European Market Update: EuroStat formally revises Greece debt-to-GDP ration higher to 15.4% from 13.9% prior (TTN)
Monday, November 15, 2010
European Market Update: EuroStat formally revises Greece debt-to-GDP ration higher to 15.4% from 13.9% prior
***Economic Data*** - (IN) India Oct Monthly Wholesale Prices Y/Y: 8.6% v 8.5%e - (FI )Finland Oct CPI M/M: 0.4% v 0.4% prior; Y/Y: 2.3% v 1.4% prior - (FR) France Sept Current Account: -â‚¬4.4B v -â‚¬4.3B prior - (CZ) Czech Sept Export Price Index Y/Y: 2.3% v 1.6% prior; Import Price Index Y/Y: 6.2% v 5.2% prior - (CZ) Czech Oct PPI Industrial M/M: 0.0% v 0.2%e; Y/Y: 2.6% v 2.8%e - (FI) Finland Sept Current Account: â‚¬400M v â‚¬0.450M prior - (SZ) Swiss Oct Producer & Import Prices M/M: -0.4% v 0.0%e; Y/Y: 0.3% v 0.7%e - (DE) Denmark Oct Wholesale Prices M/M: 0.3% v 0.4% prior; Y/Y: 6.2% v 5.5% prior - (IT) Italy Sept Total Trade Balance: -â‚¬3.2 v -â‚¬3.0B prior; EU Trade Balance: -â‚¬440M v -â‚¬829M prior - (NO) Norway Oct Trade Balance (NOK): 23.4Bv 23.4B prior - (EU) Euro-Zone Sept Trade Balance: â‚¬2.9B v â‚¬0.1Be; Trade Balance Seasonally Adj: â‚¬2.4B v -â‚¬1.4B prior;
*** SPEAKERS/FIXED INCOME/FX/COMMODITIES/ERRATUM ** Notes/Observations: - Portugal Foreign Minister warns of possible Euro exit - Greece deficit to GDP ratio official widened to 15.4% from 13.9%; Debt to GDP the highest in EU - Ireland 'confesses' bailout talks have taken place following 'intense' German/EU pressure - Japan Q3 GDP beats expectations
Equities: As of 5:31 ET EuroStoxx at 2820.7, -0.06%, FTSE100 at 5789, -0.12%, CAC40 at 3825.35, -0.18%, DAX at 6734.4 at-0.01%
- European markets fell at the open on debt concerns from Ireland with banks and commodities stocks leading the decline. At the time of writing, DAX is the only bourse paring the early losses and trading up slightly at less than 1% following the open. German retail industry group HDE was reported to say that this Christmas would be the best season in Germany in five years and it expected an increase of 2.5% y/y. - There fewer corporate earnings reporting as earnings season is slowing down. Among notable German names, GFK [GFK.GE] reported an increase in both revenues and net and reaffirmed its FY10 guidance. Koenig and Bauer [SKB.GE] reported a much narrower loss from its prior year level. Revenues had also increased and the company noted that it would consider paying a dividend at the end of December after a 2-year freeze. - In France, Energies Nouvelles [EDF.FR] rose up slightly as it reported a 9.5% increase in its revenues and confirmed its EBITDA growth target. - In UK, Lonmin [LMI.UK] gained about 4.2% in the FTSE100 which was its biggest gain since Nov 4th on good results. Company also reinstated its dividend as demand for metals and prices increased.
Speakers: - Eurostat finally released its long awaited revision of Greece's 2009 deficit to GDP ratio from 13.9% to 15.4% (in line with expectations) and noted that it saw no further revision to Greek data. It did also revise prior years 2006 thru 2008 upwards as well with the 2008 Deficit to GDP at 9.4%, 2007 at 6.4%, 2006 at 5.7%. It noted that Greece's Govt 2009 debt to GDP ratio was now the widest in the Euro Zone at 126.8% (next is Italy at 116%). - Greece Fin Min Papaconstantinou reiterated that the country would meet its 2010 deficit-to-GDP ratio target of 9.4% from 15.4% y/y and committed to bringing the 2014 deficit below 3% of GDP. He noted that 2009 Eurostat deficit revisions did affect the country's current policy and to target additional public spending cuts. The minister pledged that no further increases in taxes or cuts in either pension and income - Ireland press noting that the country was considering asking the EU for funds for domestic banks at EcoFin this week and that the funding would be to fend off a state bailout. The article noted that the Irish government could unveil budget before the expected date of Dec 7th in order to calm markets - India Fin Min Mukherjee stated the country had yet to see the full impact of central banks interest rate increases. The minister reiterated that headline inflation would decline back towards 6% by end of fiscal year in March but would not prejudge if the RBI needs to perform additional interest rate increases - China Vice Premier Li Keqiang wrote in the Chinese press that loose monetary policies abroad could increase international turbulence in financial markets and higher commodity prices. Slow global economic growth had created new pressures on China's ability to expand foreign demand for its goods and to maintain fast, steady economic growth. Hot money flows wouldill impact emerging economies development Structural changes in global demand are pressuring China's fast growth. - ECB member Ordonez commented that Spanish banks reliance on wholesale funds had raised their vulnerability. He noted that such banks