Forex Blog - European Market Update: IMF's Lipsky confirmed that the IMF would modestly raise 2010 growth forecast; EU Summit draft statement noted that the Euro-Zone economy was on course for 'sustai
European Market Update: IMF's Lipsky
confirmed that the IMF would modestly raise 2010 growth forecast; EU Summit
draft statement noted that the Euro-Zone economy was on course for
'sustainable' recovery without need for more fiscal stimulus
*** ECONOMIC DATA ***
- (GE) German Producer Prices M/M: 0.0% v 0.0%e; Y/Y:-3.6% v -3.6%
- (FR) French Q1 Final Wages Q/Q: 0.8% v 0.8%e
- (HU) Avg Gross Wages Y/Y: 3.6%e v 4.3% prior
- (NE) Netherlands Jun Consumer Confidence: -24 v -24e
- (IT) Italian Q1 Unemployment Rate: 7.3% v 7.3%e
- (UK) May Car Production -43% y/y, Commercial Vehicle Production -73.5% y/y -
- In equities news overnight: European Equity markets opened to a positive
following muted pre-market trading. News flow from the Asian session again
remained mixed with continued GDP upgrades for China
but bearish/cautious central bank speak. On the open, in sector performance
utilities outperformed with E.on [EOAN.GE] and ENEL[ENEL.IT] leading the way
following a sector upgrade out of UBS. UBS downgrade of pan-European retailers
added further weight to that sector following yesterdays disappointing UK
retail sales number. UK
listed names including Kingfisher [KGF.UK] and Home Retail [HOME.UK] led this
sector underperformance. Interim trading reports out of UK
home builder Talyor Wimpey [TW.UK] proved more bullish than expected noting
signs of recovery in UK
and US markets
lifted sector names including Bovis [BVS.UK] and Bellway [BWY.UK]. Equity
bourses turned negative by 3:15EST but rallied and moved through the unchanged
mark at 3:30EST. With limited European data to affect the direction of equity
trade, markets decoupled past 3:45EST with the CAC and FTSE pushing higher with
strength in industrials as EAD's [EAD.FR] continued to announce new orders,
mixed financials and earnings based equity strength (Carnival [CCL.Uk]). German
equity markets continued to be weighed by automotive names [VOW.GE] and the
approach of an equity weight rebalance set to come into effect on Monday. On
the back of these forces the DAX underperformed and remained negative through
4:00EST. Trading remained subdued through the 4:00EST hour with heavy attention
given to Iran's
Khamenei Friday prayer speech (downplaying divisions, seeing continuity of
Islamic Republic). Decoupling of equity markets continued as the DAX labored
near the unchanged level, above and below zero on continued auto sector weight
while the CAC and FTSE printed highs of +0.75% and +1.00% at 4:45EST before
paring gains. Euribor fixings, coming in at 5:10EST at new lows provided
comfort to concerns regarding BBA alterations over Libor structuring and equity
markets quickly caught a bid. The DAX recovered its losses and moved to +0.25%
while the FTSE printed +1.44% and the CAC +0.75%.
-In individual equities: Standard Charter [STAN.UK] Banking group is
considering further listings in Asia -WSJ. CEO states
that group is always looking for further listing locations, see India
as primary candidate. || Taylor Wimpey [TW.UK] Provides trading update: Severe
downside scenarios previously foreseen are now less likely to materialize. Net
debt at Â£1.01B v Â£1.68B y/y, Order book at Â£971M v Â£562M y/y, Operate 337
outlets v 386 y/y. || BritishLand
[BLND.UK] London Times: Israel's
Property & Building in talks to take Â£100M stake in Broadgate. Property and
Building is controlled by Billionaire Nochi Dankner stated that it was in the
initial stages of buying a stake in Broadgate for Â£100M. Article noted that
under the deal being proposed, the pair would also take on a sizeable part of
the Â£2B of debt that is secured on Broadgate, which - along with the cash they
are putting in - could give them a half-share in the 32-acre office
development. || Air France:
[AF.FR] CEO: Considering all options to face crisis; can not confirm
speculation of partial employee unemployment plans. Outlook to remain difficult
through Dec 2009, could cut up to additional 3K employees. || Daimler [DAI.GE]
S&P lowers rating one notch to BBB+ from A-. || Porsche [PAH3.GE] Reports
9-month (August-April) sales â‚¬4.64B v â‚¬5.46B y/y, will not reach 2008 level
sales in 2009. Delivered 53.6K units v 74K units y/y. || BMW [BMW.GE]
Reportedly Chinese JV partner trading lower on the back of reports that Chinese
gov does not plan to purchase BMW vehicles. ||
Fortis [FORB.BE] Update: Files court order asking Dutch state to force
nationalized Fortis Capital Company to pay preferred stock holders â‚¬362.5M. ||
Strabag STR.AS: [CEO] To see flat revenue growth in FY09; Expect continued
painful economic consolidation. To attempt to diversify operations outside of Europe.
See coming construction crisis in Europe in 2012-2013.
