- In equities news overnight: Equity markets in Europe opened to the downside following a negative close out of NY on Thursday and a mixed downside close in Asia. Bourses in Europe opened broadly negative following these trading trends, along with disappointing earnings from the European financial sector and forward looking expectations for crucial employment data out of the US in the NY morning. Earnings in the pre-market included RBS [RBS.UK], Allianz [ALV.GE], Puma [PUM.GE] and Logica [LOG.UK]. RBS, as expected, presented disappointing figures with a net loss below expectations and continued cautious commentary. RBS stated that it expected to see a continuation of high impairment levels through at least the next two years. Allianz, while beating on the top and bottom end, posted a 49% op profit decline in its key Property and Casualty unit. On the open, these names led their respective national bourses to the downside. An aftermarket credit rating cut to Peugeot [UG.FR] out of S&P dropped that stock. Equity markets trended downwards through 4:00EST making a brief upward blip at 4:30EST following UK PPI data for the month of July. These figures served to provide a trading range base into 5:00EST. Markets have traded throughout the session on strong volumes, with the FTSE trading approx 100% higher than its moving average on high turnover in financial shares, especially RBS. Entering the NY morning, European markets continue to anxiously eye the US July non-farm payroll figures expected at 8:30EST.
-In individual equities: RBS [RBS.UK] Reports H1 Adj Net loss Â£1.04B v loss Â£833.3Me, Rev Â£21.8B v Â£16.8Be; Sees impairment levels as remaining elevated. H1 ROE -18.1% v -2.0% y/y. Total group impairments Â£7.5B v Â£7Be. Outlook: Results may not substantially improve until 2011 and full recovery will take time. || Allianz [ALV.GE] Reports Q2 Net â‚¬1.9B v â‚¬1.5Be, Rev â‚¬22.2B v â‚¬21.8Be. Property and Casualty Combined ratio 98.9% v 98.9% q/q. CEO: "Overall, we achieved very good quarterly results. Allianz is prepared for what we perceive as 'the new normal', an ongoing challenging market environment with structurally lower returns. We remain strongly capitalized and our low risk profile allows us to withstand potential market shocks" ||Logica [LOG.UK]: Reports H1 Prextax Â£24.2M v Â£104.9Me (unclear if comp), Rev Â£1.88 v Â£1.88Be. Group orders up 3% on last year. || Air France [AF.FR] Reports July Load factor 85.1% v 84.4% y/y. July traffic -3.3%, July cargo traffic -17.2% y/y. || Peugeot [UG.FR] S&P lowers ratings one notch to BB+ from BBB-; now junk status. || Hypo Real Estate [HRX.GE] Reports Q2 net loss â‚¬750M, Pretax loss â‚¬664M v gain â‚¬17M y/y; Does not see return to profitability prior to 2012. || Puma [PUM.GE] Reports Q2 Net â‚¬38.5M v â‚¬32.2Me, Rev +4% y/y. Reports H1 net â‚¬44M. Will continue to work on improving margin and cashflow. || Zurich Financials [ZURN.SZ] Appoints Martin Senn as CEO. Appointment made following the retirement of James Schiro set for Dec. 31,2009. ||
- Speakers: Asian Development Bank (ADB) official reiterated the view that its too early to consider exit strategy in Asian region at this time (in line with early july comments). The official noted that the region should maintain an expansionary monetary and fiscal policy mode. The ADB Predicted a "V" shape recovery for the region. || EU) ECB's Trichet commented that the Euro-zone economy remained in a period of contraction but that the economic freefall was over. Trichet noted that one must remain cautious || Senior China NDRC Planner: reiterated the official view that China's economic recovery was not stable or balanced and that the direction of its fiscal and monetary policies would change. Reiterates that China will continue with "relatively loose" monetary policy. China cannot decouple from a weak global economy || China PBoC's Su commented that the second half loan growth might lag the pace seen H1. The central banker noted that loan growth in H1 was due to roll out of new China fiscal plan. China would not use quantitative curbs on credit and would continue to fine tune policy using market tools || ECB's Noyer commented that he was concerned that foreign banks may breach G20 rules
- In Currencies The focus this Friday will be on the outcome of the U.S. nonfarm payroll data. Overall market participants seem unsure how to position for the report.
