European Market Update: US Payrolls expected to register its best monthly gain in 27 years (Trade the News)
Friday, June 04, 2010
European Market Update: US Payrolls expected to register its best monthly gain in 27 years
***Economic Data*** - (HU) Hungary Apr Preliminary Industrial Output M/M: 1.1% v -0.4% prior; Y/Y: 9.7% v 7.3%e v 2.8% prior - (SP) Spain Apr Industrial Output NSA Y/Y: 3.0% v 6.8% prior; Industrial Output WDA Y/Y: 2.4% v -0.1% - 3:40 (SZ) SNB's Hildebrand speech - (UK) May Halifax House Prices M/M: -0.4% v 0.3%e; Y/Y: 6.9% v 7.4%e - (UK) May New Car registrations: 13.5% v 11.5% prior - (EU) Euro Zone Q1 Preliminary GDP Q/Q: 0.2% v 0.2%e; Y/Y: 0.6% v 0.5%e - (EU) Euro Zone Q1 Preliminary Gross Fixed capital Q/Q: -1.1% v -1.1%e; Gov't Expenditures Q/Q: 0.6% v 0.3%e; Household Consumption Q/Q: -0.1% v -0.1%e - (IC) Iceland May Preliminary Trade Balance (ISK): 16.8B v 6.3B prior - (PO) Portugal Apr Industrial Sales M/M: -6.6% v 19.2% prior; Y/Y: 12.0% v 16.6% prior - (MA) Malaysia Apr Trade Balance (MYR): 9.2Bv 12.6Be; Exports Y/Y: 26.6% v 38.0%e; Imports Y/Y: 27.0% v 29.9%e
*** SPEAKERS/FIXED INCOME/FX/COMMODITIES/ERRATUM *** - Equities: - European equity markets opened the session marginally higher, following yesterday's mildly positive US session. As of , Germany's Dax is gaining by more than 0.90%, FTSE 100 is higher by 0.8% and France's CAC-40 is up by 0.80%. Overall, markets remain focused on the upcoming US payrolls data and comments out of the G20 summit. Euro Stoxx +0.6% at 2,650; CAC-40 +0.7% at 3,583; FTSE 100 Index +0.8% at 5,253, DAX +0.9% at 6,100
- In Individual Stocks: RWE and Siemens will cooperate to build an offshore wind facility in Munich. The investment is valued at over â‚¬2B //Novartis [NOVN.SZ]: Reported that 18-month results showed Tasigna surpassed Glivec in slowing disease progress for newly diagnosed CML patients// Sanofi Aventis [SAN.FR]: Signed oncology agreement with Ascenta valued at $398M // SSE.UK: Acquired upstream gas assets for a revised offer of $324M in cash. Company would have originally paid $423M // EZJ.UK: Reported May load factor 85.8% v 83.5% y/y May passengers 4.26M were higher at 3.95M y/y. May statistics were affected by ash cloud. Approx 215K passengers were affected. // STHR.UK: Provided trading update and reported a Q2 gross profit +8% y/y
- Speakers: Japan's new PM Kan commented that Cabinet appointments had not yet decided. He would his position on sales tax after forming his cabinet. He targets economic growth and fiscal reconstruction with focus on creating demand and jobs.***Japan Federation of Economic Organizations (Keidanren) urged new PM Kan to combat deflation and follow through regarding tax policy*** Portugal PM Socrates commented that its budget performance thus far this year should ensure that the overall target is achieved in 2010 ** Asian Development Bank (ADB) economist commented that policy rates of emerging markets should be normalized *** SNB's Hildebrand commented that Swiss global banks were still too big to fail and the that the country should not wait until global regulatory efforts. He noted that there was no doubt that European authorities would protect the Euro *** German Fin Min Schaeuble commented that Euro currency moves should not be 'dramatized' . He noted that Germany would push for European financial tax if G20 cannot agree on the topic *** South Africa Central Bank Mminele commented that the SARB was not indifferent to exchange rate adding that the rand currency was one of the most volatile currencies. He noted the SARB was mulling changes in how open market operations are conducted, could use longer-term currency swaps. He noted that the country's FX reserves were too low to peg the USD/ZAR pair and remained committed to a flexible rate regime. South Africa was on sound footing in relation to its fiscal debt. *** Germany's upper house (Bundesrat) delayed planned cuts to solar subsidies. The bill was sent to parliamentary mediation committee *** Taiwan FX Official Lin commented that the Central Bank was monitoring Forward Euro positions and added that seven Taiwan banks have active forward deals*** Chin's The National Development and Reform Commission (NDRC) stated that the country's 2010 GDP growth might slow compared to 2009 levels; China is not facing risk of stagflation as the economy was seen stable with relatively fast growth. It noted that reports of 7% inflation rate during the second half of the year had no basis. The inflation target of 3% inflation was achievable although it could exceed 3% level in some months ***