Russian markets remain a long way from full recovery. ||
- Speakers: IMF's Lipsky confirmed that the IMF would modestly raise 2010
growth forecast for global economy from its +1.9% view from April. IMF to
unveil its new forecasts in early July but G8 sources put the 2010 GDP outlook
at 2.4% ||| ECB's Gonzalez-Paramo noted that economic recovery was less certain
without reforms as financial regulators have failed without doubt ||| ECB's
Bini Smaghi commented that one must resist nationalism in push for financial
oversight reforms. He noted that there were signs of stabilization in financial
markets. ||| BBA stated that it had no targets for number of additional banks
that could join LIBOR panels ||| Polish Central Banker Skrzypek commented that
that central bank remained towards an easing bias and that inflation was not a
significant problem. He did note that the central bank might not use its
monetary policy tools over commodity-led inflation. He expected a positive GDP
reading for 2009. The central banker noted that the IMF credit line was an
'insurance policy' and was not expecting to use the line ||| EU Summit draft
statement noted that the Euro-Zone economy was on course for 'sustainable'
recovery and to reject further calls for additional stimulus measures. The EU
seeks a for 'credible' exit strategy. EU applauded Latvia
planned budget cuts and calls for 'rigorous implementation' of such cuts. It
urged swift payment of next aid installment for Latvia.
Lastly the EU to call Pan-European risk board and watchdogs in 2010 ||| (HU)
Hungary Central Banker Chief Simor noted that the market environment remained
uncertain ||| World Steel Association: May Global output 95.6M tons v 89M tons
- In Currencies: The EUR/USD continues to consolidate within the 200 pips range
of 1.38 to 1.40 with reported sovereign names on each end of the bounders. Euro
was initially firmer after EU draft statement noted 'sustainable' recovery in
the Euro-Zone. Dealers were still trying to understand the implications of the
LIBOR changes announced on Thursday. UBS Analyst noted that the Dollar FX rate
might be supported by the increase in LIBOR panels and ECB refi tender.
- The JPY was softer against its major pairs as the IMF and EU Summit comments
fueled risk appetite.
- CAD and AUD firmer as well on the back of higher crude oil prices. Aussy also
aided by an analyst call that the RBA could raise interest rates before
- In Energy: Royal Dutch Shell [RDSA.UK] Announced natural gas discovery in Norwegian
Sea with the discovery made at a record depth. The find estimated
between 10 to 100 billion standard cubic meters ||| PetroChina [PTR] FT
reported that the company was negotiating possible investment in Ineos'
refinery in Grangemouth, Scotland.
A purchase by the co. would be its first move into refining in Europe.
NYMEX July crude up over 50 cents just under the $72/barrel mark.
- In Fixed Income Supply: The boost to risk appetite stemming from IMF and EU
comments has put government bond markets under pressure this morning. Gilts
have lead the way down on a cross markets basis, and yield curves on both sides
of the Atlantic are exhibiting bear steepening biases.
Ten year Gilts are yielding 3.875% at the time of writing, with the 10y Note
yielding 3.84% and the Bund at 3.576%. To avoid the wrath of the bond
vigilantes, the French debt agency announced it would sell up to â‚¬4B in 30y
OAT's via a syndicate of banks next week, a trend that is gathering steam
following the UK's 25y Gilt auction earier this week. Three month Euribor fixed
at a new record low of 1.22%, whilst Usd swap spreads narrowed back below 50bps
following clarification on changes to Libor from the BBA. The BBA noted that
allowing additional banks to join the panel which calculates Libor "will
not affect the way in which current contributors formulate their rate submissions."
- Credit crisis: S&P reduced its risk assessment on Japanese banks to 2
from 3 as it noted that risks have moderated. S&P commented that Japanese
banks could withstand cyclical downturn and absorb credit losses of
nonperforming assets as their loan portfolios have improved in the past few
years ||| Irish press article that the IMF's projections on the Irish budget
deficit and medium-term recovery are worse than Gov't estimates. IMF is
believed to have calculated that the "structural" deficit could be as
much as 10% of GDP or â‚¬18B versus Irish Govt estimate of 8%. Article noted that
the IMF believes correcting this would require very difficult choices on public
spending and would endorse the widespread view that most of the correction must
now come on the spending side, rather than through more tax rises |||
- Quiet European session on the data front but some supportive economic
comments providing some momentum on the green shoot scenario.
- EU Summit- draft statement: Economy on course for 'sustainable' recovery;
reject further stimulus measures. Calls for 'credible' exit strategy
- IMF to modestly raise 2010 growth forecast for global economy to +2.4% from
its Apr view of +1.7%
***Looking Ahead*** Triple Witching expiry of stock index futures, stock index
options and single stock options.
i- 8:00 (PD) Polish May Producer M/M: 0.1%e v
-0.6% prior, Y/Y: -6.6%e v -12.4% prior
- 8:30 (CA) Canadian Apr Retail Sales M/M: 0.1%e v 0.3% prior, Retail Sales
less Autos M/M: -0.1% v -0.2% prior
- (RU) Russian May Unemployment Rate: 10.3%e v 10.2% prior
- (RU) Russian May Retail Sales M/M: No expectations v -0.2% prior, Y/Y: -6.2%e
v -5.3% prior
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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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