European Market Update: European financials provide further impetus for risk appetite (Trade the News)
Monday, August 02, 2010
European Market Update: European financials provide further impetus for risk appetite
***Economic Data*** - (SW) Sweden July Swedbank PMI Survey 64.2 v 62.4e - (NO) Norway July PMI: 54.9 v 52.0e - (TU) Turkey July Manufacturing PMI: 52.8 v 53.2 prior - (PD) Poland July Manufacturing PMI: 52.1 v 53.3 prior - (IR) Ireland July NCB Manufacturing PMI: 51.4 v 51.8 prior - (HU) Hungary PMI: 53.5 v 49.6 prior - (IR) Ireland Jun Retail Sales Volume M/M: -0.2% v -0.1% prior; Y/Y: 1/0% v 3.1% prior - (SP) Spain July Manufacturing PMI: 51.6 v 51.2 prior - (SZ) Swiss Jun Real Retail Sales Y/Y: 0.9% v 3.9% prior - (SZ) Swiss Jul SVME-Purchasing Managers Index: 66.9 v 65.0e; highest reading on record - (CZ) Czech July Manufacturing PMI: 56.8 v 57.6 prior; four month low - (DE) Denmark Jun Retail Sales M/M: -1.4% v 3.7% prior; Y/Y: 0.2% v 0.3% prior - (IT) Italy Jul PMI Manufacturing: 54.4 v 54.6e - (FR) France July Final PMI Manufacturing: 53.9 v 53.7e - (GE) Germany PMI Manufacturing: 61.2 v 61.2e - (EU) Euro Zone July Final PMI Manufacturing: 56.7 v 56.5e - (NO) Norway Jun Credit Indicator Growth Y/Y: 4.6% v 4.3%e - (GR) Greece July Manufacturing PMI: 45.3 v 42.2 prior - (HK) Hong Kong Jun Retail Sales Value Y/Y: 15.3% v 19.0%e; Retail Sales Volume Y/Y: 12.1% v 14.7%e - (UK) July PMI Manufacturing: 57.3 v 57.0e - (SA) South Africa July Kagiso PMI: 49.5 v 48.0e - (DE) Denmark July PMI Survey: 50.7 v 50.3 prior - (RU) Russia July Reserve Fund: $40.6B v $39.3B prior; Wellbeing Fund: $88.2B v $85.5B prior
Fixed income: - (NV) Netherlands Debt Agency (DSTA) Auction results: Sold total â‚¬6.1B in three tranches v â‚¬8.0B indicated - Solds â‚¬2.61B in 3-month bills, avg yield 0.425% - Sold â‚¬1.32B in 5-month bills, avg yield 0.485% - Sold â‚¬2.15B in 6-month bills, avg yield 0.515%
*** SPEAKERS/FIXED INCOME/FX/COMMODITIES/ERRATUM ** ***Notes/Observations*** - China PMI slightly less than exp but still at expansion levels. - European PMIs basically beating expectations - Commodity currencies remain firm as CRB registered its largest one month gain in 14 months. - JGBs yields hit 7 year lows at 1.045% - European banking results from BNP and HSBC beat expectations
- As of 5:30am ET Euro Stoxx 50 Index +1.7% at 2,788 ; DAX Index +1.6% at 6,243; CAC-40 Index +2.0% at 3,716 and FTSE 100 Index 1.9% at 5,359
- Two major financial names reported today, BNP Paribas and HSBC, both of them coming out with better than expected results. BNP reported a disappointing revenue in the corporate and investment banking segment due to a contraction in fixed income trading and higher hedging costs as a result of excessive market volatility. However, noted an improvement in corporate health which was reflected in a decreasing cost of risk. Outlook for the next quarter and the general macro conditions was positive. Shares opened 3.8% higher after results. HSBC opened higher by 1.9% ahead of earnings and reported its better-than-expected numbers during trading hours. One of the brightest spots of the report was the level of loan impairment charges which almost halved to $7.2B, lowest level since the start of financial crisis. All regions were profitable except North America and the company is focusing more on the Asian markets where growth is expected to come from. At the time of writing, shares are trading off their highest level up by 4.5%. - Disappointing numbers from Metro which reported worse than expected numbers and flat growth in its cash and carry and real revenues. Company reaffirmed their FY10 outlook but sales growth for FY10 still falls short of the medium term target level of 6% growth per year. Shares opened down 1.4% following results. On the other hand, the other German name, Linde reported better than expected revenues although EBIT came in a bit softer than analysts' estimates. Company reaffirmed its outlook for FY10 with operating profit growing faster than sales and operating profit to exceed its record year 2008 level. Shares opened 0.9% higher after results. - TNT reported a sharp decline in the net income compared to last year's level due to final restructuring provisions. Revenues were slightly higher than expected. While Express volumes and revenues were expected above 2009 levels, Mail volumes are expected to decline by 7-9% in the Netherlands and operating income for the division is expected to be lower than 2009. Shares opened down by 2.4% following earnings. French name Air Liquide reported better than expected results and confirmed its outlook of net profit growth in 2010. Shares opened up by 0.7% after results.
