Forex Blog - European Market Update: European Bourses slump as Q1 earnings begin, jitters over Ireland resurface
European Market Update: European Bourses
slump as Q1 earnings begin, jitters over Ireland resurface
FTSE100 -43 DAX30 -41.77 CAC40 -35.5 STX50 -23.55
- Equity markets opened to the downside in Europe this morning tracking US/Asian
markets. Major initial movers to the downside included heavy industrials
(following Alcoa's Q1 earnings), banking shares and a mix of automotive names.
Equity markets began paring their losses soon after the open, coming off their
lows and after 5:00ET have traded broadly in the -1% region in light, holiday
week trading. DAX volumes are notably 37% below average their 52 week moving
- In significant individual equity news; Rolls Royce (RR.UK) announced it has
been awarded a contract from Saudi Arabian Airlines valued at approx $900M,
with deliveries expected to begin in 2010.
- Pernod-Ricard (RI.FR) announced the sale of its Wild Turkey label to Gruppo
Campari for $573M in cash. It also confirmed plans to raise ‚ā¨1B in capital via
a rights issue (repereseting about 10% of market cap).
- Daimler's (DAI.GE) CEO announced the company would seek continued financial
flexibility and would look to manage costs by cutting labor expenditures. The
company is prepared for a significant decline in business in 2009.
- The UK times
reported the EIB is talks to provide a ¬£3B rescue package for the E.ON's
(EOAN.GE) UK London Array wind power scheme.
The array, located in the Thames estuary is planned to
be the largest offshore array (planned 341 turbines to generate power for 750K
homes). Planning for project has been in the air since May of 2008 when Shell
exited the joint venture
- In the European Pre-market, analysts at Goldman Sachs provided new ratings
for some major auto names, with Renault and Fiat both cut. It had been an
analyst note from GS on March 23 raising the sector to Attractive that led to a
flurry of like-minded notes and saw a rally in the names.
Trade Balance increased slightly to ‚ā¨8.7B in February, exceeding analyst
estimates but ultimately improving for all the wrong reasons. Imports (-4.4%)
fell faster than exports (-0.4%) with the latter posting its fifth successive
current account surplus fell slightly to ‚ā¨5.6B. Germany's Factory Orders for
February printed a 38.2% decline, the worst reading since Germany's
re-unification in 1991
- Speaking with the FT the ECB's Stark noted that Germany continues to suffer
from shirking global trade, Stark added that he feared confidence in the banking
system would not return and that he expected the size of the financial sector
to decline, putting upward pressure on financing costs and downward pressure on
- The Irish economy has been back in focus again this morning, re-igniting some
of the concerns over the viabilty of the EMU and weighing on the Euro.
Following up from yesterday's emergency budget, which outlined aggressive
measures aimed at reducing Ireland's
deficit including tax increases and spending cuts, Irish Finance Minster
Lenihan firmly rejected the idea of an EU bailout for Ireland
but confirmed the European Commission had outlined a 5 year timeframe for
fiscal improvements. Lenihan said he was confident Ireland
could meet its commitments. He conceded that the country has experienced a
crisis in public finances, and that public spending cuts will need to continue.
- Moody' s downgraded multiple Irish banks including recently bailed out Bank
of Ireland and Allied Irish Bank. Moody's cited ‚Äúcontinuing deterioration in
the outlook for commercial real estate prices, the likelihood of more corporate
defaults as the Irish economy enters a deep recession, and the current erosion
in residential loan performance‚ÄĚ
- Japanese financial behemoth Mizuho was also downgraded at Moody's , one notch
to Aa3. However rather than anything fundamental to the company, Moody's cited
the recently announced recalibration of its own bank rating methodologies for
- Reports surfaced stating the Japanese MoF had set the size on Japan's
upcoming stimulus package at ¬•15T, above the ¬•10T expected. Former BoJ Governor
Iwata called for increased purchases of JGB's as a means of reviving the japese
economy, in direct comments yesterday made by the BoJ's Shirakawa.
- In currencies, USD and JPY have again benefited from risk aversion. Sterling
was buoyed by an increase in the BRC Shop Price Inflation Index, which rose to
0.4% in March against -1.2% in Feb on a monthly basis. GBP/USD is about 20 pips
off session lows to trade at 1.4665 at the time of writing. USD/JPY is also off
its lowest levels, trading at 99.70 at the time of writing, having touched
session lows below 99.50
- In fixed income, Gilts have outperformed Bunds and UST's, benefiting from a
strong auction result and impending BoE purchases later in the New York
morning.. The DMO sold ¬£1.1B 1.25% 2032 linkers with an above average
bid-to-cover of 2.08 times. Earlier the BoE announced it would look to buy
¬£3.5B in 5-10y gilts later in the London afternoon. Focus now shifts to the FOMC
minutes and Treasury's 3y note auction, later in the New York afternoon
- 10:00 SEC begins holds to vote on restoring the uptick rule
- 10:00 (US) Feb Wholesale Inventories (last -0.9%)
- 10:30 (US) DoE Crude Oil/Gasoline/Distillate Inventories
- 1:00 (US) Treasury's 3-year note auction
- 2:00 (US) FOMC minutes
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