European market Update: U.S. payroll report would likely set the trading sentiment for the weeks ahead
Friday, January 08, 2010
European market Update: U.S. payroll report would likely set the trading sentiment for the weeks ahead
*** ECONOMIC DATA *** - (SZ) Swiss Dec Unemployment Rate: 4.4% v 4.4%e; Unemployment rate Seasonally Adj: 4.2% v 4.2%e - (FI) Finland Oct GDP Indicator: -10.4% v -12.4% prior - (FI) Finland Nov Industrial Production M/M: 1.3% v 1.9% prior; Y/Y: -15.2% v -19.4% prior - (GE) Germany Nov Trade Balance: â‚¬17.4B v â‚¬12.5Be; Current Account: â‚¬18.1B v â‚¬10.8Be; Exports M/M: 1.6% v 0.8%e; Import M/M: -5.9% v 1.3%e - (FR) France Nov Trade Balance: -â‚¬5.3B v -â‚¬4.4B prior - (HU) Hungary Nov Preliminary Industrial Output M/M: -1.3% v 1.8% prior; Y/Y: -9.3% v -7.8%e - (SP) Spain Nov Industrial Output WDA Y/Y: -5.7% v -7.5%e; Industrial Output NSA Y/Y: -4.1% v -12.9% prior - (TU) Turkey Nov Industrial Production WDA M/M: 0.2% v 3.2% prior; Y/Y: 5.8% v -1.4% prior; Industrial Production NSA Y/Y: -2.2% v 6.5% prior - (DE) Denmark Nov Retail Sales M/M: -0.3% v 1.1% prior; Y/Y: -2.8% v -1.7% prior - (SW) Sweden Nov Industrial Production M/M: 0.2% v -2.7% prior; Y/Y: -12.6% v -16.1% prior - (SW) Sweden Nov Industrial Orders M/M: 2.1% v 1.5% prior; Y/Y: 1.5% v -13.3% prior - (IT) Italy Q3 Deficit to GDP YTD: 5.2% v 6.1% prior - (SP) Spain Dec Consumer Confidence: 74.7 v 75.3 prior - (NO) Norway Nov Retail Sales Volume M/M: -1.2% v 0.4%e; Y/Y: 2.1% v 4.2%e - (NO) Norway Nov Industrial Production M/M: 0.5% v -1.1% prior; Y/Y: -4.3% v -4.9% prior - (NO) Norway Nov Industrial Prod Manufacturing M/M: 0.9% v 1.0%e; Y/Y: -3.3% v -3.8%e - (SA) South Africa Dec Naamsa Vehicle sales Y/Y: -13.1% v -12.1% prior - (UK) Dec PPI Input M/M: 0.1% v -0.2%e; Y/Y: 6.9% v 6.5%e - (UK) Dec PPI Output M/M: 0.5% v 0.2%e; Y/Y: 3.5% v 3.1%e - (UK) Dec PPI Output Core M/M: 0.7% v 0.1%e; Y/Y: 2.6% v 1.9%e - (BR) Brazil Dec FGV Inflation: -0.1% v -0.2%e - (EU) Euro-Zone Q3 Final GDP Q/Q: 0.4% v 0.4%e; Y/Y: -4.0% v -4.1%e - (EU) Euro-Zone Nov Unemployment Rate: 10.0% v 9.9%e - (IT) Italy Nov Unemployment rate: 8.3% v 8.2% prior
*** SPEAKERS/FIXED INCOME/FX/COMMODITIES/ERRATUM *** - Equities: Following a mixed session in Asia, European markets opened on a soft note. Initial equity strength was driven by a range of analyst actions. Notably, UBS raised its view on the European Investment Bank sector to Overweight with key calls Barclays [BARC.UK] and Deutsche Bank [DBK.GE] leading the movement. Upgrades and PT revisions in the basic resources sector from RBS sent those names higher with an upgrade in Eurasian Natural Resources [ENRC.UK] generating outperformance in the name. Markets trended lower from the open but took a decisive move lower past 4:00EST with disappointing retail and production numbers in Norway (continuing a European trend), declines in Spanish confidence and Italian deficit to GDP furthered this rotation. In this lower movement, integrated oils followed the price of oil down and added weight to the bourse movements. A general decline in metal prices tempered interest in commodity and industrial names. All trading has, however, taken place in light of the expected Dec non-farm US payroll number that is eagerly anticipated at 8:30EST. Ahead of this figure, trading volumes have remained high across Europe.
