Forex Blog - European Market Update: IEA raised its global oil demand forecast for the first time in 10 months; No currency discussions expected at weekend G8
Today 05:47am EST/09:47am GMT
European Market Update: IEA raised its
global oil demand forecast for the first time in 10 months; No currency
discussions expected at weekend G8
*** ECONOMIC DATA ***
- (US) RealtyTrac: US May Foreclosure Activity 321.5K v 342K (-6% m/m), +18%
- (FR) French Q1 Final Non-farm Payrolls: -1.2%% v -0.9% prior
- (CZ) Czech Apr Final Industrial Output Y/Y: -22.1% v -23.0%e; Construction
Output Y/Y: 2.1% v -9.0% prior
- (HU) Hungarian May Consumer Prices M/M: 1.5% v 0.8%e; Y/Y: 3.8% v3.1%e
- (RU) Russian May Producer Prices M/M: 0.6% v 2.3%e; Y/Y: -6.5% v -6.7%e
- (SW) Swedish May CPI - Headline Rate M/M: 0.1% v 0.1%e; Y/Y: -0.4% v -0.5%e
- (SW) Swedish May CPI- Underlying Inflation M/M: 0.3% v 0.2%e; Y/Y: 1.3% v
1.3%e; CPI Level: 299.45 v 299.46e
- (SW) Swedish May AMV Unemployment Rate: 4.7% v 4.7%e
- (EU) ECB June Monthly Report: Reiterates that economic growth set to resume
in mid-2010 period. Risks to inflation are 'broadly balanced' and that current
interest rates of 1.0% are 'appropriate.
- IEA monthly report raised global crude oil demand by 12K to 83.3M bpd; first
increase in 10 months; Global oil supply at 83.7M bpd, down 210K bpd
- (UK) BoE Quarterly Inflation Attitudes Survey: 1-year CPI expectations at 2.4%
v 2.1% q/q
- (RU) Russian Gold & Forex Reserves w/e Jun 5th: $409.5B v $401.1B prior
- In equities: Equity markets continue to search for direction. Having traded
in more or less of a funk since May 7th, erratic equity behavior on the open
epitomized the lack of clear momentum. Asian equities took a strong boost past
20:00EST following Japan's Q1 final q/q GDP read coming in 'less bad' than
expected at -3.8%. This read sent Japanese markets above the 10K handle and US
S&P futures sharply higher. This positivity carried into the European
pre-market with futures opening higher, looking to continue yesterday's
positive session. Gains proved illusionary and as Asian equity markets slipped
from their best levels, Euro futures, aided by weak earnings out of Club Med
[CU.FR]. Home Retail [HOME.UK] and Premier Farnell [PFL.UK] slipped into the
red. On the open, the CAC, DAX and FTSE opened down, the CAC40 showed the
largest declines at Vallourec [VK.FR] traded -6%. As with every other recent
trend, this movement was not to last. A recovery in capital good shares,
following a pre-market call out of Goldman Sachs, led an equity recovery with
the industrial heavy DAX turning positive by 3:15EST. Markets again slipped
negative across the board in high volatility leading up to 4:00EST. 4:00EST saw
the release of the ECB's monthly report showing little change from the group.
The IEA's monthly report at the same time showed the first demand increase for
oil in 10-months. This comment and its implications for a recovery in economic
activity rallied markets. The FTSE and CAC printed their first positive
readings while the DAX traded as high as +0.40%. European equity markets
continued this linear upward trend through the 4:00EST hr, recovery in
commodity and energy futures underscoring a mining and industrial up lift.
German IFW comments regarding a -6% 2009 GDP and slight recovery in 2010
followed expectations and previous guidance. Markets stabilized and slipped off
their best level past 5:15EST as traders began looking to the NY morning and US
data including retail sales and continuing job claims.
