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Back to The Headlines

Tuesday October 18, 2011 - 10:19:35 GMT
Trade the News Staff - www.global-view.com/forex-services/TTN/

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TradeTheNews.com European Market Update: German ZEW survey registers a lower reading for the 8th consecutive month; UK CPI exceeds 5% but looking to fall significantly in 2012

Tuesday, October 18, 2011 5:52:19 AM

 TradeTheNews.com European Market Update: German ZEW survey registers a lower reading for the 8th consecutive month; UK CPI exceeds 5% but looking to fall significantly in 2012

***Economic Data***
- (EU) Euro Zone Sept EU 25 New Car Registrations: 0.7% v 7.7% prior
- (HU) Hungary Aug Avg Gross Wages Y/Y: 6.5% v 4.6%e
- (SP) Spain Q3 House Price Index Q/Q: -1.3% v -1.4% prior; Y/Y: -5.5% v -5.1% prior (largest drop since 2009)
- (HK) Hong Kong Sept Unemployment Rate: 3.2% v 3.3%e
- (UK) Sept CPI M/M: 0.6% v 0.4%e; Y/Y: 5.2% v 4.9%e; Core CPI Y/Y: 3.3% v 3.2%e
- (UK) Sept RPI M/M: 0.8% v 0.5%e; Y/Y: 5.6% v 5.4%e (highest since 1991); RPI-X Y/Y: 5.7% v 5.5%e; Retail Price Index 237.9 v 237.6e
- (GE) Germany Oct ZEW Economic Sentiment: -48.3 v -45.0e; Current Situation: 38.4 v 40.0e
- (GR) Greece July Unemployment Rate: 16.5% v 16.4%e
- (EU) Euro Zone Oct ZEW Economic Sentiment: -51.2 v -44.6 prior
- (IT) Italy Aug Current Account: -€5.4B v €1.7B prior
- (IS) Israel Oct Inflation Forecast: 2.2% v 2.3% prior
- (IS) Israel Sept Money Supply Y/Y: 0.7% v 3.6% prior

Fixed income
- (SP) Spain Debt Agency (Tesoro) sold €4.6B vs. €4.0-5.0B indicated range in12-Month and 18-Month Bills
- Sold €3.56B in 12-month Bills; Avg Yield 3.608% v 3.591% prior; Bid-to-cover: 2.30x vs. 2.80x prior; Max Yield 3.68% v 3.648% prior
- Sold €1.04B in 18-month Bills; Avg Yield 3.801% v 3.807% prior; Bid-to-cover: 4.30x vs. 2.70x prior; Max Yield 3.856% v 3.900% prior
- (GR) Greece Debt Agency (PDMA) sold €1.625B vs. €1.25B indicated in 13-week Bills; avg yield 4.61% v 4.56% prior; Bid-to-cover: 2.86x v 2.84x prior
- (HU) Hungary Debt Agency (AKK) sold HUF30B in 3-Month Bills; Avg Yield 6.03% v 6.03% prior
- (EU) ECB allotted €201.2B vs. €200Be in 7-Day Main Refinancing Tender
- (BE) Belgium Debt Agency sold €3.26B vs €3.0-3.75B in 3-month and 12-month Bills
- Sold €1.934B in 3-month Bills; Avg Yield 1.128% v 0.909% prior; Bid-to-cover: 2.3x vs. 3.41x prior
- Sold €1.330B in 12-month Bills; Avg Yield 1.673% v 1.420% prior; Bid-to-cover: 2.30X v 2.26X prior

*** SPEAKERS/FIXED INCOME/FX/COMMODITIES/ERRATUM ***
***Notes/Observations:
- China Q3 GDP YoY at 9.1% vs +9.3e; Slowest pace in 2 years
- Moody's to review France sovereign outlook within three months
- Germany ZEW survey falls for the eighth consecutive month
- UK inflation breaks 5% but expected to slow significantly in 2012

Equities:
FTSE 100 -1% at 5385, DAX -0.40% at 5837, CAC 40 -1.6% at 3114, IBEX 35 -0.90% at 8784, FTSE MIB -0.10% at 15,900, SMI -0.80% at 5676

- European shares fell during today's session, interrupting the week's rally. German Finance Minister Schaeuble abruptly announced yesterday that investors should not expect a final solution for the Eurozone crisis during October 23rd summit. This healthy dose of reality check coupled with disappointing Chinese GDP dampened the optimism that had prevailed a few days ago after the G20 meeting. Furthermore, a disconcerting report from Moody's on France cast a cloud on country's Aaa rating due to deterioration in French government debt metrics. French banks sank during the session.
- Dexia [DEXB.BE] fell over 13% after the European commission will investigate its nationalization. Xstrata [XTA.UK] also fell over 4% despite higher coal production. Copper output fell 4% - not improving over the last quarter's figure.

