European market Update: Irish budget concerns simmer (TTN)
Monday, November 08, 2010
European market Update: Irish budget concerns simmer
***Economic Data*** - (SZ) Swiss Oct Unemployment Rate: 3.5% v 3.5%e; Unemployment Rate Seasonally Adj: 3.6% v 3.6%e - (GE) Germany Sept Current Account: â‚¬14.0B v â‚¬9.0Be; Trade Balance: â‚¬16.8B v â‚¬12.0Be; Exports M/M: 3.0% v 1.5%e; Imports M/M: -1.5% v 1.0%e - (CZ) Czech Sept Industrial Output Y/Y: 1.2% v 10.0%e; Construction Output Y/Y: -7.3% v -2.1% prior - (CZ) Czech Oct Unemployment Rate: 8.5% v 8.3%e - (CZ) Czech Sept Retail Sales Y/Y: 3.5% v 2.0%e - (CZ) Czech Sept Trade Balance (CZK): 12.4B v 8.5Be - (TU) Turkey Sept Industrial Production WDA M/M: % v 2.7% prior; Y/Y: % v 14.2% prior; Industrial Production NSA Y/Y: 11.2%e v 11.0% prior - (TT) Taiwan Total Trade Balance: $3.0B v $2.4Be v $1.8B prior; Total Exports Y/Y: 21.9% v 16.0%e; Total Imports Y/Y: 27.9% v 24.6%e - (EU) Euro Zone Nov Sentix Investor Confidence: 14.0 v 10.0e
Fixed Income: - (GE) Germany sold â‚¬4.96B in 6-monrth BuBuills; avg yield 0.7849% v 0.6140% prior; Bid-to-cover: 1.1x v 1.8x prior - (NO) Norway sold NOK3.0B in 5% 2015 Bonds; avg yield 2.47% - (SL) Slovakia sold â‚¬121M in 3.50% 2016 bonds; avg yield 3.08%; bid-to-cover 2.49x
*** SPEAKERS/FIXED INCOME/FX/COMMODITIES/ERRATUM ** Notes/Observations: - BoJ revises down economic activity outlook. - Peripheral spreads were mixed in session. Greece's prime minister dropped his threat to call early elections but Ireland opposition backing away from its support for the budget - Greek ruling PASOK party is projected to win 7 out of 13 regions and taking 3 of the 5 largest cities.
Equities: EuroStoxx at 2859, -0.6%, FTSE100 at 5853, -0.4%, CAC40 at 3907, -0.3%, DAX at 6,741 -0.2%
European shares fell into negative territory during the session after hitting 6-month high at the Friday close as investors start taking profits. - Germany's second largest lender, Commerzbank [CBK.GE] disappointed on net despite returning to profitability in the third quarter. Net interest income was also lower than estimates. Provision for loan losses came in lower than expected and had also decreased over the quarter. Nonetheless, the firm said it would reach a profit of at least â‚¬1B in 2010 while it expects to report an even higher operating profit in 2011. Shares opened down by 1.4%. Siemens [SIE.GE] rose about 1.3% after reporting a preliminary figure for environmental sales at â‚¬28B, which is an increase from last year's figure of â‚¬27B and its prior guidance of â‚¬25B. Also, the CFO said in an interview that the company was planning a significant dividend increase and a new target growth. Telecom name QCSC [QSC.GE] beat expectations on a revenue increase and guided FY10 revenue at â‚¬1.2-1.3B. Shares rose 3.4%. - Meanwhile, UK investment management business Gartmore Group [GRT.UK] fell 22% after providing management statement noting that it had hired Goldman Sachs to evaluate the strategic options available to the firm which may include the possibility of a sale or merger. At the same time, company said they were implementing a targeted cost reduction programme of Â£10M
Speakers: - China Commerce Min (MOFCOM): Reiterates view that Issuers of reserve currencies should keep their exchange rates stable and avoid competitive depreciation. - China Vice Fin Min commented that the global economy lacked confidence rather than liquidity. Fed's launch of QE2 could cause excessive inflows of capital to emerging markets. The official pledged cooperation at the upcoming G20 leader summit in South Korea but China will be frank in its views with the US on the GE2 measure - UAE Central Bank: not considering de-pegging its currency from the dollar despite its recent weakness - Russia G20 Sherpa Dvorkovich commented that Russia would not support the US proposal for current account numerical targets. Russia believed that it was against such a simplified approach but stated that a system of criteria was possible (but one criterion could not work). Russia was not afraid of capital inflows as its economy was not at risk of overheating. G20 should hold consultations before key policy steps are implemented (reference to the Fed's QE2 measures) - Sweden Central Bank (Riksbank) Minutes from Oct 26th noted that the Repo Rate path was lowered due to concerns over weak global growth - Portugal Debt Agency (IGCP) commented that it had issued more than 93% of 2010 funding requirements and would hold its final 2010 bond auction on Wed, Nov 10th. It would not comment on China involvement but country