European Market Update: USD approaches multiple key psychological levels (TTN)
Thursday, October 07, 2010
European Market Update: USD approaches multiple key psychological levels
***Economic Data*** - (RU) Russia Gold & Forex Reserve w/e Oct 1st: $494.3B v $487.7B prior - (JP) Japan Sept preliminary Machine Tool Orders Y/Y: 112.9% v 170.0% prior - (IN) India Primary Articles WPI Y/Y: 18.5% v 18.3% prior; Food Articles WPI Y/Y 16.2% v 16.4% prior - (FR) France Aug Trade Balance: -â‚¬4.9B v -â‚¬4.0Be - (UK) Sept Halifax House Price Index M/M: -3.6% v -0.2%e; 3M/Year: 2.6% v 3.9%e - (CZ) Czech Aug Industrial Output Y/Y: 12.9% v 9.5%e; Construction Output Y/Y: -2.1% v -4.5% prior - (CZ) Czech Aug Retail Sales Y/Y: 2.8% v 2.9%e - (CZ) Czech Aug Trade Balance (CZK): 500M v 5.0Be - (HU) Hungary Aug Preliminary Trade Balance: â‚¬392.0M v â‚¬234.0Me - (AS) Austria Sept Wholesale Price Index M/M: 1.1% v 1.4% prior; Y/Y: 7.1% v 5.6% prior - (DE) Denmark Aug Industrial Production M/M: -6.6% v 1.4% prior; Industrial Orders M/M: +21.0% v -22.1% prior - (NV) Netherlands Sept CPI M/M: 0.6% v 0.2% prior; Y/Y: 1.6% v 1.6%e - (NV) Netherlands Sept CPI EU Harmonized M/M: 0.7% v 0.1% prior; Y/Y: 1.4% v 1.2% prior - (SW) Sweden Sept Budget Balance (SEK) -15.4B v 8.4B prior - (NO) Norway Aug Industrial Production M/M: -4.7% v -2.9%; Y/Y: -13.0% v -7.8% prior - (NO) Norway Aug Industrial Production Manufacturing M/M: -2.0% v -0.1%e; Y/Y: 2.6% v 6.6% prior - (TT) Taiwan Sept Total Trade Balance: $1.8B v $2.5Be; Total Exports Y/Y: 17.5% v 26.6%e; Total Imports Y/Y: 25.0% v 30.0%e - (PH) Philippines Central Bank leaves its Overnight Borrowing Rate at 4.00%; as expected - (UK) Aug Industrial Production M/M: 0.3% v 0.2%e; Y/Y: 4.2% v 4.1%e - (UK) Aug Manufacturing Production M/M: 0.3% v 0.2%e; Y/Y: 6.0% v 5.8%e - (IC) Iceland Sept Preliminary Trade Balance: 11.2B v 7.0B prior - (GR) Greece Sept Consumer Price Index Y/Y: 5.6% v 5.5% prior; CPI EU Harmonized Y/Y: 5.7% v 5.6% prior - (SA) South Africa Sept SACCI Business Confidence: 87.8 v 87.6 prior - (PO) Portugal Aug Industrial Sales M/M: -19.3% vv 6.7% prior; Y/Y: 14.7% vv 6.4% prior - (GE) Germany Aug Industrial Production M/M: 1.7% v 0.5%e; Y/Y: 10.7% v 9.8%e
Fixed income: - (SP) Spain Debt Agency (Tesoro) sold total â‚¬3.2B in 2.5% Oct 2013 Bono bond vs. indicated range between â‚¬3.0-4.0B; avg yield 2.527% v 2.276% prior; Bid-to-cover: 2.2x v 1.9x prior - (FR) France Debt Agency (ATF) sold total â‚¬8.49B vs. â‚¬8.5B indicated in 2020, 2026 and 2029 Bonds - Sold â‚¬5.075B in Oct 2020 Oats; avg yield 2.68% v 2.55% prior; Bid-to-cover: 1.78x v 2.17x prior - Sold â‚¬2.29B in Apr 2026 Oats; avg yield 3.07% v 3.00% prior; Bid-to-cover: 1.76x v 1.28x prior - Sold â‚¬1.125B in Apr 2029 Oats; avg yield 3.15% v 3.65% prior; Bid-to-cover: 2.8x v 2.43x prior - Hungary Debt Agency sold total HUF50B in 2014, 2016 and 2020 bonds - Sold HUF20B Feb 2014 Bond, avg yield 6.38% - Sold HUF15B Feb 2016 Bond, avg yield 6.51% - Sold HUF15B Nov 2020 Bond, avg yield 6.6%
*** SPEAKERS/FIXED INCOME/FX/COMMODITIES/ERRATUM ** Notes/Observations: - Very strong Australia employment and reinforces tightening bias - ECB and BOE rate decisions later today - US Corp earning season kicks off with Pepsi and Alcoa - Global rebalancing issue moving back to the front burner ahead of weekend G7 and IMF meetings in Washington DC. China has a different view on the currency front compared to EU and US officials. USD continues to be pressured.