Speakers:
- ZEW Economists commented that Germany might already be in a technical recession as it saw the possibility for negative growth for both Q4 and into Q1 2012. The economists stated that the sentiment for growth outlook was due to uncertainty regarding solutions to debt crisis. Weak German data contributed to ZEW survey decline and that current debt crisis might cause both German companies and consumers to postpone investment and spending.
- France Fin Min Baroin commented that the country's 'AAA' sovereign rating was not threatened as France was ahead of its planned deficit reduction target. Baroin believed that France's 2012 GDP growth target of 1.75% might be 'too high' but would not revise its growth view at this time. He noted that all countries were in the spotlight regarding sovereign ratings and all countries must take steps to avoid an economic slowdown
- EU Officials reiterated that the main idea for leveraging the EU bailout fund was to use it to guarantee first losses on new debt and that the EFSF fund could have flexibility to alter the size of guarantees it offers on an auction by auction basis. The degree of leverage would not be fixed, but likely to vary between 3 and 5 times.
- EU Commissioner Rehn expressed concern about "soft patch" in global economy and reiterated that Portugal's reform program was ambitious yet realistic and that the country has made satisfactory progress with its program, He reiterated extra capital and liquidity backstops needed for banks.
- UK ONS commented after the inflation data that the data was driven by rising gas and power prices; annual inflation rate was in line with record high seen in Sept 2008. It also noted that BOE saw CPI falling rapidly in 2012
- Former Fed official Meyer commented that the Fed could introduce explicit inflation objective and he did note that the risk of possible US double-dip had receded somewhat.
- Turkey Fin Min Simsek commented that global economic slowdown would affect Turkey while the global trend was for slower inflation. He noted that the country's domestic demand had slowed to "reasonable level". The first 9 months budget balance saw a surplus TRY234M with year-end balance still seen at deficit of TRY22.2B but would be narrower than prior estimates
- Poland Central Ban Dep Gov Kozinski commented in the local press ready to offer FX swaps to banks

Currencies/Fixed Income:
- The European currencies turned defensive during the session aided by risk aversion resulting from the slower pace of China's GDP reading and concern's France's AAA sovereign rating might be under review. Moody's warned in France's annual rating report that it may be put on negative watch in the next three months if the costs for helping to bailouts banks and other euro zone members impacts its budget too much. The EUR/USD reversed its gains registered during the Asian session and tested 1.3656 before finding some technical support. The dealers were taking notice of the Oat-Bund spread which tested fresh EMU highs above 100bps.
- The USD/JPY remained locked within its 200 pip range for the 50th consecutive session but dealers noted the current environment was ripe for a stop hunt and eyeing some 'massive' USD sell stops building below the 76 and 75 levels.
- The higher inflation data failed to provide any significant lasting bid for the GBP/USD pair as dealers noted that a 5% reading was expected in the near term for the UK. The ONS comments that the BOE continued to believe that inflation would fall significantly in 2012 took the sting from the headline data. BOE Gov King did state earlier this month that Sept might be the peak for UK inflation. The GBP/USD was at 1.,5720 as the NY morning approached

Political/ In the Papers:
- The financial press reported that the bond markets have started to view Spain as being less risk than Italy. The Italian/Spanish spread is near 60bps, which is the widest level since Dec 2008.
- Analysts at UBS believe that European banks require funding guarantees and not additional capital. The Telegraph article also noted that analysts believe that EU governments should guarantee the debt issued by banks. As a reminder, back in 2008, the US FDIC implemented the temporary liquidity guarantee program (TLGP) which allowed US banks to sell unsecured debt which carried a government guarantee.
- The Telegraph's Evans-Pritchard looked at obstacles to the plan to leverage the EFSF. The German DIW Institute noted that an increase in the size of the EFSF could present a threat to France's AAA sovereign rating. According to DIW's research Chief Dr Ansgar Belke, the leverage proposal for the EFSF could lead to the break-up of the EU in an extreme case. It is not clear if plans to leverage the EFSF would violate the Sept ruling by Germany's top court.

**Looking Ahead***
- 7:00 (EU) ECB to drain €165.0B in 7-day Term-Deposit tender
- 7:45 (US) ICSC Chain Store Sales
- 8:00 (PD) Poland Sept Employment M/M: 0.0%e v -0.1% prior; Y/Y: 2.9%e v 3.1% prior
- 8:00 (PD) Poland Sept Avg Gross Wages M/M: 0.0%e v -0.6% prior; Y/Y: 5.5%e v 5.4% prior
- 8:15 (US) Fed's Rosengren gives Welcome Remarks at Boston Fed Conference
- 8:30 (US) Sept Producer Price Index M/M: 0.2%e v 0.0% prior; PPI Ex Food & Energy M/M: 0.1%e v 0.1% prior
- 8:55 (US) Weekly Redbook Retail Sales
- 9:00 (US) Aug Net Long-term TIC Flows: -$20.0Be v $9.5B prior; Total Net TIC Flows: no est v -$51.8B prior
- 9:45 (UK) BOE reverse auction for 2028-2060 Gilts
- 10:00 (MX) Mexico Central Bank Announces International Reserves for Prev. Week
- 10:00 (US) Oct NAHB Housing Market Index: 15e v 14 prior
- 11:00 (GE) German Fin Min Schaeuble
- 11:00 (US) Fed to purchase $2.25-2.75B in Notes/Bonds
- 11:30 (US) Treasury to sell 4-Week Bills
- 11:30 (US) Treasury to sell 52-Week Bills
- 12:00 (EU) ECB's Coene speaks at Belgian Central Bank Conference
- 12:30 (US) Fed Chairman Bernanke speaks in Boston 1
- 13:15 (US) Fed Chairman Bernanke
- 14:00 (EU) EU President Van Rompuy
- 15:00 (UK) BOE Gov King
- 15:00 ((AR) Argentina Aug Economic Activity Index M/M: No est v-1.2% prior; Y/Y: 7.1%e v 7.65 prior
- 22:00 (CH) China Aug Leading Economic Index:

 

 

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