- Currencies/Fixed Income: The USD and JPY were marginally lower ahead of the key US employment data later today. The analyst expectations were set to see the strongest US monthly job growth since Sept 1983 with calls around 540K increase in jobs. The USD/JPY was it two-week highs but dealers noted that there was a 'muted reaction' to confirmation of Kan as the next PM. FX markets taking keen note that â‚¬15B in Jun options expire today with key levels cited between 1.21 and 1.2330 area. The EUR/CHF cross was being keenly watched for signs of any escalation in the European debt crisis with the 1.4000 deemed as the proverbial 'line-in-the-sand' for sentiment. The pair is currently around the 1.4055 area as the NY market sets in. EUR/USD hovering around the 1.2200 as the NY morning approached. The European peripherals spread remain elevated with 10-year Spanish and Italian Gov't bonds widening to fresh post euro launch levels against the Bund
- Geo-Political:Germany's upper house (Bundesrat) delayed cuts to solar subsidies and sent bill to consolidation committee. Since the vote failed, the cut may not be able to take effect on July 1st as planned but they may be applied retroactively because Bundestag (the lower house) has already approved them. Bundesrat also called parliamentary mediation committee over planned reductions to solar support measures ***Government representatives from G20 member nations to meet in Korea this weekend to discuss various financial matters including the establishment of common financial standards. According to a BBC report, central bankers and government officials expected to endorse EU initiatives to remedy the European financial crisis. Note there is an upcoming G20 summit in Toronto on the 26th and 27th of June.***Spanish unions continue to voice their frustrations towards the governemt, as workers syndicates CCOO, UGT and CSI-CSIF intend to implement a general strike within the public sector Tuesday, the 8th of June.
In The papers: London Telegraph commented on the ECB's balance sheet and noted that the central bank has capital and reserves of â‚¬77.3B. The central bank is now supporting lending to Greek banks of â‚¬88.4B as of April (Data from Henderson Global Investors). Additionally, the ECB has taken on an added â‚¬25B by buying Greece's government bonds. The article says the ECB's exposure to Greece is larger than the central banks own capital and reserves. If there should be any bank run within the EU the article suggested that the ECB might need more capital.
***Notes/Observations: - US Payroll data key focus with the fifth consecutive month of gains seen (perhaps best reading in 27 years) - Japan's Kan officially takes the PM position. - G20 summit in South Korea - IMF Boutros-Ghali: IMF needs more resources after support for Greece. - Warren Buffet: Expects terrible problem for muni debt in years to come.
***Looking Ahead*** - 7:00 (CA) Canada May Net Change in Employment: 15.0Ke v 108.7K prior; Unemployment Rate: 8.0%e v 8.1% prior; Full Time Employment: No est v 43.8K prior; Part time Employment: No est v 64.8K prior - 7:30 (IC) Iceland Bond auction - 8:30 (US) May Change in Nonfarm Payrolls: 536Ke v 290K prior; Change in Private Payrolls: 180Ke v 231K prior; Change in Manufacturing Payrolls: 33Ke v 44K prior - 8:30 (US) May Unemployment Rate: 9.8%e v 9.9% prior - 8:30 (US) May Avg Hourly earnings M/M: 0.1%e v 0.0% prior; Avg Weekly Hours: 34.1e v 34.1 prior - 8:30 (CA) Canada Apr Building Permits M/M: -2.0%e v 12.2% prior 9:30 (US) Fed's Lockhart on US outlook - 10:00 (CA) Canada May Ivey Purchasing Managers Index: 60.5e v 58.7 prior
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