-In individual equities: RBS [RBS.UK]: Confirms sale of asset management for Â£87M to Aberdeen. || Lloyds [LLOY.UK] : May take a Â£200M charge related to receivership of Kilmartin Holdings -Times. || SocGen [GLE.FR]: Plans to group toxic assets valued at â‚¬35B into separate unit - La Tribune. ||
- Speakers: Fed's Bullard commented that the worst of global recession was now over and that manufacturing has bounced back globally. The improvement in global growth being driven by China and Asia while US consumption has stabilized. Forecasted US unemployment to "drift down" in 2010. The US was unlikely to react to bubbles elsewhere and does not see much evidence of them. He did note that the FOMC would discuss MBS purchase program in Jan and that there was "some interest" on FOMC to extend the MBS program*** Polish Central Bank member commented that theQ4 GDP growth would be above 2% level and could possibly approach 3%*** India Fin Min Mukherjee reiterated the view that India's economy could grow by approx 7.8% in current fiscal year. The Minister added that 9-10% growth could be achieved if current trend persisted. Stimulus measures are helping economic revival and that the country was now on a growth trajectory*** Philippine Central Bank member Guinigundo commented that a review of bank's reserve requirement would be part of the BSP's exit strategy *** China Bank Regulator CBRC denied press speculation that it had issued new lending policy regarding second homes or raising the required down payment for second-home purchases to 50% of the home value from the current 40% level *** Moody's raised Turkey's sovereign rating one notch to Ba2 from Ba3 and amended the country's stable from positive
- Currencies: Dealers were keenly aware that the upcoming U.S. payroll report would likely set the trading sentiment for the weeks ahead. There is some hope that after two years of job losses that total over 7M jobs the Dec Nonfarm payroll could register a positive reading. The price action ahead of the release saw the USD retreat against the GBP and JPY pairs. Comments from FED's Bullard were adding a dovish tone to the US interest rate outlook when he commented that the FOMC would discuss MBS purchase program in Jan and noted there was "some interest" on FOMC to extend MBS program. The JPY was firmer and did test below the 93 handle at one point. As noted in Asia the Yen recovered from its recent lows after Fin Min Kan backtracked from yesterday's comments and govt officials downplayed their role in FX.
- German data a bit bipolar in determining whether the appreciating Euro currency was starting to undermine demand and output. The EUR/USD was little change at 1.4315 and the 200-day moving average is a key focus for this pair. A move below the 1.4240 area could provide a spark to retest the mid Jun level around 1.38.
- Fixed Income: Bond markets are weaker ahead of the pivotal US employment reports Treasury yields are higher across the curve with the benchmark 10y up 3bps and above 3.85%. In a positive development for emerging market sovereigns Turkey was upgraded by one notch to Ba2 at Moody's , with a stable outlook. With rumors circulating through the market yesterday, the upgrade was already priced in and 5 yr CDS spreads tightened just 2.5bps to the 173bps area
- Geo/political: In the America's, the WSJ notes that Venezuela is now facing an all-out electricity crisis as years of flawed policy and subsidies failed to spur investment in the sector. Reliant upon hydro power, low levels of rainfall have cut electricity output figures. Argentina's Pres Kirchner has again attempted to remove the Central Bank Chief following refusal to release $6.6B to service international debts. A previous attempt ended in failure as the countries Congress stated that any fund release had to be approved by the Congress, and as such the denial was lawful. In India, security forces have killed two gunmen in Indian controlled Kashmir. Yesterday saw the end of a 20hr siege in which heavily armed militants killed four police officers in Srinagar which began with an ambush on a police convoy, and turned into a running gun battle (reminiscent of the 2008 Mumbai attack). In Europe, record cold and decade high snow falls continue to stress transportation and infrastructure systems with Eurotunnel suspending ops and natural gas supplies pressured. In the UK, supplies of natural gas to factories have been diverted for electricity and heating demand.
***Notes: - US payrolls to be the key and could set sentiment for weeks to come. Over the last two years the US has shed 7.2M jobs ( biggest as a percentage of all jobs since World War II was ending in 1944-45). President Obama to comment on economy at - Japan's PM Hatoyama downplays Fin Min Kan's currency views. Reiterates the G7 view that rapid fx price movements are desirable. - Japan govt to decide stance on JAL bankruptcy/bailout as early as Jan 12.
***Looking Ahead: - (GR) Greece Nov Unemployment Rate Y/Y: No est v -9.2% prior - (BE) Belgium Nov Unemployment Rate: No est v 8.1% prior - 7:00 (CA) Canada Dec Net Change in Employment: 20.0Ke v 79.1K prior; Unemployment Rate: 8.5%e v 8.5% prior - 8:30 (US) Dec Change in Nonfarm Payrolls: 0Ke (flat) v -11K prior; Change in Manufacturing Payrolls: -35Ke v -41K prior - 8:30 (US) Dec Unemployment Rare: 10.0%e v 10.0% prior - 8:30 (US) Dec Average Hourly earnings M/M: 0.2%e v 0.1% prior; Average Weekly Hours: 33.2e v 33.2 prior - 10:00 (US) Nov Wholesale Inventories: -0.3%e v 0.3% prior - 10:00 (MX) Mexico Dec Consumer Confidence: 79.5e v 78.2 prior - 15:00 (US) Nov Consumer Credit: -$5.0Be v -$3.5B prior
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