European Market Update: Risk appetite returns to equities but vanishes from FX markets following Anglo Irish unsecured bond downgrade (TTN)
Monday, September 27, 2010
European Market Update: Risk appetite returns to equities but vanishes from FX markets following Anglo Irish unsecured bond downgrade
***Economic Data*** - (FI) Finland Sep Business confidence: 2.0 v 4.0 prior; Consumer Confidence: 23.0 v 21.9 prior - (SP) Spain July Mortgages on houses y/y: -6.8% v -10.8% prior; Mortgages-capital loaned y/y: -15.9% v -25.3% prior - (NE) Netherlands Sep producer confidence: -0.1 V +0.2 - (SW) Sweden Aug Trade Balance (SEK): -2.8B V 5.0BE - (TT) Taiwan Aug Leading Index M/M: -0.3% v -0.2% prior; Coincident index 0.8% v 1.0%e - (EU) Euro Zone Aug M3 Money Supply y/y: 1.1% v 0.3%e; M3 three-month avg: 0.5% v 0.2%e - (HK) Hong Kong Aug Trade Balance (HKD): -11.9B V -31.0BE
Fixed Income: - (GE) Germany sells â‚¬2.85b in 12-month Bubills; avg yields 0.6070% v 0.4995% prior; bid-to-cover 2.3x v 2.4x prior - (IT) Italy Debt Agency (Tesoro) auction results: sells total â‚¬12Bin 6-mo and 2-yr bonds (as expected) (BE) Belgium Debt Agency bond auction results: Sells total â‚¬2.29B in 2016, 2020 and 2041 OLOs (indicative range between â‚¬1.8-2.5B)
Equities - As of 06:09 FTSE100 +0.01%, CAC40 +0.24%, DAX +0.20% - European equities were trading up and remained in positive territory throughout the session aided by M&A activity. Unilever [UNA.NV] confirmed it was acquiring Alberto Culver [ACV] for $3.7B in cash, valuing the company's shares at $37.46/shr. China's Bright Food Group was reported to be in talks to acquire Britain's United Biscuits from Blackstone for $2B. AstraZeneca [AZN.UK] fell less than 1% after the company provided results of zibotentan Phase III trial which did not show a significant improvement in the primary endpoint of overall survival (OS). Actelion [ACT.SZ] reported that Clazosentan conscious-2 study did not meet primary endpoints, Shares fell approx 8%. British building materials supplier. Wolseley [WOL.UK] narrowed its loss for FY10 from last year but revenues came in softer than expected. The outlook continued to remain cautious on mixed demand even though company expects to reinstate dividend at 2011 half year results. Shares fell about 3%.
***SPEAKERS*** (EU) ECB's Trichet: Considerable policy challenges lie ahead. (EU) ECB Tumpel-Gugerell: Bank models need to be more sustainable, must reform corporate governance and pay (FR) France Fin Min Lagarde: French GDP to rise at least 1.5% in 2010, 2% in 2011, and up to 2.5% in 2012 - WSJ (GE) German Fin Min Schaeuble supports EU plans of new fiscal sanctions (JP) BoJ Shirakawa: Reiterates to take timely and appropriate action on monetary policy as needed; to maintain easy monetary conditions (JP) Japan Finance Ministry's Igarashi: Japan's fiscal state in an emergency state (JP) Japan Econ Min Kaieda: Should not rule out issuing JGBs for extra budget (KU) Kuwait Oil Min Al-Sabah: Comfortable with current oil prices of $70-$80/barrel; Sees no change in output quota after the next OPEC meeting (UK) BoE's Sentance: Important to preserve MPC credibility on keeping inflation low; reiterates should think about increasing rates quite soon.
Currencies/Fixed Income: The main event in the European session today was Moody's downgrade of Anglo Irish unsecured senior bonds which impacted risk appetite. EUR/USD fell to session lows at 1.3435 after trading steadily at 1.3470 during the session. Swissy traded at session highs as USD/CHF retreated from its highs of 0.9870 to 0.9850. EUR/CHF fell to 1.3240 level from session highs of 1.3296. Cable was trading in the 1.58 range following Friday's action and pair hit 1.5808 lows following disappointing UK Hometrack house prices when some sellers were noted in the early market. Buying interest reappeared and cable is trading at 1.5820.
In the Papers-Geopolitical - In the Financial Times, senior Irish ministers were discussing details related to the future of Anglo Irish Bank. The government is expected to make an announcement related to Anglo Irish on Thursday, which is expected to include how much it will cost to restructure the lender. It is also expected to comment on the plan to restructure part of the bank's bond debt. - The Telegraph's Evans-Pritchard said he believed gold prices can move higher as central banks around the world continue to debase their currencies. In addition he added further insight by stating that gold prices are to remain below the $2,200-2,400 range attained in the late medieval era of the 14th and 15th centuries. - Over the weekend, the British Labour party elected Ed Miliband as the new party leader narrowly beating his brother by a margin of 50.65% to 49.35% receiving strong union support, though David Miliband received stronger support from parliament and party members.
***Notes/Observations*** - Spot Gold continues to trade just below $1,300/oz, while spot Silver is at 30-yr highs - Equities and Euro pared gains, following Moody's downgrade of Anglo Irish.
*** Looking ahead*** - 7:00 (BR) Brazil Sept FGV Construction Costs M/M: 0.1%e v 0.2% prior - 8:00 (HU) Hungary Central Bank Interest Rate Decision: Expected to maintain the Base Rate unchanged at 5.25% current level - 8:30 (US) Aug Chicago Fed Nat Activity Index: No est v 0.00 prior - 10:00 (MX) Mexico July Global Economic Indicator: No est v 6.8% prior - 10:30 (US) Sept Dallas Fed Manufacturing Activity: No est v 13.5 prior - 10:30 (IS) Israel Central Bank Interest Rate Decision: Expected to maintain the Base Rate unchanged at 1.75% - 5:45 (TU) Turkey Debt Agency to sell 2011 Zero Coupon Bonds - 6:00 (PD) Poland Debt Agency to sell up to PLN1.0B in 52-Week Bills - 9:00 (FR) France Debt Agency (ATF) to sell Bills - 13:00 (US) Treasury to Sell 2-Year Notes
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