- In equities: European Equity markets extended their streak of positive opens
across the board followed by a strong pre-market session in which DAX30 futures
outperformed on the back earnings out of Commerzbank [CBK.GE] moving those
shares higher. Financials remain the name of the game following finalized
Stress Test results and cap raise levels out of the US Treasury (see backlogged
headlines for full details). Strength in financial names in the NY after-market
rolled over into the Asian trading session and has pushed through into Europe.
US dual listed
firms, including Citi [TRV.GE] and BoA [NCB.GE] have all shown strength in Frankfurt
trading. While earnings flows were down on a day/day basis, a significant flow
was still seen in the Euro pre-market with financial names RBS [RBS.UK] and
Commerzbank [CBK.GE] releasing mixed statements, but trading higher on general
sector strength. Outperformance in basic resource names has continued on the
back of rises in hard commodity and energy prices with names such as Xstrata
[XTA.UK] and Lonmin [LMI.UK] moving higher. Other movers include some of the
heavy manufacturers such as ArcelorMittal [MT.NV], ThysenKrupp [TKA.GE] and
E.On [EOAN.GE] on the back of continued economic optimism and risk appetite.
Equity markets exhibited choppy tendencies, rising from the open to their then
highs by 3:35EST, then paring gains to trade below the +1% mark. Stronger than
expected UK April PPI Outputs rallied markets from their slide returning to
their best levels by 5:00EST in the case of the CAC and DAX. With a lighter US
corporate earnings calendar for the day, key trading out of Stress Test rated
banks and the expected US April Non-farm payroll are expected to dominate NY
morning news flow.
- In individual equities: *STRESS TEST RESULTS: 10 BANKS NEED TO RAISE $74.6B
IN CUMULATIVE CAPITAL: BAC needs $33.9B, CITI needs $5.5B, WFC needs $13.7B,
GMAC needs $11.5B, MS needs $1.8B, STI Needs $2.2B, PNC Needs $600M, KEY needs
$1.8B, RF needs $2.5B, FITB needs $1.1B, GS, JPM, AXP, BBT, BK, COF, MET, STT,
USB does not need capital. ||Commerzbank [CBK.GE] Reports Q1 Net loss â‚¬861M v
loss â‚¬814.3Me, Pretax loss â‚¬880M v loss 767Me, â‚¬ Rev â‚¬2.33B v â‚¬2.3Be, Q1 Core
capital 6.8% v 10.1% y/y, Q1 Tier 1 ratio 10.9% v 13.9% y/y, ROE -15.1% v 8.4%
y/y, Default exposure â‚¬729B, with losses projected at â‚¬1.98B. || RBS[ RBS.UK]
Reports Q1 Pretax loss Â£44.0M v Â£479M y/y, Adj Op Profit Â£4.1B v Â£2.86B y/y,
Rev Â£9.7B v Â£7.7B y/y, Q1 Writedowns Â£4.9B, Q1 Tier 1 ratio 6.7% v 7.5% q/q, Q1
impairment losses Â£2.86B v Â£656M y/y, Q1 Credit market write-downs Â£2.07B v
Â£2.02B y/y, Q1 Monoline writedowns Â£2.1B. || 3I [III.UK] Reports FY08 Net loss
â‚¬1.95B v loss Â£1.8Be; Confirms rights issue at 135p/shr, seeking to raise Â£700M
(48% of market cap), Total AUM at Â£8B v Â£9.8B y/y, Total NAV/share at Â£4.96 v
Â£10.77 y/y. || Puma [PUM.GE] Reports Q1 Net (ex items) â‚¬81M v â‚¬75.7Me, Rev
â‚¬697M v â‚¬676Me, Q1 Gross Margin 52.1% v 53.4 %y.y, Market environment expected
to remain difficult in 2009 and the year would be one of consolidation with a
clear focus on adjusting the cost basis. Positive signs in markets not expected
until 2010 when World cup begins. Current restructuring costs are seen at
â‚¬110M. || Endesa [ELE.SP] Reports Q1 Net â‚¬509M v â‚¬548Me, EBITDA â‚¬1.73B v
â‚¬1.7Be. || Repsol [REP.SP] Reports Q1 Net profit â‚¬401M v â‚¬333Me (ex
- Speakers: IMF commented that recent Chinese economic indicators appear 'very
encouraging' but additional data is necessary to see a clearer picture || ECB's
Bini Smaghi reiterated the press conference view that 1.0% interest rate may
not necessarily be the minimum rate. He did note that the Euro-Zone economy was
improving. || German Econ Min Guttenberg commented that he did not expect its
economy to recover quickly once it reached bottom but that the recent
manufacturing and exports data were good signs. || German Fin Min Steinbrueck
commented that the first stage of bad bank issue to be discussed next week || Reportedly
South Africa's Fin Min Manuel will not return in role under new administration
- In Currencies: The rising risk appetite theme continued to undermine the
sentiment of the USD ahead of the US employment report. EUR/USD was holding
above the 1.34 handle but continued to face some resistance ahead of the 200-day
moving average at 1.3456.
