European Market Update: USD continues to be vulnerable following FOMC minutes and rising risk appetite; India's central bank reportedly mulling another purchase of 200 metric tons of gold purchases
Wednesday, November 25, 2009
Update: USD continues to be vulnerable following FOMC minutes and rising risk
appetite; India's central bank reportedly mulling another purchase
of 200 metric tons of gold purchases from IMF
*** ECONOMIC DATA ***
- (GE) German GFK Consumer Confidence survey: 3.7 v 4.0e
- (CZ) Czech Nov Business Confidence: -4.8 v -7.1% prior, Consumer Confidence:
-8.0 v -14.3 prior; Consumer & Business Confidence: -5.4 v -8.5 prior
- (SP) Spain Sept Mortgages on Houses Y/Y: -4.2% v -6.6% prior;
Mortgages-capital loaned Y/Y: -14.3% v-14.9% prior
- (TU) Turkey Sept Industrial Production Y/Y: -8.4% v -8.8% prior
- (SW) Swedish Nov Consumer Confidence: 11.4 v 8.5e; Econ Tendency survey: 98.8
v 95.8e; Manuf Confidence: -10 v -12e
- (IT) Italian Nov Consumer Confidence: 112.8 v 111.5e
- (NO) Norway Sept AKU Unemployment Rate: 3.1% v 3.3%e
- (IT) Italian Sep Retail Sales M/M: -0.1% v 0.1%e; Y/Y: -1.6% v - 2.9%e
- (PD) Polish Oct Retail Sales M/M: 3.9% v 4.5%e; Y/Y: 2.1% v 2.3%e
- (PD) Poland Unemployment Rate: 11.1% v 11.0%e
- (UK) Q3 Prelim GDP Q/Q: -0.3% v -0.3%; Y/Y: -5.1% v -5.1%e
- (UK) Q3 Preliminary Exports: 0.5% v 1.4%e; Imports: 1.3% v 2.0%e; Gov't
Spending: 0.2% v 0.5%e; Private Consumption: 0.0% v -0.2%e
- (UK) Sept Index of Services Q/Q: -0.1% v -0.1%e
- (SA) South Africa Oct CPI (all items) M/M: 0.0% v 0.0%e; Y/Y: 5.9% v 5.9%e
- (BR) Brazil Nov FGV Consumer Confidence: 115.5 v 114.5 prior
- (SA) South Africa Q4 BER Business Confidence: 28 v 25e
*** SPEAKERS/FIXED INCOME/FX/COMMODITIES/ERRATUM ***
- European equity markets opened at session highs on the rebound from
yesterday's action. Continued dollar weakness following the FOMC minutes has led to new highs in commodities and new lows in the USD
Index. These moves extend the multi-week trend pushing minerals, miners and
industrials higher. Despite continued speculation of Chinese capital
requirement alterations, Asian markets printed a positive session furthering
equity appetite in the European morning. The one year anniversary of Mumbai's
hotel attack and siege was reflected in India with the SENSEX up over 9,000 points in the year
period, closing at 17198.95. Final FY09 figures out of Porsche [PAH3.GE]
confirmed a second consecutive year of loss making figures and sent shares of
VW [VOW.GE] lower. German bank Commerzbank [CBK.GE] held its EGM, confirming
2012 targets and integration operations with Dresdner. Equity markets halted a
downward slide at 4:30EST with the UK Q3 prelim release reading that was in
line with expectations (though still showing the state in continued recession).
Trading volumes have been depressed through the session ahead of the holiday in
-In equities: LSE [LSE.UK] Reports H1 Net 49M v 52Me, Rev 311M v 312Me. Compass
Group [CPG.UK] Reports FY09 pretax 773M v 768Me, Rev 13.4B v 13.5Be. Bayer
[BAYN.GE]: To increase polycarbonate operations in India; enters into JV with Malibu Plastica. Remy Cointreau
[RCO.FR] Reports H1 Net 39M v 35Me, Rev 362M v 358Me. France Telecom [FTE.FR]
To merge Orange mobile Switzerland operations with Sunrise operated TDC. Nicox [COX.FR] Announces 70M (19% of
market cap) secondary offering; rights issue at placement price of 3.49/share.
Ericsson [ERICB.SW] To Acquire Nortel's North American GSM Business with
- In speakers: Russian Central Bank Ulyukayev commented that the CBR needs to
continue lowering interest rates to curb the carry trade. He noted that he was
more concerned about currency volatility than actual levels and plans to
increase currency interventions to limit volatility. Ulyukayev added that the
CBR sees no inflationary risks in H1 2010 and believes next year's inflation
could be much lower than 9%. South Korea Fin Min Yoon forecasted 2010 GDP grow of 4%, up from flat this year. The ministry remains optimistic yet
cautious on recovery outlook, although it is too early for an exit strategy
given that the economy is not on a firm footing. Premature exit strategy from
special measures might cause prolonged economic slowdown. The Indonesian
Central Bank's Budi Mulya commented that the rupiah remains in line with
fundamentals and said he would try to avoid volatility in currency markets. In
addition, the central bank said it would not change stance regarding inflows of
funds. French Budget Minister Woerth commented in a newspaper interview that
French 2010 borrowing could exceed â‚¬175B as France could borrow an additional â‚¬22B without compromising
its credibility. He estated that France was against any revision in the Maastrict Stability
Pact. Deficit to be reduced by 1.5 percentage points of GDP if economic
recovery is confirmed with ongoing deficit cuts of 1 point needed.
