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Tuesday December 20, 2011 - 11:35:59 GMT
Trade the News Staff - www.global-view.com/forex-services/TTN/

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TradeTheNews.com European Market Update: Better German IFO Survey and Spain Bill auction results buoys risk appetite in session

Tuesday, December 20, 2011 5:54:15 AM

 TradeTheNews.com European Market Update: Better German IFO Survey and Spain Bill auction results buoys risk appetite in session

***Economic Data***
- (TH) Thailand Nov Customs Trade Balance: -$1.4B v -$746Me; Exports Y/Y: -12.4% v -9.0%e; Imports Y/Y: -2.4% v -1.6%e
- (GE) Germany Jan GfK Consumer Confidence Survey: 5.6 v 5.5e
- (GE) Germany Nov Producer Prices M/M: 0.1% v 0.1%e; Y/Y: 5.2% v 5.2%e
- (FI) Finland Nov Unemployment Rate: 6.2% v 7.0% prior
- (JP) Japan Nov Convenience Store Sales Y/Y: 7.5% v 14.1% prior
- (SA) South Africa Oct Leading Indicator: 131.4 v 130.9 prior
- (SZ) Swiss Nov Trade Balance (CHF) 3.0B v 2.0Be; Real Exports M/M: -6.8% v +0.9% prior; Real Imports M/M: -7.7% v 1.4% prior
- (TT) Taiwan Nov Export Orders Y/Y: 2.4% v 2.8%e
- (RU) Russia Nov Real Retail Sales M/M: -0.8% v -0.5%e; Y/Y: 8.6% v 8.3%e
- (RU) Russia Nov Unemployment Rate: 6.3% v 6.5%e
- (AS) Austria Oct Producer Price Index M/M: -0.1% v +0.5% prior; Y/Y: 3.4% v 3.5% prior
- (GR) Greece Oct Current Account: -€1.5B v -€1.1B prior
- (HK) Hong Kong Nov CPI - Composite Index Y/Y: 5.7% v 5.6%e
- (NV) Netherlands Dec Consumer Confidence: -37 v -34e
- (SW) Sweden Central Bank (Riksbank) cuts Repo Rate by 25bps to 1.75%; As Expected
- (GE) Germany Dec IFO Business Climate: 107.2 v 106.0e; Current Assessment: 116.7 v 116.0e; Expectations Survey: 98.4 v 97.0e
- (IT) Italy Oct Industrial Orders M/M: -1.6% v -1.3%e; Y/Y: -4.8% v -1.2%e
- (IT) Italy Oct Industrial Sales M/M: +0.1% v -5.5% prior; Y/Y: 1.1% v 1.9% prior
- (PO) Portugal Nov Producer Prices M/M: +0.2 v -0.3% prior; Y/Y: 5.2 v 5.5% prior
- (UK) Dec CBI Industrial Reported Sales: +9 v -12e
- (IR) Ireland Nov Property Prices M/M: -1.5% v -2.2% prior; Y/Y: -15.6 v 6.7% prior

Fixed income:
- (SP) Spain Debt Agency (Tesoro) sold total €5.64B vs. €3.5-4.5B indicated range in 3-Month and 6-Month Bills
- Sold €3.72B in 3-month Bills; Avg Yield 1.735% v 5.111% prior; Bid-to-cover: 2.9x v 2.9x prior; Max Yield 1.880% v 5.220% prior
- Sold €1.92B in 6-month Bills; Avg Yield 2.435% v 5.227% prior; Bid-to-cover: 4.1x v 4.9x prior; Max Yield 2.530% v 5.328% prior
- (EU) ECB allotted €141.9B in 1-Day Liquidity providing tender
- (GR) Greece Debt Agency (PDMA) sold €1.3B vs. €1.0B indicated in 13-week Bills; avg yield 4.68% v 4.63% prior; Bid-to-cover: 2.91x v 2.94x prior
-(EU) ECB allotted €169.0B vs. €250Be in 7-Day Main Refinancing Tender at fixed 1.00%
- (HU) Hungary Debt Agency (AKK) sold HUF30B in 3-Month Bills; avg yield 7.03% v 7.03% prior
- (UK) DMO sold £750M 4.25% 2027 Conventional Gilt mini-tender; Avg Yield 2.637% v 4.00% prior; Bid-to-cover: 2.81x v 1.85x prior

*** SPEAKERS/FIXED INCOME/FX/COMMODITIES/ERRATUM ***
***Notes/Observations***
- Euro-Zone Fin Ministers agree to commit €150B in loans to IMF
- AT&T drops bid for T-Mobile Deal
- Sacyr creditors willing to extend up to three years the pending €4.9B of debt due this week
- German IFO Survey beats expectations and rises for a second month
- Spain Debt Agency sells more than targeted in Bill auction at substantially lower yields

Equities:
FTSE 100 -0.24% at 5352, DAX +0.70% at 5709, CAC 40 +0.80% at 2997, IBEX 35 +1% at 8337, FTSE MIB +1.1% at 14,713, SMI -0.25% at 5752

- European shares rose for the second straight session as the shock over Kim Jong-Il's death waned over the Asian and European session. Stronger than expected German IFO data and bullish comments from the IFO's economists helped sustain the rally in the markets. Healthcare stocks were pressured by Astra Zeneca [AZN.UK] which announced an impairment charge related to trouble with its drug pipeline. Its antidepressant, developed in a collaboration with Targacept, failed to meet its primary endpoint in a second Phase III study. On the other hand, its cancer drug Olaparib will not progress into Phase III development. Company will take a $381.5M in pre-tax impairment charges. However, Astra Zeneca reaffirmed its full year targets.

