European Market Update: Subdued trading characterizes session as various centers around the globe continued to celebrate public holidays
Monday, December 28, 2009
European Market Update: Subdued trading characterizes session as various centers around the globe continued to celebrate public holidays
*** ECONOMIC DATA *** - (FI) Finland Dec Consumer Confidence: 14.4 v 11.5e; Business Confidence: -9.0 v -17.0e - (CZ) Czech Dec Business Confidence: -2.5 v -4.8 prior; Consumer Confidence: -6.8 v -8.0 prior; Consumer & Bus Confidence: -3.3 v -5.4 prior - (SP) Spanish Oct Mortgages on Houses Y/Y: -18.0% v -4.2% prior, Mortgages-capital Loaned Y/Y: -37.1% v -14.3% prior - (TT) Taiwan Nov Leading Index: 0.7% v 0.5%, Coincident Index: 1.1% v 1.6% prior - (HK) Hong Kong Nov Trade Balance (HKD): -20.7B v -21.0Be; Exports Y/Y: 1.3% v 1.6%e (first increase since Oct 2008); Imports Y/Y: 6.5% v 6.1%e - (GE) German Dec CPI Saxony M/M: 0.8% v -0.1% prior; Y/Y: 0.8% v 0.3% prior
*** SPEAKERS/FIXED INCOME/FX/COMMODITIES/ERRATUM *** - Equities: Entering a second consecutive abbreviated trading week, those European equity markets which are open are continuing last weeks end-of-year-rally. With London, and the London Stock Exchange, along with the majority of Commonwealth states celebrating the Boxing Day bank holiday, already thin holiday volumes have been taken down another notch. Through the first two hours of trade, Deutsche Bourse volumes were down 50% while the CAC40 was off 60%. In this light environment, trading direction and themes have been sparse. Commentary from an executive at Scania [SCVB.SW] appeared to pour cold water on a possible tri-party action with VW [VOW3.GE] combining the trucking assets of the company along with Man AG [MAN.GE]. Continued commodity gains have boosted energy and exploration companies. Other strong movers included the broader European utility sector, which has outperformed on both the CAC and DAX, with E.On [EOAN.GE], GDF GSZ.FR] and Suez Environment [SEV.FR] leading movers.
-Individual equities: Daimler [DAI.GE]: Plan to re-task workers as Sindelfingen Mercedes Benz facility -Focus Magazine. || VW [VOW3.GE]: Audi unit investments seen at â‚¬7.3B for 2009-2012; Plan to offer total of 42 models in 2015. || Scania [SCVB.SW]: Scania CEO skeptical of MAN merger assumptions in interview - Die Welt. || Seat Pagine Giall [PG.IT]: Reportedly may lower FY10 earnings guidance; Seeking to extend debt refinancing agreements. || Nestle [NESN.SZ]: CEO: Plans to double sales in Brazil by 2012 to BRL31B - Folha de Sao Paulo. ||
- Speakers: PBoC's advisor Fan Gang: reiterates views that Global economy remains unstable with two to three years of low growth likely. He reiterated that the outlook remained uncertain for developed economies. China needs measures to guard against bubbles forming from rising asset prices and hot money inflows and added that one cannot assume that counter-crisis measures wouldl be available 'forever'. China has seen rising hot money inflows and reflected in stock and property volatility. He forecasted China's 2010 GDP seen between 8% to 9%. On the currency front he echoed the growing government view that there was no reason that the yuan currency (CNY) would depreciate against any currency, including the USD *** Association of Southeast Asian Nations along with China, Japan and South Korea signed an agreement to create $120B foreign currency reserve fund called the Chiang Mai initiative. (Reminder: The countries agreed in May that Southeast Asian nations will contribute 20% to the pool; Japan will provide $38.4B; China and Hong Kong together will add another $38.4B. South Koreas contribution will be $19.2B)
- Currencies: Subdued trading was the theme as various centers around the globe continued to celebrate public holidays. The USD was little changed from its opening levels in Asia and continued to consolidate its recent gains against the major pairs. Dealers did note that despite rising and widening yields the dollar seemed to be at a crossroad and struggling to garner additional strength. Over the course of the last week the dollar did benefit from the eventually interest rate increases that might come later in 2010 coupled with sovereign credit concerns at the euro-zone periphery. EUR/USD was just below the 1.44 level throughout the European morning. The GBP was steady despite some adverse press reports that political and budget strife could erode the pound (See in the papers section below).