Equities: - As of 5:30 am Euro Stoxx flat at 2,779; FTSE100 was flat at 5,679; CAC40 -0.1% at 3,761; DAX -0.1% at 6,267
- European markets failed to sustain gains from yesterday's session and today's open and are heading lower ahead of BoE and ECB rate decision this morning. Also with the jobs report out of the US, it seems that investors are taking profit following a two-day rally. Markets do not expect BoE to act on QE today despite speculations. ECB is also expected to maintain rates steady. Miners gave up yesterday's gains and traded lower despite commodities remaining high. Banks also weighed in the market. - In individual names, French carmaker Renault [RNO.FR] rose 6.75% in the CAC40 after announcing the sale of its 14.9% stake in Volvo in an effort to pay down its debt. Volvo [VOLVA.SW] slipped about 3%. Air France gained as it announced a 1.8% increase in September passenger traffic. - UK retailer Marks & Spencer [MKS.UK]opened flat after its trading update where it warned of tough trading conditions ahead. Company also predicted a pressure in consumers' disposable income, increased commodity prices and remained cautious for this year and the next. However, the like-for-like sales were up 5.3% and the company reiterated its guidance. - Recruiter Michael Page [MPI.UK] reported a 37% increase in gross profit for the third quarter but noted uncertainty over future levels of business confidence and economic activity. Shares are in the red giving up about 3.8%. Car parts retailer - Halfords [HFD.UK] reported a 7.6% increase in its first half revenues but its outlook was grim due to macroeconomic uncertainty. Like-for-like sales are expected to decline 3% in H2. Shares are down by 6%. - Spanish bank Banesto [BTO.SP] reported results in line with estimates but its bad loans had increased on a yearly basis.
Speakers: - IMF's Strauss-Kahn: China Must Accelerate Yuan Revaluation - Japan MoF Sakurai commented that the BoJ's recent easing measures was more aggressive than expected by govt . He added that it would consider whether a sovereign wealth fund is necessary at this time - Japan Fin Min Noda: There is no change in Japan's stance to take decisive fx measures - Greece PM Papandreou reiterated that Greece will achieve its 2010 deficit target despite recent Eurostat upward revisions it's the country's deficit - Poland Fin Min Rostowski commented in an address to Parliament that the present 2011 budget draft deficit would not to exceed PLN40.2B - Fitch analyst commented following yesterday's sovereign downgrade in Ireland debt that the Irish govt could fall in the next few months and that the country needed to impress determination on markets . the analyst reiterated that it was not that concerned over the Irish funding prospects - World Gold Council: Central banks expected to be net buyers of gold in 2011 - OPEC delegate commented that Oil markets remained over supplied and that the organization must adopt a 'wait and see' stance
Currencies: The USD remained under pressure again in the session ahead of the NY morning but was off its worst levels with prop traders sighting the interest rates scenario continues to weigh on the greenback. Numerous psychological levels are being approached including 1.40 in EUR/USD, parity for both USD/CAD and AUD/USD pair; 1.60 handle in GBP/USD. Dealers were keening watching USD/JPY with the next alleged 'line-in-the-sand stated to be at the 82.00 level. Japanese officials continue to use verbal intervention and reiterate that they were watching the FX markets closely. The benign USD neglect theme continues ahead of key European interest rate decisions later today and the US job report on Friday amid growing expectations the Fed will expand credit easing operations to sustain the fragile US economic recovery. The GBP even managed to shrugged of its largest monthly fall in its Halifax house price index but found support after the better production data.
Geopolitical/ In the papers: - In a Telegraph article by Evans-Pritchard, the head of the Irish Business and Employers Confederation (IBEC) Danny McCoy stated that Ireland should honor its debts. According to McCoy a default by Ireland on the junior debt of Anglo Irish Bank could lead to a loss of faith in the country. Note the comments from McCoy came as there has been growing pressure on Ireland's government to rethink its plans for a haircut on the subordinated debt of Anglo Irish and Irish Nationwide Building Society. - In British press, the IMF said that the UK needs to reform its public finances. The country needs wholesale reform of its public finances to address its rising pension costs and other spending commitments.
***Looking Ahead *** - 6:45 (EU) IMF Economist Leigh Speaks at Bruegel Institute - 7:00 (UK) BOE Interest Rate Decision: Expected to maintain both interest rates and Asset Purchase 'Target (APT) at current levels of 0.50% and Asset Purchase Target at Â£200B respectively - 7:45 (EU) ECB Interest Rate Decision: Expected to maintain main refi rate unchanged at the current 1.00% level - 8:00 (BR) Brazil Sept IBGE Inflation IPCA M/M: 0.5%e v 0.0% prior; Y/Y: 4.7%e v 4.5% prior - 8:30 (CA) Canada Aug Building Permits M/M: -2.0%e v -3.3% prior - 8:30 (CL) Chile Sept Trade Balance: $1.0Be v $530M prior - 8:30 (US) Initial Jobless Claims: 455Ke v 453K prior; Continuing Claims: 4.45Me v 4.457M prior - 8:30 (EU) ECB's Trichet speaks at ECB Monthly News Conference - 9:30 (BR) Brazil Sept Vehicle Sales: No est v 312.8K prior; Vehicle Production: No est v 329.1K prior; Vehicle Exports: No est v 65.4K prior - Anfavea - 10:00 (UK) Sept NIESR GDP Estimate: No est v 0.7% prior - 10:00 (MX) Mexico Sept Consumer Prices M/M: 0.6%e v 0.3% prior; Y/Y: 3.7%e v 3.7% prior; Core CPI M/M: 0.4%e v 0.1% prior - 10:30 (US) Sept ICSC Chain Store Sales Y/Y: 3.0%e v 3.2% prior - 11:00 (HU) Hungary Sept YTD Budget Balance (HUF): No est v -1.1B prior - 13:20 (US) Fed's Fisher Speaks on Economic Conditions in Minneapolis - 13:30 ( US) Treasury's Goldstein at Conference in North Carolina - 13:30 (US) Fed's Hoenig Speaks at Forum in Nebraska - 15:00 (US) Aug Consumer Credit: -$3.5Be v -$3.6B prior - (PE) Peru Central Bank Interest rate Decision: Expected to raised the Reference Rate by 25bps to 3.25%
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