European Market Update: Greece debt concerns continue to weigh of European sentiment
Thursday, January 21, 2010
European Market Update: Greece debt concerns continue to weigh of European sentiment
*** ECONOMIC DATA *** - (RU) Russia Gold & Forex reserves w/e Jan 15th: $441.4B v $440.9B prior - (SZ) Swiss Dec M3 Money Supply Y/Y: 6.5% v 7.9% prior - (FR) France Jan Preliminary PMI Manufacturing: 54.7 v 54.7e; PMI Services: 57.0 v 59.0e - (DE) Denmark Jan Consumer Sentiment: +1.1v -1.0e (first positive reading since Dec 2007) - (NE) Netherlands Dec Unemployment Rate SA: 5.5% v 5.4%e - (NE) Netherlands Nov Consumer Spending Y/Y: -2.7% v -2.5% prior - (NE) Netherlands Jan Consumer Confidence SA: -10 v -10e - (GE) Germany Jan Advanced PMI Manufacturing: 53.4 v 52.9e; PMI Services: 51.2 v 53.0e - (HK) Hong Kong Dec CPI Composite Y/Y: 1.3% v 0.9%e - (EU) ECB Monthly Report: Mirrors ECB press conference from last Thursday (Jan 14th) - (EU) Euro-Zone Jan Advanced PMI Manufacturing: 52.0 v 51.9e; PMI Services: 52.3 v 53.8e; PMI Composite: 53.6 v 54.4e - (UK) Dec Preliminary M4 Money Supply M/M: -1.1% v 0.9%e; Y/Y: 6.4% v 8.9%e - (UK) Dec Public Finances (PSNCR): Â£23.6B v Â£25.5Be; Public Sector Net Borrowing: Â£15.7B v Â£19.0Be - (UK) Nov Major Banks Mortgage Approvals: 62K v 65Ke - (SZ) Swiss Jan ZEW Survey: 56.2 v 54.0 prior - (UK) Jan Industrial Trends Total orders: -39 v -42 prior - (IR) Ireland Dec PPI M/M: 0.5% v -0.1% prior; Y/Y: -3.8% v -6.5% prior - (IR) Ireland Nov Trade Balance: â‚¬2.6B v â‚¬2.9B prior
*** SPEAKERS/FIXED INCOME/FX/COMMODITIES/ERRATUM *** - Equities: European equity markets opened well bid in an effort to come off yesterday's session low close. On the open, markets were broadly positive on the back of earnings from EasyJet [EZJ.UK], Ahold [AH.NV] and SSL International [SSL.UK]. Markets were further supported by defensive strength in Euro pharma names following a sector and individual positive calls from Morgan Stanley. Equities began a slow retracement of opening gains past 3:30EST with PMI reads disappointing expectations. PMI concerns mixed with further concern from China regarding tightening and mineral demand. This action sent miners lower with the weighted FTSE driving the lower rotation. EADs [EAD.FR] traded sharply lower through the session ahead of a scheduled meeting in Berlin that may be the final 'make or break' regarding the A400M. In upside moves, ThyssenKrupp [TKA.GE] stated Q1 operations were ahead of expectations and Siemens [SIE.GE] announced a large Chinese rail tech contract. On the regulation front, the EU has given the green light to a proposed Oracle [ORCL] buy of SunMicorosystems [JAVA]. Trading levels in the news heavy session have been high ahead of further US earnings, highlighted by financial sector name Goldman Sachs. -In equities: Sun [JAVA] EU clears Oracle's proposed acquisition of Sun Microsystems; EU approval is 'unconditional' . || Nokia [NOK1V.FH]: Exec: Confirms plans to offer new free navigation system on smartphones. || Morrison [MRW.UK]: Reports 6-week LFL +6.5% (+6.8% incl fuel). || Remy Cointreau [RCO.FR]: Reports Q3 Rev â‚¬226.9M v â‚¬232Me; LFL -0.9%. ||Ahold [AH.NV]: Reports Q4 Rev â‚¬6.8B v â‚¬6.6Be; Q4 operations were influenced by pricing declines and deflation. ||
- Speakers: Russia Central Bank (CBR) increased gold holding by 4% in Dec to 20.5M oz (valued at $22.4B). *** Greece Fin Min Papaconstaninou: Remains optimistic over current situation, Greek citizens support government's decision. The minister again denied that the EU was preparing a loan for Greece. He reiterated that Greece was not expecting any rescue package nor had asked for help. Greece will be able to cover its borrowings over the next few months *** Spain Dep Fin Min Ocana commented that Spain was committed to reducing its deficit by controlling spending. He added that no more large tax changes were expected *** The ECB monthly report mirrored the ECB press conference from lat Thursday. The report noted that the central bank would continue to gradually phase out of non-standard measures. It reiterated that the 1.00% refi rate was appropriate and that inflation was to remain subdued. Euro-Zone to expand at a modest pace this year with growth to fluctuate and to be uneven but overall risks to remain broadly balanced. It continued to reiterate that sharply increasing deficits risk higher interest rates. ***Bundesbank's Weber commented that the German economic upswing had shown signs of waning in momentum. He added that the 2010 deficit seen reaching 5% of GDP and only marginally lower in 2011. German growth in winter 2009/10 has been weak but that the recovery was intact. German budget deficit was mostly based on structural issues and that Germany must continue as fiscal role model for the EU. Tax cuts would require further cuts in spendingand he warmed of debt-financed tax cuts in Germany. If there was no budget consolidation then monetary policy could be tighter. Lastly he stressed that there must not allow any weakening of Maastrict Stability pact ***Greece Debt Agency head Papanicolaou stated that it had yet to make any debt issuance decision but would so within the near future. The agency noted it did have an interest in either a USD or JPY denominated bond issuance ***Indian Statistics Economist Sen : Q3 GDP may be negatively affected by farm output and could be between 6.0% to 6.5% range***China State Council reportedly had decided to cut over-capacity in power, coal and steel sectors
- Currencies: Chinese data provided additional risk aversion flows that again benefited the USD against the major pairs. Stronger than expected China inflation data fueled concerns that the PBOC may have to do more to stop its economy from overheating. The European peripherals also continued to weigh on the Euro sentiment. The EUR/USD pair tested below the 1.4050 level on Greek supply concerns. The Greece Debt Agency noted it would make an announcement in the coming days about its first bond issue for 2010. Market chatter was putting the issuance around $2.0B. The Greek 10-year spread against the Bund widened to a record +300bps. The stronger dollar prompted a retreat in commodities. Spot gold was briefly in positive territory after the Russian Central Bank noted it again added gold to its reserves in the month of December. As the NY morning approached the spot gold market was trading just above $1,100/oz level.
