European Market Update: Euro pares earlier losses on supportive comments out of China (TTN)
Tuesday, September 28, 2010
European Market Update: Euro pares earlier losses on supportive comments out of China
***Economic Data*** - (GE) Germany Oct GfK consumer confidence: 4.9 V 4.2E - (SZ) Swiss Aug UBS consumption indicator: 1.954 V 1.860 PRIOR - (FI) Finland Aug prelim retail sales volume Y/Y: 5.4% V 5.5% PRIOR - (FR) France Aug consumer spending M/M: -1.6% V -0.2%E; Y/Y: 1.2% V 0.9%E - (RU) Russia Central Bank (Rossi) maintains refi rate unchanged at 7.75% ( as expected) - (HU) Hungary July unemployment rate: 11.0% V 11.0%E - (GE) Germany Sept CPI Saxony m/m: 0.1% v 0.0% prior; y/y: 1.5% v 1.1% prior - (IT) Italy Sept consumer confidence: 107.2 V 104.1E - (SW) Sweden Aug retail sales M/M: 0.0% V 0.5%E; Y/Y: 4.4% V 4.0%E - (GE) Germany Sept CPI Brandenburg M/M: -0.3% V 0.0% PRIOR; Y/Y: 1.0% V 1.0% PRIOR - (IT) Italy Aug hourly wages M/M: 0.0% V 0.1% PRIOR; Y/Y: 2.2% V 2.2%E - (GE) Germany Sept CPI Hesse M/M: -0.1% V 0.1% PRIOR; Y/Y: 1.1% V 0.7% PRIOR - (UK) Q2 Final GDP Q/Q: 1.2% v 1.2%e; Y/Y: 1.7% v 1.7%e; Current Account -Â£7.4B v -Â£8.2Be - (UK) Q2 Final Total Business Investment Q/Q: +0.7 % v -1.6%e; Y/Y: 1.8% v 1.9%e - (GE) Germany Sept CPI North Rhine Westphalia M/M: -0.2% v +0.2% prior; Y/Y: 1.1% v 1.0% prior - (IC) Iceland Sept CPI M/M: 0.0% V 0.3%E; Y/Y: 3.7% V 4.0%E - (BE) Belgium Sept CPI M/M: 0.32% V 0.06% PRIOR; Y/Y: 2.91% V 2.3% PRIOR - (UK) Sept CBI reported sales: 49 V 25E
Fixed Income: - Italy sold â‚¬1.4B Sept 2021 BTPei - (SP) Spain Debt Agency (Tesoro) sells total â‚¬2.979B in 3- and 6-months bills v â‚¬2.5-3.5B indicated - Sells â‚¬1.174B in 3-month bills, avg yield 0.685% v 0.692% prior, Bid-to-cover 3.0x v 2.2x prior - Sells â‚¬1.805B in 6-month bills, avg yield 1.180% v 1.037% prior, Bid-to-cover 2.0x v 3.9x prior
Equities - As of 06:10 FTSE -0.33%, DAX +0.27%, CAC40 0.0% European equities remained in negative territory during most of today's session as risk aversion returned to markets prompted by European debt concerns. Chatter on the market speculated that Moody's may downgrade Spain as it ends its 3-month review and may lower its rating to Aa1 which is the same level as Fitch. Furthermore, Anglo-Irish costs also ignited the risk aversion as S&P noted that costs may exceed â‚¬35B. French name and the world's second largest tire maker Michelin [ML.FR] dropped 8% as it announced the launch of â‚¬1.2B rights issue priced at â‚¬45/shr. AkzoNobel [AKZA.NV] also lost about 4% after its strategy update. Company set a target of â‚¬20B in sales in the medium term and remained cautious on consumer, construction and housing markets. Qcells [QCE.GE] traded down by 5% after it announced an issuance of 58M shares. Among UK names Daily Mail & General [DMGT.UK] noted that trading was in line with expectations and revenue trends were overall positive. Company also announced that its director of Finance would retire.
