Forex Blog - European Market Update: German ZEW improves but below market expectations; UK CPI registers lowest M/M reading ever
Tuesday, October 13, 2009
European Market Update: German ZEW improves but below market expectations; UK CPI registers lowest M/M reading ever
*** ECONOMIC DATA *** - (FR) French Sept CPI M/M: -0.2% v -0.1%e; Y/Y: -0.4% v -0.2%e - (FR) French Sept CPI-EU Harmonized M/M:-0.2% v 0.0%e; Y/Y: -0.4% v -0.2%e - (HU) Hungarian Sept Consumer Prices M/M: -0.1% v 0.0%e; Y/Y: 4.9% v 5.2%e - (SP) Spain Aug House Transactions Y/Y: -9.9% v -20.3% prior - (SZ) Swiss Sept Producer & Import Prices M/M: 0.2% v 0.1%e; Y/Y: -4.9% v -4.9%e - (SW) Swedish Sept CPI-Headline Rate M/M: 0.3% v 0.4%e; Y/Y: -1.6% v -1.4%e - (SW) Swedish Sept CPI-Underlying Inflation M/M: 0.4% v 0.5%e; Y/Y: 1.4% v 1.5%e - (NV) Dutch Aug Industrial Production M/M: 0.9% v 0.4%e, Y/Y: -8.2% v -9.2%e; Industrial Sales Y/Y: -21.8% v -24.1% prior - (UK) Sept CPI M/M: 0.0% v 0.3%e Y/Y: 1.1% v 1.3%e; Core CPI Y/Y: 1.7% v 1.7%e; lowest m/m reading on record, lowest annual reading since Sept 2004 - (UK) Sept RPI M/M: 0.4% v 0.3%e; Y/Y: -1.4% v -1.5%e; Ex Mortgage Int Payments: 1.3% v 1.2%e - (UK) Aug DCLG UK House Prices Y/Y: -5.6% v -4.9%e - (GE) German Oct ZEW Survey-Econ Sentiment: 56.0 v 58.8e; Current Situation: -72.2 v -69.0e - (EU) Euro-zone Oct ZEW Survey -Econ Sentiment: 56.9 v 61.2e
*** SPEAKERS/FIXED INCOME/FX/COMMODITIES/ERRATUM *** - In equities news overnight: European equity markets opened mixed but rapidly aligned in negative territory. This movement was in contrast to a broadly positive Asian trading session and a positive close in NY on Monday. Markets have attempted to move out of negative territory but have been cut short. Most profoundly, a slight equity rally into 4:30EST was cut short by disappointing ZEW survey figures out of both Germany and the Euro-zone. Equity movers to the downside have been dominated by financial names Deutsche Bourse [DBK.GE], Lloyds [LLOY.UK] and Credit Agricole [ACA.FR] the leading lagers on their respective bourses. A rating cut on Goldman Sachs [GS] by Meredith Whitney, profit taking before earnings, and overall continued questions regarding costs, exposures and earnings power have been cited as motivation behind today's movements. A notable sector standout has been European steel names that are trading higher in sympathy with a Goldman Sachs sector call on Asian steel names to 'Maximum Bullish.' ThyssenKrupp [TKA.GE] and AreclorMittal [MT.NV] are both outperforming in the wake of this call. Into 5:30EST, equities have pressed their trading range lows on mixed volumes, (strong on the FTSE100 and light on both the CAC and DAX)
-In equities: Analysts at Goldman Sachs raise Asian Steel sector to Maximum Bullish; State 'buy steel and buy in now.' || Whitbread [WTB.UK] Reports H1 Pretax Â£106M v Â£109Me, Rev Â£703M v Â£691Me. || ITV [ITV.UK] Announces Â£120M (7% of market cap) convertible bond offer; Provides trading update. || Old Mutual [OML.UK] Launches Â£500M senior bond (9% of market cap). || BAE Systems [BA.UK] According to Daily Telegraph, company's 3-yr contract with Saudi Air Force for Typhoon fighters may be worth over Â£500M. || Lloyds LLOY.UK: Exit fee from UK toxic asset protection scheme (APS) may be more than Â£2B vs the Â£1B previously reported - London Telegraph. || Orpea [ORP.FR] Raises FY09 Rev target to â‚¬840M v â‚¬840Me; Sees FY11 Rev well above â‚¬1B v â‚¬1.1Be. || Fraport [FRA.GE] Reports Sept traffic figures; Frankfurt Passengers -4.7% y/y at 4.6M. || Merck [MRK.GE] Acquires private bioscience company in India. ||