- Speakers: - Japan Vice Fin Min Minezaki: JPY currency rise deemed not abrupt at this time
- Currencies: The USD maintained a mix tone against the majors in the session despite an improvement in risk appetite. The greenback was softer against both the Euro and GBP pairs with better economic data (PMI readings) and firmer equity markets continuing to be the catalyst for the price action. Earnings from several European banks (BNP and HSBC) provided the momentum for the financial sector. EUR/USD was unable to capitalize fully capitalize on the euphoria and was unable to hit fresh 11-week highs and continued to consolidates between 1.30-1.31 area. GBP/USD moved past the pivotal 1.5750 level to test 1.5800 in the session for fresh five-month highs. The USD/JPY remains contained within the 86-88 neighborhood. The commodity-related pairs are also firmer by 50 pips with USD/CAD at 1.0240 and AUD/USD above the 0.91 level.
- In the Papers-Geopolitical: - The southern region of Israel, rocket attacks were reported striking Eilat and the nearby Aqaba port in Jordan. No casualties were declared in Israel, though there were four civilian injures so far indicated in Aqaba. Regional authorities state that at least five rockets were fired from the Sinai desert in Egypt. - On NBC's 'Meet the Press' Former Federal Reserve Chairman Greenspan commented on the current state of the US economy noting that a decline in home prices may result in a double-dip US recession. He further goes on to say that we are in a pause in a recovery, a modest recovery, but a pause in the modest recovery feels like quasi recession. - The Wall Street Journal commented on the failure of an agreement to be reached between the EU/IMF and Hungary regarding the country's budget cuts partially due to the desire of Hungary Prime Minister Orban to set its own economic agenda, with minimal interference from international agencies. Orban has stated in the past that he believes Hungary can survive without any more aid from the IMF or EU. Note that if Hungary does not reach an agreement with the IMF/EU, its standby loan agreement will expire in Oct and the lack of these funds will limit the government's safety net, in addition to making it more difficult for Hungary to raise funds on the international markets. - NationalSkillsAcademy for Power, the power industry runs the risk of not having enough skilled labor if they do not start training twice as many people now. Currently four out of five employees are set to retire over the next 15 years. - PricewaterhouseCoopers made remarks on the new bonus rules prepared by the UK's Financial Services Authority (FSA) noting that they are riddled with legal problems which they expect to lead top numerous court appeals. According to the press, the provision will see the contracts of employees found in breach of the FSA's remuneration code having their contracts voided by the city regulator with the bonuses having to be repaid. - Sentiment for Britain's Liberal Democrats party continues to decline following results of recent UK polling data. According to YouGov, polls show that support for the Lib Dems has dropped to 12%, a further decline from the 13% registered on the 22nd of July. Similarly Deputy Prime Minister Clegg's satisfaction rating stands now at 8 points against the 72points during televised campaign debates.
***Looking Ahead *** - (RU) Russia July Official Reserve Assets: $ v $461.2B prior - (IN) India Jun Trade Balance $ v -$10.6B prior; Exports Y/Y: % v 35.1% prior; Imports Y/Y: % v 38.5% prior - (CZ) Czech July Budget Balance (CZK) v -75.7B prior - 8:30 (CL) Chile Central Bank Meeting Minutes - 9:00 (BR) Brazil July PMI Manufacturing: No est v 52.7 prior - 9:00 (FR) France Debt Agency (ATF) to sell â‚¬8.5B in Bills - 9:30 ECB calls for bids in 7-day main refi operation - 10:00 (BR) Brazil July Trade Balance: $1.9Be v $2.3B prior; Exports: $17.8Be v $17.2B prior; Imports: 16.1Be v $17.1B prior - 10:00 (MX) Mexico Central Bank Economist Survey - 10:00 (US) July ISM Manufacturing: 54.0e v 56.2 prior; Prices Paid: 54.5e v 57.0 prior - 10:00 (US) Jun Construction Spending M/M: -0.5%e v -0.2% prior - 10:15 (US) Fed's Bernanke speaks on US economy - 12:00 (IT) Italy July New Car Registrations Y/Y: No est v -19.1% prior - 14:00 (IT) Italy July Budget Balance (EUR): No est v 4.3B prior; Budget Balance (YTD): No est v -45.8B prior - 16:00 (US) Treasury Sec Geithner speaks on financial reform - (AR) Argentina Mercosur Summit - (AR) Argentina July Government Tax Revenue : No est v $37.3B prior - (AR) Argentina July Vehicle Sales: No est v 60.9K prior
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