Monday, December 07, 2009 5:55:14 AM
European Market Update: USD tries to build upon its recently found momentum
*** ECONOMIC DATA ***
- (CZ) Czech Oct trade Balance (CZK) 17.5B v 8.8Be
- (TT) Taiwan Nov Trade Balance: $2.1B v $2.7Be
- (TT) Taiwan Nov CPI Y/Y: -1.6% v -1.0%e; WPI Y/Y: 0.8% v 0.1%e
- (SZ) Swiss Oct Retail Sales Y/Y: 3.1% v -1.6% prior
- (SW) Swedish Nov Budget Balance (SEK): 6.7 v -19.6B prior
- (IC) Iceland Q3 GDP Q/Q:: -5.7% v -2.0% prior, Y/Y: -7.2% v -6.5% prior
- (NO) Norway Oct Industrial Prod Manufacturing M/M: -1.5% v-0.2%e Y/Y: -5.3% v -3.9%e
- (NO) Norway Oct Industrial ProductionM/M: -1.1% v 0.9% prior, Y/Y: -4.9% v -1.2% prior
- (EU) Euro-Zone Dec Sentix Investor Confidence: -5.5 v -7.0 prior
- (GR) Greece Nov Consumer price Index Y/Y: 2.0% v 1.6%e; CPI EU harmonized Y/Y: 2.1% v 1.6%e
- (GE) German Factory Orders M/M: -2.1% v 0.8%e; Y/Y:-8.5% v -6.2%e; First monthly decline since Feb (8 months)
*** SPEAKERS/FIXED INCOME/FX/COMMODITIES/ERRATUM ***
- Equities: European equity markets have set a heavy tone through morning trade. Overall sentiment has been led by the USD taking back some its losses and the corresponding effect in commodity markets. With metals, energy and soft's on the back foot, miners and industrials have led the downward trend. This action has been the most apparent on the global miner heavy FTSE100. Financials and healthcare (ahead of expected clinical data and investor day conferences later in the week) have also moved lower. Other movers included Siemens [SIE.GE] following a downgrade from Morgan Stanley and UK electricity utilities following regulatory comments on future end user charges. Some names that shook the trend and outperformed included German auto's with Daimler [DAI.GE] releasing Nov figures and VW [VOW.GE] shareholders approving plans to integrate Porsche [PAH3.GE] over the weekend. Equities trended lower following the heavy open, paring some losses after 4:00EST due to a pull back in the USD Index. Trading volumes have remained below trading averages.
-Individual stocks:: BASF [BAS.GE]: CEO: Company to post better than expected Q4 results after strong Oct-Nov sales, rise in new orders - Frankfurter Allgemeine Zeitung (FAZ). || Rio Tinto /BHP [RIO.UK]: Confirms signing of $116B iron ore venture with Rio Tinto to combine mines, ports, rail, and workforce in Pilbara region. || National Express [NEX.UK]: Near an agreement to name Dean Finch as CEO - FT. || Shanks Group [SKS.UK]: Confirms receipt of "highly preliminary and unsolicited approach" from private equity group proposing 135p/share takeover (90.1p last). || EADS [EAD.FR]: A400M first flight might may come as soon as Dec 9 (Wednesday) -FT. CEO: Deferrals of aircraft orders are impacting the cash cushion of Airbus ahead of the start of its A350 production - FT. || Software AG [SOW.GE]: CFO: Expects sales in 2010 to grow comparably to "slight" improvement in overall economy - Euro am Sonntag. || Anheuser Busch [ABI.BE]: May cut as much as 30% of its 8K workforce in Western Europe - Le Soir. ||
- Speakers: China's Central Economic Working Conference noted that the Govt sought to strike a suitable balance between growth and inflation and added that the government should increase flexibility of economic policy. It noted that China was pushing for export driven recovery but would improve its domestic demand. It noted that the employment situation remained grave. Gov't would control new investment projects next year and focus mainly on existing projects. Gov't would control loans to overcapacity industries but noted that key projects would continue to receive loans. It would continue pushing forward Yuan settlement trial and deepen resource pricing reforms. China sought to improve Forex management for outward Investment ||Germany''s DIHK: survey: 2010 Industrial output up 5%, but will not curb job losses || ECB's Trichet reiterated that current interest rate policy was appropriate. He also stated that unconventional measures would not be necessary in the future as it was in the past (all in line with ECB speak). || Japan's Fin Min Fujii tells World Bank president he hopes for a stronger USD
- Currencies: Technical factors aiding the dollar during the European morning. The EUR/USD held below its March uptrend line that was violated on Friday at the 1.4900 level after again testing the level during the Asian morning. Dealers noted that medium term models funds said to be covering USD short positions against European currencies coupled with thinning liquidity conditions as year-end approached.
