European Market Update: JPY currency firms during European session as participants demand more specific Japanese action to curb its appreciation trend (Trade the News)
Monday, August 30, 2010
European Market Update: JPY currency firms during European session as participants demand more specific Japanese action to curb its appreciation trend
***Economic Data*** - (SP) Spain Aug Preliminary CPI EU Harmonized Y/Y: 1.8% v 1.8%e - (SW) Sweden Jun Non-Manual Workers Wages Y/Y: 1.7% v 1.5% prior - (DE) Denmark Q2 Preliminary GDP Q/Q: 1.0% v 0.3%e; Y/Y: 2.8% v 1.7%e (first positive YoY reading since Jun 2008) - (PD) Poland Q2 GDP Y/Y: 3.5% v 3.2%e - (NO) Norway July Retail Sales Volume M/M: 1.3% v 0.3%e; Y/Y: 1.8% v 2.9% prior - (NO) Norway July Credit Indicator Growth Y/Y: 4.7% v 4.8%e - (EU) Euro-Area August Retail PMI M/M: 49.7 v 52.4 prior - (EU) Euro Zone Aug Business Climate: 0.61 v 0.70e; Consumer Confidence: -11 v -12e; Industrial Confidence: -4 v -4e; Economic Confidence: 101.8 v 101.6e; Services Confidence: 6 v 6e - (PO) Portugal Aug Consumer Confidence: -40.4 v -42 prior; Economic Climate: 0.1 v 0.1 prior - (BE) Belgium Aug CPI M/M: 0.1% v 0.0% prior; Y/Y: 2.3% v 2.6% prior
Fixed Income: - ( IT) Italy Debt Agency (Tesoro) Auction Result - Sold â‚¬2.86B in 2.0% Jun 2013 BTPs; avg yield 2.07% v 2.01% prior; Bid-to-cover: 1.45x 1.4x prior - Sold â‚¬5.0B in 4.0% Aug 2021 BTPs; avg yield 3.81% v 4.03% prior; Bid-to-cover: 1.3x v 1.7x prior - Sold â‚¬2.5B in 2015 Floating rate Notes; avg yield 1.74% v 1.7% prior; bid-to-cover 1.27x v 1.44x prior
***Notes/Observations*** - Emergency BoJ meeting resulted in: Loan extension. JPY continues to maintain firm tone on weak Japanese rhetoric - Asian equities open the week higher on the back of strong US session on Friday. - ECB rate decision on Thursday with new economic forecasts - Week ahead sees ISM surveys with risks of sub 50 prints; US Non-Farm Payrolls on Friday
- Equities: - As of 5:40am ET Euro Stoxx 50 Index +0.3% at 2,638; DAX Index +0.3% at 5,967; CAC-40 Index +0.1% at 3,4511 and FTSE 100 Index Closed for banking holiday. - European equities opened the session higher by about 0.5%, tracking Friday's gains in the US following remarks from Fed Chairman Bernanke
- In individual equities, German utilities names, including RWE [RWE.GE], opened the session higher on reports that the German economy ministry may support extending the use of nuclear power by approximately 15 years. Also in German, shares of Deutsche Wohnen gained following the company's H1 financial results and raised FY FFO guidance. Shares of Smartrac [SM7.GE], are sharply higher, after the company received a takeover bid from One Equity Partners, which valued the company at a 17% premium to the prior closing price. BASF [BAS.GE] is trading higher on speculation that its Wintershall unit will announce a new oil find. Infineon's shares have moved into negative territory, as some traders sold the news after the company confirmed that Intel would acquire its wireless solutions unit for $1.4B (approximately 20% premium to the unit's 2009 sales). In other equity movers, shares of Zodiac [ZC.FR] are higher by more than 15% on speculation that the company could receive a bid for Safran [SAF.FR], while Orkla is gaining on reports that the firm might receive a bid for its silicon unit.
