European market Update: Greece outlines its Stability plan
Thursday, January 14, 2010
European market Update: Greece outlines its Stability plan
*** ECONOMIC DATA *** - (IN) India Dec Wholesale Prices Y/Y: 7.3% v 7.3%e - (GE) Germany Dec Final CPI M/M: 0.8% v 0.7%e; Y/Y: 0.9% v 0.8%e - (GE) Germany Dec Final CPI EU Harmonized M/M: 0.9% v 0.9%e; Y/Y: 0.8% v 0.8%e - (FI) Finland Dec CPI M/M: 0.1% v 0.1%e; Y/Y: -0.5% v -0.6%e - (HU) Hungary Dec Consumer Prices M/M: 0.0% v 0.2%e; Y/Y: 5.6% v 5.7%e - (CZ) Czech Nov Final Industrial Y/Y-0.1% v 0.2% prior; Construction Output Y/Y: 7.8% v 0.1% prior - (SP) Spain Dec CPI M/M: 0.0% v 0.0%e; Y/Y: 0.8% v 0.8%e - (SP) Spain Dec CPI EU Harmonized M/M: 0.0% v 0.0%e; Y/Y: 0.9% v 0.9%e - (SP) Spain Dec CPI Core M/M: 0.0% v 0.0%e; Y/Y: 0.3% v 0.2%e - (NE) Netherlands Nov retail Sales Y/Y: -6.4% v -5.5%e - (SA) South African Nov Gold output -4.9% y/y; Non gold output -1.0% y/y; total mining output -1.6% y/y - (UK) Nov Mortgage approvals 33.6K; down 5% m/m and up 67% y/y - CML - (UK) Q3 Construction Orders Q/Q: +1.0%; Y/Y: +4.0% - (GR) Greece Oct Unemployment rate: 9.8% v 9.1% prior - (EU) Euro-Zone Nov Industrial Production M/M: 1.0% v 0.5%e; Y/Y: -7.1% v -8.4%e - (RU) Russia Gold & Forex reserves w/e Jan 8th: $440.9B v $437.7B prior - (BR) Brazil Nov retail Sales M/M: 1.1% v 1.0%e; Y/Y: 8.7% v 9.2%e - (IR) Ireland Dec CPI M/M: -0.5% v -0.2%e; Y/Y: -5.0% v -4.7%e - (IR) Ireland Dec CPI EU Harmonized M/M: -0.5% v -0.2%e; Y/Y: -2.6% v -2.3%e
*** SPEAKERS/FIXED INCOME/FX/COMMODITIES/ERRATUM *** - Equities: Macro themes out of the US and Australia boosted trade in NY and Asia. This strength flowed into Europe with specific corporate news kicking equities higher. Rio Tinto [RIO.UK] provided its Q4 production update with surging figures in iron ore and copper that could not be dampened by soft, cautionary commentary on macro outlook. Demand for basic resources, specifically from China, led to a predictable uptrend in the mining sector with the heavily weighted FTSE100 outperforming.
- Other names that outperformed included German sugar name Suedzucker [SZU.GE] following earnings and Commerzbank [CBK.GE] following a Handelsblatt article on the performance of the group's Investment Bank arm. Not all corporate news was positive with Belgian grocer Delhaize [DELB.BE] disappointing on price cutting losses along with UK retailer Home Retail [HOME.UK] after its Holiday season trading update. Deutsche Bourse [DB1.GE] moved lower following a cut at Goldman and Carrefour [CA.FR] gave back some ground ahead of earnings expected after the European close. In broader rotations, the banking sector has mirrored the basic resource sector ahead of today's expected ECB decision and US corporate earnings seen later in the week. -In individual equities: RioTinto [RIO.UK]: Reports Q4 iron ore output +49% y/y vs +12% in Q3; copper output +36% y/y; aluminum output -3% y/y v -4% in Q3. || Fresnillo [FRES.UK]: Provides Q4 production report: Attributable silver production of 9.36 million ounces +10% y/y. || Home Retail HOME.UK: Holiday trading update: sees trading approx Â£20M ahead of expectations. || Renault [RNO.FR]: Reports 2009 sales 2.3M units, -3.1% y/y; Continuing to seek market share growth. || Suedzucker [SZU.GE]: Reports Q3 Net â‚¬56.7M v â‚¬59Me, Rev â‚¬1.5B v â‚¬1.6Be; Reiterates FY09/10 Rev and Op profit goals. || Delhaize [DELB.BE]: Reports Q3 Rev â‚¬4.9B v â‚¬5.0Be. ||
- Speakers: Greece Fin Min Papaconstaninou presented a Stability Plan outline and stressed that it was imperative to reduce deficit. The plan forecasted Greek 2010 GDP at -0.3% but saw growth of 1.5% in 2011. It targeted â‚¬1.12B from battling tax evasion' â‚¬1.2B from increased pension contributions and â‚¬1.4B in savings from lower hospital spending. The plan reiterated 2010 hiring freeze. On the key stat the plan reiterates the goal of cutting the deficit to GDP over the next few years. It forecasted 2010 deficit to GDP of 8.7% and 2011 deficit to GDP of 5.6%. It saw 2.8% by 2012 and 2.0% by 2013. The debt to GDP was projected to be 120% in 2010, at 120.6% in 2011 and at 113.4% by 2012 ***Germany BDI Industry Association stated that the German government needed to slowly withdrawal stimulus measures and added that a strong Euro currency was a risk to recovery. The Assoc also noted that it expected tighter credit conditions in the coming weeks. Exports continue to drive the German recovery and forecasted 2010 export growth of 4%. It saw 2010 GDP growth of 2% as the best case scenario *** Japan Vice Fin Min Noda commented that there was room to debate what to do with reserves in the foreign exchange special account nut noted that the government did not have any specific ideas on how to manage the reserves at this time***China Investment Corp (CIC) Chairman Jin stated that the Chinese stimulus measures were helping both domestic and regional economies but added that China was not out of the woods just yet. He commented that Asia should continue promoting exports and not overshoot in promoting domestic demand. China should move to a higher level of exports. *** Fitch analyst commented on CNBC that there was no plan to change Japanese Sovereign "AA" Ratings at this time and reiterated that the country had a stable outlook. The analyst did concede that a significant Chinese monetary tightening would impact the regional economies***
