- In equities: European equity markets opened to the downside continuing a
profit taking theme seen rolling over from the Asian trading session.
Pre-market trading was downside biased as well, with notable underperformance
from the DAX30. Comments out of VW [VOW.GE]regarding the cancellation of
planned merger talks with Porsche [PAH3.GE] that had been scheduled for Monday,
along with further statements that VW saw no constructive reasoning to
immediately re-schedule negotiations sent those names lower. The European
automotive sector as a whole traded lower with French names, such as Renault
[RNO.FR] and Peugeot [UG.FR] leading lagers on the CAC40. Banking names showed
mixed results, a FT article noting that US
small and mid-cap banks could need an additional $24B in capital swirling
further concern in the strength of banking balance sheets. On the open, equity
markets traded lower, pushing off to losses greater than -1% by 3:15EST. Shares
of Lloyds [LLOY.UK] staged a recovery following 3:15EST. In the pre-market
Lloyds had priced its Â£4B right placement as it attempted to buy back some UK
Treasury held preference shares. News that the groups Chairman was to step down
in 2010 out of the UK
press also provided positive momentum in the name. By 3:30EST the FTSE100
turned positive moving to then session highs +0.25% while the CAC and DAX
paired some of their opening losses. Markets traded in a tight range through
the -5:00EST hrs with the FTSE
holding to positive territory and the CAC and DAX with losses around the -0.75%
mark. Leading up to 5:00EST, markets exhibited some strength, rallying in
currencies against the Yen following statements out of the Japanese vice Fin
Min and a strong Euro Zone March trade balance provided lightness. Past
5:00EST, the CAC and DAX paired nearly all their opening losses, down less than
- Lloyds [LLOY.UK] Launches Â£4B Placing and Open Offer set for May 20. Proceeds
from the Placing and Open Offer will be used to redeem the Â£4 billion of
preference shares held by UK Treasury. Offer price set at 38.43p/share (57%
discount from Fridays close). Chairman Blank to step down in 2010 (had been
instrumental in HBOS merger). Lloyds named Alexander Leitch, who becomes the
group's senior non-executive director at the next annual general meeting, as
- Volksagen [VOW.GE] Spokesman Bestenbostel: Co. cancels
merger talks with Porsche scheduled for Monday. Co shares the view of Mr
Osterloh that there is currently no atmosphere for constructive talks. Co
remains open to constructive talks with Porsche, but said it remains uncertain
if and when talks could resume. Porsche spokesman Albrecht Bamler: The company
will stick to the agreed confidentiality of the talks and declined to elaborate
- Speakers: ECB's Weber noted in a report that simulative measures set out by
ECB were adequate unless conditions deteriorate significantly. The report
reiterated that negative Euro-zone inflation could occur for several months in
the summer, before rising to 1% or more toward year-end. He noted that Monetary
policy needs time to produce impact but one should not exaggerate hopeful signs
seen in financial markets. Weber reiterated that current interest rates were
'appropriate' given the current environment and warned against excessive
optimism from positive economic data . he did note that perhaps the worst of
economic crisis might be behind in Germany but does not see sustained positive
growth before mid-2010 and that setbacks could still occur ||| ECB's
Tumpel-Gugerell reiterated the ECB view that inflation could be negative in the
coming months. She noted that the monetary policy must act appropriately and
leave no stone unturned in combating issues at hand. She reiterated that
keeping inflation near 2.0% target was priority of the central bank. Lastly, an
economic recovery can only take place once confidence has been restored |||
Japanese Vice Fin Min Sugimoto commented that the Ministry continues to monitor
currency markets, do not want currency markets to have negative effect on
economy. He noted that the finances in Japan remain severe and that discipline
remained important ||| Moody's unified the government of Japan's local and
foreign currency bond ratings at Aa2, increasing its domestic currency bond
rating (the JGB rating) from Aa3 and lowering its foreign currency bond rating
from Aaa. Moody's outlook for the Japanese government's ratings was stable. Japan's
foreign and domestic currency long-term bond ceilings and deposit ceilings
remain unchanged at Aaa, and its short-term ceilings remain at Prime-1. |||
Japan Fin Min Yosano commented that action by Moody's reflected the ability of
Japanese market to absorb further JGBs ||| China
reiterated it would take additional measures if its economic recovery stumbled
- NDRC ||| China FX Regulator SAFE announced rules to promote outbound
investment. The agency noted that Chinese firms could purchase foreign
currencies to invest aboard. Chinese firms could reinvest overseas profits
abroad and borrow in foreign currencies to invest abroad
- In Currencies: The surge in Indian shares helped to stem any risk aversion
flows that characterized the early Far East trading
session. The USD and JPY came off their best levels ahead of the European
mornings after Indian equity markets were halted for the first time ever after
breaching an upper limit. USD/JPY was at 95.40 after testing 94.55 in Asia.
EURJPY and GBP/JPY crosses were also well off their Asian session lows of
127.00 and 143.10 respectively. The JPY weakness was also aided by comments
from Japanese top finance official Sugimoto that the Government was carefully
watching the currency markets carefully. The EUR/USD bounces off its 200-day
moving average of 1.3410 in Asia to hover around the
1.3450 area for most of the European morning. || Reportedly Singaporean Central
bank to intervene if pair moves below $1.46 fro its current level of $1.4715 ||
The BOJ might upgrade its economic assessment for the first time in 2 years
according to Japanese press reports. This has been echoed in the media lately.
Numerous times last week there was chatter that the Japanese Government would
likely upgrade its economic assessment for the first time in three years citing
the fact that exports and production were showing signs of bottoming out.
-In Fixed Income: Government bonds have performed reasonably well in thin
volumes in Europe this morning, with Gilts outperforming
Bunds ahead of the BoE's 20th reverse auction. Some selling has moved into
T-Note futures at the time of writing with session lows at 121-13. Three month
Euribor fixed at a new low of 1.44%, with 2y EUR swap spreads at the unchanged
- In Energy: Reportedly Iran to raise oil production to over 5M bpd from
current level of 3.6M bdp ||Brazil's President Lula da Silva to meet with
China's President Hu Jintao to finalize terms of funding partnership for
Brazil's oil industry by China in exchange for guaranteed oil shipments ||
Nigeria MEND militants attack two oil and gas pipelines near to Escravos which
supply the 110K bpd Kaduna refinery in northern Nigeria ||
*** NOTES ***
- Indian equities surge following election results; markets were halted for the
first time ever after breaching an upper limit
- Moody's unifies Japanese debt ratings. Japan's
local and foreign-currency debt ratings were brought to the same level, Aa2, to
reflect that the repayment risk for each is equal. Moody's cut the
foreign-currency debt rating from Aaa and raised the local-currency assessment
from Aa3 to unify the ratings
- The cycle of life. Dealers noting that the underlying theme has evolved over
the last few weeks from the initial global financial collapse risk; to the
duration of crisis risk and now morphing into the durability of recovery risk.
- SNB managed to keep the EUR/CHF cross above the 1.5000 level following the London
close on Friday. Japan
follows with verbal intervention during the European session today. Chatter
that Singapore will intervene in USD/SGD below the 1.46 handle
- White House NEC Director Summers: US economy is no longer in freefall;
Economic data "suggests more mixed picture than two months ago"
- IMF: Global expansion to start next year; ECB's Webers say not before mid
- Dealers noting that the US NAHB Housing Market Index will be used to for
further sign of stabilization
- Looking Ahead:
- 11:30 (US) Treasury's Geithner speaks in Washington
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