European Market Update: Greece releases its final 2010 budget; Capital flows controls continue to simmer (Trade the News)
Friday, November 20, 2009
European Market Update: Greece releases its final 2010 budget; Capital flows controls continue to simmer
*** ECONOMIC DATA *** - (GE) German Oct Producer Prices M/M: 0.0% v 0.1%e; Y/Y: -7.6% v -7.5%e - (JP) Japan Oct Convenience Store Sales: -5.5 v -5.6% prior - (TT) Taiwan Q3 Current Account Balance: $8.6B v $8.5Be - (DE) Denmark Nov Consumer Confidence Indicator: -2.4 v 0.3e - (NV) Netherlands Nov Consumer Confidence: -14 v -17e - (IT) Italy Sept Industrial Orders M/M: 5.2% v 5.0%e; Y/Y: -20.4% v -21.7%e - (IT) Italy Sept Industrial Sales M/M: 2.3% v -1.3% prior; Y/Y: -17.3% v -21.2% prior - (UK) October Car Production Y/Y: -6.7% y/y - SMMT - (MA) Malaysian Q3 GDP: -1.2% v -2.0%e
*** SPEAKERS/FIXED INCOME/FX/COMMODITIES/ERRATUM *** - Equities: European equity markets have rebounded from some of their week losses, shaking off a mixed Asian session and a tech crunch after the US market close driven by disappointing Dell [DELL] figures. Corporate and economic data has remained light as Q3 earnings season winds down. Political action, in the form of a final EU selection for President and Foreign Min has proved stability to a linger question despite the selection of two relative unknowns. Equity movers in today's session included Dutch based TNT [TNT.NV] that followed a strong upgrade at UBS and VW [VOW.GE] as its managing board approved the purchase of Porsche [PAH3.GE] contracts (a de-facto approval of the industrial merger). Trading volumes have been thin with all major bourses trading below moving averages. Eurostoxx50 sector leaders included basic resources (recovering from yesterdays declines), consumer goods and financials.
-In individual equities: HSBC [HSBA.UK] Provides October Master Trust; Net charge offs 9.97% v 11.3% m/m. || JC Decaux [DEC.FR] Have renewed current contract from Shanghai bus system for 10 year period. || VW [VOW.GE]Supervisory Board has approved Porsche contracts, merger plans. ||
- Speakers: BoJ Gov Shirakawa commented that the central bank would prolong its accommodative policy and added there was no change in monetary stance at all . The economy was showing sign of improvement but still saw downside risks for Japan. The BOJ was monitoring currency markets and noted that investor risk appetite and dollar markets have a close link. On the topic of deflation, the BOJ noted that weak demand causing continuous price declines and downside price pressures will linger. Adding liquidity alone would not increase prices and must increase capex spending to defeat price declines || ECB's Trichet stated that it was too early to declare victory over economic crisis. Recent financial developments are more benign and market participants should be conscious of fact that size of support measures are unprecedented || SNB's Roth commented that its inflation outlook guides the central bank's policy decisions. He noted that the unconventional policy measures have worked well and would exit special measures based upon the SNB's inflation forecasts || German Fin Min Monthly report noted that it expected the German economy to grow less in Q4 compared to the 0.7% seen in Q3 as job security concerns would dent consumption. The ministry saw consumers holding back in Q4 on employment concerns. It did note the German economy recovery was broadening amid risks. Overcapacity might dampen German investment and it expected German prices to remain calm even as oil prices rose. Lastly the report commented that the Euro currency level was a burden on German exports and would crimp the competitiveness of German exports if sustained. The report echoed the view that the economic recovery would be soon but slow and gradual || IMF's Lipsky commented that inflation was not a threat for advanced economies and that monetary policy must be geared towards low inflation. He noted that the IMF was relieved to see return of capital flows to emerging markets and added that such capital flows to small markets could mean distortions || ECB's Weber stated that monetary policy was not a cause of recent global crisis and added that it it was a mistake to use interest rates to address asset bubbles. He noted that he would look into regulation to counter potential asset bubbles. The ECB's interest rate policy targeted consumer prices not credit growth || Greece releaed its final 2010 budget plan and the : Gov't sought to cut deficit levels to 9.2% of GDP from current 12.7% level. Public sector debt seen at 120.8% of GDP from 113.4% current level. Net borrowing seen at 44.5B in 2010. The budget reductions would come in part from tighter controls on public spending. Spending cut to total 2.2B from original 1.6B and the Gov't planned to collect additional 3.6B in taxes
- Currencies: The EUR/USD price action was largely subdued in the dearth of data during the European morning. Dealers were also focusing on the expiration of the "double No-touch" binary option at the NY cut. More comments seemed to focus on the holiday thinned markets next week and the "gargantuan" US bond auctions.
- In Energy: Oman Central Bank Chief stated that it would stick to a USD currency peg, echoing the Saudis view Thursday. He saw 2010 oil price between $70 to $80 per barrel || UAE Central Bank stated that it had no plans to price oil in any currency other than USD || Macquarie energy economist commented that crude oil prices might fall to about $60/barrel in the next quarter on weakening demand from developed and emerging world || traders taking note of the long dated crude is $20+ from current levels.and the largest such spread in recent memory
- Credit Crisis: Sweden's Riksbank Fall Risk Survey: financial markets still not functioning normally. Almost 50% in survey stated they had increased a buffer of liquid assets versus six months ago -In the papers: CNN Money: Article on the US Federal borrowing situation. The article noted that unless lawmakers make big changes, the interest Americans will have to pay to keep the country running over the next decade would reach unheard of levels to the tune of $4.8 trillion interest on the debt. Article noted that U.S. government's epic borrowing: More than half of the $9 trillion in debt that the Gov't was expected to build up over the next decade would be interest. In 2015 alone, the estimated interest due is projected to be -$533B - is equal to a third of the federal income taxes expected to be paid that year.
***Notes: - China PBoC Zhou: "We are passive on the level of the usd as the level does not effect the nations economy. Its like watching a tournament. We just watch the game. Regardless of who wins or loses, the issue of whether the winner or loser benefits the spectator doesn't arise." - EU selects a President. - India looks to swing to net importer of Rice in 2010. - BoJ leaves interest rates unchanged . Japan govt raises view on employment, capex . - US real rates turn negative at the short end
***Looking Ahead: - (HU) Hungary Oct Industrial Output: % v -9.6% prior - (RU) Russia Oct Retail Sales M/M: % v 0.3% prior; Y/Y: -9.2%e v -9.9% prior -8:00 (PD) Poland Oct Core Inflation M/M: 0.2%e v 0.2% prior; Y/Y: 2.9% v 2.9% prior -9:00 (BE) Belgium Nov Consumer Confidence: No est v -12.0% prior -15:30 (MX) Mexican Q3 GDP Q/Q: -6.7%e v -10.3% prior
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