- Speakers: WTO's Lamy: No significant signs of protectionism at this time, global contraction in trade appears to have reached a bottom. Exit strategies from special measures must rely on fiscal consolidation complemented by sustained GDP growth || China end Jun foreign debt at $360.6B, down 3.8% y/y - SAFE || ZEW Economists commented positive signals were now weakening but noted that the Expectations survey remained well above historical average but conceded that the German economy would improve only gradually. It cautioned that the recent decline in exports would likely to have weakened expectations and was uncertain how private consumption would develop. Increase in incoming orders should have had a positive impact || France PM Fillon reiterated the view that the worst of crisis had passed. Consumption to be maintained in coming months but unemployment to continue to rise into 2010 || Norway Government saw 2010 budget of NOK148.5B in non-oil structural deficit, structural deficit to increase by 0.5%. 2010 budget to show 1.75% real increase in expenditures with the 2010 budget overall surplus seen at NOK172B Expect oil fund at NOK2.824T at end of 2010 || Russian Econ Min commented that its 2009 inflation could be between 10.5% to 11.0% compared to Gov't official view of 11.0% to 12.0% || China Vice PM Wang commented ahead of the European morning that China could expand local currency settlement with Russia and establish bilateral currency deal with Russia. Russia says working on CNY and RUB currencies for trade settlement and not use either USD or EUR for the transactions. || German Dep Fin Min commented that inflation to stay low for the next few years
- In Currencies: The recent benign neglect in the USD and GBP currencies continue to remain in effect against the major pairs and commodity currencies and this was reflected in most outright commodity prices. Spot gold registered a fresh al-time high above the $1,065.40 level and NYMEX crude approached the $74.00 level. The GBP continued its soft tone and hit fresh multi-month lows against the USD and Euro pairs. The UK inflation data indicated that BoE would continue to pursue its ultra-easy policy stance. GBP/USD tested 1.5710 before consolidating, while EUR/GBP hit six-month highs above the 0.94 handle.
- The EUR/USD retested the 1.48 level during the European morning but could not capitalize too much on the strength in commodity prices. The German ZEW survey took some of the luster out of the Euro but its losses were limited ahead of the NY morning. The data did stress that ECB monetary policy would remain accommodative for some time to come with the participants not expectation any ECB rate move over the next six months.
- In Fixed Income: Government bonds have exhibited a firm tone in European trade following weaker than expected data from Germany and the UK. Ahead of tomorrow's reopening, the 2y Schatz is outperforming the rest of the German yield curve after the October ZEW survey undershot market expectations. It's a different story in the UK, where despite the lowest monthly reading in UK CPI, and lowest annual reading in half a decade, the short dated Gilt yields are higher, suggesting flatteners or at least steepener unwinds. Treasuries have seen good buying across the curve in the overnight session, with 5 and 7 year notes the best performers in current trade. The 10year Note has made up lost ground against both Bunds and Gilts with yield spreads a touch wider at -27bps and +5bps respectively.
- In commodities: Spot Gold hits fresh all-time highs at $1,065.40 per ounce || China Iron & Steel Association (CISA) to lead 2010 iron ore talks, seeks to set China specific iron ore price (separate from prices agreed by other Asian steel makers) || Analysts at Citi commented on European Mining sector and remained positive on the sector due to continued global restocking. Continue to see recovery driven by China and global supply constraints. Saw sector becoming increasingly political as states with large resources attempt to play their advantage in the market
*** NOTES *** - US Corporate earning seasons starts to heat up with financial sector to highlight the remainder of the week. Meredith Whitney lowers Goldman Sachs to Neutral - German ZEW improved but did not meet expectations; Positive signals are now weakening - UK inflation data keeps the door open to the possibility of additional BOE quantitative easing - Goldman Sachs raise Asian Steel sector to "Maximum Bullish"
***Looking Ahead - 8:00 (PD) Polish Aug Current Account: -â‚¬15Me v -â‚¬565M prior, Trade Balance: -â‚¬250Me v -â‚¬551M prior - 8:30 (CA) Canadian New Housing Price Index M/M:0.2%e v 0.3% prior - 9:00 (UK) BoE's Bean -10:00 (US) IBD/TIPP Economic Optimism: 52.5e v 52.5 prior
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