European Market Update: UK election results confirms hung Parliament; G7 confirms teleconference call later today to tackle spreading debt crisis (Trade the News)
Friday, May 07, 2010
European Market Update: UK election results confirms hung Parliament; G7 confirms teleconference call later today to tackle spreading debt crisis
***Economic Data*** - (SZ) Swiss Apr Unemployment Rate: % v 4.1%e; Unemployment Rate Seasonally Adj: % v 4.1%e - (FI) Finland Feb GDP Indicator: -0.7% v -0.2% prior - (FR) France Mar Trade Balance: -â‚¬4.7B v -â‚¬3.4Be; Central Gov't balance: -â‚¬28.9B v -â‚¬21.8B prior - (CZ) Czech Mar Trade balance (CZK): 18.3BB v 20.0Be - (CZ) Czech Mar Industrial Output Y/Y: 10.2% v 8.1%e; Construction Output Y/Y: -18.3% v -23.6% prior - (CZ) Czech Mar Retail Sales Y/Y: 3.9% v 0.0%e - (SZ) Swiss Mar Retail Sales Y/Y: 4.5% v 2.8%e - (SW) Sweden Mar Industrial Production M/M: 4.0% v -0.8% prior; Y/Y: 6.7% v 0.7%e - (SW) Sweden Mar Industrial Orders M/M: 4.2% v -0.9% prior; Y/Y: 24.0% v 12.5% prior - (SW) Sweden Apr Trade Balance (SEK): 29.8B v 4.4B prior - (DE) Denmark Mar Industrial Production M/M: 0.1% v 2.5% prior; Industrial Orders M/M: %v -6.3% prior - (AS) Austria Apr Wholesale Price Index M/M: 1.8% v 0.8% prior; Y/Y: 4.8% v 3.1% prior - (UK) Apr New Car registrations Y/Y: 11.5% v 26.6% prior - (UK) Q1 England and Wales Individual Insolvencies: 35.7K v 35.6K q/q - (UK) Apr Halifax House Price M/M: -0.1% v 0.5%e; 3M/Y: 6.6% v 7.0%e - (TT) Taiwan Apr Total trade Balance: $2.2B v $1.2Be; Total Exports Y/Y: 47.8% v 52.7%e; Total Imports Y/Y: 52.6% v 70.4%e - (NO) Norway Mar Industrial Production M/M: -1.8% v -0.5% prior; Y/Y: -5.0% v -6.2% prior - (NO) Norway Mar Industrial Prod Manufacturing M/M: 0.4% v 0.5%e; Y/Y: 1.6% v 1.3%e - (UK) Apr PPI Input M/M: 0.6% v 1.0%e; Y/Y: 13.1% v 13.1%e - (UK) Apr PPI Output M/M: 1.4% v 0.5%e; Y/Y: 5.7% v 4.8%e ; highest reading since Oct 2008 - (UK) Apr PPI Output Core M/M: 1.1% v 0.3%e; Y/Y: 4.4% v 3.5%e - (IC) Iceland Apr Preliminary trade Balance (ISK): 6.3B v 11.5B prior - (GR) Greece Apr Consumer price index Y/Y: 4.8% v 3.9% prior; EU Harmonized Y/Y: 4.7% v 3.9% prior
*** SPEAKERS/FIXED INCOME/FX/COMMODITIES/ERRATUM *** - Equities: Following the sharp declines seen in Asian and US equity trading, European indices opened the session to the downside, led by declines in Spain, Portugal, France and Greek as bond spreads widened. Also, the FTSE 100 opened the session lower as the UK is nearing a hung parliament. In early trading the French banking as they have started to disclosed their exposures to the peripheral EU economies. At the open shares of SocGen were off by more than 5%. Other including losers included Germany's BASF, on reports that the company might bid for chemical firm Cognis. Also, Munich Re opened lower following its Q1 earnings on concerns about the company's outlook and RBS opened down by more than 6% after its trading statement. As the equity session progressed, equities moved off of the lows, following HSBC's Q1 trading update, comments from Moody's on Italy and rumors of a possible ECB conference call with local banks. As of , equity markets remained in negative territory ahead of Friday's G7 finance ministers conference call, German vote on the Greek aid package and US payrolls.