-In individual equities: Air France [AF.FR] CEO: Have 'complete lack' of
economic visibility for this year; plane financing improving slowly. Still in
process for finding financing for A380s. To receive first A380 in October. 'Not
convinced' that failure of speed probe led to last week's crash of flight 447.
|| Premier Farnell [PFL.UK:] Reports Q1 Pretax profit Â£9.0M v Â£24.0M y/y, Op
profit Â£13.5M v Â£24.2M y/y, Rev Â£204.3M v Â£199.3M y/y, GM 39.4% v 39.3% q/q. ||
Home Retail Group [HOME.UK] Provides interim statement: Reports 13 week Argos
LFL -2.8% y/y, Homebase LFL +3.7% y/y. 13-wk Argos sales Â£937M (+0.9% y/y),
Gross Margin -0.75% y/y, 13-wk Homebase sales Â£465M (+5.8% y/y), Gross Margin
-0.25% y/y. || Barclays [BARC.UK] BlackRock's $13B acquisition of Barclays
Global Investors is likely to be announced by as early as Thursday - WSJ. ||
EAD's [EAD.FR] Company denies a press report that it is mulling grounding its
A330/340 fleet; Says the planes are safe. || STM Microelectronics [STM.FR] CEO:
Expects to achieve sales target within 6 to 12 months; bottom was hit in Q1 -
French press. Sees quarterly revenues between $2.3B to 2,4B; net cash flow at
6%-7% of sales. || Banco Santander [SAN.SP] To reportedly sell â‚¬2B worth of
preferred shares (approx 3% of market cap). Preferred shares to yield 5.75%
through July 2010, then fall to 4.75%. || Magnitogorsk [MAGN.RU] Reports Q1Net
loss $110M v loss $55Me, EBITDA $99M v $166Me, Rev $965M v $910.5Me. Production
of crude steel and commercial products in Q1 2009 grew by 26% and 24%
accordingly. EBITDA margin of the parent company equaled to 19.4% in Q1 2009.
The Debt/Equity ratio as of March 31, 2009 was x0.2. Debt level of MMK Group is
the lowest among the largest Russian peers: total debt stands at $1.694B, net
debt at $775M. ||
- Speakers: ECB Noyer commented that the increase in unemployment would impact
consumption but that declining prices combined with gov't stimulus operations
would increase purchasing power. He noted that the IMF's special drawing rights
(SDRs) cannot replace currencies for reserve purposes ||| ECB's Orphanides
reiterated that price stability remains the cebtral bank's main mandate, but
ECB is not blind to other policy goals ||| German Deputy Fin Min Asmussen
stated that the upcoming G8 Finance Minister meeting in Italy this weekend
would not discuss either FX or monetary policy. Rather, the meeting would focus
on exit strategies from stimulus measures. He noted that there are the first
signs for global economic stabilization but that high uncertainties to remain
in financial markets. IMF was now more optimistic on US and Asian economies;
and noted that any European recovery would lag the US upturn. He cautioned that
the timing of a sustained recovery remained unclear. Must expect unemployment
to rise. Lastly, he reiterated the german govt's 2009 GDP view of -6.0% and
+0.5% in 2010 ||| Germany Think tank IFW Institute forecasted 2009 German GDP
-6.0% y/y, 2010 GDP +0.4% y/y (in line with government's current view). It
expected ECB to cut rates to by 25bps to 0.75% at some point later this year
and to start 'slowly' raising rates in Q4 2010
- In Currencies: The USD remained largely range-bound in the session and its
price action continues to reflect the overall sentiments of the commodity
direction. The EUR/USD began the session near the hourly pivotal level of
1.4050 and found some minor strength on the back of several ECB comment. ECB's
Noyers SDRs comment. Noyer noted that the : IMF's special drawing rights (SDRs)
unlikely to replace currencies for reserve purposes. However, the IEA monthly
report saw global oil demand rise for the first time in 10 months and the
resulting firmer oil price ebbed away at the USD. The higher UK quarterly
inflationary expectations survey helped precious metals recover from earlier
negative territory and added additional pressure on the greenback. Lastly
German comments that no currency discussion at the weekend G8 meeting also
weighed upon the USD sentiment. Nonetheless the EUR/USD maintaining the 1.3950
to 1.4050 range seen over the last day. EUR/GBP tested fresh 6-month lows near
0.8510. Manchester United deal to receive Â£80M to release Chistiano Ronaldo to
Real Madrid highlighted the price movement in the cross.
