] To delay some
investment projects due to declining demand for chemical products globally;. It
reaffirmed its FY EBITDA in a range of â‚¬710-730M versus expectations of â‚¬701M.
|| RBS [RBS.UK] To cut roughly 70 Asian investment banking jobs (less than 1%
of workforce) || Grupo Ferrovial [FER.SP] Studying possible merger with sister
companies including Cintra unit || Hypo Real Estate [HRX.GE] German press
report that company was planning restructuring which would eliminate one third
of workforce ||
- Speakers: BOJ's Shirakawa stated that a Strong JPY hurts economy in the short
term but added that he was not singling out strong JPY in overall economic
view. Recent, measures announced are not a return to quantitative easing but
today's interest rate cut of 20bps to 0.1% level was warranted by rapid
worsening market conditions during the past several months. He added that could
not rule out future interest rate cuts || Econ Min Yosano noted that today's
BOJ rate cut was a bold move which reflected Japanese commitment to
international cooperation in fighting current economic crisis. BoJ purchasing
of commercial paper to boost corporate funding until 2009. he added that the
rate cut unlikely to improve banks' lending attitude. || Press speculation that
considering a new â‚¬40B stimulus package. German comment noted that it had not
made a decision on the size of the second stimulus package || Russia's Dep
Energy Minister noted that the government was drafting a RUB146B rescue package
for state utilities. Funding for package to come from budget, state banks and
the issuance of Bonds. He added that utility companies should reduce CAPEX by
20% || German Upper House approved 2009 budget || Ukraine Central Bank stated that
the Government polices are pushing country into default
- In Currencies: thinner conditions continue to give rise to fresh volatility.
The USD continued its rebound from multi-month lows against the European pairs.
The moved was underway after the ECB announced a reduction in its deposit rate
and increase in marginal lending rates on Thursday. Dealers noted that move by
the ECB was viewed to discourage Euro-Denominated deposits. The USD received
additional momentum after the Danish Central bank unexpectedly cut its interest
rates by 50bps in today's session. European selling against the JPY-related
pairs also a factor in today's price action. Dealers testing BOJ resolve after
Gov Shirakawa noted that he was not singling out strong JPY in overall economic
view. EUR/USD tested 1.3990 level during the European morning after testing its
200-day moving average of 1.4705 on Thursday ||SNB took over the first trance
of assets from UBS || Lots of discussion on the â€śtriangleâ€ť formation on the
EUR/AUD daily chart. Dealers watching to see if the recent breakout suggests a
sizeable trend move || Honda Motor Co [HMC] CEO stated that the Japanese
Government needs to take action to halt JPY appreciation. Honda hoping to
remain in positive numbers in FY09 even is dollar remains at ÂĄ90 level ||
USD/CAD saw the USD rally towards the 1.24 area during the European morning.
Weaker gold and steady oil prices cited for soft CAD sentiment. Canadian CPI
data due out later today as well.
-In Fixed Income: The JGB 10y cash yield plunged to 1.21% its lowest lever
since 2005, after Japan's
unexpected rate cut, and hints at JGB purchases from the BoJ. The March futures
contract rallied over 14 ticks to close in positive territory at 139.71. Trade
in European fixed income has been characterized by light volumes this morning,
with higher yields across curves in both Germany
and the UK . A
mid-morning collapse in the short end of the UK
yield curve - with short sterling futures moving 100 ticks in a matter of
minutes - was being attributed to sticky fingers, however an investigation by
Liffe has cleared all trades.
- In Energy: OPEC Pres Khelil state that he believed oil price has 'found'
floor. He added. OPEC will review oil market again in Jan during its Kuwait
meeting || Saudi Oil Minister noted that Saudi
Arabia would pump less oil in January at new
quota levels. Current price levels are causing havoc on industry investment
noting that non-fundamentals are still greatly influencing prices. Reiterates
that $75/bbl is fair and reasonable price. Lastly he saw the need for all
viable means to accommodate future global needs || UK
PM Brown stated that price volatility remained biggest challenge on oil adding
that high prices had caused significant economic damage. Producers would need
to invest in oil capacity and that the global market crisis demand
international response ||
*** NOTES ***
- The chatter has been focused on the pending option expiration set for today.
Overall sentiment for equities seems 'bleak' once the December expirations out
of the way. Bearish sentiment fixated on the recent S&P revision of GE's
outlook to negative and Moody's downgrade of Citigroup's senior debt. S&P
downgraded 12 major banking institutions debt to â€śAA-â€ś from â€śAAâ€ť. Hopes that
perhaps President Bush's plan for automakers could be unveiled at some point on
Friday. The State level of financial affairs was also on the radar after
lawmakers in California passed a
package to lower the state's budget gap by $18B over the next year and a half.
Dealers wondering if California is heading towards â€śfinancial Armageddonâ€ť and
what State would be nextâ€¦
- Lastly in the â€śraceâ€ť to ZERO interest rates, the BOJ moves ahead after
cutting by 20bps to 0.1%. Honda'a chief telling Japan
to address JPY appreciation, thus possible intervention scenarios playing out
in dealers' mindsâ€¦
- 7:00 (CA) Canadian Nov CPI: M/M consensus expectations are -0.8%; The prior
number was -1.0%. Y/Y Consensus expectations are 1.5%; The prior number was
- 7:00 (CA) Bank of Canada
CPI Core: M/M consensus expectations are -0.1% ; The prior number was -0.2%.
Y/Y Consensus expectations are 1.6%; The prior number was 1.7%.
- 9:00 (BE) Belgian Dec Consumer Confidence: There are no consensus
expectations; the prior number was -22.0
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