needed more and better capital as they were too reliant on foreign financing and could not rule out a temporary 'uptick' in non-performing loans (NPLs) - ECB's Weber commented that a stable financial system was key to financial growth and noted that Basel III would not hamper growth and would make banks more stable - ECB member Nowotny stated at the Austrian central bank conference that growth prospects for Central European economies (CEE) still remained fragile. He added that nearly all CEE countries expected to grow this year, based on restocking and external demand but risks remained. CEE growth would be above EU average but below pre-crisis levels and stressed that it was necessary to reduce deficits and debt levels as soon as macro-economically possible - German retail industrial group HDE commented in a press interview that Germany was expected have best Christmas period in five years and forecasted an increase of 2.5% y/y
Currencies: - Peripheral debt concerns continued to weigh upon the Euro currency as Irish officials reportedly refuse to ask for any EU rescue package. The EUR/USD remained above the 1.3575 low seen on Friday but was lower by around 50pips from its Tokyo open. EUR/CHF moved below the 1.34 handle and was some 20 pips lower from its Tokyo open. The peripheral bond action diverged a bit from the currency price action with most spreads narrowing a touch. Talk that Ireland would ask for cash for its banks rather than the official government budget had little impact on price action. - The USD/JPY pair was firmly above its former May downtrend line of 82.60 area but encountered some headwinds in trying to move above the 83 handle. Nonetheless the technical picture for the pair appears to be gaining some momentum with post intervention high of 86.00 possible in play.
Geopolitical/In the papers: - In the Wall Street Journal, citing an interview with Expresso, Portugal Foreign Affairs Minister Luis Amado said that Portugal faces "a scenario of exit from the euro zone" if it fails to tackle its economic challenges. The country's economy, deficit and fractured government are a threat to its stability. - Irish Fianna Fail member and minister of Irish parliament O'Keefe said the up and coming 2011 Irish budget will incur no change to the corporate tax rate. Earlier during the session the Irish government stated in the Irish press that it could unveil budget a week before the expected date of December 7th in order to calm markets. - The Telegraph's Ambrose-Evans Pritchard noted that the EU faces the risk of a 1931-type double-dip. The ECB, rather than the Fed, should be printing money on mass scale for government debt purchases. In addition, he sees EU's European Financial Stability Facility (EFSB) as flawed. If Ireland asks for help, chain reaction to unfold, "starting with Iberia." Despite Ireland Premier Cowen's insistence there is adequate funding, says this is unlikely to be enough, with private sector funding evaporating for banks and likewise for Irish companies. - Commenting in the Financial Times, Man Group CEO Clarke stated that the decision by the government to abolish the FSA has damaged London's ability to withstand punitive regulation from Europe. The FSA has demonstrated over many years successful oversight of the hedge fund industry. The article goes to state that it is not yet clear whether BoE will regulate hedge funds under its new macro-prudential responsibilities.
***Looking Ahead *** - (PO) Portugal Q3 labor Costs: % v 1.2% prior - (PE) Peru Sept GDP Y/Y: % v 9.2%e v 9.2% prior - (PE) Peru Oct Unemployment: No est v 7.6% prior - 6:00 (NV) Netherlands Debt Agency to Sell Up to â‚¬7.5B of Feb, Mar and SepT 2011 Bills - 6:00 (IS) Israel to Sell ILS200M 3.5% 2013 Bonds; Sell ILS200M 4.5% 2015 Bonds; Sell ILS300M 0.5% 2013 I/L Bonds; to Sell ILS250M 2020 Floating Notes - 6:30 (CL) Chile Oct Copper Exports: No est v $3.9B prior - 8:00 (PD) Poland Oct CPI M/M: 0.4%e v 0.6% prior; Y/Y: 2.9%e v 2.5% prior - 8:30 (US) Oct Advance Retail Sales: 0.7%e v 0.6% prior; Retail Sales Less Autos: 0.4%e v 0.4% prior; Retail Sales Ex Auto & Gas: 0.3%e v 0.4% prior - 8:30 (US) Nov Empire Manufacturing: 14.0e v 15.73 prior - 9:00 (PD) Poland Oct Budget Level YTD (PLN): No est v -39.5B prior; Budget Performance YTD: No est v 75.7% prior - 9:00 (FR) France Debt Agency (ATF) to sell up to â‚¬7.5B in 13-week, 26-week and 52-week Bills; - 9:30 (EU) ECB Calls for Bids in 7-Day Tender - 10:00 (US) Sept Business Inventories: 0.8%e v 0.6% prior - 11:30 (IS) Oct Consumer Prices M/M: 0.2%e v 0.3% prior; Y/Y: 2.5%e v 2.4% prior - 11:30 (US) Treasury to Sell $29B in 3-Month; sell $28B in 6-month - 12:00 (EU) EU's Juncker Speaks in Frankfurt - 21:00 (CH) China Sept Conference Board Leading Economic Index - 21:00 (CH) China Oct Actual FDI Y/Y: 10.4%e v 6.1% prior
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