European Market Update: European equities receive support from technology earnings out of the US (TTN)
Friday, September 17, 2010
European Market Update: European equities receive support from technology earnings out of the US
***Economic Data*** - (GE) Germany Aug Producer Prices M/M: 0.0% v 0.3%e; Y/Y: 3.2% v 3.5%e - (FI) Finland Aug Producer Prices M/M: 0.0% v 0.3% prior; Y/Y: 6.0% v 6.7% prior - (HU) Hungary Jul Avg Gross Wages Y/Y: 0.3% v 0.9%e - AS) Austria July Producer Price Index M/M: 0.4% v 0.5% prior; Y/Y: 4.2% v 3.5% prior - (IT) July Industrial Orders M/M: -3.0% V -0.4%E; Y/Y: 0.7% V 18.3%E - (IT) July Industrial Sales M/M: -2.7% v 3.6% prior; Y/Y: 8.9% v 16.1% prior - (EU) Euro Zone Current Account: -â‚¬3.8B v -â‚¬3.8b prior; Current Account nsa: â‚¬3.7b v â‚¬1.8b prior - (SP) Spain Jul Services Sector Sales Y/Y: -3.8% v +7.1% prior
Equities - As of 05:51 AM ET, FTSE100 +1.02%, CAC40 +1.26%, DAX +0.89% - Risk appetite remained strong in the European session after it returned to the markets yesterday at the US close and continued to prevail in the Asian session. Asian bullish sentiment drove major European equities higher as miners and bankers rallied. - In individual equities, newsflow was fairly light. UK energy firm Centrica [CAN.UK] rose 1% as it doubled its equity interest in Statfjord field in a Â£144M. The star performer of the FTSE100 was engineering group Invensys [ISYS.UK] rising 2.5% after signing a licensing agreement with Chinese company CSR, increasing its exposure to the Asian horsepower. Shares of 3i [III.UK] were in the red as company decided to merge its growth capital team with its buyout team causing its top deal-maker Jonathan Russell to leave the company. Also, Evolutions Securites downgraded firm from Add to Neutral which did not help the shares. - Dutch biotech company Crucell [CRX.NV] surged to 55% at the open after Johnson and Johnson said it was in advanced talks to buy the rest of Crucell's shares for $1.75B. Johnson&Johnson currently owns 17.9% of shares. - French supermarket retailer Carrefour [CA.FR] led European retailers after announcing it was planning to sell Dia hard discount unit. BNP Paribas upgraded company to Outperform from Neutral
***SPEAKERS*** - (EU) ECB's Weber: Sovereign default in Euro Zone will NOT happen; Economic situation looks more relaxed, though financial crisis is still with us - (EU) ECB's Nowotny: Inflation risks are stable now; Sees potential upside inflation risks but not material; Notes problems with banks addicted to ECB funding - (EU) EU's Almunia: Special banking measure will not be eliminated - (IR) Ireland Debt Agency (NTMA) to sell between â‚¬1.0-1.5B in 2014, 2018 IGB issues on 21st Sept - (IR) Ireland Junior Coalition party: Wants to keep fiscal adjustments in next year's budget at â‚¬3B - (JP) Moody's analyst Byrne: Reelection of PM Kan is credit positive; intervention is credit neutral for Japan; BoJ has more scope to expand balance sheet than the Fed does; Increasing the issuance of JGBs not necessarily negative if temporarily done. - (TU) Turkey Central Bank: Turkey still has not reached a permanent level in price stability - (UK) UK Chancellor Osborne: New actions by the govt have reduced Sterling market rates, representing a positive monetary stimulus; Current budget situation is different from the budget cuts of the 1980s; Return of sovereign credit risk is the biggest threat to European economies.
Currencies/Fixed Income: - The risk-on attitude continued to pressure the USD and the CHF while Euro and Sterling continue to rally. Dollar weakness continues to persist amidst renewed risk appetite and ahead of FOMC's next week meeting when the FED may restart its QE. Cable recovered brief losses from yesterday's retail data and is trading about 1.572. Inflation remains a concern for the Island despite dovish rhetoric from the BoE. In the Eurozone the calendar was fairly light with mostly low-impact data. German PPI printed weaker than expectations suggesting that inflationary pressures are contained and the ECB is unlikely to tighten its monetary policy. EUR/USD fell briefly after the data but quickly recovered and is currently trading at 1.315. Traders will be watching US CPI data expected at +0.3% which if stronger than expected may spark an upside in the dollar and reduce the probability of a QE operation. Gilts and Bunds continue to decline as stock markets rose.
In the Papers-Geopolitical - UK Business Secretary Cable said that punitive caps on non-EU workers resulted in companies moving operations abroad. Note that restricting immigrants was among David Cameron's campaign promises. As a result of these shortages, companies cannot fill the jobs required now that the economy is recovering. - According to the Financial Times, citing regulators and industry analysts', impact from recent Basel III rules could be 30% tougher than what was initially suggested by data. Further, the banks will have to subtract items such as goodwill, tax credits and minority investments from equity and retained earnings. The aim is to make this key measure of capital reflect the equity that would be available to absorb losses in a crisis. The data suggests the real impact of changes would raise the minimum capital requirement to 10% from 2% for many banks rather than 7% stated.
***Notes/Observations*** - Broad USD weakness: EUR/USD hits 1-month high; AUD/USD hits 2-yr high; US dollar index hits 5-week low - Spot Gold hits fresh record high above $1,280/oz, silver hit levels not seen since March 2008 - Swiss Franc continues to be weak after yesterday's SNB rate decision; EUR/CHF hits 1-month high, GBP/CHF briefly traded above 1.6000 - EUR/GBP continues to trade near 0.8390 - Spread between Irish and Germany 10-yr yields widen on session, despite improvement in risk appetite - Agricultural commodities are mostly higher - Equities in China end the week lower by more than 2% on policy tightening concerns.
*** Looking ahead*** - 7:00 (BR) Brazil Sept FGV Inflation IGP-10 M/M: 1.2%e v 0.5% prior - 7:30 (IN) India weekly Forex reserves - 8:00 (PD) Poland Aug Producer Prices M/M: -0.1%e v 0.3% prior; Y/Y: 4.2%e v 3.9% prior - 8:00 (PD) Poland Aug Sold Industrial Output M/M: -1.6%e v -6.1% prior; Y/Y: 13.3%e v 10.3% prior - 8:30 (US) Aug Consumer Price Index M/M: 0.3%e v 0.3% prior; CPI Ex Food & Energy M/M: 0.1%e v 0.1% prior; CPI NSA: 218.324e v 218.011 prior - 9:00 (BE) Belgium Sept Consumer Confidence: No est v -4.0 prior - 9:55 (US) Sept Preliminary University of Michigan Confidence: 70.0e v 68.9 prior - 15:00 (AR) Argentina Q2 Quarterly GDP: 11.0%e v 6.8% prior; Current Account Balance: $331M v -$365M prior - 17:00 (CO) Colombia July Industrial Production Y/Y: 8.0%e v 8.5% prior - 17:00 (CO) Colombia July Retail Sales Y/Y: 14.01%e v 15.4% prior
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