European market Update: UK data disappoints; ECB press conference eyed (TTN)
Thursday, September 02, 2010
European market Update: UK data disappoints; ECB press conference eyed
***Economic Data*** - (RU) Russia Gold & Forex Reserve w/e Aug 27th: $ v $475.2B prior - (FR) France Q2 ILO Unemployment Rate: 9.7% v 10.0%e; ILO Mainland Unemployment Rate: 9.3% v 9.6%e ; Mainland Unemployment Change: -70K v -8K prior - (SZ) Swiss Q2 GDP Q/Q: 0.9% v 0.8%e; Y/Y: 3.4% v 2.6%e - (UK) Aug Nationwide House Prices M/M: -0.9% v -0.3%e; Y/Y: 3.9% v 4.9%e - (SP) Spain Aug Net Unemployment M/M: +61.1K v +50.0Ke - (SZ) Swiss July Real Retail Sales Y/Y: % v 0.9% prior - (SW) Sweden Central Bank (Riksbank) raised interest rates by 25bps to 0.75%; as expected - (IT) Italy July PPI M/M: -0.1% v 0.4%e; Y/Y: 4.1% v 4.3%e - (BR) Brazil Aug FIPE CPI: 0.2% v 0.2%e - (UK) Aug PMI Construction: 52.1 v 53.2e - (EU) Euro-Zone July PPI M/M: 0.2% v 0.3%e; Y/Y: 4.0% v 4.0%e - (EU) Euro-Zone Q2 Preliminary GDP Q/Q: 1.0% v 1.0%e; Y/Y: 1.9% v 1.7%e - (EU) Euro-Zone Q2 Preliminary Gross Fix Capital Q/Q: 1.8% v -0.4% prior; Govt Expend Q/Q: 0.5% v 0.2% prior; Household Consumption Q/Q: 0.5% v 0.2%e - (SA) South Africa Aug Naamsa Vehicle Sales Y/Y: 36.9% v 20.0% prior
Fixed Income: - (SP) Spain Debt Agency (Tesoro) sold â‚¬3.3B versus â‚¬3.0-4.0B indicated range in 3% 2015 Bonos; avg yield 2.964% v 3.657% prior; Bid-to-cover 1.7x v 1.7x prior - (FR) France Debt Agency (ATF) sells total â‚¬ v â‚¬9.0B indicated in Bonds via four tranches - Sold â‚¬685M in Apr 3.25% 2016 BTANs; avg yield 1.78% v 2.970%; Bid-to-cover: 5.04x v 1.69x prior - Sold â‚¬2.895B in Apr 3.50% 2020 OATs; avg yield 2.55% v 3.04%; Bid-to-cover: 2.16x v 3.51x prior - Sold â‚¬3.970B in Apr 2026 OATs; avg yield 3.00% v 3.54%; Bid-to-cover: 1.28x v 1.45x prior - Sold â‚¬1.33B in Apr 2041 OATs; avg yield 3.17% v 3.84%; Bid-to-cover: 1.94x v 1.88x prior - (HU) Hungary Debt Agency sold HUF35B vers HUF50B in 12-Month Bills ; avg yield 5.82% v 5.44% prior - (UK) DMO sold Â£3.75B in 5% 2014 Gilts; avg yield 1.542% v 2.032% prior; Bid-to-cover: 1.69x v 2.28x prior; tail 0.7bps
*** SPEAKERS/FIXED INCOME/FX/COMMODITIES/ERRATUM ** - Equities: - As of 5:35am ET (9:30 GMT) Euro Stoxx 50 Index unchanged at 2,714; DAX Index Unchanged at 6,084; CAC-40 Index +0.1% at 3,628 and FTSE 100 Index +0.1% at 5,373
- French spirits name Pernod Ricard [RI.FR] slid 1.7% at the opening after results had decreased and company missed estimates. Note slow recovery in US consumer spending and contrasting situation in Europe with signs of a recovery but also the impact of austerity measures. Company said it would provide earnings guidance at its AGM and said it would focus on a strong marketing investment level, and the reduction in Group debt - Russia's Gazprom [GAZP.RU] reported an increase both in net and revenues as cold weather in Russia and Europe triggered a raise in volumes. In other Russian names, VTB Group [VTBR.RU] swung to a profit in H1 and Q2 compared to a loss a year ago. Its revenues increased by 23% beating analyst expectations. Group saw the first signs of recovery in demand for credit both from corporate and retail customers with corporate and retail loans up by 12% and 5% respectively. Evraz [EVR.UK], one of Russia's largest steelmakers reported a narrowing first half net loss of $267M as compared to last year loss of $987M. Excluding items, the result was a profit of $284M. Revenues also rose but came slightly below analysts' estimates. Company noted that Q3 results might be affected by prices and volumes volatility. - UK name Go-Ahead Group [GOG.UK] reported a 24%fall in FY profit and flat revenues. Group cut its dividend to 25.5p from 55.5p and remained cautious on the near term prospects for the UK economy which rendered the FY outlook difficult to predict.
