European Market Update: Concerns continue to linger whether Greece would secure financial assistance from the EU
Friday, March 19, 2010
European Market Update: Concerns continue to linger whether Greece would secure financial assistance from the EU
*** ECONOMIC DATA *** - (JP) Japan Nationwide Dept Sales Y/Y: -5.4% v -5.7% prior; Tokyo Dept Store Sales Y/Y: -6.5% v -7.4% prior - (TH) Thailand Customs Trade Balance: $440M v $890Me; Exports Y/Y: 23.2% v 18.8%e; Imports Y/Y: 71.2% v 55.8%e - (GE) Germany Feb Producer Prices M/M: 0.0% v 0.1%e; Y/Y: -2.9% v -2.8%e - (FR) France Q4 Final Wages Q/Q: 0.2% v 0.2%e - (HU) Hungary Jan Avg Gross Wages Y/Y: 6.5% v 0.0% prior - (TT) Taiwan Feb Export Orders Y/Y: 36.3% v 30.7%e - (MA) Malaysia Feb CPI Y/Y:1.2 % v 1.4%e - (IT) Italy Jan Industrial Orders M/M: -2.8% v -0.2%e; Y/Y: 1.1% v 8.7%e - (IT) Italy Jan Industrial Sales M/M: 2.7% v 2.2% prior; Y/Y: 5.1% v -2.5% prior
*** SPEAKERS/FIXED INCOME/FX/COMMODITIES/ERRATUM *** - Equities: European equity markets opened positive on the session seeking to erase yesterday's losses. Equities in Europe finished downside largely on the back of macro worries from a resurgent risk in Greece and heavy tone in banks on Tuesday. An 8-session rally in the DJIA and strong trading in Asia set the tone for this morning's trade. What had been a restrained pre-market took a boost from commentary coming out of Llloyds Banking Group [LLOY.UK]. In an unscheduled release, the bank stated that operations remained strong y/y and that impairments were better y/y and ahead of initial expectations. Lloyds also raised the possibility of net positive FY10 results. UK listed financial names rallied hard on the news. The LSE also saw two IPO pricings and launches highlighted by African Barrick Gold [ABG.UK] who priced at 101.1M share offering at 575p, seeking to raise Â£581M. Commodity flows in both mining and energy sectors recovered from their losses yesterday on a positive oil service note from Barclays/Rio and Chinalco signing an agreement for Simandou. Equity trading has been bracing for options expiration and index reweighting on the EuroStoxx and DAX. This volatility has played itself out in sharp moves throughout the session with choppy trading reacting to European data and fx moves driving flows. Trading volumes have recovered with the FTSE significantly outperforming as turnover in the financials has churned the index higher. Markets in Europe have recovered yesterday's losses and are again at 18 month highs.
- Individual equities: African Barrick Gold [ABG.UK]: African Barrick Gold plc announces offer price of 575 pence in 101M share LSE IPO. || CPP Group [CPP.UK]: CPP Group announces offer price of 235 pence in 12.8M share LSE IPO. || Lloyds [LLOY.UK]: Provides update on current trading; performance strong in first 10 weeks; sees better impairment performance than expectations. || Rio Tinto [RIO.UK]: Confirms signing JV agreement with Chinalco on the Simandou project. || Recordati [REC.IT]: FDA approves Carbaglu for use in the USA. ||
- Speakers: ECB's Draghi commented in the German press that he sought stricter reforms and rules to Maastrict Stability Pact. He reiterated the view that members States must improve cooperation and discipline. He did note that it was too early to determine what the new rules would be but sanctions for breaches in rules must be made tougher. The Greek situation showed that the system needs to be made more robust and added that Europe would not need a European Monetary Fund (EMF) if rules were tightened to stability pact *** BoE Sentence reiterated his view that consumer confidence was an important factor to the global recovery and did not expect any global double dip recession but did concede that the risks of such an occurrence remained *** **ECB's Trichet called for greater transparency in Credit Default Swaps (CDS) and noted that such instruments should not be used in a speculative manner. Reforms should go beyond the banking sector and include non-financials. He stressed that authorities must restore confidence to achieve economic and financial stability ***Russia Fin Min Kudrin commented that the Russian Central bank continues to have room to possibly lower interest rates. The minister also noted that it would begin a Eurobond road show starting in New York in mid- Apr. This would be the country's first international bond sale since 2000*** EU's Monetary & Affairs Commissioner Rehn commented that the budding economic recovery in Europe was not yet self sufficient but that the worst might be over for European aspect. He added that both Greece and Europe were not out of the woods just yet and that EU policymakers continuing working on plan to aid Greece. The commissioner noted that the EU needed to address measure to avoid future issues such as current Greece problem
