European Market Update: Equities unable to sustain opening gains, which were partially driven by China PMI data (TTN)
Wednesday, September 29, 2010
European Market Update: Equities unable to sustain opening gains, which were partially driven by China PMI data
***Economic Data*** - (FR) France Sept Consumer Confidence: -35 V -39E - (SP) Spain Jul Total Housing Permits M/M: -8.7%; Y/Y: -15.9% - (SP) Spain Aug Preliminary CPI EU harmonized Y/Y: 2.0% V 2.1%E - (HU) Hungary Aug Producer Prices M/M: -0.2% V +0.2% Prior; Y/Y: 9.0% V 9.3%E - (SP) Spain Aug Real Retail sales y/y: -1.2% v -2.2% prior; adjusted real retail sales y/y: -2.5% v -2.4%e - (SW) Sweden Sept Consumer Confidence: 28.4 V 24.0E; Manufacturing Confidence: 12 V 6E - (IT) Italy Sept Business Confidence: 98.4 V 100.1E - (IT) Italy Aug PPI M/M: 0.2% V +0.3%E; Y/Y: 3.7% V 3.7% E - (EU) Euro Zone Sept Business Climate: 0.77 V 0.58E; Consumer Confidence: -11 V -11E - (UK) August Final M4 Money Supply M/M: -0.1% V -0.2% prior; Y/Y: 1.9% V 1.8% prior - (UK) Aug Net Consumer Credit: -Â£0.1B V Â£0.1BE; Net Lending: Â£1.7B V Â£0.3BE - (UK) August Mortgage Approvals: 47.4K V 47.0KE - (UK) Jul Index of Services 3M/3M: 0.5% V 0.7%E - (SZ) Swiss KOF Sept Leading Indicator: 2.21 V 2.11E - (SA) South Africa Aug CPI (All items) M/M: 0.1% V 0.2%E; Y/Y: 3.5% V 3.6%
Fixed Income: - (SW) Sweden Sells Sek2.5B in 4.5 % 2015 bonds, avg yield 1.989% - (IT) Italy Debt Agency (Tesoro) bond auction results: Sells total of â‚¬7.905B in three tranches
Equities - As of 06:19 DAX -0.37%, CAC40 -0.33%, FTSE100 -0.34% European shares opened higher sustained by a higher NY close but extended loss on continuing concerns over global recovery. Banking sector was hit over concerns on further downgrading of Spain. Retailers also weighed on the market as Hennes & Mauritz [HMB.SW] fell approx 6% after its third quarter results. Operating profit was slightly lower than expected while revenues were in line with expectations. Gross margin was lower than expectations at 60.5%. Company will open fewer stores than planned this year citing economic downturn. Smith Group [SMIN.UK] from the UK reported final results with operating profit and revenue having increased on a yearly basis. Profitability had also improved. But company said sales growth would be negatively affected by the uncertain economic outlook in the UK and planned budget cuts. Shares fell less than 1% during session. BP [BP.UK]rose 1.7% after press reports that company was in settlement talks with US authorities over Gulf of Mexico spill. However, unconfirmed report later noted that a US official had denied reports of settlement talks
***SPEAKERS*** - (BR) Brazil Central Bank chief: Fx issue will be on the G20 agenda - (CH) China Central Bank: Reaffirms loose monetary policy appropriate; to increase yuan currency flexibility - (EU) ECB's Constancio: No currently in currency war; sees money market gradually normalizing though not yet normal; Situation in Ireland and Portugal not to be compared to that of Greece's; Indicators point to positive Q3 GDP though less than prior quarter; If US GDP slows a lot then it would be a clear concern. - (EU) ECB's Bini-Smaghi: Ireland and Portugal must move quickly; recovery will be gradual and bumpy, current rates are appropriate; New liquidity rules to increase demands for central bank funding and affect monetary policy mechanism - (GE) German IFO: German credit provision is back at pre-credit levels - (GR) Greece PM Papandreou: Supports German Fin Min Schaueble fiscal plans - German media - (IR) EU's Rehn said Ireland needs to identify the budget cuts that it will make over the next few years in order to meet budget deficit target of 3% of GDP by 2014- Press - (JP) Japan Econ Min Kaieda: Govt to take decisive fx intervention as required - OECD Gurria: Against all protectionism; fx manipulation must be dealt with at all costs - (SP) Spain Fin Min Salgado: Cutting deficit is priority; govt is prepared to do more if necessary - (SP) Spain Debt Office's Nunez: Spanish bank reliance on ECB funds may fall further - (SW) Sweden's Central Bank (Riksbank) Ekholm: Sees broad upturn in Swedish economy - (UK) Labour party leader Miliband: Should not go faster than former Chancellor Darling regarding deficit; Would need to review deficit cuts if downturn.
