European Market Update: Greece opens books on 5 year bond offering; European bourses seek to shake Asian sentiment
Monday, January 25, 2010
European Market Update: Greece opens books on 5 year bond offering; European bourses seek to shake Asian sentiment
- 2:00 (GE) Germany Feb GFK Consumer Confidence: 3.2 v 3.1e - 3:00 (HU) Hungary Nov Retail Trade: -7.3%e v -7.5% prior - 3:00 (CZ) Czech Jan Consumer & Business Confidence: -1.1 v -3.3 prior - 3:00 (SP) Spain Dec Producer Prices M/M: 0.1% v 0.0% prior; Y/Y: 0.4% v -1.8% prior - 3:00 (TT) Taiwan Dec Industrial Production Y/Y: 47.3% v 40.9%e
-In equities: European equity markets entered the week on heavy downside note. This sentiment was a carryover from a negative trading range in Asia that saw a rotation of losses out of the banking names (hit hardest last week) into the tech sector. Market lows were set on the open with trends being upward since that time. With earnings season underway, Philips [PHIA.NV] posted strong Q4 figures and has made broadly positive commentary on 2010. The electronics giant has had a slowing effect on the downturn in tech that flowed out of Asia. Poor results were posted from Swedish Ericsson [ERICB.SW] with a disappointing net figure that continued to be impaired by restructuring charges [SEK4.3B]. Despite further financial hesitation in Asia( Bank of China [3988.HK] announcing at $6B convertible bond offering), European banks led the upward trend from the open. The heavily weighted FTSE100 was the first bourse to exit negative territory on this strength with the CAC40 touching unchanged into 5:00EST. Trading volumes have been high on earnings interest across the board
-Individual equities: Ericsson [ERICB.SW]: Reports Q4 Net SEK700M (unclear if comp) v Net SEK4.2Be, Rev SEK58.3B v SEK58.9Be; To cut a further 1.5K jobs as part of restructuring (2% of work force). || Philips [PHIA.NV]: Reports Q4 Net â‚¬251M v â‚¬250Me, Rev â‚¬7.3B v â‚¬7.1Be; Expect upward trend in emerging markets to continue. || Cadbury [CBRY.UK]: Kraft provides offer update; Updates mix and match cash/share offering. || Wincorp [WIN.GE]: Reports Q1 Net â‚¬33M v â‚¬27Me, Rev â‚¬607M v â‚¬560Me; Reiterates outlook, conditions remain difficult. || Deutsche Post [DPW.GE]: CFO: Reiterates FY09 pretax target of â‚¬1.35B (â‚¬990Me) along with return to positive net figure -Boersen Zeitung. ||
-Fixed Income/FX: With few macro themes for markets to grab hold of, Monday morning has been quiet in bonds and fx. The greenback was broadly weaker throughout the morning with dealers pointing to renewed expectations that Bernanke will be confirmed in the Senate this week. Ahead of UK Q4 GDP data tomorrow (expected to confirm that the UK finally exited recession) GBP/USD was the strongest performer, with stops triggered at 1.6150 and session highs reached at 1.6175. following reports of strong interest in Greece's new 5 year bondsthe EUR/USD moved shaply higher, hitting session highs above 1.4190 while USD/CHF moved below 1.0375.
- Bunds and Gilts have outperformed Treasuries but spreads remain rangebound. With risk appetite getting an early boost the Greek 10y firmed up to Bunds +290bps, only to retreat back to +300bps area after the PDMA confirmed the worst kept secret of last week, opening books on a 5 year EUR benchmark offering. The deal will be closely watched as a gauge for Euro-zone peripheral sovereigns in a supply heavy week, with early price talk at swaps +375bps. Details of the Portuguese Budget are also expected later inb the session with reports indicating it is likely to gain passage in Parliament.
-Geo/political: Argentina Central Bank Pres Martin Redrado has vowed to return to work despite multiple government efforts to remove him from his post, efforts that have culminated in the posting of police guards outside the Central Bank. Multiple late court rulings on Friday failed to clarify Redrado's role and looks set to reignite a fire related to the sale of Central Bank reserves to service foreign debts. The sale is vehemently opposed by the Bank and Redardo while supported by Argentina's President Cristiana Kirchner. An Ethiopian Airlines operated Boeing 737-800 crashed into the Mediterranean Sea. The plane crashed approx 5 min after taking off from RafikHaririAirport in BeirutLebanon and was headed for Addis Ababa. The plane carried 90 passengers and crew; no survivors have yet to be recovered. Afghanistan has decided to delay controversy riddled Parliamentary elections until September 2010. Pres Karzai had sought an earlier Spring 2010 date in an attempt to bring a more favorable legislative into power. Karzai's relationship with Parliament has become increasingly strained following last year (widely viewed as fraudulent) Presidential election. The US and NATO had been seeking later elections and a hoped for improved security environment following Obama's planned troop surge.
-Energy: Morgan Stanley analysts set their 2010 WTI outlook price at $95/bbl and bumped their long term 2011 view to $100/bbl on demand and growth fundamentals. The CEO of ENI put expectations for 2010 Brent crude at $65/bbl and was quoted as stating the firm had no plans to sell its gas trading arm. Tullow Oil executives stated that weekend talks with the Ugandan government were successful regarding acquisition of stake held by Heritage oil.
***Looking Ahead: - 8:00 (HU) Hungary Central Bank Interest Rate Decision: Consensus expectations for a 25bps cut to 6.00% - 10:00 (US) Dec Existing Home sales: 5.9Me v 6.54M prior; M/M: -9.8%e v 7.4% prior - 10:00 (MX) Mexico Nov Retail Sales: -4.0%e v -4.6% prior - 10:30 (US) Jan Dallas Fed Manufacturing Activity: No est v 3.8% prior - 11:30 (IS) Israel Central Bank Interest Rate decision: No change expected in the Base Rate from the current 1.25% level - 14:00 (AR) Argentina Dec Shop Center Sales Y/Y: No est v 23.3% prior
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