Forex Blog - European Morning Update: ECB's Liikanen says Zero interest rates not necessarily a solution to credit crunch and deflation; Gold moves above $920/oz on speculation that Chinese funds are
Morning Update: ECB's Liikanen says Zero interest rates not necessarily a
solution to credit crunch and deflation; Gold moves above $920/oz on
speculation that Chinese funds are being told to avoid U.S. Treasury's; Russia
Central Bank vows that Ruble will maintain its ceiling of 41 in basket
*** ECONOMIC DATA ***
- (IN) India Q1 Annual GDP 9.0% v 9.6% prior
- (HK) Hong Kong Dec M2 Money Supply Y/Y: -1.35 v -12.1% prior
- (SP) Spain Nov Current Account: -ÔéČ8.5B v -ÔéČ7.5Be
- (SP) Spain Jan Preliminary CPI - EU Harmonized Y/Y: 0.8% v 1.1%e
- (IT) Italian Retailer's Confidence: 95.5 v 88.7 prior; Services Survey: -30 v
- (IT) Italian Nov Large Company Employment Y/Y: -1.0% v -0.6% prior
- (NO) Norway Dec Retail Sales M/M: 0.1% v -1.0%e; Y/Y: 0.2% v-0.6%
- (CZ) Czech Dec Money Supply: 6.5% v 7.9% prior
- (UK) Dec Net Consumer credit: ┬ú0.3B v ┬ú0.7Be; Net Lending: ┬ú1.9B v ┬ú0.6e
- (UK) Dec Mortgage Approvals: 31K v 26ke
- (UK) Dec Final M4 Money Supply: M/M: 1.4% v 1.7% prior; Y/Y: 16.1% v 16.6%
- (IT) Italian PPI M/M: -1.3% v -1.2%e; Y/Y: 0.6% v1.0%e
- (EU) Euro-zone Jan CPI Estimate: 1.1% v1.4%e; lowest since July 1999
- (EU) Euro-zone Unemployment Rate: 8.0% v7.9%e; highest since Oct 2006
- Equities: Honda Motor [HMC] Reports Q3 net profit ┬ą20.2B compared to ┬ą200B
y/y || Kuoni [KUNN.SZ] Guided FY08 Rev CHF4.86B versus 4.96B estimates. It
announce that it would reduce its workforce and initiates 3-year CHF106M
investment and cost reduction program. || Roche [ROG/sz} Reduced offer for
Genetech [DNA] to $86.50/share in cash for the company from $89/shr prior ||
Kloecker [KCO.GE] Reported Q4 Operating loss of ÔéČ65M. It FY08 revenues were
ÔéČ6.70B slightly below the ÔéČ6.84B consensus estimates. It noted that it was
impossible to issue guidance for 2009. || Misys [MSY.UK] Reported H1 Adj Op
profit ┬ú36M versus ┬ú35M y/y. its revenues were ┬ú280M compared to ┬ú230M y/y.
Company was conscious of the difficult environment, but remained optimistic
that it would achieve full year targets. || Porsche [PAH3.GE] CEO stated that
H1 Rev ÔéČ3B which was lower by 14% y/y as Car sales plunged by 27% to at 34K
units. CEO gave no current FY outlook. Company targeted to increase 50.76% stake
in Volkswagen to 75% throughout 2009 depending on economic circumstances ||
Close Brothers [CBG.UK] Provided trading update in which its FY08 AUM was ┬ú7.1B
compared ┬ú7.0B from prior quarter. It noted that the businesses have faced
increasingly challenging and unpredictable trading conditions; but expected to
benefit from a particularly strong performance in our Securities division ||
Banco Popular [POP.SP] Reported Q4 Net of ÔéČ92.6M below consensus of ÔéČ235M. its
FY08 Net ÔéČ1.05B versus ÔéČ1.17B expectations. It was not considering a capital
increase, to continue paying dividends but will not increase payout || Dexia
[DEXB.BE] Announced transformation plan in which it would book net loss of
about ÔéČ3B in 2008. it also announce that it planned to cut 2008 dividends and
eliminate 900 jobs (about 2.5% of workforce) || Lufthansa [LHA.GE] Reportedly
Cargo Unit strikes an agreement with employees to shorten work week, impacting
2.6K jobs in Germany || Renault [RNO.FR] CEO commented that he saw 2009
Industry car sales down by 14% to 55M units; will be a 'tough' year. He did
note pent up demand was strong in emerging markets. Coordinated support needed
for European auto makers
- Speakers: ECB"s Liikanen: GDP in developed countries to contract
considerable; Zero interest rates not necessarily a solution to credit crunch
or deflation. He noted that the deflation risk was smaller in Europe
than in US. Deflationary expectation would be detrimental || SNB's Roth noted
that the central bank still has the ability to support economy in comments from
a newspaper interview. He stated that Swiss banks are among the 'best
capitalized banks in the world' but acknowledged that they could face trouble
if global economy continued to deteriorate || German Fin Ministry expected the
recession to continue for the time being and noted that the job market
situation would deteriorate further in next few months. He noted that
deflationary trends should not be feared as a slowdown of core inflation was
not expected || Russian Central Bank's Ignatyev stated that he would not allow
ruble to fall beyond 41 to the basket and would use currency intervention of
other monetary tools if necessary ||RBNZ's Bollard: Sees additional room for
rate cuts and capacity for cash injection; Expects economy, households, and
exports to remain weak through 2009 || Japan MoF: Confirms that did not
intervene in the currency markets during January || US Econ Advisor Tyson
stated that the Obama administration sought to incresase economic growth in H2
with a front loaded stimulus package. US does not plan long-term
nationalization of banks || Swiss KOF: Jan Banking indicator hits lowest level
since survey began back in 2000
- In Currencies: The USD was mixed against the major pairs. The EUR/USD tested
below the 1.2900 level ahead of the European morning as vague rumors circulated
that perhaps Greece might withdraw from EMU this weekend. The yield on
Greek 10y closed at 247bps over Bund on Thursday, which was below the record
300bps touched on 26th of Jan. ECB's Trichet commented on Thursday that there
was no chance of an EMU breakup. The Russian Ruble weakendabove 40 against the
basket but remained within recently expanded ceiling of 41. The Russian Central
Bank'head Ignatyev was vocal in noting that the Ruble weakness would not go
beyond the 41 to the basket and vowed that it would use currency intervention
and other monetary tools to ensure that task. Ahead of the NY morning the
EUR/USD tested 1.2835 following the lower Euro-Zone CPI estimate and the 8.0%
- the GBP was firmer against the USD and Euro pairs. BOE's Blanchflowwer
commented on Thursday that he wasÔÇŁBullish on the poundÔÇŁ and saw it as
undervalued. EUR/GBP moving below the 0.90 level while GBP/USD probed around
the 1.43 handle. The UK mortgage approval data also aided the GBP's cause in
the session with its better reading in December.