-In Fixed Income: Government Bond markets, the chief beneficiary of doomsday
scenarios in recent months, continue to suffer from fast money rotation into
riskier asset classes. The Bund printed its highest yield of 2009 in early
European trade at 3.44% and the US
10y Note also touched new 2009 highs at 3.343%. Yield curves in Germany
and the UK also
registered new steepening highs above 250pbs and 207pbs respectively
||Government debt futures are lower, with Bunds underperforming after
yesterday's ECB and BoE decisions. June 10-year Bund future were down 50 ticks
on the day at 12.43, while the corresponding Gilt future was off 43 ticks at
118.51. In the cash market the 10-year Bund yield is up 5 bps at 3.43% and the
10-year Gilt yield was up 6 bps at 3.73%.
- In Energy: Reportedly, China
has canceled a plan to increase the ceiling retail price for gasoline and
diesel from today and no reason for the decision was not disclosed. According
to prior reports, China
was expected to increase gasoline prices by CNY520/metric ton and diesel prices
*** NOTES ***
- The week has been characterized by a sense of a growing risk appetite. The US
employment could cement the view that the 'worst' of the economic downturn
could be behind us.
- Bank stress tests contained no big surprises. Trader chatter centers on where
will the money come from and pondering the consequences if a bank is unable to
obtain the funding.
- Looking Ahead:
- 7:00 (CA) Canadian Apr Unemployment Rate: 8.3% expected v 8.0% prior
- 7:00 (CA) Canadian Apr Net Change in Employment: -50.0k expected v -61.3k
- 8:30 (US) April Nonfarm Payrolls : -600k expected versus -663K prior)
- 8:30 (US) Apr Average Hourly Earnings M/M: 0.2% expected versus 0.2% prior;
Average Weekly Hours: 33.2 expected versus 33.2 prior
-10:00 (US) March Wholesale Inventories (last -1.5%)
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Mon 18 Dec
10:00 EZ- final HICP Tue 19 Dec
09:00 DE- IFO Survey
13:30 US- Housing Starts/Permits
13:30 US- Current Account Wed 20 Dec
15:00 US- Existing Homes Sales
15:30 US- EIA Crude Thu 21 Dec
03:00 JP- BOJ Decision
13:30 CA- CPI & Retail Sales
13:30 US Weely Jobless
13:30 US- GDP Fri 22 Dec
09:30 US- GB- GDP
13:30 US- core PCE Deflator & Presonal Income
15:00 US- New Homes Sales
15:00 US- final University of Michigan
17:00 US- early Closes Mon 25 Dec
00:00 Christmas Holidays
Potential Trading Opportunities
POTENTIAL PRICE RISK: Medium Mon--10:00 GMT-- EZ- final November HICP. flash data are rarely changed.
POTENTIAL PRICE RISK: HIGH- Medium Tue --09:00 GMT-- DE- IFO Survey. Key report but usually not a market-mover
POTENTIAL PRICE RISK: HIGH- Medium- Tue --13:30 GMT-- US- Housing Starts and Permits. Leading indicators of activity
POTENTIAL PRICE RISK: HIGH-Medium- Wed --15:00-- US- Existing Homes Sales. Top Housing statistic
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