Speakers:
- Swedish Central Bank (Riksbank) commented it its rate decision that the economy deteriorated abroad and this led to a slowdown in the Swedish outlook. CPI inflation was still high but noted the underlying inflation wass low. The weak demand in Sweden together with the poorer outlook abroad would also help to keep inflationary pressures low in the period ahead. Deputy Governor Karolina Ekholm and Deputy Gov Lars Svensson entered a reservation against the decision and sought a more aggressive cuts of 50bps
- IFO Economists were upbeat and noted that the German economy seemed to defy Euro Zone woes and saw a good outlook for German economy with better conditions in next six months. The IFO noted that the current outlook for Christmas sales was good as well and saw greater opportunities for exports. IFO noted that it saw no danger of credit crunch in Germany and added that the ECB current level of 1% for interest rates was appropriate and no further cuts would be necessary
- France Debt Agency (AFT) trimmed its planned 2012 medium and long-term debt issuance to €177.9B from €179.0B compared to 2011 financing requirement of €184B.
- Bundesbank's Nagel reiterated that monetary policy was not the solution to the EU debt crisis and unlimited bond buying was not compatible with the ECB's official mandate
- Moody's comment on Finland banking system noting that its outlook continued to remain Negative with the operating environment likely to deteriorate.
- Finland Finance Ministry published its economic forecast which lowered 2012 GDP growth view to 0.4% from its 1.8% Oct view. It set its initial 2013 GDP growth at 1.7%. It did raise 2012 Unemployment Rate at 8.1% from prior 7.6% view in Oct
- ECB's Constancio commented in an exclusive CNBC Europe interview that a breakup of EMU was 'unthinkable'
- EU Commission approves plan to split WestLB as plan is in line with State aid rules
- Italy Think Tank REF lowered Italy's 2012 GDP view to -1.5% from +0.4% prior and raised 2012 Deficit to GDP Ratio at 2.3% vs. 2.2% prior view
- EU Parliament to consider rules related to sovereign debt ratings
- Fitch commented that it saw pressure on local governments in Poland due to underfunding and forecasted Polish local government debt at PLN62B at the end of 2011 and to rise 10-15% in 2012
- BoE releases paper on macroprudential policy tools which would recommend policy tools to the government in H1 2012. There was limited evidence for the effectiveness of some tools. The tools focus on capital, leverage, provisioning, distributions, LTV ratios and margin requirements.
- China Premier Wen commented that taxes on small companies were too high and should be cut. He called for orderly development of small banks.

Currencies:
- The USD was softer against the major and commodity-related pairs. The Euro was aided by a number of factors including the German IFO Survey (which again beat expectations) and the Spain Debt Agency auction results in which it sold more than its intended targeted at substantially lower yields. The EUR/USD was almost a big figure higher as the NY morning approached and nearing the 1.31 level

Political/ In the Papers:
-Telegraph Ambrose Evans-Pritchard argues that Spain's new austerity measures could make the country's economic rebound more difficult
- Suggests it was easier for Spain to turn its economy around in the 1990s, as the government benefitted then from the ability to devalue the paseta currency.
- Despite the cautious outlook given by Spain's new PM Rajoy, Spanish yields declined sharply on yesterday's session, amid demand from global funds seeking to take advantage of the "ECB carry trade"
- With regards to the Spanish property market, consultants RR de Acuna forecasts that prices could have to decline an additional 20% in order to clear the market.

***Looking Ahead***
- (SP) Spain Nov YTD Budget Balance: no est v -€40.1B prior
- 7:00 (EU) EU's Almunia
- 7:00 (EU) ECB to drain €211.0B in 7-Day Term Deposits to Offset Bond Purchases
- 7:00 (CA) Canada Nov Consumer Price Index M/M: 0.1%e v 0.2% prior; Y/Y: 2.9%e v 2.9% prior; CPI Index: No est v 120.8 prior
- 7:00 (CA) Canada Nov CPI Core M/M: 0.2%e v 0.3% prior; Y/Y: 2.2%e v 2.1% prior
- 7:30 (BR) Brazil Nov Current Account: -$6.5Be v -$3.1B prior; Foreign Direct Investment (FDI): $4.0Be v $5.6B prior
- 7:45 (US) ICSC Weekly Chain Store Sales
- 8:00 (HU) Hungary Central Bank Interest Rate Decision: Expected to raise the Base Rate by 50bps to 7.00%
- 8:00 (PD) Poland Nov Core Inflation M/M: 0.3%e v 0.3% prior; Y/Y: 3.0%e v 2.8% prior
- 8:30 (US) Nov Housing Starts: 635Ke v 628K prior; Building Permits: 635Ke v 644K (revised from 653K)
- 8:55 (US) Redbook Weekly Retail Sales
- 9:00 (MX) Mexico Oct Retail Sales: 3.9%e v 4.7% prior
- 9:30 (EU) ECB calls for bids in 3-Year Loan
- 9:30 (EU) ECB calls for bids in 3-Month Tender
- 9:45 (EU) EU Parliament votes on Stability Bonds resolution
- 10:00 (MX) Mexico weekly change in International Reserves
- 11:00 (US Fed to purchase $2.25-2.75B in Notes
- 11:30 (US) Treasury to sell 4-Week Bills
- 13:00 (US) Treasury to sell 5-Year Notes
- 14:00 (AR) Argentina Nov Industrial Production M/M: No est v -0.3% prior; Y/Y: No est v 4.1% prior
- 16:30 (US) Weekly API Energy inventories
- 18:50 (JP) Japan Total Merchandise Trade Balance: -Â¥442.4Be v -Â¥273.8B prior

 

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