European Market Update: UK poised to call for general elections; European peripheral concerns resurface
Tuesday, April 06, 2010
European Market Update: UK poised to call for general elections; European peripheral concerns resurface
*** ECONOMIC DATA *** - (JP) Japan Preliminary Leading Index: 97.9 v 97.8e; Coincident Index: 100.7 v 100.5e - (ID) Indonesia Central Bank Interest Rate maintained the Reference rate at 6.50%; as expected - (CZ) Czech Feb Retail Sales Y/Y: -2.1% v -3.5%e - (CZ) Czech Feb Trade Balance (CZK): 15.3B v 15.0Be - (SP) Spain Mar Net Unemployment M/M: 36.0K v 32.0Ke - (NO) Norway Mar PMI: 49. 6 v 50.5e - (SZ) Swiss Mar CPI M/M: 0.1% v 0.1%e; Y/Y: 1.4% v 1.4%e - (DE) Denmark Feb Retail Sales M/M: 0.4% v -0.9% prior; Y/Y: -0.8% v -3.2% prior - (TT) Taiwan Mar CPI Y/Y: 1.3% v 1.9%e; WPI Y/Y: 6.6% v 6.2%e - (EU) Euro-Zone Apr Sentix Investor Confidence: +2.5 v -5.2e; first positive reading since Jun 2008 - (UK) Mar PMI Construction: 53.1 v 48.7e - (UK) Q4 BOE Housing Equity Withdrawal: -Â£4.0B v -Â£3.0Be - (SA) South Africa Naamsa Vehicle Sales Y/Y: 15.0% v 16.2% prior - (DE) Denmark Mar PMI: 54.3 v 54.4 prior
*** SPEAKERS/FIXED INCOME/FX/COMMODITIES/ERRATUM *** - Equities: Equity markets in morning trade have fought to recover lost ground following a 4-day extended weekend. Positive rotation has chased similar gains seen in the US and Asia, pushing markets to new 18-21 month highs. This action has taken place in light of renewed political concerns emanating from Greek debt and the march towards a close election in the UK. Equity strength has been driven by new yearly highs in a range of commodities, basic resources and base metals that have sent the miners, drillers and heavy manufacturers higher once again. Specific equity news included the on-going saga of an expected JV/asset swap between Daimler [DAI.GE] and Renault [RNO.FR], the completion of a Petrofac [PFC.UK]/Lundin petro [LUN.SW] IPO spin off. Following US March auto sales figures last Thursday, German auto's moved higher on continued y/y improvement. Trading in Europe has been choppy and volatile with markets quickly surrendering opening highs, only to rebound and push higher on supportive PMI data. Trading volumes into the new week remain depressed and below moving averages.
- Individual equities: Petrofac [PFC.UK]: EnQuest PLC - Demergers Effective and Trading Expected to Begin [ENQ.UK]. || Allied Irish Bank [ALBK.IR]: Seeking to accelerate asset divestments through summer 2010 -Times. || Irish Life and Permanent [IPM.IR]: Considering acquisition of Irish Nationwide Building Society - Telegraph. || Novolipetsk [NLMK.RU]: Reports Q4 Net $294M v $164M y/y, Rev $1.82B v $1.74B y/y: confirms FY09 sales output at 10.6M tonnes, +1% y/y. ||
- Speaker: China Foreign Min reiterated view that Yuan currency appreciation is not the cause or solution to rebalancing US-China trade. It pledged to continue to push forward reform of Yuan regime. The ministry denied charges that China manipulates the Yuan currency for its trade advantage. It added that China never engaged in manipulation to gain a trade advantage and denied its label as a "currency manipulator". ***China Govt Economist stated that a widening of yuan trading band was possible and could return to modest yuan appreciation policy** Reportedly a senior Greece Official stated that there was no major push to get IMF out of the aid picture but did conceded that Greece sought more 'clarity' on IMF package. He added that he did not believe Greek aid could be withdrawnBut snubbing IMF would show inconsistency*** Russian Fin Min Kudrin commented that the Russian Central Bank (CBR) might pause in its rate cutting cycle due to inflation risk. Kudrin added cutting interest rates remained most important economic priority ***US Tsy Sec Geithner commented during his visit to Asia that US and India retained a strong mutual interest in a global recovery. He noted that the US was in the process of restoring its fiscal sustainability and that US borrowing needs have declined globally. Both countries would continue discussion regarding financial sector reform, expanding capital market investments. India must work for liberalizing its financial institutions, opening trade *** Fitch commented on the Portuguese banking sector and stated that major Portuguese Banks to maintain profitability despite high funding costs *** Japan's Vice Min Furukawa commented that some Gov Panel Members sought to cut the country's debt/GDP ratio as part of fiscal responsibility targets. ***
- Currencies/Fixed Income: The Euro was softer in the session as the European peripheral concerns returned from holiday. The Greek tragedy came back into focus after Greece reportedly sought to amend agreement with EU in order to bypass IMF contribution due to concerns of social unrest because of tough IMF conditions. Other talk centered on speculation that Germany sought higher interest rates on emergency loan aid. Press reports that an IMF delegation was to arrive in Greece on Wed to provide technical assistance and review the country's finances. The spread on the 10-year Greek/Bund bonds rose to 5-week highs above the 355bps area. EUR/USD approaching the 1.3400 area. ***The GBP was softer as chatter circulated that Prime Minister Brown was expected to announce today that the general election will be held on May 6th. GBP/USD lower by 120 pips from the Tokyo open to test 1.5150 area. ***The USD/JPY retraced from its recent 7-month highs to move back below the 93.80 area in European trading. The soft tone in Euro and GBP pairs feeding into JPY strength for the session.
- Geo-political: UK PM Gordon Brown will formally request the dissolution of Parliament by the Queen today, formally kicking off election season. The general election will then be held on Thursday May, 6 2010 (expected). The request comes on the heels of further polling data that shows Labour continuing to cut into the Conservatives margin.***The US consulate in Peshawar, Pakistan came under a sustained Taliban attack that included suicide bombings, rocket and automatic weapons fire. The attack killed 5 security personnel but the militants were not capable of penetrating the buildings defenses.
***Notes/Observations: - Prime Minister Brown is expected to announce today that the general election will be held on May 6 - Fresh concerns on Greece as speculation surfaces that it sought amend its agreement with EU in order to bypass IMF contribution - Chinese officials continue to double talk on the Yuan currency issue - LME copper moved above the $8,000 level for the first time since Lehman Brother's bankruptcy (Sept 2008)
***Looking Ahead*** - (RU) Russia Mar Official reserve Assets: $444.8Be v $436.2B prior - (PO) Portugal Feb Industrial Sales M/M: % v 0.8% prior; Y/Y: % v 10.5% prior - 7:45 (US) ICSC weekly chain store sales - 8:55 (US) Redbook weekly chain store sales - 9:00 (BZ) Brazil Feb CNI Capacity Utilization: 82.0%e v 81.4% prior - 9:30 US Tsy Sec Geithner in India - 10:00 (MX) Mexico Mar Consumer Confidence: 82.0e v 80.6 prior - 13:00 (US) Fed's Kocherlakota - 14:00 (US) FOMC minutes
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