European Market Update: Greece sells more bills than expected, yields below 5%
Tuesday, April 13, 2010
European Market Update: Greece sells more bills than expected, yields below 5%
*** ECONOMIC DATA *** - (GE) Germany Mar Final Consumer Price Index M/M: 0.5% v 0.5%e; Y/Y: 1.1% v 1.1%e - (GE) Germany Mar Final CPI EU Harmonized M/M: 0.6% v 0.6%e; Y/Y: 1.2% v 1.3%e - (GE) Germany Mar Wholesale Price Index M/M: 1.3% v 0.5%e; Y/Y: 4.3% v 3.6%e - (FR) France Mar Consumer Price Index M/M: 0.5% v 0.4%e; Y/Y: 1.6% v 1.5%e - (FR) France Mar CPI EU Harmonized M/M: 0.5% v 0.4%e; Y/Y: 1.7% v 1.6%e - (FR) France Feb Current Account: -â‚¬3.6B v â‚¬-4.0B prior - (HU) Hungary Mar Consumer Price Index M/M: 0.7% v 0.4%e; Y/Y: 5.9% v 5.6%e - (SP) Spain Feb House Transactions Y/Y: 18.7% v 2.1% prior - (NV) Netherlands Feb Trade Balance: â‚¬4.0B v â‚¬1.6B prior - (SW) Sweden Mar CPI - Headline M/M: 0.2% v 0.5%e; Y/Y: 1.2% v 1.4%e - (SW) Sweden Mar CPI - Underlying M/M: 0.3% v 0.5%e; Y/Y: 2.5% v 2.7%e; CPI Level: 302.32 v 302.97e - (CZ) Czech Feb Current Account (CZK): 10.3Bv 12.7Be v 15.6B prior - (UK) Feb Visible Trade Balance: -Â£6.2B v -Â£7.4Be; Total Trade Balance: - Â£2.1B v -Â£3.0Be ; Trade Balance Non-EU: -Â£3.3B v -Â£3.9Be; - (UK) Feb DCLG House Prices: 7.4% v 6.2% prior - (PO) Portugal Mar Consumer Price Index M/M: 1.1% v 1.1%e; Y/Y: 0.5% v 0.6%e - (PO) Portugal Mar CPI EU Harmonized M/M: 1.2% v 0.0% prior; Y/Y: 0.6% v 0.2% prior - (IR) Ireland Feb Retail Sales Volume M/M: 14.9% v -16.1% prior; Y/Y: 3.0% v -3.8% prior
*** SPEAKERS/FIXED INCOME/FX/COMMODITIES/ERRATUM *** - Equities: Equity markets in Europe opened offered and despite a brief foray into positive territory for the CAC and FTSE100, the dominate sentiment and trading positions through a lackluster session has been negative. Markets have taken a cue from earnings releases from the US with Alcoa [AA] depressing metal names and CF Industries [CF] weighing on fertilizer sector. Increased guidance from South Korean steel name POSCO [005490.KS] for FY10 failed to rally the heavy industrial sphere. Macro level sentiment continued to be pressured by growing expectations of results from 26 and 52 week Greek T-Bill auctions. Positive earnings release from LVMH [MC.FR], the largest luxury retailer with clothing, spirits, and accessory operations rallied the high end European retail market throughout the session. LVMH's commentary on a recovery of sales in Champaign had positive effects for liquor and related distribution firms. Despite positive commentary in the integrated oil sector from UBS, the monthly oil demand outlook from IEA sent oil and sector names lower. The IEA kept 2010 bpd demand flat from its March read and commented that offshore US drilling could potentially double current US reserves (with negative pricing implication). Into 5:30EST markets had made a tentative bounce from their trading session lows. Market volumes remained broadly lower with the FTSE significantly underperforming its moving average.
- Individual equities: Debenhams [DEB.UK] reported H1 LFL +0.3%. || Heidelbergcement [HEI.GE] has accelerated book build placed shares at â‚¬42.50 (closed at â‚¬42.67). || LVMH [MC.FR] reported Q1 Rev â‚¬4.5B v â‚¬4Be. || Telecom Italia [TIT.IT] reported FY09 Net â‚¬1.85B v â‚¬2.2B y/y and said it would pay a dividend of â‚¬0.05/share. || Seadrill [SDRL.NO] completed private placement of 12.5M shrs at NOK151.5/shr.
