- Equities: European equity markets shook off opening lows to move into positive territory as the Czech Rep, Netherlands, Italy and Austria all moved out of technical recessions with positive Q3 GPD prints. Equities took cheer from the formation of Europe's third largest airline with the finalization of an agonizingly long dance between British Airways [BAY.UK] and Iberia [IBLA.SP] coming to a close. Positive earnings momentum from Vivendi [VIV.FR], KBC Groep [KBC.BE] and luxury retailer CIE Financiere Richemont [CFR.SZ] supported this positive momentum. Oil and gas names continued their multi-day underperformance following bearish 2010 commentary from oil service firm Technip [TEC.FR] following its Q3 earnings. Disappointing financial sector earnings from Dexia [DEXB.BE] in the premarket and Natixis [KN.FR] in yesterday's post market added weight to that sector. Other underperforming sectors included healthcare and basic resources/miners, specifically on the FTSE100 where Thursday's losses were extended. Into 5:00EST European equity markets are clearly looking forward to US data, including Sept trade balance and University of Michigan figures. Trading volumes for the session are down sharply from moving averages with the DAX off by approx 60%.
-in individual equities: Technip [TEC.FR] Reports Q3 Net â‚¬108M v â‚¬103Me, Rev â‚¬1.7B v â‚¬1.6Be; confirms FY09 outlook; cautious on FY10. ||Dexia [DEXB.BE] Reports Q3 Net Profit â‚¬274M v â‚¬331Me, Rev â‚¬1.4B v â‚¬1.6Be. || KBC [KBC.BE] Reports Q3 â‚¬631M v â‚¬420Me, Rev Â£2.4B v â‚¬2.3Be. || Iberia [IBLA.SP] Signs "merger of equals" deal with British Airways; Merger expected to close in late 2010. || Porsche [PAH3.GE] Reports 2009 pretax loss â‚¬4.4B v gain â‚¬8.6B y/y. || Vinci [DG.FR] Reports Q3 Rev â‚¬8.6B v â‚¬9.1B y/y; Outlook unchanged. || Bouygues [EN.FR] Reports Q3 Rev â‚¬8.38B v â‚¬8.5Be. || Natixis [KN.FR] Reports Q3 Net â‚¬268M v â‚¬526Me, Rev â‚¬1.3B v â‚¬1.1Be. || Vivendi [VIV.FR] Reports Q3 net adj â‚¬645M v â‚¬625M y/y, Rev â‚¬6.4B v â‚¬6.5Be. || Gamsea [GAM.SP] Reports 9-month net â‚¬86M v â‚¬288M y/y, EBITDA â‚¬311M v â‚¬311M y/y. ||
- Speakers: IMF's Strauss-Kahn commented that a stronger Chinese Yuan currency would boost Chinese domestic demand and stated that a revaluation of CNY should be not resisted. The IMF noted that the US growth had resumed earlier than expected but that the US economic recovery remained sluggish. The IMF did not expect the US to fall victim to a double dip recession. Overall, the IMF expects 2010 to be year of gradual global economic recovery. On the currency front, the IMF noted that the recent USD decline was within normal ranges but noted the dollar was resilient during the global crisis. Most Asian currencies were undervalued and that the currency reserves accumulation process was an insurance policy, although not a cheap policy ||Bundesbank's Zeitler commented in the German press that 2010 would be tough for banks as effects of recession now arriving on balance sheets. He noted that removal of special measures would be staggered. Removal of central bank support measures will not be removed all at once so institutions have time to prepare || French Fin Min Lagarde stated that the French economy was on path towards recovery. She noted that Only 5k jobs lost in Q3, indicating a deceleration of unemployment and a sign of stabilization. She noted that Stimulus plan must remain in place next year || German Economic Council (Wisemen) released their annual report: It forecasts that the ECB to hold interest rates steady at 1.0% through 2010; Forecasted German 2010 GDP at 1.6% and debt /GDP ratio at 5.1%. It noted that the Germany economy to recover but no upswing. Abrupt currency rate swings could hurt recovery prospects. Govt must prepare exit strategies from special measures and must begin in 2011 || Japan Fin Min Fujii commented that he was no longer concerned about falling JGB. He also noted that the Gov't could cut a few trillion from Â¥95T initial budget requests for the next fiscal year budget. || ECB's Sramko reiterated view that ECB interest rates of 1.0% were appropriate and would help increase economic stabilization. He did note it was premature to be worried about inflationary expectations. Commodity prices remained an inflation risk but expectations were currently anchored. He expressed optimism that the economy had begun to bottom out, but cautioned that uncertainties remain. Risks to future developments were no longer just on the downside and might be a moderate Employment recovery in 2010
- In Currencies: Comments from that IMF that a revaluation of CNY should be not resisted prompted amid persistent speculation that China could revalue its currency over the weekend, particularly with President Obama visiting the region. Earlier this month Dealing desks noted chatter circulating about good selling pressure in USD/CNY long-dated forwards ahead of President Obama's visit to China. Such speculation that these sorts of developments could prompt a weaker dollar again other Asian pairs in coming months. However, China's PBoC reportedly told APEC members at the recent summit that Yuan flexibility would be very gradual. USD/JPY tested 89.70 during the course of the European morning.
- Fixed income: Euro-zone sovereign debt spreads remain relatively steady against bunds following a plethora of Q3 preliminary GDP readings from the continent. The data has provided markets with a nice insight into the divergent paths of European economies as the crisis recedes. Germany is ultimately leading the way out of the crisis, registering its second successive quarter of growth, and a sequential increase. France also had a second quarter of growth, but the somewhat disappointing 0.3% read was in line with the prior quarter. Austrian and dutch yield spreads are narrower versus Bunds after they resumed growth in Q3. Of the club med nations, Portugal and Greece managed growth in Q3 while Spain and Greece remain mired in recession. The tesoro d'italia sold â‚¬2B in 12yr BTP's with modest results, whilst France has scheduled up to â‚¬9B in supply for next week . In corporates British American Tobacco launched a two part bond offering, with 11 year Euro denonated and 25 year sterling denominated tranches in the works
- In Energy: JPM analyst report stated that China to be net coal importer in 2009 for the first time. The report believes that China was accelerating its importation of coal to cope with fallen output caused by the consolidation of small coal mines
*** NOTES ***
- Risk back in during the European morning following slew of GDP data highlighted by the Euro-Zone moving out of recession
- Hong Kong Financial Sec Tsang: FED's policy of keeping interest rates near zero is fueling a wave of speculative capital that may cause the next global crisis
- Looking Ahead:
- US Corporate Earnings expected: BBI, DIS and JWN
- (RU) Russia Oct Producer Prices M/M: % v 1.3%e; Y/Y: % v 1.6%e
- 8:00am (PD) Poland Oct CPI M/M: 0.2%e v 0.0% prior; Y/Y: 3.2%e v 3.4% prior
- 8:30 am (US) Sept Trade Balance: -$31.8Be v -$30.7B prior
- 8:30 am (US) Oct Import Price Index M/M: 1.0%e v 0.1% prior, Y/Y: -5.5%e v -12.0% prior
- 8:30 am (CA) Sept International Merchandise Trade: -C$1.8Be v -C$2.0B prior
- 8:30 am (CA) Canadian New Motor Vehicle Sales M/M: 0.0%e v -0.3% prior
- 10:00 (US) Oct Import Price Index M/M: 1.0%e v 0.1% prior; Y/Y: -5.5%e v -12.0% prior
- 10:00 (US) Nov Prelim U of Michigan Confidence: 71.0e v 70.6 prior
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