Currencies/Fixed Income: - EUR/USD reached session highs of 1.3638 as dollar weakness persisted. The rally capped at that level and the pair is trading lower at 1.3595 as markets anticipate an imminent downgrade of Spain. Despite good business confidence data out of Europe, the pair is impacted by the sovereign risks which have pressured the spreads. USD/JPY continues to trade at its lowest levels of 85.3 since BoJ September 15th intervention. The move ignited speculations and press reports that BoJ may be preparing for additional easing steps which will decided at next week's policy meeting. Cable reached 1.5874 in early session due to dollar selling after yesterday's drop at 1.5717 following BoE's Posen dovish comments. However, pair was trading in the 1.58 range sustained by better mortgage approvals and money supply data out of UK.
In the Papers-Geopolitical - The Wall Street Journal looked at the challenges facing the Irish government as it seeks to disclose bank bailout costs this week. The article noted the government needs to convince investors that it can deal with the cost of restructuring Anglo Irish Bank without spooking markets and creditors. In terms of Irish debt problems, some economists believe that the country could eventually need outside assistance from the EU. Banks in Ireland have been basically shut out of the capital markets for weeks, which have made it more difficult for them to refinance their debts. - According to the Financial Times, the Irish Central Bank will inject an additional â‚¬5 billion into Anglo Irish Bank this week. The new cost of the bailout estimated around â‚¬30 billion.
- The Telegraph's Evans-Pritchard comments on the rising inflows for emerging economies on the Fed's easy monetary policy. The stimulus from Western countries is being moved into emerging markets. Citing Goldman Sachs, some governments in emerging currencies could seek to implement direct capital controls in order to slow inflows. Nomura believes the quantitative easing by the Fed and other central banks is forcing money into emerging market bond funds.
*Notes/Observations*** - After opening higher on Chinese PMI data, European equities have moved off of the session's highs on factors including, declines in banks, renewed concerns about EU peripheral economies, profit warning from Japan's Nintendo and comments out of the ECB's Bini Smaghi - Greece consumer confidence at weakest level since early 1990s. - Portugal CDS widen to a record level. Irish bond yields open the session higher - UK consumer credit lowest level since Nov 2009 - USD broadly weaker: EUR/USD hits highest level since mid April, AUD/USD hits highest level since July 2008, USD/CHF hits record low, USD/JPY moves to lows not seen since Sept 15th intervention by Japan, US dollar index hits the lowest level since early Feb. - EUR/GBP hits 4-month high above 0.86 - Metals supported by weaker dollar: Spot Gold hits another record high above $1,300/oz, palladium hits levels not seen since March 2008, platinum moves to best levels since May, copper hits mid-April highs.
*** Looking ahead*** - 7:00 (US) MBA Mortgage Applications w/e Sept 24th: No est v -1.4% prior - 7:00 (BR) Brazil Sept FGV Inflation IGP-M M/M; 1.11%e v 0.8% prior; Y/Y: 7.8%e v 7.0% prior - (PD) Poland Central Bank Interest Rate Decision: Expected to maintain the Base Rate unchanged at 3.50% - 8:30 (CA) Canada Aug Industrial Product Price M/M: 0.2%e v 0.1% prior; Raw Materials Price Index M/M: 0.5%e v 1.8% prior - 9:30 (BR) Brazil Aug Nominal Budget Balance (BRL) -10.4Be v -14.3B prior; Primary Budget Balance: 6.0Be v 2.5B prior; Net Debt to GDP Ratio: 41.6%e v 41.7% prior - 10:30 (US) DOE weekly Energy Inventories - 15:00 (AR) Argentina Aug Supermarket Sales Y/Y: No est v 12.6% prior; Shop Center Sales Y/Y: No est v 37.9% prior
Fixed income - 13:00 (US) Treasury to Sell 7-Year Notes
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