- Speakers: Moody's analysts commented on Greece, noting that the EU aid package has failed to remove downside risk as the agreement was implicit in Greece's "A2" sovereign rating. The analyst stated that Greece still faces significant execution risks. ***ECB Ordonez commented that the support for Greece was not a subsidy. ***ECB Nowotny commented to the Austrian press that the aid plan for Greece would allow country to help itself . He added that the EU plan would counter speculation against Greece abd that the matter has been "defused." *** France Fin Min Lagarde stated that the Greece's accord had no room for questions and commented that the French parliament can clear Greece's aid in 1 week - Is confident on the agreement on all aspects of the package of the aid- Last resort nat named as a condition in the EU Summit agreement ***Japanese Ruling Party Panel Draft Document stated that Japan wouldl need to see drastic levels of monetary easing to wipe out deflation and that the USD/JPY level should be attempted to be kept around the 120 area. ***India Chief Econ Advisor Basu commented that India's Q1 GDP growth might be around 8.5% (compared to 6.0% seen in Q4). He noted that inflation remained a great concern to Gov't and that the base effect to be strong in March data. He did add that the core inflation was not significantly high and saw inflation coming down over the next 2-3 months. On the growth front, he noted that India targeted 10% growth rate in 4 years time. *** China NDRC Official commented in the Chinese press that China would not raise interest rates in the short term as March inflation had likely slowed and would slow further in April.
- Currencies/Fixed Income: Today's Greek Bill issuance was one of the key event for the market as dealers eagerly awaited the results of the 26-week and 52-week auctions, particularly with question marks over the EU package hanging over the euro in the last session. The auction result saw a larger planned issuance and yields below the 55 level. The EUR/USD tested above 1.3610 in the aftermath of the results but slipped back into negative territory at 1.3570 area as dealers noted that the Greek Debt Agency (PDMA) paid a hefty price when compared to its January Bill auction. *** JPY traded on a softer footing after the Japan ruling party panel said that efforts should be made to maintain appropriate currency levels of around 120 yen per dollar. The USD/JPY moved from 92.60 to test 93.40 following the comments. However, a soft equity tone provided the JPY with some risk aversion momentum.
- Geo-political: As the global Nuclear Security Summit moves into its second day in WashingtonDC, disagreement over policy towards Iran, between the US and China have continued. The role and necessity of sanctions continues to separate key players despite some softening of Chinese tones. The only tangible agreements that have yet to be reached include a pledge by Ukraine to eliminate its stockpile of enriched uranium by 2012. It is expected that the bulk of the materials will be shipped to the US.
- Energy: IEA presented its April Monthly Report and slightly raised its 2010 world oil demand by 30K bpd to 86.6M bpd. The slight increase due to the better flash OECD and non-OECD data adjustments. The IEA saw Mar global oil supply down 220K bpd to 86.6M bpd. OPEC supply down 190K bpd to 29.0M bps (cites 10% decline in Iraqi crude). Mar Non-OPEC output at 52.5M bps (unchanged) m/m. It increased 2010 non-OPEC supply outlook due to production in Russia and Canada by 220K bps to 52.0M bpd and trimmed 2010 OPEC supply demand by-100K bpd. OPEC compliance seen at 55% v 56% m/m. The IEA stated that the expansion of US offshore drilling could double US reserve levels.
***Notes/Observations: - IEA: Expansion of US offshore drilling could double US reserve levels - Greece Bill auction result saw yields move below 5% on firm demand but post EU agreement euphoria waned when participants compared the price Greece paid compared to prior auctions yields for similar paper - China President Hu reiterated that revaluing yuan currency cannot solve trade imbalances - US Trade data later this morning
***Looking Ahead*** - 7:30 (US) Mar NFIB Small Business Optimism: 89.2e v 88.0 prior - 7:45 (US) Weekly ICSC Chain Store Sales - 8:00 (PD) Poland Feb Current Account: â‚¬150M v -â‚¬710M prior; Trade Balance: -â‚¬82M v -â‚¬171M prior - 8:30 (US) Feb Trade Balance: -$38.5Be v -$37.3B prior - 8:30 (US) Mar Import Price Index M/M: 1.0%e v -0.3% prior; Y/Y: 11.7%e v 11.2% prior - 8:30 (CA) Canada Feb Intl Merchandise Trade: C$0.6Be v C$0.8B prior - 8:30 (CA) Canada Feb New Housing Price Index M/M: 0.4%e v 0.4% prior - 8:55 (US) Redbook weekly Retail Sales - 10:00 (US) Apr IBD/TIPP Economic Optimism: 47.5e v 45.4 prior - 10:45 (US) Fed's Tarullo - 12:00 (TU) Turkey Central Bank interest rate decision: Expected to maintain the Base Rate unchanged at 6.50% - 12:45 US Tsy Sec Geithner
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