European Market Update: Risk Appetite continues to find footing (Trade the News)
Friday, June 11, 2010
European Market Update: Risk Appetite continues to find footing
***Economic Data*** - (IN) India Apr Industrial Production Y/Y: 17.6% v 14.3%e - (GE) Germany May Wholesale Price Index M/M: 0.3% v 0.2%e; Y/Y: 6.2% v 6.1%e - (FR) France May Consumer Price Index M/M: 0.1% v 0.2%e; Y/Y: 1.6% v 1.7%e - (FR) France May CPI - EU Harmonized M/M: 0.1% v 0.1%e; Y/Y: 1,9% v 1.9%e; CPI Ex Tobacco Index: 120.04 v 120.11e - (FR) France Apr Current Account : -â‚¬3.5B v -â‚¬4.5B prior - (HU) Hungary May Consumer Prices M/M: 0.9% v 0.8%e; Y/Y: 5.1% v 5.2%e - (HU) Hungary Apr Final Industrial Output M/M: 1.1% v 1.1% prior; Y/Y: 9.7% v 9.7% prior - (SP) Spain May Consumer Price Index M/M: 0.2% v 0.1%e; Y/Y: 1.8% v 1.7%e - (SP) Spain May Core CPI M/M: 0.2% v 0.0%e; Y/Y: 0.2% v -0.1%e - (SP) Spain May CPI EU Harmonized M/M: 0.2% v 0.1%e; Y/Y: 1.8% v 1.8%e - (TU) Turkey Apr Current Account (TRY): -4.4B v -4.4Be - (UK) BOE Quarterly Inflation Attitudes Survey: 1 Year CPI expectations: 3.3% v 2.5% prior; Highest reading since Aug 2008 - (UK) May PPI Input M/M: -0.6% v -1.0%e; Y/Y: 11.2% v 10.7%e - (UK) May PPI Ouput M/M: 0.3% v 0.5%e; Y/Y: 5.7% v 5.8%e - (UK) PPI Output Core M/M: 0.1% v 0.4%e; Y/Y: 4.4% v 4.7%e - (UK) Apr Industrial Production M/M: -0.4% v 0.4%e; Y/Y: 2.1% v 2.2%e - (UK) Apr Manufacturing Production M/M: -0.4% v 0.5%e; Y/Y: 3.4% v 3.8%e
Fixed income Auctions: - (IT) Italy Bond auction: Sold total of â‚¬7B in three tranches (as expected) - Sold â‚¬4B in new 3% 2015 BTPs; avg yield 2.91%; Bid-to-cover: 1,3x v 1.4x prior - Sold â‚¬1.74B in 4% 2017 BTPs; avg yield 3.32%; Bid-to-cover: 1.8x v 1.5x prior - Sold â‚¬1.26B in 4% 2037 BTPs; avg yield 4.91%; Bid-to-cover: 1.9x v 1.5x prior - (IR) Ireland Debt Agency (NTMA) set the size of its Jun 15th IGB offering between â‚¬1B to â‚¬1.5B
*** SPEAKERS/FIXED INCOME/FX/COMMODITIES/ERRATUM *** - Equities: Equities in Europe opened the session higher by less than 1%, tracking yesterday's gains in US equities. Factors supporting the markets include sharp gains in shares of BP, comments from Spain Santander's shareholders meeting and the Italian government's bond auctions. Additionally, Spain's Economic Minister denied that his country had requested aid from the EU.
- In Individual Stocks: Fraport [FRA.GE]: Reported passenger volume increased at 7.1% y/y and group passeneger volume increased 14% y/y. || Buckeye Partners [BGH]: Buckeye Partners, L.P. and Buckeye GP Holdings L.P. announced merger agreement. Under the terms of the agreement, BGH unitholders would receive 0.705 BPL limited partnership units in exchange for each BGH limited partnership unit owned at closing || Fuller Smith & Turne [FSTA.UK] Reported FY ajd profit and Revenues at Â£26.6M and Â£227.7M, respectively, both comparing favorably to year-ago figures of Â£22.8M and Â£210M. Remained very cautious on UK economy outlook.|| K+S [SDF.GE]: Raised prices for granulated potash by â‚¬8 or 2.7% to â‚¬305/ton.This is the second time that the company raised prices this year. Remained positive on demand in Europe. || Banco Sabadell [SAB.SP] Confirmed press speculation on merger with Guipuzcoano and stated it was studying merger. Guipuzcoano is based in Spain's Basque country, has â‚¬10.34B in assets and a market capitalization of â‚¬799M. ||Santander [SAN.SP]: Guided FY10 earnings flat y/y. Company had reported FY09 Net â‚¬8.94B, Rev â‚¬39.4B. Expected 2010 to be difficult but was very positive on medium term prospects. Saw growth driven by emerging markets in the coming years.