- Fixed Income: Volumes in Bund futures have been predictably thin with less than 50k contracts traded at the time of writing. Cash yields are higher and the curve has flattened with the short end underperforming and the benchmark 10y Bund yield is up 3bps at 3.35%. In equally subdued trading, UST's have seen some bear steepening, with the 10y yield adding another 4bps to rise above 3.84%. With a deluge of supply due this week, there is a real possibility that the 10y note could make a run at 4% before the year is out. - with the sole technical obstacle - the August high yield of 3.85% - but a basis point away The Treasury's $44B 2 year note auction should generate some attention later in the New York afternoon in what is shaping up as an otherwise quiet session. Those traders that have bothered to show up will be eyeing at the 1% level - the last time a 2 year note auction stopped out above that mark was in September.
- Energy: Gazprom [GAZP.RU] Dep CEO Ananenkov commented that the company sought to purchase all Sakahalin-1 gas produced from Exxon in 2010. The company would Increased Kirinsky field reserves by 25% to 100BCM and begin exploration drilling at Kirinsky block next year
- In the papers: London Telegraph article noted that the British Pound (GBP) might decline beyond parity with the euro according to the Center for Economics and Business (CEBR). The report cited the state of the UK's finances and concern about governmental policies. According to the Center for Economics and Business, ratings agencies are "looking for an excuse" to lower the UK's AAA sovereign rating. Other themes in the UK Times and FT have focused on retail sales figures over the Boxing day weekend with sales figures seen +18.65 y/y. Post-holiday sales are seen as being driven by timing (weekend), weather and promotional levels. Sales levels in the US in the same period appear to be in line with the European figures. US based NY Post has looked at efforts by CBS and NBC to place commercial advertisements during the 2010 Super Bowl and Winter Olympics, finding that both channels are continuing to struggle to fill slots at asked prices.
- Geo-political Over the Holiday weekend, Abdul Farouk Abdulmutallab attempted to ignite an explosive device aboard a Delta Operated Northwest Airlines flight from Amsterdam to Detroit. Abdulmutallab, a Nigerian national is believed to have received training in Yemen, what is now speculated to be a new front in the US GWOT. Following the failed attempt, the US DOT and Homeland Security have implemented new security measures at check in and whilst onboard. Violence in Iran has accelerated following massed action as Shiite Muslims celebrated Ashura on Sunday. In the ensuing events, upwards of 15 demonstrators, including a nephew of failed presidential candidate Mousavi were killed following clashed with security forces. In Japan, Fin Min Fujii has been hospitalized following high blood pressure issues. It is expected that the 77 year old Fin Min will stay in the hospital for a period of 10-days following treatment. Speculation regarding the standing of Irish Fin Min Lenihan has grown following the confirmation that he was diagnosed with cancer this weekend. Immediate signs seem to indicate that Linehan plans to continue serving in his roll.
***Notes: - China Premier Wen commented that China refuses to yield to foreign pressure for Yuan currency to appreciate - Japan Fin Min Fujii hospitalized for high blood pressure; Ireland's Finance Minister Lenihan diagnosed with cancer - Canadian markets closed for Holiday
***Looking Ahead: -10:30 (US) Dec Dallas Fed Manf. Activity: 2.0%e v 0.3% prior - (IS) Israel Central Bank Base Rate Announcement: no change expected from the current 1.00% level
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