- The GBP was lagging the European pairs over the fiscal concern in the UK ahead of the pre-budget to be unveiled later this week. GBP/USD tested below 1.6350 ahead of the NY mormning.
- The USD/JPY was little changed at the 90 level after the pair's surge last week from its 14-year lows below 85. As noted last week the 88 level in USD/JPY pair might provide an ideal situation for possible intervention as dealers note that recent rhetoric, lower interest rates, technical overstretch and market participants positioned long JPY. Even at the 90 handle the upside momentum in the pair could be placed into overdrive should G7 have the united front to stand by its rhetoric.
- Fixed Income: Gilts have underperformed Bunds and Treasuries this morning in Europe. With uncertainty building head of the government's pre Budget report on Wednesday the UK 10y has widened to 49bps over the Bund and 27bps over the 10y Note , with the yield up a basis point on the day at 3.72% and US and German yields lower on the day thanks asset reallocation buying. The Greek 10yr has widened to as much as 185bps over the Bund in contrast to the rest of the peripherals, which have broadly speaking, firmed up against the core. In corporates, French cement name LaFarge launched at â‚¬750M 10y, with price taslk at 220bps over swaps.
- Energy: Various Arab oil ministers met at the annual meeting in Cairo Saudi Arabia Oil Min Al-Naimi: Oil prices are in the right range, no need to reduce inventories. Separately, Algerian oil minister Khelil said it will be "some time" before oil production has to increase.- Another unidentified senior OPEC delegate has noted that any change to supply at the Dec 22 OPEC meeting is not likely. || Nigerian Oil Min expressed the view that no change in output production was expected at the Dec 22nd meeting in Angola || Lundberg noted that in the 2 weeks to Dec 4, US avg retail gasoline prices declined by 1.2 cents or less than 1% to $2.64/gallon. It noted that if crude oil prices remain stable, it expected gasoline prices will either level off or decline further. Unemployment has impacted gasoline demand.
- Commodities: BHP Billiton [BHP.AU] Confirmed signing of $116B iron ore venture with Rio Tinto to combine mines, ports, rail, and workforce in Pilbara .The European Commission spokesman noted that they would ensure that the Rio Tinto - BHP JV complies with EU anti-trust rules. European Confederation of Iron/Steel: stated that it remained opposed to the jv ||
- In the papers: UK Telegraph article noted that the UK Treasury will warn later this week that the country faces decades of rising public sector debt, increasing taxes and, potentially, falling living standards unless it tackles the growing costs of its pensions and health bill. The article noted that Treasury will warn that the costs of paying for state pensions and the National Health Service are set to rocket between now and 2059 unless action is taken to reduce the bill. The European Commission forecasted earlier this year that the UK public debt would rise from around 60% of GDP this year to 160% by 2020, 406% by 2040, and 760% by 2060. Artcile noted that the UK Treasury attacked such figures as having "no basis in reality", and is likely to use its Long-Term Fiscal Projections document as a rejoinder.
- Kuwait sells $4.1B stake in Citigroup [C]
- China's Statistics Bureau Chief Economist Yao: China is still facing "insufficient" domestic demand; weak global economic conditions going into 2010
- USD builds upon Friday's momentum following nonfarm payroll data; Technical factors and year-end could further aid its cause.
- US consumer credit later today. Might provides more insight to the sustainability of global recovery
- 6:30 (CL) Chile Nov Trade Balance: 1.1Be v 0.9B prior
- 8:30 (EU) ECB's Trichet appears before EU Parliament
- 8:30 (CA) Canadian Oct Building Permits M/M: 1.0%e v 1.6% prior
- 11:00 (HU) Hungary Nov Budget Balance YTD (HUF): No est v -1.1B prior
- 12:00 (US) Fed's Bernanke speaks in Washington
- 15:00 (US) Oct Consumer credit: -9.3Be v -14.8B prior
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