is attempting to diversify its investor base. The size of 2011 remittances needed final budget approval but remained committed to financing its needs via the market and use of EFSF is a questions for the Portuguese Gov;t - US Treasuy Sec Geithner commented from India that he was encouraged by the recent US employment data. He added that the US economy was gradually becoming stronger and would emerge from its economic slowdown with higher than expected growth rates. Most of the adjustment in the US housing market was behind at this time. The Tsy Sec added that there were signs that broader inflation pressures were starting to appear in emerging market economies. He spoke about the US G20 proposal and noted that the current account indicators was an early warning signal working with the IMF. He sought that China's currency policy to work with the rebalancing process and not against it
Currencies: - Greece's prime minister dropped his threat to call an early elections Sunday, believing that results from the weekend local elections had shown they wanted his government to continue its austerity efforts. However, the EUR/USD maintained a soft tone as continued concerns whether Ireland had the capacity to gain support for its budget reduced the appeal of the region's assets. The EUR/USD saw the bulk of last week's gains evaporate in the session as the NY morning approached in the wake of Ireland's situation as analyst suggest that the country was heading toward default and likely tap the euro zone support program (ESF) by mid-2011. Market participants were wondering where demand for Irish debt was going to come from when the government returns to the market for fresh funding in early 2011. The peripheral situation was mixed as the Irish/German 10-year spread widened back towards all-time premium of 534bps. The Greek/German spread did narrow by 30bps towards 870bps neighborhood. The USD/JPY remained contained below the key 81.50 level but remained above the 81 handle as the NY morning approached. The JPY pair was former against the major European currencies.
Geopolitical/In the papers: - In various media sources, the Irish opposition party leader stated it will not support the Irish government's budget plan. The leader of the opposition's largest party, Fine Gael, said the government has no credibility, though it does agree with next year's â‚¬6 billion figure in budget cuts. - In the Financial Times Analysis section, there were comments that investors are concerned that Portugal and Ireland are increasingly likely to be challenged with funding their debt, and 'follow Greece into the emergency room'. The article pointed to questionable timing for the EU to suggest investors will have to share some of the burden in the event of a sovereign default. - The Greek local elections began on Sunday with recent estimates placing candidates supported by the governing socialist party ahead in eight out of 13 regions. The Prime Minister Papandreou withdrew prior warnings to call an early election restoring some short-term market confidence and political stability. Voter turnout was roughly 60 percent; with a majority of voters oppose early general elections. According to a survey by Greek television, over 80% of 1,000 voters polled oppose a call for early general elections following this weekend's local elections.
***Looking Ahead *** - 6:00 (CL) Chile Oct CPI M/M: 0.2%e v 0.4% prior; Y/Y: 2.2%e v 1.9% prior; CPI Ex Perishables & Fuel M/M: 0.1%e v 0.4% prior - 6:00 (GE) Germany Sept Industrial Production M/M: 0.4%e v 1.7% prior; Y/Y: 9.5%e v 10.7% prior - 6:30 (CL) Chile Trade Balance: $1.1Be v $1.8B prior - 7:30 (BR) Brazil Oct Vehicle Production: No est v 308.2K prior; Vehicle Sales: No est v 307.1K prior; Vehicle Exports: No est v 71.4K prior - 8:15 (CA) Canada Oct Housing Starts: 183.0Ke v 186.4K prior - 9:00 (FR) France Debt Agency (ATF) to Sell â‚¬7.5B in 12-Week, 27-week and 49-week Bills - 9:30 (EU)ECB Calls for Bids in Main 7-Day Refi Tender and 1-Month Tender - 9:00 (EU) EU Juncker Speaks to European Parliament Committee - 11:00 (HU) Hungary Oct YTD Budget Balance (HUF): No est v -1.1B prior - 11:00 (US) Fed to Purchase Notes/Bonds - 12:30 (US) Fed's Bullard to Speak to New York Analysts Society - 12:30 (GE) German Fin Min Schaeuble Holds Speech on Public Finances - 13:00 (US) Treasury to sell %32B in 3-Year Notes - 13:00 (US) Fed's Fisher Speaks in San Antonio - 14:00 (EU) EU President Van Rompuy Gives Speech - 15:30 (US) Fed's Warsh Speaks at Sifma Conference in New York
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