European Market Update: Risk appetite finds fresh legs as Ireland hints of accepting help from IMF/EU (TTN)
Thursday, November 18, 2010
European Market Update: Risk appetite finds fresh legs as Ireland hints of accepting help from IMF/EU
***Economic Data*** - (IN) India Primary Articles WPI w/e Nov 6th Y/Y: 13.3% v 14.9% prior; Food Articles WPI Y/Y: 10.3% v 12.3% prior - (SZ) Swiss Oct Trade Balance (CHF): 2.1B v 1.4Be; Exports M/M: +6.2 v -3.1% prior; Imports M/M: +1.9% v -4.0% prior - (PH) Philippines Central Bank Interest maintained the Overnight Borrowing Rate unchanged at 4.00% - (TT) Taiwan Q3 GDP Y/Y: 9.8%% v 8.3%e - (NV) Netherlands Oct Unemployment Rate: 5.2% v 5.2%e - (NV) Netherlands Nov Consumer Confidence: -7 v -10e - (SW) Sweden Oct Unemployment Rate: 7.5% v 7.6%e - (EU) Euro-Zone Sept Current Account: -â‚¬13.1B v -â‚¬6.9B prior; Euro-Zone Current Account Net Seasonally Adj: -â‚¬9.2B v -â‚¬10.6 B prior - (UK) Oct Retail Sales Ex Auto Fuel M/M: 0.3% v 0.2%e; Y/Y: 1.2% v 1.5%e - (UK) Oct Retail Sales with Auto Fuel M/M: 0.5% v 0.4%e; Y/Y: -0.1% v 0.0%e - (UK) Oct Public Finances (PSNCR): Â£2.4B v Â£6.0Be; Public Sector Net Borrowing: Â£9.8B v Â£8.9Be; PSNB ex Interventions: Â£10.3B v Â£9.6Be - (SZ) Swiss Nov Credit Suisse ZEW Expectations Survey: -30.9 v -27.5 prior
Fixed Income: - (SP) Spain Debt Agency (Tesoro) sold total â‚¬3.65B vs. â‚¬3.0-4.0B Indicated Range in 2020 and 2041 Bonds - Sold â‚¬2.6B in 4.85% Oct 2020 Bono; avg yield 4.615% v 4.144% prior; Bid-to-cover: 1.8x v 2.3x prior - Sold â‚¬1.1B in 4.7% Jul 2041 Bono; avg yield 5.488% v 5.077% prior; Bid-to-cover: 2.1x v 2.1x prior - (FR) France Debt Agency (ATF) sells total â‚¬7.965B in 2013, 2014 and 2015 Notes - Sells â‚¬2.47B in Jan 2013 BTANs - Sells â‚¬2.465B in July 2014 BTANS - Sells â‚¬3.036B in Jul 2015 BTAN - (HU) Hungary Debt Agency sells total HUF60B in 2014, 2016 and 2020 Bonds - (UK) DMO to sell Â£3.25B in 3.75% 2020 Gilts; avg yield 3.45% v 3.055% prior; Bid-to-cover: 1.77x v 2.01x prior
*** SPEAKERS/FIXED INCOME/FX/COMMODITIES/ERRATUM ** Notes/Observations: - Ireland: IMF, EU/ECB mission to Dublin for a few days; Central Bank Gov hints that it would accept aid - Risk appetite finds fresh legs on hope of an Irish package - OECD expresses concerns on 2011 growth as US lags in momentum - Hong Kong confirms first bird flu case in human (1st time since 2003) - GM prices at high end $33/shr and raises $20B - China Sovereign Wealth Fund (CIC) Chairman: China should stop buying US Treasuries but should still buy US assets
Equities: Eurostoxx at 2843, +1.45%, FTSE100 at 5764, +1.27%, CAC40 at 3850, +1.52%, DAX at 6792, 1.39%
- European shares were in positive territory following Asian gains and also as speculations that Ireland may accept a bailout arose. Irish central banker Honohan said that IMF could provide a loan if Ireland asked and the amount would be in tens of billions of euros. Autos were lifted after GM priced its IPO at the high end of the expected range - Air France [AF.FR] swung to profit after reporting its Q2 figures after the Paris close yesterday. Both net and earnings were higher than analysts' estimates. Company also boosted its FY10 operating profit outlook. European airliners have benefitted from a surge in demand and have reported better than expected figures. - SABMiller [SAB.UK] was up 4.8% as profit increased 15% and revenues 6% on a yearly basis. Lager volume growth had also grown by 25% on an organic basis. Company said the driver of the period's performance was growth in developing markets while global outlook was mixed as group remained cautious over US and UK recovery. - French supermarket chain Carrefour [CA.FR] also rose about 1.4% after company decided to stay in Asia following failed bids to sell its Malaysia and Singapore businesses. Company said that the emerging markets would be value-enhancing in the medium to long term. - Meanwhile, Dutch supermarket Ahold [AH.NV] fell 3.1% as the company missed expectations due to a one time charge related to the acquisition of Ukrop. Revenue was in line with estimates and company said it expected Ukrop to return to profitability by the end of the next year.