- Speakers: ECB's Stark commented that there were no alternatives to the euro currency and labeled the current crisis as one of a sovereign debt nature and not about the euro itself. He stated that there has been a crisis of a loss of confidence in fiscal policies and have now entered a new phase of global crisis. He stressed that the debt crisis was not only limited to euro region and that the recent tensions in sovereign debt markets were a test. Alternatives for the euro lead would 'go nowhere'. He reiterated that the ECB delivered on its mandate and that Inflation was very well anchored in Euro Area. Greece austerity measures were credible and the rating agencies downgrade of Greece was not justified ***ECB's Draghi commented that markets were beginning to understand that the euro was here to stay and not possible to go back ***ECB's Wellink reiterated the central bank view that public budgets were stretched and consolidation was necessary. He added that the global economy was at a critical crossroad ***ECB's Tumpel-Gugerell added to the chorus that Greece was moving in the right direction *** Spain Econ Min Campa commented that Spain had not made any request to the EU for possible Aid *** German Govt: No signs that Spain needs to tap â‚¬750M EU rescue fund. German Govt also stated that there were no signs that Spain needs to tap â‚¬750B EU rescue fund ***Austria Fin Min Proell stated that he was certain that euro currency would continue to play 'strong role' *** Iran Pres Ahmadinejad stated that the UN Security Council was a 'tool' for the US and added that the recently passed resolution illustrated the weakness of sponsoring nations and did not have legal value. *** Germany's Bundesbank revised Germany's 2010 GDP forecast higher to 1.9% from its 1.6% prior view. It also tweaked the 2010 GDP forecast to 1.4% growth from 1.2% prior. It noted that the 2011 GDP would weaken due to fiscal tightening. It reiterated the view that it saw modest domestic price pressures and that commodity prices were the main risk to CPI forecast. Jobless may still rise but labor market was resilient. It forecasted 2010 German unemployment at 3.3M and at 3.4M in 2011. It put the 2011 jobless rate at 8.0% ***EU's Barroso stated that he did not believe that there was a conspiracy against the euro
- Currencies/Fixed Income: The USD and JPY maintained a consolidative tone in the session and little changed from the opening levels seen in Asia with dealers noting the dollar pausing after its recently 'stretched' levels achieved in recent weeks. Overall dealers are noting that equities seem supportive in tone after testing recent key support levels while the European bond spreads continue to narrow after successive auction in the latter part of the weeks. The EUR/USD holding above the 1.21 level but talk of option-related flows capping the 1.2150 area for the time being. GBP was softer on weaker production data and retraced from 19-month highs against the Euro after testing 0.8212 in the cross earlier in the session
- Geo-Political: UK press reported Sir Peter Gershon, the efficiency advisor to the government, raised doubts to whether or not it will be possible to make all of the planned government spending cuts as planned by next April. Sir Peter helped advise the Conservative party in its proposed plan in spending cuts. ***George Soros addressed the Institute of International Finance in Austria on the financial crisis. He said that a double dip recession cannot be ruled out and that we are in a situation similar to that of the 1930s. He goes on to say that the crisis has only entered the 'middle stage' with sovereign debt concerns to become global in scope. ***Poland's parliament approved Marek Belka as new Central Bank Chief. He is to replace the former head of the central bank Skrzypek after being fatally involved in an airliner crash back in April. The result of the approval in the Lower house was 253 to 184 votes in favor. ***According to a Wall Street Journal article, firms in the US increased cash positions to record levels. The high levels of cash could be a reflection of worries about financial markets and how stable the recovery is proceeding. Nonfinancial companies held about $1.84T in cash and liquid assets at the end of March. This is a gain of 26% y/y, the biggest rise since at least 1952. In addition, on May 27th the Journal made similar comments stating that Banks in Europe are starting to hoard cash. ***Australia Prime Minister Rudd reaffirmed commitments to 40% rate of mining tax. He is to continue talks with the mining industry, which may take weeks or months.
***Notes/Observations: - World Cup starts in South Africa!!! - Asian equities build on recent rise in risk appetite and Europe follows - Japan PM Kan: Japan risks default if fiscal problems are left neglected - China inflation accelerates +3.1% v +3.0e. - China Stats Bureau: reiterates China can reach 2010 CPI target of 3%; Euro Zone crisis helps ease inflationary pressures.
***Looking Ahead*** - 8:00 (IC) Iceland May Unemployment Rate: no est v 9.0% prior - 8:00 (GE) German Chancellor Merkle, Fin Min Schaeuble - 8:20 (US) Fed's Plosser speaks on economic outlook - 8:30 (CA) Canada Q1 Capacity Utilization Rate: 73.2%e v 70.9% prior - 8:30 (US) May Advance Retail Sales: 0.1%e v 0.4% prior; ; Less Autos: 0.2%e v 0.4% prior; Retail Sales Ex Auto & Gas: 0.2%e v 0.4% prior - 9:55 (US) Jun Preliminary University of Michigan Confidence: 74.5e v 73.6 prior - 10:00 (MX) Mexico Mar Gross Fixed Investment: 0.2%e v -2.3% prior - 10:00 (MX) Mexico Apr Industrial Production /Y: 8.2% v 7.6% prior - 10:00 (US) Apr Business Inventories: 0.5%e v 0.45 prior - 10:00 (UK) May NIESR GDP Estimate: No est v 0.5% prior - 10:00 (GE) German Chancellor Merkle speech to CDU party members -12:00 (US) Fed's Kocherlakota speaks on economy - 13:00 (EU) EU's Barroso meets German Chancellor Merkle in Berlin - 15:00 (AR) Argentina May Consumer Price Index M/M: 0.7%e v 0.8% prior; Y/Y: 10.6%e v 10.2% prior - 15:00 (AR) Argentina May Wholesale Price Index M/M: No est v 1.0% prior; Y/Y: No est v 14.5% prior - (CO) Colombia Central Bank Monetary Policy Minutes
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