Speakers: - BOJ Gov Shirakawa commented at the post-emergency meeting press conference that the downside risks for Japan's economy was increasing but he disappointed the markets after reiterating the view to take appropriate policy steps at proper time . The BOJ Gov stressed the need to watch drawbacks in weighing any interest rate cut and it must consider 'side-effects' of any such move. The BOJ to decide monetary policy based upon medium-term economic and price views and added that policy steps would not be bound by JPY currency and equity price action. Thus there was no one-to-one relationship between FX and policy. The BOJ Gov stated that he could not deny possibility of downgrading BOJ economic view of its current assessment and those downside economic risks were growing more than upside factors. Falling growth was biggest issue for Japan - BOJ Gov Shirakawa commented to reports following a meeting with PM Kan that Kan did welcome the central bank's policy moves but had no specific policy request. The BOJ declined to comment on recent currency moves and vowed to continue close communication with Japanese government - Japanese PM Kan stated following his meeting with the BOJ Gov that the country would use Â¥920B budget reserves for its economic steps and would consider extra budget if needed . he noted that the full stimulus package to be decided on Sept 10th. He reiterated that was paying close attention to economy and conceded that it was facing downward risks. - Czech Central Bank's Holman commented in a press interview that it was likely raise the central bank would raise its main interest rate by 25 bps by the end of 2010 or early 2011 due to inflationary pressures - Czech press interview - New Zealand Fin Min English delayed an Asia trip due to South Canterbury finance troubles
Currencies/Fixed Income: The USD/JPY probed below the 85 handle ahead of the European morning after BOJ Gov seemed to disappoint the market during the post-emergency BOJ press conference. The pair tested as high as 85.90 during the Asian session. BOJ Gov Shirakawa commented that the central bank's policy steps would not be bound by the yen or stock market move. The Gov also noted that PM Kan welcome the central bank's policy moves but had no specific policy request. The BOJ declined to comment on recent currency moves and vowed to continue close communication with Japanese government. The JPY was fimer against all major pairs during the course of the European morning. EUR/JPY dipped back below the 108 handle after testing above 109.50 in its Asian session. The verbal rhetoric continued to flow from both Japanese government and industry leaders but the market seeks more action in order to curb the JPY currency appreciation trend. The USD was mixed against the European pairs with the UK participants out for a bank holiday. EUR/USD softer by some 30 pips from its Tokyo open with dealers commenting that the Italian bond auction results were 'unimpressive'. EUR/USD around 1.2720 as the pair moves into the NY morning.
In the Papers-Geopolitical: - In press news related to Germany, it reported over the weekend that the country's Economy Ministry may support extending the use of nuclear power by approximately 15 years. Also, the Rheinische Post reported that German's Construction Ministry may cut subsidies which seek to improve the energy efficiency of buildings. German Landesbank NordLB's CEO was quoted as saying that the firm is planning to raise its capital levels in the near-term. In Italy, La Repubblica reported over the weekend that EU Commission President Barroso told Italy to continue to be vigilant in controlling its deficit and public debt. In Hungary, a press report quoted the EU's Rehn as saying that the country's government could not afford to ease its budget consolidation progress.
***Looking Ahead*** - (PO) Portugal July Retail Sales M/M: No est v -1.1% prior; Y/Y: No est v -1.6% prior - (PO) Portugal July Industrial Production M/M: No est v -0.5% prior; Y/Y: No est v 3.4% prior - 6:00 (PD) Poland to Sell Up to PLN800M in 52-Week Bills - 7:00 (BR) Brazil Aug FGV Inflation IGP-M M/M: 0.7%e v 0.2% prior; Y/Y: No est v 5.8% prior - 7:30 (GE) German Chancellor Merkel and Ukraine President Yanukovych - 8:30 (CA) Canada Q2 Current Account (BOP): -C$10.7Be v -C$7.8B prior - 8:30 (CA) Canada July Industrial Product Price M/M: +0.4%e v -0.9% prior; Raw Materials Price Index M/M: 0.2%e v 0.3% prior - 8:30 (US) July Personal Income: 0.3%e v 0.0% prior; Personal Spending: 0.3%e v 0.0% prior - 8:30 (US) July PCE Core M/M: 0.1%e v 0.0% prior; Y/Y: 1.4%e v 1.4% prior; ) PCE Deflator Y/Y: 1.5%e v 1.4% prior - 8:30 (SA) South Africa July Budget (ZAR) No est v 8.9B prior - 9:00 (CL) Chile July Industrial Production Y/Y: 3.0%e v 2.9% prior; Industrial Sales Y/Y: 2.7%e v 1.4% prior - 9:00 (CL) Chile July Total Copper Production: No est v 465K tons prior - 9:00 (FR) France Debt Agency (AFT) to Sell Bills - 9:30 (EU) ECB call for bids in 7-day Main refi operation - 10:30 (US) Aug Dallas Fed Manufacturing Activity: -16.0e v -21.0% prior - 12:00 (IC) Iceland Q2 Current Account (ISK): No est v -27.0B prior - 13:30 (US) Fed's Bullard - 15:00 (AR) Argentina July Supermarket Sales Y/Y: No est v 19.0% prior - 15:30 (MX) Mexico July YTD Budget Balance (MXN): No est v -101.71B prior
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