- In Individual Stocks: Aurubia [NDA.GE]: Reports H1 Net â‚¬119M v loss â‚¬53M y/y, pretax profit â‚¬167M v loss â‚¬59My/y , Rev â‚¬4.54B v â‚¬3.03B y/y || Belgacom [BELG.BE]: Reports Q1 Net â‚¬638M v â‚¬622Me, EBITDA â‚¬931M v â‚¬935Me, Rev â‚¬1.64B v â‚¬1.6Be || Rheinmetall AG [RHM.GE]: Reports Q1 Net â‚¬19M v â‚¬16Me, EBIT â‚¬39M v â‚¬35Me, Rev â‚¬800M v â‚¬823Me || Tognum [TGM.GE]: Reports Q1 adj Net â‚¬22.3M, Rev â‚¬509.4M v â‚¬560Me; Confirms 2010 outlook of Rev â‚¬2.3-3.5B || Royal Bank of Scotland [RBS.UK]: Reports Q1 Net loss Â£248M v loss Â£800Me; Op profit Â£713M v Â£1.3B y/y; Total Rev Â£8.95B v Â£7.5Be || Munich Re [MUV2.GE]: Reports Q1 Net Profit â‚¬482M v â‚¬416Me, Op Profit â‚¬770M v â‚¬708Me, Rev â‚¬10.63B v â‚¬10Be || Italcementi [IT.IT]: Reports Q1 EBITDA â‚¬135.7M,-28.2% y/y, Rev â‚¬1.07B, -10.7% y/y || ITV [ITV.UK]: Issues trading update; Reports Q1 Rev Â£450M v Â£425M y/y || HSBC [HSBA.UK] Provides interim statement: Notes very good Q1 performance and well ahead of Q1 2009; global banking and markets saw slightly lower trading activity after Q1
- Speakers: Japan's Vice Fin Min Tamaki commented that the Greek crisis had moved beyond the EU borders; G7 conference call unlikely tto result in currency intervention ***German Fin Min Schaeuble commend as the lower house debated the Greek aid program that Germany must defend common European currency. He noted that every other alternative for Greek aid package would be more costly to German taxpayers *** Bank of Spain (BOP) Guided Q1 GDP +0.1% y/y *** China Housing Minister commented that an overly fast property price increase could lead to social problems and such growth has curbed in some cities. *** G7 Finance minister and central bankers to signal support for Portugal and Spain in teleconference - WSJ *** Monetary Authority of Singapore (MAS) commented that it would closely monitor global developments; to take appropriate actions where needed ***Moody's Official commented that he did not see a sovereign rating cut for Portugal ***S&P European Credit Chief stated that market sentiment towards a country could lead to vicious circle when assessing sovereign ratings. The markets could send wrong signals, but increase in refinancing costs could have impact on credit quality ***Italy Cabinet approved Greek aid package
- Currencies/Fixed Income: Extreme volatility continued into the European session but unlike the levels experienced in the latter part of Thursday's NY session. The liquidating mood that characterized the US afternoon moved towards a more sense of calm as markets looked towards central bankers to re-establish order. EUR/USD rebounded from 1.2630 European lows amid speculation that the ECB wouldl hold a conference call with 47 of the largest banks in Europe to stabilize the money markets. Other chatter circulated that the swap lines with central banks might be reinstated. Analyst believe that the ECB seeks to stress there sufficient liquidity conditions. Dealers note that the overall euro problems will not simply disappear and would any central bank intervention as a means to re-establish shorts. The GBP was volatile as the election results trickled in. The confirmation of a hung Parliament couple with Moody comments that fiscal consolidation must begin right away sent the GBP/USD down 250 pips from session highs to test fresh one-year lows below 1.4495 level before stabilizing. The USD/JPY held steady above the 92 handle for the bulk of the morning.
- Geopolitical:UK Elections: Final voting results have swayed in favour for the Conservative party, though unable to acquire the necessary 326 seats to gain Parliamentary majority. As of 1030BST the polls reported Conservatives claiming 291 seats with 617 seats reporting results. BBC forecasts indicate that they will end the general elections with 306 seats. The shift in momentum for the Tories began with initial voting results from northern England, which has traditionally voted Labour. Similar scenarios occurred through other regions including various parts of central and southern England. Reportedly, the prospects of a Labour loss has led to a possibility of a coalition between Labour and Liberal Democrats, however, the votes generated by Liberal Democrats were not as high as previously forecasted. It still remains to be seen which party will be able to form a government. *** Euro region government officials to meet in Brussels today to discuss various debt crisis concerns, including finalising Greek aid plan and discussing preemptive measures to avoid future crisis.
- Greece passes austerity package. The legislation passed by 172 votes to 121 in the 300-member chamber vote ***In Germany the biggest test for Merkel's government will come from the German electorate. In fact, North Rhine-Westphaila, Germany's most populous state, is to hold elections Sunday 9th May. Recent media polls point to a decline in support for Chancellor Merkel and the CDU. Alternatively, the opposition party SPU has increased in recent polling figures.*** In Australia the mining industry will start a week-long campaign to block the 40% super-profit tax. Opposition leader Abbot also intends to block the tax but PM Rudd reiterated during the session that the tax was appropriate.
***Notes/Observations: - Incredible price action across all asset classes. - G7 wants to have a conference call re Greece. WSJ reports that G7 Finance minister and central bankers to signal support for Portugal and Spain in teleconference - UK: According to poll results reportedly, UK Conservative Leader Cameron will not win a majority - Overall sentiment remains that markets will continue to push until they have a reason not to.
***Looking Ahead*** - 7:00 (CA) Canada Apr Net Change in Employment: 25.0Ke v 19.9K prior; Unemployment rate: 8.2%e v 8.2% prior - 8:00 (BR) Brazil Apr IBGE Inflation M/M: 0.6%e v 0.5% prior; Y/Y: 5.2%e v 5.2% prior - 8:00 (CL) Chile Apr CPI M/M: 0.6%e v 0.1% prior; Y/Y: 1.0%e v 0.3% prior; CPI Ex-perishables: 0.4%e v 0.1% prior - 8:30 (CL) Chile Apr Trade Balance: $1.3Be v 1.4B prior; Total Exports: No est v $5.5B prior; Total Imports: No est v $4.1B prior - 8:30 (US) Apr Change in NonFarm Payrolls: 190Ke v 162K prior; Change in Private Payrolls: 100Ke v 123K prior; Change in Manufacturing Payrolls: 20Ke v 17K prior - 8:30 (US) Apr Unemployment Rate: 9.7%e v 9.7% prior - 8:30 (US) Apr Average Hourly Earnings M/M: 0.1%e v -0.1% prior; Average Weekly Hours: 34.1e v 34.0 prior - 10:00 (MX) Mexico Apr Consumer Prices M/M: -0.2%e v 0.7% prior; Y/Y: 4.4%e v 5.0% prior; CPI Core M/M: 0.1%e v 0.4% prior - 10:30 (US) Treasury's Krueger on US employment - 12:30 (US) Fed's Plosser - 13:00 (EU) EU Leaders hold Summit on Greece aid package - 13:15 (US) Former Fed Chaiman Greenspan - 15:00 (US) Mar Consumer Credit: -$3.9Be v -11.5B prior
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