Speakers: - Ireland Central Bank gov Hohohan commented that the IMF would provide aid in the form of a loan if Ireland agreed upon the conditions. He noted that the objective of current IMF/EU official visit was to provide assurances to both investors and depositors of country's banking sector. He stated that any potential loan would be 'large' and seen in the range of 'tens of billion of euros'. Such a loan would be made available and drawn upon as necessary. He commented that the corporate deposit outflows have been replaced by ECB funding and noted that the interest rate of EFSF was expected to be in line with typical IMF's rate. - South Korea Fin Min Yoon stated in a press conference that the Gov't would support the removal of withholding tax exemption on foreign bond purchases and would help the related bills pass parliament as soon as possible. - Russia Central Bank Ulyukayev commented that the country's Q4 capital outflows might total $7B. He confirmed that the CBR had adjusted the Ruble currency (RUB) floating trading band by 5 Kopecks in the last few days and the Central bank had been surprised by the weakness in the Ruble currency - Philippines Central Bank commented after its rate decision that its forecasts for inflation was lowered as a result of the strength in the peso, yet the Peso currency (PHP) remained competitive against other currencies. The central bank noted that inflation was manageable and on path to meet 2010-2012 targets. - OECD released its Nov Economic Outlook and noted that the global recovery was slowing as US economy lagged in growth. Thus central banks could delay monetary tightening until H2 of 2012. It cuts its 2011 GDP forecast to 4.2% from prior view of 4.5%, It did maintain the 2010 global GDP growth at 4.6. - Sees 2011 global GDP growth at 4.2% v prior forecast of 4.5% - The Japanese Gov't released its monthly Cabinet report which maintained its assessment that the Japanese economy had entered a 'lull' period. The Gov't cuts its views on several of the components including personal consumption, production and imports. However it raised its view on employment as it believed the job market was showing signs of a rebound. - Japan Econ Min Kaieda commented that he could not determine whether the recent JPY currency weakness was sufficient. But gains in Japanese equities have been aid by positive corporate data and the recent pause in yen appreciation trend
Currencies: - While the EcoFin ended on Wed without a deal to solve the lingering peripheral situation in Europe the market continued to believe that Ireland would accept the terms to stabilize the markets. Comments from the Irish Central bank highlighted that perhaps Ireland was set to accept a 'bailout' from the IMF and this aided risk appetite. The EUR/USD continued to rebound from its 7-week lows established earlier this week and tested above 1.3650 in the session. The submission of risk aversion had breathed some life back into stock and commodity markets as a result. The peripheral spreads narrowed in the morning as Ireland seems prepared to accept aid. The Irish/German 10-year gov't bond spread narrowed by over 10bps to around 540bps. There was talk that Spanish two-tranche auction was going 'well' and also allayed fears of contagion for the time being. Geopolitical/In the papers: - Following yesterday's comments made by German Interior Minister De Maiziere, there were unconfirmed reports of a suspected bomb package headed for Germany, which was detected in Namibia. Note yesterday the Interior Minister warned of possible terror attack to Germany sometime towards the end of November. His comments were addressed after various tips and the interception of a postal bomb sent from Yemen. - The Telegraph reported recent data released from the Bank for International Settlements (BIS). The data indicated a $222 billion exposure to Ireland, the highest figure, by British banks. The second and third largest exposure is Germany ($205.8B) and the US ($113.9B), respectively. The total foreign exposure stands at $843.8 billion. The Royal Bank of Scotland alone has an exposure of more than $79 billion.