- Note that the USD was modestly steady to firmer despite the higher gold
prices. Spot Gold broke above the "key" $920/oz level as dealer
chatter suggested that strong gold demand being attributed to speculation that
Chinese funds are being told to avoid U.S. Treasury's
Reportedly Eurozone seeks that the new US administration to get more involved on currency
policy at G7 meetings. The 'source' noted that EU sought to avoid strong
fluctuations in FX and keep FX markets calm during times of crisis. It also
stated that currency intervention was unlikely; but more cooperation between
the US and the Eurozone group could help reduce volatility
- Fixed income: In fixed income the German yield curve has exhibited a
steepening bias this morning, with the long end of the curve selling off in
response to yesterday's disappointing T-Note auction and the short end rallying
in response to weak CPI and unemployment figures. Better than expected mortgage
lending data has eased some of the pressure on Gilts which solidified yesterday
after the UK's own weak auction, and expected supply next week, but yields are
still higher across the curve , with March Gilts down 30 ticks at 117.30 at the
time of writing.
- In Energy: OPEC Sec Gen El Badri reiterate sit wopuld cut output further at
its March summit if market was not balanced. He again urge non-OPEC oil
producers to lower supply if current OPEC cuts fail to balance the oil market
|| IEA's Tanaka: Turkey is an important strategic transit route, notes
stability in Middle East is important for investors. NYMEX Mar crude was off
0.30 to move towards $41.oo level.
- Credit Crisis: JP Morgan analyst: Forecasts German banks to take up to ÔéČ34B
of potential collective write downs and identifies up to ÔéČ93B of assets 'at
risk.' The analyst expected Deutsche Postbank to take ÔéČ4B in write downs;
Aareal bank to take ÔéČ2B in write downs. Expected Hypo Real estate to take ÔéČ8B
in write downs
*** NOTES ***
- What the global leaders need to be aware of is that credit remains more
effective than interest rates. Today the attention is focused on the US GDP
today and the question is just how negative the reading would be. Below -3%
would be the worst since 1982 and below a -6.4% reading would be the lowest
since 1980. The global economic front remains dismal following a slew of
Japanese data that was all below expectations today. Euro-Zone Unemployment
came in at 8.0%. The New Zealand Central Bank stated that it had room to
continue its aggressive easing cycle.
- ECB's Trichet stated on Thursday that no breakup of Euro-Zone would happen,
but 'vague' rumors circulated that Greece could pull out this weekend.
- Looking Ahead:
- 7:00 (CL) Chile Dec Copper Production: v 442.8K tons prior
- 8:30 (CA) Nov GDP M/M: -0.4% expected v -0.1% prior
- 8:30 (US) GDP Q4 Adv Q/Q Annualized: -5.5% expected v -0.5% prior
- 8:30 (US) Q4 Personal Consumption: -3.5% v -3.8% prior
- 8:30 (US) Q4 GDP Price Index: 0.4% expected v 3.9% prior
- 9:00 (US) Nov RPX Composite 28dy Y/Y: No expectations v -20.14% prior
- 9:00 (US) Nov RPX Composite 28dy Index: No expectations v 206.73
- 9:45(US) Chicago Purchasing Manager: 34.9 expected v 35.1 prior
- 10:00 (US) Jan Final University of Michigan Confidence: 61.9 expected
- 10:00 (US) Jan NAPM- Milwaukee: no expectations v 30 prior
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Mon 10 Sep 2018 AA 08:30 GB- GDP, Trade, Output Tue 11 Sep 2018 AA 08:30 GB- Employment Decision A 09:00 DE- ZEW Survey Wed 12 Sep 2018 A 12:30 US- PPI A 14:30 US- EIA Crude A 18:00 US- Beige Book Thu 13 Sep 2018 A 1:30 AU- Employment AA 11:00 GB- Bank of England Decision AA 11:45 EZ- European Central Bank Decision A 12:30 US- Weekly Jobless AA 12:30 US- CPI Fri 14 Sep 2018 A 08:30 GB- GDP AA 12:30 US- Retail Sales A 13:15 US- Industrial Production AA 14:00 US- prelim University of Michigan
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