ropean Market Update: European equities decline as Germany's ZEW survey unexpectedly declined and hit levels not seen since Feb 2009 (TTN)
Tuesday, September 14, 2010
European Market Update: European equities decline as Germany's ZEW survey unexpectedly declined and hit levels not seen since Feb 2009
****Economic Data**** (FR) France Aug Consumer Price Index M/M: 0.2% v 0.3%e; Y/Y: 1.4% v 1.5%e (FR) France August CPI-EU harmonized M/M: 0.2% v 0.3%e; Y/Y: 1.6% v 1.7%e (IN) India Aug Monthly Wholesale Prices Y/Y: 9.5% v 9.6%e (GE) Germany August Wholesale Price Index M/M: 1.6% v 0.3%e; Y/Y: 6.4% v 4.9%e (FI) Finland August CPI M/M: +0.4% v -0.5% prior; Y/Y: 1.2% v 1.1% prior (TU) Turkey Q2 GDP Q/Q: 3.7% v 0.1% prior; Y/Y: 10.3% v 9.0%e; GDP wda Y/Y: 10.3% v 11.7% prior (IT) Italy Q2 Labor Costs Q/Q: 0.7% v 0.6% prior; y/y: 3.4% v 3.3% prior (UK) August CPI M/M: 0.5% v 0.3%e; Y/Y: 3.1% v 3.0%e; Core CPI Y/Y: 2.8% v 2.5%e (UK) August RPI M/M: 0.4% v 0.3%e; Y/Y: 4.7% v 4.6%e; RPI ex mortgage y/y: 4.7% v 4.8%e (UK) UK July DCLG House Prices Y/Y: 8.4% V 8.4%E (GE) Germany Sept ZEW Economic Sentiment: -4.3 v +10.0e; Current Situation: 59.9 v 50.0e (EU) Eurozone Sept ZEW economic sentiment: 4.4 V 14.5E (EU) Eurozone July Industrial Production M/M: 0.0% V 0.1%E, Y/Y: 7.1% V 8.0%E (EU) Eurozone Q2 Labor Costs Y/Y: 1.6% V 1.9% Prior
** Fixed Income*** - (NV) Netherlands Debt Agency (DTSA) Sells â‚¬2.8b in 2013 DSL, Avg yield 0.861% v 0.405% prior - (GR) Greece Debt Agency (PDMA) Sells â‚¬1.17B in 26 week bills; Avg yield 4.82% v 4.65% prior; Bid-to-Cover 4.5X V 3.6X prior - (HU) Hungary Debt Agency Sells HUF60B in 3-month bills; Avg yield 5.48% v 5.53% prior - (BE) Belgium Debt Agency Auction results - Sells â‚¬804M in 3-month bills v â‚¬700M Expected; Avg yield 0.400% v 0.405% prior - Sells â‚¬2.0B in 12-month treasury certificates, avg yield at 0.760%
Equities: - As of 6:18 AM EST, FTSE 100 +0.4% at 5,567, CAC-40 +0.05% at 3,768 and DAX -0.03% at 6,259 - French vacation resort name Club Meditarranee [CU.FR] traded higher after reporting increasing revenues on a yearly basis. Company swung to profit in its first half and gave a bullish outlook, noting a double digit rise in bookings which starts off winter sales on a positive note. - UK retailer Debenhams [DEB.UK] traded less than 1% higher at the open provided a trading update noting a 9.6% increase in gross transaction value. Company guided its FY10 FY10 headline profit before tax and exceptional items to be in the region of Â£150M, an increase of some 20% over last year and up over 35% on a two year comparison. Ashmore Group [ASH.UK] reported an increasing pre-tax profit and revenues. The assets under management also increased and performance fees as well.
***SPEAKERS*** - (AU) Australia Resource Min Ferguson: No plans to expand the tax into other commodities; No times table set for mining tax laws
- (CH) China Ministry of Finance (MoF) researcher Digan Yifan: Economic outlook to be more clearer following Sept data releases; Data from Q1-Q3 range to help in deciding whether or not keep stimulus policy; US currency legislation may initiate trade war with China.
- (FR) France Budget Min Baroin: Sees 2010 GDP above the 1.4% prior forecast; 2010 Deficit to be below 8% GDP
- (GE) German ZEW Economists: Risk of a double dip in Germany is low; Markets seems to act as if they do not believe in rescue packages for troubled countries; - Experts are concerned by US GDP and bond spreads in Greece.