***Looking Ahead *** - (RU) Russia Oct Real Industrial Production M/M: 2.2%e v 1.5% prior; Y/Y: 5.2%e v 6.2% prior - (RU) Russia Gold & Forex Reserve w/e Nov 12th: No est v $499.2B prior - (IS) Israel Oct Leading 'S' Indicator M/M: No est v 0.0% prior - (PO) Portugal Oct Producer Prices M/M: No est v - 0.2% prior; Y/Y: No est v 4.4% prior - (AR) Argentina Nov Consumer Confidence: No est v 50.05 prior - 6:00 (CZ) Czech Republic to Sell CZK5.0B in 273-Day Bills - 6:00 (UK) Nov CBI Trends Total Orders: -24e v -28 prior - 6:30 (CL) Chile Q3 Gross Domestic Product Y/Y: 7.1%e v 6.5% prior; Current Account: -$120M v $46.8M prior - 6:30 (GE) ECB's Mersch Speaks in Frankfurt - 7:15 IMF Fiscal Analyst Cottarelli Speaks at Brussels Think Tank - 8:00 (SA) South Africa Gov News Conference on South African Interest Rates - 8:00 (PD) Poland Oct Employment M/M: 0.1%e v 0.2% prior; Y/Y: 2.0%e v 1.8% prior - 8:00 (PD) Oct Avg Gross Wages M/M: 1.3%e v -0.1% prior; Y/Y: 4.0%e v 3.7% prior - 8:30 (CA) Oct Leading Indicators M/M: +0.1%e v -0.1% prior - 8:30 (CA) Sept Int'l Securities Transactions: C$7.0Be v C$11.1B prior - 8:30 (CA) Canada Sept Wholesale Sales M/M: -0.3%e v 1.2% prior - 8:30 (US) Initial Jobless Claims: 441Ke v 435K prior; Continuing Claims: 4.295Me v 4.301M prior - 8:30 (GE) ECB's Trichet, Gonzalez-Paramo, Bini Smaghi Speak in Frankfurt - 10:00 (US) Oct Leading Indicators: 0.5%e v 0.3% prior - 10:00 (US) Nov Philadelphia Fed: 5.0e v 1.0 prior - 10:30 (US) Weekly EIA natural Gas Inventories - 10:30 (CA) Bank of Canada Publishes Its Quarterly Review - 13:00 (US) Fed's Warsh Speaks on Panel in Chicago - 13:30 (EU) EU's President Van Rompuy, Barnier Speak at Conference on Euro - 13:30 (US) Fed's Kocherlakota Speaks in - 14:00 (BR) Brazil Oct Tax Collections (BRL): 74.2B v 63.4B prior - 16:00 (CO) Colombia Sept Industrial Production Y/Y: No est v 4.4% prior - 16:00 (CO) Colombia Sept Retail Sales Y/Y: No est v 12.7% prior - 16:00 (US) Sept RPX Composite 28dy Y/Y: No est v -2.68% prior; RPX Composite 28dy Index: No est v 195.01 prior - 16:30 (US) Fed's Plosser Speaks at Cato Institute in Washington - On Friday: - (GE) Fed's Bernanke, ECB's Trichet, PboC Zhou and IMF's Strauss-Kahn Speak on Panel - (PO) EU Leaders meet President Obama in Lisbon, Portugal (NATO Summit)
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