- Currencies: European currencies continue to act defensively throughout the morning as fiscal concerns continue to linger. The overall concerns continue to stem whether Greece would secure financial assistance from the EU. The EUR/USD was back below the 1.36 handle after its failure to reclaim 1.38area. The European peripherals widened in the session as Greek jitters continue to reverberate in the markets ahead of next week EU Summit. ***The GBP was off over 100 pips from its opening levels in Asia after BOE's Sentence voiced a bit of concern that a double-dip recession could not be ruled out at this time. GBP/USD probed the mid-1.51 level ahead of the NY morning. ***The EUR/CHF cross continues to make fresh 17 month lows and tested 1.4350. The CHF building upon the momentum following the Thursday remarks from it newest SNB member Danthine that firms and consumers should prepare now for a return to higher rates and market-set exchange rates. Dealers continue to believe the comments reinforced expectations that the SNB might be willing to tolerate a broader trading range for the CHF.
- Geo/political: Ghosts of 2004 story have resurfaced as UK and US courts have froze $648M in assets formerly attributed to Russian oil firm Yukos. The former oil giant Yukos became a test case for Russian expropriation when then Pres Putin attacked the firm in a 'back tax' charge that led to imprisonment of the CEO and bankruptcy for the firm. Yukos assets were low-ball offered by the Kremlin to supportive domestic firms. It is through this auction process that Rosneft acquired the assets/liabilities that have been moving through European and US courts. Legal claims could present payment/financial issues for Rosneft in various states for its export products. *** US diplomats continue to face direct rebuffs as Russian PM Putin stated plans to aid Iran in its first nuclear reactor spin up by this summer as US Sec of State visited Russia for planned arms talks. Following last week's fiasco in Israel, the comments are seen as a direct rebuff to the U,S and planned cooperative action against Iran
- In the papers: London Telegraph reported that Germany's Finance Min Schaeuble sought to possibly protect the euro by having its intelligence agencies to set up surveillance operations
***Notes/Observations: - China continues to up the rhetoric on the Currency and reserve fronts. Commerce Ministry Ning reminded the US what is at stake in the growing tension in the currency row. China's purchase of U.S. Treasury securities have helped to stabilize the U.S. financial system - SNB's newest member Danthine: exchange rates should be guided by market forces. - Germany and Greece continue to accuse each other of economic drunk driving
***Looking Ahead: - 7:00 (CA) Canada Feb Consumer Price Index M/M: 0.3%e v 0.3% prior; Y/Y: 1.4%e v 1.9% prior - 7:00 (CA) Canada Feb Core CPI M/M: 0.3%e v 0.1% prior; Y/Y: 1.7%e v 2.0% prior - 8:30 (CA) Canada Jan Retail Sales M/M: 0.6%e v 0.4% prior; Less Autos M/M: 0.5%e v 0.4% prior - 9:00 (US) Fed's Bernanke speaks with community bankers in Fla - 9:30 Fed's Greenlee at House Subcommittee - 10:00 (BE) Belgium Mar Consumer Confidence: No est v -15.0 prior - 11:00 (MX) Mexico Central Bank Interest Rate Decision: Expected to maintain the Overnight rate at 4.50% - 11:50 Greenspan speaks at Brookings on financial crisis - 15:00 (AR) Argentina Q4 GDP: 2.65e v -0.3% prior; Current Account: $1.5Be v $3.8B prior - 15:00 (AR) Argentina Feb Industrial Production M/M: No est v -8.0% prior; Y/Y: 6.8%e v 5.2% prior
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