- The GBP continued its heavy tone that enveloped the currency following yesterday's BoE 'surprise' move to increase its APF program by Â£50B. Some chatter that the move could have been a move to keep the level of GBP pressured as various UK officials and central bankers have cited the 'benefit' of a more competitive pound. GBP/USD probed the lower end of the 1.67 handle, EUR/GBP moving towards 0.86.
- EUR/USD trading in the middle of the 1.43 handle. ECB's Trichet said that he feels we are still in a period of economic contraction, adding the free fall is over, but we must remain cautious weighing a bit on the Euro sentiment.
- The JPY firmed against the major pairs as USD/USD continues to hover just over the 95 area. One dealer noting that market appears to be eyeing Japanese exporters offers above the market during the next week Obon holiday with some $3B in USD/JPY sell orders between 95.50-98.00 placed this year, and more up to 100. This compares to $5.0B from year ago levels
- In Fixed Income: Gilts continue to outperform Treasuries and Bunds following the BoE's expansion of quantitative easing above and beyond expectations in yesterdays session and with longer dated Gilts about to be included better buying is being seen in the long end. The 10y Gilt is remarkably now trading over 5bps rich to the 10y Note, having traded at a 44bps discount to the US benchmark in early July. Yesterday's decision marks the second successive month in which the MPC has wrong footed the market in what amounts to a startling about face from July. That the decision was made in the face of a steady flow of positive data questions chatter of competitive devaluation by stealth are beginning to circulate.
- In Commodities: European central banks agreed on five-year gold sales commencing Sept 27th 200.- ECB has agreed with other central banks that total gold sales in the next five years would not exceed 2,000 tons with annual sales not exceeding 400 tons
- Agreement signed by ECB, SNB, Swedish Riksbank and Euro-16 banks
- Gold signatories recognize IMF's plan to sell 403 tons of gold (from the Apr G20 summit held in london) IMF gold sales can be accommodated with the agreed upon ceiling
*** NOTES ***
- Deutsch Bank and Goldman Sachs have lowered the level of job losses expected for the non-farm payroll data; tone overall remains cautious ahead of the data
- China Construction Bank to cut new loans by 70% as risks rise
- China Shanghai Composite declines by 2.9%. First time since Feb that the index suffered 4 consecutive down days
- Japan public pension fund mulls investing in BRIC shares
- RBS sees two more difficult years ahead; Hypo Real Estate sees at least three
- All about the payrolls: Deutsche Bank revising its call from -325,000 to -150,000 and Goldman Sachs also cutting its projected job losses from -300,000 to -250,000. It's all based on a drop in claims
- 7:00 (CA) Canada July Unemployment rate: 8.8% expected versus 8.6% prior; Net Change in Employment: -15.0K expected versus -7.4K prior
- 8:00 (BR) Brazil July IBGE Inflation IPCA M/M: 0.3% expected versus 0.4% prior; Y/Y: 4.5% expected versus 4.8% prior
- 8:30 (US) July Change in Non-Farm Payrolls: -328K expected versus -467K prior; Change in manufacturing payrolls: -100K expected versus -136K prior
- 8:30 (US) July Unemployment rate: 9.6% expected versus 9.5% prior
- 8:30 (US) July Avg Hourly earnings M/M: 0.1% expected versus 0.0% prior; Avg Weekly Hours: 33.0 expected versus 33.0 prior
- 10:00 (CA) Canada July Ivey Purchasing Managers Index: 54.0 expected versus 58.2 prior
- 10:00 (MX) Mexico July Consumer Prices M/M: 0.3% expected versus 0.2% prior; Y/Y: 5.5% expected versus 5.7% prior; CPI Core M/M: 0.3% expected versus 0.3% prior
- 15:00 (US) Jun Consumer Credit: -$5.0B expected versus -$3.2B prior
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