- Fixed Income: The market has experienced more than just a touch of indigestion in taking down a deluge of supply during the session, particularly with regards to peripheral markets. Spain sold â‚¬1.26B in 20yr bono's at a generous yield of 4.86%, while Greek 10yr spreads hit fresh wides at +300bps over Bunds with speculation and denial over the issuance of up to $2B in USD bonds. France's sale of â‚¬9B in 2,3 and 5 year BTAN's was more robust while the UK sold Â£3.25B in off the run 10y Gilts with a strong cover of 2.38x. Gilts have outperformed throughout the session following better than expected public finances and borrowing data for Dec. In corporates, Volkswagen is planning a 4 year Euro benchmark offering while Manchester United launched a Â£500M equivalent, 2 part $ and Â£ denominated offering
- Geo-Political: Following yesterday's Massachusetts special Senate election, US Pres (D) Obama has quickly moved to outline a forward moving plan for healthcare reform. In the absence of a super majority, Senate Dem's will not be able to drive through legislation and face filibuster threats. In several interviews, Obama has maintained support for reform, but more limited in scope and focused on consensus agreements. Notably, a push for universal or near universal coverage seems distant. US Sec of Defense Robert Gates, speaking in Pakistan, continues to highlight the threat to regional stability in South Asia and the wider world through al Qaeda and militant groups. Gates alluded to the possibility that Islamic forces may seek to stir controversy in an attempt to start an armed conflict between rivals India and Pakistan. The comments followed an isolated incident over the weekend in which Indian and Pakistani soldiers exchanged fire near a disputed border region. The UK has sought to ban direct flights to the country from Yemen in a further reaction to Decembers failed attack that has been linked to the troubled state. Yemen authorities have also halted the issuance of arrival visa's (visa's given at the point of arrival following flight) in an attempt to keep radicals out.
-Energy: The new Russian East Siberian Pac Ocean Pipeline (ESPO) has experienced a technical fault that led to the leak of approx 2.8K barrels of crude. Russian authorities say that crude is still flowing to Asian markets, but repairs to the system may take through May due to weather and conditions.
***Notes: - EU clears Oracle's proposed acquisition of Sun Microsystems; says deal will not harm competition - China's GDP data stokes speculation the central bank will start raising interest rates and reign in credit - European Peripheral concerns continue to weigh on Euro sentiment; To announce its first 2010 bond sale within the 'coming days'
***Looking Ahead: - US earnings season coming in focus. Goldman Sachs to report this morning. - 7:30 (BR) Brazil Dec Total Outstanding Loans (BRL): No est v 1.4B prior; Private bank Lending: No est v 815M prior - 8:00 (PD) Poland Dec Producer Prices M/M: -0.3%e v -0.3% prior; Y/Y: 2.2%e v 2.0% prior - 8:00 (PD) Poland Core Inflation M/M: No est v0.0% prior; Y/Y: 2.7%e v 2.8% prior - 8:00 (PD) Poland Dec Sold Industrial Output M/M: -1.0%e v -3.3% prior; Y/Y: 11.7%e v 9.8% prior - 8:30 (CA) Canada Nov Wholesale Sales M/M: 0.5%e v 0.3% prior - 8:30 (US) Initial Jobless Claims: 440Ke v 444K prior; Continuing Claims: 4.598Me v 4.596M prior - 9:00 (US) Nov RPX Composite 28-day Y/Y: No est v -7.46% prior - 9:00 - (PD) Poland Dec Budget Level (PLN): v -498.2M prior; Budget Level YTD: v -24.4B prior - 10::0 (US) Jan Philadelphia Fed: 18.0e v 20.4 prior - (US) Dec Leading Indicators: 0.7%e v 0.9% prior
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