Speakers: - France Budget Min: Might have to increase taxes in 2013 - Le Figaro - Japan DPJ Ozawa commented that the country must halt sharp JPY currency appreciation but conceded that a JPY rise over the longer term was 'not bad'. He stated that BOJ policy alone could not stop the JPY appreciation trend and that there were other steps beside JPY-selling intervention to curb JPY appreciation. Solo BOJ currency intervention might not have much effect but the central bank must be prepared to act - Japan PM Kan commented that recent yen moves had been driven by dollar weakness. BOJ emergency measures represented awareness of "crisis" on Yen - Germany's Chemical Body VCI raised its 2010 production outlook to 11% versus 8.5% prior view . The association also increased its 2010 German chemicals sales to +18% compared to their prior view +10%. It noted that German chemical industry was close to pre-crisis levels - Reportedly a Chinese Government Researcher stated that China would not launch new stimulus program though wary of exiting current one and noted no need for major economic policy initiatives. It noted that credit growth was sufficient. - The Swedish Central Bank (Riksbank) stated after its rate hike decision that it would maintain the repo rate path forecast as set out back in it July minutes. It reiterated that it saw a normalization in rate with Q4 Repo Rate at 0.9%; 3Q 2011 Repo Rate at 2.1%; 3Q 2012 Repo Rate At 3.1%; Q3 2013 Repo rate at 3.8% unchanged from July view. The central bank noted that two members (Ekholm and Svensson) had reservation about the current interest rate path and sought a lower rate path at today's decision - China and India agreed that reserve currencies should be kept relatively stable and that inflationary pressures were rising in some emerging market economies. The two nations noted that ensuring robust global economic recovery remained challenging and that monetary policy adjustments might cause capital flow disorder - Japanese press reported that the BOJ might consider further easing measure if the JPY currency continued to rise sharply
Currencies/Fixed Income: - The GBP exhibited a weaker tone during the European session as softer economic data weight upon the currency. GBP/USD retesting the 1.54 handle while EUR/GBP was firmer by around 50 pips in the session at 0.8335 area. The EUR/USD maintained a foothold above the 1.28 handle but remained below the hourly highs established on Wednesday that option related flows capped. All eyes will be on the ECB press conference later today to see if the central bank introduces new liquidity facilities to accommodate the maturities of the September LTROs. Dealers continue to note that option plays likely to cap the 1.2650 to 1.2850 range. The SEK currency surged in the aftermath of the Riksbank rate decision. EUR/SEK posted 16-month lows below the 9.30 level before consolidating. The JPY maintained a steady tone with the continued rhetoric on the evils of continued strength by Japanese gov't and corporate officials . USD/JPY holding above the 84 handle but within striking distance of fresh 15-year lows below the 83.57 achieved last month.
In the Papers-Geopolitical: - In the Financial Times, according to an IMF report, markets may be overestimating the risk of a Greek sovereign debt default, and along with Japan, it is a country among those with the least 'fiscal space'. The market consensus states Greece will eventually have to restructure its debt. Adding further insight, of the eight cases in the past 20 years 'when an advanced economy with high government debts cut its deficit to zero, none of went on to default'. - It was reported that China will not launch a new stimulus program, though it is wary of exiting the current one. There is no need for major economic policy initiatives and credit growth is sufficient. Note on 17th of August China Ministry of Commerce Huo Jianguo planned to introduce import stimulus as soon as September
***Notes/Observations*** - ECB rate decision later today. ECB seems likely to introduce new liquidity facilities to accommodate Sept maturities. ECB Staff forecasts are likely to raise growth forecasts. - UK data disappoints while Swiss and EU GDP data a touch better - Aug Monster online employment index 136 vs 138 in July. - IMF: Warns countries of debt risks (Greece, Italy, Portugal, Japan). Dismisses idea of Greek default. - Middle East peace talks under way at the White House. - India and China bring up the reserve currency issue again - Hungary debt auction again fails to sell targeted amount - US same-store sales data expected ahead of the equity open
***Looking Ahead*** - 6:00 (MA) Malaysia Central Bank Interest Rate Decision: Expected to maintain the Overnight Rate unchanged from the current rate of 2.75%. - 6:00 (MA) Malaysia July Trade Balance (MYR):v 6.1Be v 5.0B prior; Exports Y/Y: 11.5%e v 17.2% prior; Imports Y/Y: 18.6%e v 30.1% prior - 6:00 (CZ) Czech Republic sold CZK v CZK7.0B indicated in 91-Day Bills - 7:45 (EU) ECB Interest Rate Decision: Expected to maintain the Main Refi Rate at 1.00% - 8:30 (US) Q2 Final Nonfarm Productivity: -1.9%e v -0.9% Prior; Unit Labor Costs: 1.2%e v 0.2% prior - 8:30 (US) Initial Jobless Claims: 475K v 473K prior; Continuing Claims: 4.440M v 4.456M - 8:30 (EU) ECB press conference - 9:30 (SI) Singapore Aug Purchasing Managers Index: 51.3e v 52.2 prior; Electronics Sector Index: 52.8e v 55.7 prior - 10:00 (US) July Factory Orders: 0.3%e v -1.2% prior - 10:00 (US) July Pending Home Sales M/M: -1.0%e v -2.6% prior; Y/Y: No est v -20.1% prior - 10:30 (US) Aug ICSC Chain Store Sales Y/Y: No est v 2.8% prior - 10:30 (US) Weekly EIA Natural Gas Inventories - 13:00 (US) Treasury to sell 10-Year TIPS Reopening - 21:00 (CH) China Aug Non-manufacturing PMI: No est v 60.1 prior
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