- (GE) German Fin Min Schaeuble: Sees 2010 borrowing at â‚¬50-60B range; Sees 2011 new debt at â‚¬57.5B; sees 2011 economic growth at less than 3%
- (IR) Ireland PM Cowen: Current deficit figures not sustainable - Irish media
- (JP) S&P notes that DPJ election is not credit positive
- (JP) Fitch comments on DPJ results: Kan's victory is not a key near-term credit rating driver
- (PD) Poland Fin Min Rostowski: Planning to introduce bank tax in Jan 2011
- (UK) ZEW's Schroeder: Risk is relatively high for UK double dip - OPEC's El-Badri: Compliance with production at 53%, low quota compliance is not impacting prices
Currencies/Fixed Income: Euro lost its yesterday's gains against the dollar after disappointing German ZEW data which came much lower than consensus expectations at -4.3, its lowest reading since 2009. ZEW economists noted the increased uncertainties given the slowdown in the US economy and expected the capacity utilization to fall by year-end. Bunds extended gains after the ZEW negative number with risk aversion returning to the markets as Europe's largest exporter shows signs of flattening economic growth. European Industrial production was uninspiring further suggesting the sluggish recovery in the Eurozone. Meanwhile British Pound traded higher after UK CPI was stubbornly higher than estimates prompting investors expectations for a hike in rates. It is unlikely, however, that the hike will happen anytime soon BoE members are more concerned with economic recovery rather than inflationary pressures as US growth is uncertain and austerity measures are looming ahead. Gilts lost some of their gains seen earlier in the session after the CPI data. USD/JPY reached 15-yr low ahead of the DPJ election in Japan. It traded higher during Ozawa's speech who has been far more vocal in a unilateral intervention than Kan but plunged again after Kan won the election. There is is still a risk of intervention but markets feel it is unlikely that Kan would intervene solo to soften JPY strength against the dollar.
In the Papers-Geopolitical: The Telegraph's Evans-Pritchard looked at recent IMF concerns over unemployment levels. He noted that they were concerned that prolonged unemployment levels can lead to social problems in the US and Europe. The most recent downturn may be more difficult to reabsorb workers who have lost their jobs. According to the IMF's chief economist Blanchard, the level of long term unemployment have risen sharply during the most recent downturn and long term unemployment is alarmingly high.
In Japan, the Democratic Party of Japan (DPJ) leadership election resulted in Prime MinisterKan maintaining his position as both leader and Prime Minister of the country with final voting results giving Kan 721 points to 491 points challenger Ozawa. Following the election results, in a press conference, Prime MinisterKan reiterated that he was considering extra budget to supplement economic plan, and additional steps for the economy. He also said that he wanted to stick to three year lower house term with no plans of dissolution for a general election. - In the Telegraph, former US Treasury Secretary Paulson said the US budget deficit could hurt its status as a world superpower. In addition, he stated that though the US economy had slowed, it is not headed for a double-dip recession.
**Observations*** - ZEW lowest reading since February 2009 - Peripheral spreads widen as markets digest Greek bond auction and German ZEW data - USD weakens: USD/CHF hits parity for the first time since Dec 2009, while USD/JPY hit a 15-yr low ; USD index hit 1-month low - EUR/GBP: Dealers note pair is closing in on 0.8390 a level not seen since July 29th USD/CNY 1-yr offshore forwards hit lowest level since late June, after China set yuan at the highest level since the July 2005 revaluation. - Equity markets seeking further direction from the upcoming release of US retail sales.
***Looking Ahead*** - 7:00 (BR) Brazil FGV Inflation IGP-M: 0.7%e v 0.4% prior - 7:30 (US) Aug NFIB Small Business Optimism: 89.0e v 88.1 prior - 7:45 (US) ICSC/GS weekly chain store sales w/e XXX: % w/w; % y/y - 8:00 (PD) Poland Aug CPI M/M: -0.4%e v -0.2% prior; Y/Y: 2.1%e v 2.0% prior - 8:00 (BR) Brazil July Retail Sales M/M: 0.7%e v 1.0% prior; Y/Y: 10.9%e v 11.3% prior - 8:30 (CA) Canada Q2 Labor Productivity Q/Q: -0.5%e v 0.7% prior; Capacity Utilization: 75.5%e v 74.2% prior - 8:30 (CA) July New Motor Vehicle Sales M/M: 1.0%e v 2.5% prior - 8:30 (US) Aug Advance Retail Sales: 0.3%e v 0.4% prior; Retail Sales Less Autos: 0.3%e v 0.2% prior - 8:55 (US) Redbook Retail Sales - 9:00 (EU) ECB weekly Forex reserves - 10:00 (US) September IBD/TIPP Economic Optimism Index 44.0e v 43.6 prior - 10:00 (US) July Business Inventories 0.7%e v 0.3% prior - 17:00 (US) Weekly ABC Consumer Confidence: v -43 prior
Fixed Income - 7:00 (EU) ECB 7-day Term Deposit Tender
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