- In currencies: The greenback was modestly softer against the majors and
commodity related pairs following yesterday's FOMC minutes, which appeared to pave the way for additional weakness. The
dollar was testing some key technical levels as thin holiday conditions set in.
On Tuesday, the Fed described the dollar's decline as orderly, which dealers
took as a hint for the trend to continue. Press speculation that India's central bank could purchase another 200 metric
tons of gold from the IMF helped to re-enforce the higher commodity/weaker dollar
trend. Spot gold hit fresh all-time highs above the $1,180/oz level. EUR/USD
finally managed to move above the 1.50 handle and was approaching fresh
15-month highs. USD/CHF was attempting the bust below the parity level for the
first time since April 2008. USD/JPY moved below the 88 level, which was long
suggested to hold 'good bids' from the Japanese post office. Lots of dealer
commentary on the Chinese yuan and future trends. Trichet, Juncker, and Almunia
off to China this weekend to discuss economic and financial
- Fixed Income: Gilts have outperformed after UK Q3 GDP was revised slightly
upwards, in line with expectations but well short of the whispers ahead of the
official release. Subsequent buying in the short end and belly has sent the
yield curve steeper but it's a different story on the continent, with Germany
in bear flattening mode as speculation mounts over some form of spread on the
ECB's Dec 16th 12 month repo operation. With banks in the perhipery generally
perceived as chief beneficiaries of the ECB's largesse, yield spreads are wider
versus the core, with the Greek 10y hitting fresh 5 month highs above 180bps
and Italy 4bps wider at 80bps. Germany sold 4.1B in the second tap of the Oct 2014 5y Bobl
with strong results. Ahead of the last leg of the Treasury's mammoth week of
supply the question is whether yesterday's stellar performance in 5s can be
repeated with liquidity expected to be thing as markets move into holiday mode
. Price action in Europe suggests there are some questions. The new 7s are
trading at about a 4bps roll over the existing notes in the when issued market
and the benchmark 10y note is +1.4bps at 3.32%. In coprorates, Marks and
Spencer launched a 10y GBP denominated issue, benchmark size.
- In Energy: Kuwait might seek to switch its benchmark for pricing oil sold in the US to Argus Sour Crude index from the Platt's West
Texas Intermediate index. The move would follow a similar action by Saudi Arabia. According to a Kuwait oil official the country does not think the West
Texas Intermediate index represents the market. ||Chinese press noting that due
to shortages China might import at least 700M cubic meters of gas
-In the papers: India's Central bank (RBI) could consider buying the remains
201.3 metric tons of gold from the IMF according to an article found in the
Financial Chronicle. Article noted that India was open to buying more and may purchase the
remaining 201.3 metric tons from the fund . Any additional purchase would
depend on successful pitching by the central bank . There have been speculation
that central banks would increase their gold holdings. In early Nov, the IMF
disclosed that the Reserve Bank of India purchased 200 metric tons of gold for $6.7B. Mauritius recently purchased 2 tons for $71.7M Telegraph: China steps up efforts to halt explosive growth in credit.
Orders banks to raise capital or face lending sanctions.
- Risk appetite continues in thinning market conditions
- IMF: Half of banks losses might be unknown. Euro "probably a bit too
- (PD) Poland Central Bank interest rate decision: No change expected in the
base rate of 3.50%
- 7:00 (US) MBA mortgage applications w/e nov 20th: No est v -2.5% prior
- 7;30 (BR) Brazil Oct Total Outstanding Loans: No est v $1.3B prior; Private
bank Lending: No est v $797M prior
- 8:30 (US) Oct Personal Income: 0.1%e v 0.0% prior, Personal Spending: 0.5%e v
- 8:30 (US) Oct PCE Core M/M: 0.1%e v 0.1% prior, Y/Y: 1.4%e v 1.3% prior, PCE
Deflator Y/Y: 0.1%e v -0.5% prior
- 8:30 (US) Oct Durable Goods Orders: 0.5%e v 1.4% prior, Ex transportations:
0.7%e v 1.2% prior
- 8:30 (US) Initial Jobless Claims w/e Nov 21st: 500Ke v 505K prior, Continuing
claims: 5.565Me v 5.611M prior
- 10 :00 (US) Nov Final U of Michigan confidence: 67.0e v 66.0 prior
- 10:00 (US) Oct New Home Sales: 404Ke v 402K prior, M/M: 0.4%e v -3.6% prior
- 10:00 (MX) Mexico Q3 Current Account: -$2.4Be v $454M prior
- 15:30 (MX) Mexico Q3 GDP Y/Y: -3.7%e v -7.6% prior
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