***SPEAKERS*** - (CH) China PBoC Shanghai unit official Yang: Many operating conditions for companies still weak -(CH) China official: To keep positive attitude on euro-area bonds - (EU) EU Committee of European Insurance and Occupational Pensions (CEIOP): Possible that some insurers need to raise capital for solvency II rules - (EU) ECB's Stark: Likely have seen the turning point for credit growth; a number of non-standard measures will mature in Q4 and not be renewed - (EU) ECB's Liikanen: Key interest rates are appropriate and monetary policy stance is supportive of growth; many advanced countries could face lower growth - (EU) ECB's Mersch: Sees inflation around 1.5% in the coming years; ECB to maintain inflation rate at 2% for the medium-term; ECB monetary stance to continue. - (EU) ECB's Qauden: Need to introduce new regulations in a timely manner - (EU) ECB's Tumpel-Gugerell: Phasing in Basel III is realistic, and significant step forward - (FI) Finland Central Bank: Raises 2010 GDP growth forecast to 2.6% from 1.6%; Economy is recovering from deep recession; Overall growth is not seen as strong. - (GE) Germany Industry Association (BDI): Sees 2010 GDP significantly above 3% - (IR) S&P: Ireland's cost of Anglo Irish recapitalization could exceed â‚¬35B, which could trigger further rating downgrades; still uncertainty on Anglo cost: Note: S&P previously stated that the cost of Anglo Irish could be â‚¬35B, about 20% of Irish GDP. - (IR) Ireland Fin Min Spokesman: Reiterates that there will not be a default on Anglo-Irish bank's senior debt - (IR) OECD head economist: Problems in Ireland are known ones, and not seen leading to a crisis - Qatar Oil Min: Does not believe that OPEC will change supply policy at the Oct meeting
Currencies/Fixed Income: - EUR/USD movements were driven by renewal of Eurozone debt concerns and QE iniatives following an article appearing on WSJ which suggested that Fed may consider smaller scale buying. While German GfK consumer confidence came in much better than expected, France's consumer spending missed the estimates significantly. Furthermore, risk aversion came back to the markets as European debt concerns resurfaced. Markets expect Moody's to downgrade Spain as its 3-month review comes to an end this week. Also, Anglo-Irish's costs may be more than the â‚¬35B expected, suggests an S&P report. EUR/USD headed lower at 1.3400 during the session dropping from yesterday's NY session highs of 1.3506. It is now trading a little higher at 1.3490 following supportive rhetoric from China that stated they were positive on eurozone debt. ECB was also spotted buying Irish bonds. Cable continued to rally from 1.5800 level spiking at 1.5890 following the narrowing of UK account balance.
In the Papers-Geopolitical - S&P made comments on the possible recapitalization projections of Anglo Irish Bank. With uncertainty surrounding the costs, analyst state that it could exceed â‚¬35 billion, which could trigger further rating downgrades. S&P had previously stated the cost of around â‚¬35 billion, about 20% of Irish GDP. - In the Irish Independent, it was reported that Ireland will pay back, in full, senior debt holders of Anglo Irish Bank. Though the report did not cite sources, there had been intense debate in government circles on whether senior bondholders could be asked to share the burden of Anglo's wind-down. - Telegraph's Ambrose Evans-Pritchard made critical comments regarding the Fed's pledge to provide additional accommodation if necessary. He noted a large scale quantitative easing (QE) may not be justified, and that if the US is not in deep trouble the Fed should not be thinking of extra QE.
*Notes/Observations*** - Peripheral bond spreads in focus as Irish and Portugal 10-yr spreads hit record wide levels - Equity markets lower ahead of event risk due later this week including US data points, China data, Irish government's estiamte of the costs to bail out Anglo Irish and Moody's report on Spain. - British pound supported by Q2 current account data
*** Looking ahead*** - 7:45 (US) ICSC/GS weekly chain store sales - 8:00 (PD) Poland Q2 Current Account: -â‚¬2.3Be v -â‚¬1.1B prior - 8:55 (US) Redbook Retail Sales - 9:00 (CL) Chile Aug Industrial Production Y/Y: 4.3%e v 3.3% prior; Industrial Sales Y/Y: 1.3%e v 1.3% prior - 9:00 (US) July S&P/CaseShiller Home Price Index: No est v 147.97 prior; S&P/CS Composite-20 Y/Y: 3.1%e v 4.23% prior - 9:00 (CL) Chile Aug Total Copper Production (tons): No est v 454.2K prior - 10:00 (US) Sept Richmond Fed Manufacturing Index: 6.0e v 11 prior - 10:00 (US) Sept Consumer Confidence: 52.3e v 53.5 prior
Fixed income - 5:45 (TU) Turkey Debt Agency to sell 2017 Floating Rate Notes (FRNs) and 2015 Fixed Rate Bonds 3 - 6:00 (NE) Netherlands Debt Agency to sell Bonds - 7:00 (EU) ECB 7-day Term Deposit Tender
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