-In Fixed Income: With the IEA raising its demand forecast for the first time
in 10 months and the subsequent boost to risk appetite, Bunds and Gilts are
unsurprisingly weaker this morning. The yield on the 10y Gilt is hovering
around at its highest levels since November 2008 around 3.98%. The UK sold
Â£725M in 2047 linkers with respectable results whilst Italy auctioned off just
over â‚¬8B in a range of BTPs including a â‚¬4.8B in a new 5 year with the sale
attracting decent bidding. |||Treasuries have firmed up in overnight trade,
with lower yields across the board and a touch of bull flattening in the yield
curve. The yield 10y Note has fallen by about 2bps to 3.93%, and ahead of its
second reopening the yield on the Long Bond is about 1.5bps lower at 4.75%
- I n Energy: The IEA monthly report saw its first increase in demand in 10
months. Global oil supply declined by 210K bpd to 83.7M bpd. Latest price moves
in oil are not justified by fundamentals alone. The report raised non-OPEC
supply forecast to 170K bpd to 50.5M bpd while reducing OPEC stocks forecast by
200K bpd to 27M bpd. It noted that May compliance with prior output cuts at 74%
compared to 76% back in Apr. May floating oil storage was80M to85M bbl compared
to 110-115M bbl a month ago. The OECD oil stock cover fell to 62 days v 62.4
days m/m. IEA noted that OPEC output cuts are having a bigger impact on markets
as refining demand increases.
- Credit Crisis: FT reiterated a story that Spain was planning a â‚¬9B rescue
fund that would target troubled savings banks. The fund would be launched this
month. The plan would allow the Bank of Spain to take control of banks that
face problems and could borrow to leverage itself tenfold and so deploy up to
â‚¬90B to finance re-capitalization and mergers. On Apr 20th, El Economista
reported that Spain was seeking to create a â‚¬90B financial sector fund. On May
14th El Mundo reported most of the fund to be financed with Treasury backed
debt and would be aimed at smaller savings banks (cajas) rather than big banks
||| ECB financial stability expert Dejan Krusec stated that, the ECB feared
another banking crisis in 2010 if the recession dragged on. He noted that if
there was a quick V-shaped recovery, the banks would be strong enough to
weather the downturn, but if this is U-shaped the banks will have
*** NOTES ***
- German Dep Fin Min: No currency discussions at weekend G8 meeting in Italy
- Brazil is not attempting to weaken the USD, does not benefit from a weaker
- Economist Nouriel Roubini compares current Lativan currency crisis to that of
Argentina in 2000/01. Rating agency Moody's noted that such a devaluation would
likely to be avoided in the near term
- IEA raised its global oil demand forecast for the first time in 10 months
- Headwinds? The higher yield backdrop into raises concerns about the impact of
higher mortgage rates to any US economic recovery
- RBNZ kept rates steady at 2.50%
- Looking Ahead: Focus on U.S. weekly jobless and retail sales today
- 8:00 (IC) Iceland May Unemployment rate: No estimate versus 9.1% prior
- 8:30 (CA) Canadian Q1 Capacity Utilization Rate:71.5% expected v 74.7% prior
- 8:30 (US) May Advance Retail Sales: 0.5% expected v -0.4% prior, Retail Sales
less Autos: 0.2% expected v -0.5% prior
- 8:30 (US) Initial Jobless Claims w/e Jun 6th: 615k expected v 621k prior,
Continuing Claims w/e May 30th: 6.78M expected v 6.735M prior
- 10:00 (US) Apr Business Inventories: -1.0% expected v -1.0% prior
- 13:00 (US) Treasury to sell $11B 30y Bonds in reopening
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