- Currencies: European peripherals spreads continue to erode the Euro's upward momentum. The Portuguese and Greek 10-year spread widened to fresh 3-week highs against the German bund as the Greek stability outline failed to provide enough confidence in curbing the fiscal concerns. The dollar was off its worst levels against the European pairs and moving into slight positive territory as the NY morning approached. Comments from the German Export Association cautioned about the potential headwinds of a strong Euro currency but remained optimistic that Germany will see a 4% increase in its 2010 exports. The EUR/USD testing the 1.45 level ahead of the ECB interest rate decision and press conference later today. - the JPY was weaker across the board as markets remain weary of the fragility of the Japanese economic recovery. Fin Min kan reiterated his view that market forces should determine a currency's value. - Fixed Income: The European peripherals continue to dominate the trading. The respective 10-year spreads continued to widen against the bunds. The Portuguese 10-year bonds widened to the most since Dec. 21st against the Bund to test above 80bps. The Greek 10-year also widened to move beyond 262bps against the bund for fresh 3-week highs.
- Geo Political:Iran's Guardian Council has approved measures to reduce substantial subsidies placed on food and fuel stuffs. Operations are seeking to reduce the $90B spent yearly on subsidy projects that account for up to 30% of the central government's budget. The Admadinejad administration has in the past used such programs liberally to support his political base. Haiti continues to assess the toll of Tuesday's massive earthquake that affected every hospital and emergency response center in the tiny Caribbean country. Continued fears of aftershocks and exposure raise the possibility of further loss of life. As international support and humanitarian aid arrives, speculation at the final loss of life figures has risen to over 500,000. Venezuelan President Chavez has cancelled planned 'black out' program after technical failures during trial run. State had planned up to 5-months of rolling black outs in an effort to conserve electricity. Venezuela continues to suffer desperate shortages of electricity on the back of decaying infrastructure and drought conditions that have substantial cut hydro power.
***Notes: - Greece outlines its Stability plan -China's PBoC leaves yield at its 3-month auction unchanged - Japan Fin Min Kan: No sales tax hike now. FX rates should be left to market but walks the standard G7 line on excessive volatility. He noted that the Chinese currency might be discussed at the upcoming Feb G7. - Realtytrac: 2.8M US foreclosures in 2009 as 1 In 45 US Housing Units received foreclosure filing - China: Govt must play role in 'guiding' opinion on internet. - Australia Dec employment change beats expectations
***Looking Ahead: - (CH) China Dec New Yuan Loans: CNY v CNY310.0Be; M2 Money Supply: % v 28.0%e - (CH) China Dec Foreign Exchange Reserves: $ v $2.420T - (RU) Russia Nov Trade Balance: $ v $11.1Be; Exports: $ v $31.0Be; Imports: $ v $19.7Be - 7:00 (IC) Iceland Dec Unemployment Rate: No est v 8.0% prior - 7:45 (EU) ECB Interest rate Decision: No change expected in its Main refinancing rate from the 1.0% current level. Deposit and Lending rate also expected to remain unchanged - 8:00 (PD) Poland Dec CPI M/M: 0.1%e v 0.3% prior; Y/Y: 3.6%e v 3.3% prior - 8:30 (US) Dec Import Price Index M/M: 0.0%e v 1.7% prior; Y/Y: 8.6%e v 3.7% prior - 8:30 (US) Dec Advance Retail Sales: 0.5%e v 1.3% prior; Less Autos: 0.3%e v 1.2% prior; Ex auto & Gas: 0.2%e v 0.6% prior - 8:30 (US) Initial Jobless Claims: 436Ke v 434K prior; Continuing Claims: 4.750Me v 4.802M prior - ECB Press Conference begins - 10:00 (MX) Mexico Oct Global Economic Indicator: -4.6%e v -5.5% prior - 10:00 (US) Nov Business inventories: 0.3%e v 0.2% prior - 12:00 (TU) Turkey Central Bank Interest rate Decision: No expected in the Base rate from the 6.50% current level - 14:00 (CL) Chile Central Bank interest rate decision: No change expected in the Overnight rate from the 0.50% current level
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