TradeTheNews.com European Market Update: Better major European PMI data continues to aid risk appetite
Wednesday, February 01, 2012
TradeTheNews.com European Market Update: Better major European PMI data continues to aid risk appetite
***Economic Data*** - (EU) ECB: â‚¬1.6B borrowed in overnight loan facility v â‚¬2.2B prior; â‚¬472.5B parked in deposit facility vs. â‚¬479.4B prior - (AU) Australia Jan RBA Commodity Price Index: 100.2 v 103.3 prior - (IN) India Dec Trade Balance: -$12.7B v -$12.8B (prior -$13.6B); Exports Y/Y: 6.7% v 3.9% prior; Imports Y/Y: 19.8% v 24.6% prior- - (IE) Ireland Jan NCB Manufacturing PMI: 48.3 v 48.6 prior - (UK) Jan Nationwide House Prices M/M: -0.2% v -0.2%e; Y/Y: 0.6% v 1.2%e - (DE) Germany Jan Preliminary CPI EU Harmonized M/M:-0.4% v -0.4%e ; Y/Y: 2.3% v 2.4%e - (SE) Sweden Jan Swedbank PMI Survey: 51.4 v 49.5e - (HU) Hungary Jan PMI: 49.8 v 48.5 prior - (PL) Poland Jan Manufacturing PMI: 52.2 v 48.8 prior - (TU) Turkey Jan Manufacturing PMI: 51.7 v 52.0 prior - (NO) Norway Jan PMI: 54.9 v 48.0e - (DK) Denmark Dec Retail Sales M/M: -0.1% v +0.4%e; Y/Y: -1.2% v -1.6%e - (HU) Hungary Nov Final Trade Balance: â‚¬663.4M v â‚¬666.0M prelim - (ES) Spain Jan Manufacturing PMI: 45.1 v 44.5e; ninth consecutive reading below the 50 level) - (CH) Swiss Dec Real Retail Sales Y/Y: 0.6% v 1.8% prior - (CZ) Czech Jan Manufacturing PMI: 48.8 v 50.5e - (CH) Swiss Jan PMI Manufacturing: 47.3 v 51.2e - (IT) Italy Jan PMI Manufacturing: 46.8 v 45.3e; highest reading since Sept 2011 - (FR) France Jan Final PMI Manufacturing: 48.5e v 48.5 prelim (two-month low) - (DE) Germany Jan Final PMI Manufacturing: 51.0 v 50.9e (First reading above 50 since Sept 2011) - (EU) Euro Zone Jan Final PMI Manufacturing: 48.8 v 48.7e (five-month high) - (GR) Greece Jan PMI Manufacturing: 41.0 v 42.0 prior - (NO) Norway Nov AKU Unemployment Rate: 3.4% v 3.3%e - 4:00 (ZA) South Africa Jan Kagiso PMI: 53.2 v 50.1e v 49.4 prior - (UK) Jan PMI Manufacturing: 52.150.0e - (DK) Denmark Jan PMI Survey: 54.3 v 59.8 prior - (EU) Euro Zone Jan CPI Estimate Y/Y: 2.7% v 2.7%e - (IE) Ireland Jan Live Register Monthly Change: -3.2K v -3.6K prior; Unemployment Rate: 14.2% v 14.3% prior
Fixed Income: - (EU) ECB allotted $3.7B in 7-Day USD Liquidity Tender at fixed 0.59% vs â‚¬7.9B prior - (EU) ECB allotted $9.4B in 3-month USD Liquidity Tender at fixed 0.59% vs. $10Be - (RU) Russia sold RUB34.9B vs. RUB35B indicated in OFZ 2021 Bond; Yield 8.25% - (SE) Sweden sold SEK10Bvs. SEK10B indicated in 3-month Bills; avg yield 1.514% v 1.2751% prior -(DE) Germany sold â‚¬4.09B in 2.0% Jan 2022 Bund; Avg Yield 1.82% v 1.93% prior; Bid-to-cover: 1.4x v 1.3x prior - (UK) DMO sold Â£2.5B in 5.0% March 2025 Gilts; Avg Yield 2.356% v 3.835% prior; Bid-to-cover: 1.8x v 1.25x prior ; Tail 0.4bps vs. 1.4bps prior - (PT) Portugal Debt Agency (IGCP) sold â‚¬1.5B vs. â‚¬1.25-1.50B indicated range in 3-month and 6-month Bills - Sold â‚¬750M in 3-month Bills; Avg Yield 4.068% v 4.346% prior; Bid-to-cover: 2.8x v 4.1x prior - Sold â‚¬750M in 6-month Bills; Avg Yield 4.463% v 4.740% prior; Bid-to-cover: 2.6x v 3.0x prior
*** SPEAKERS/FIXED INCOME/FX/COMMODITIES/ERRATUM *** ***Notes/Observations*** - Far East and European PMI manufacturing better than expected; China seen avoiding a hard landing - Market starting to take notice that notice French President Sarkozy was lagging in polls in the upcoming April elections - Doubts over Greek resolution???
Equities: FTSE 100 +1.3% at 5755, DAX +1.9% at 6580, CAC-40 +1.5% at 3347, IBEX-35 +1.4% at 8627, FTSE MIB +2.1% at 16,151, SMI +1.1% at 6038
- European shares rose on the session lifted by mining stocks which rallied after Chinese manufacturing rose to a 4-month high. - In individual names, ICAP [IAP.UK] jumped over 8%, despite reporting a decline in revenues. However, the company expect pre-tax profits for the year to 31 March 2012 to be towards the upper end of the current analyst range of Â£336-358M. Infineon [IFX.DE] reported better than expected operating results and revenues but noted that Q2 sales are expected to be flat to down compared to Q1. Company also reaffirmed its FY12 forecast. Stock is trading up. Roche [ROG.SZ] declined after reporting lower than expected earnings.
Speakers: - German Fin Min Schaeuble commented in the German press that he assumed the ESM size of â‚¬500B would suffice and reiterated that the ESM would be reviewed at the March EU Leader Summit. He stated that Italy had made great strides under the reign of PM Monti and reiterated that implementation of reforms was necessary for Greece before additional aid is provided - (EU) ECB Publishes Bank Lending Survey: Banking sector tightened credit standards in Q4 amid worsening economic conditions and sovereign debt crisis. The tightening was widespread except in Germany with a big number of banks experiencing significant Q4 funding problems. The ECB saw an intensification of lending restraints in Q1. Hopes of better Q1 funding access might reflect the 3-year LTRO operation - BoJ official Nakaso commented it was committed to continuing with zero interest rate policy until price stability was within sight - India said to have increased benchmark import price of gold to $55.6/gram; increased import price of sliver to $1,067/kg - China said to implement lower RRR for some small lenders as Premier Wen seeks to support small business - Soc Gen economist Wei commented that the recent China PMI data might delay a RRR rate cut by the PBoC until March - IMF's Thomsen commented on Greece that discussions on the new program would be completed very soon - IAEA chief nuclear inspector Nackaerts commented that the recent Iranian visit was 'positive' but added there was still work to do with Iran over its contested atomic program. He stated that the IAEA was committed to resolving all the outstanding issues and the Iranians said they were committed too
Currencies: - Better PMI data help to bring the Euro off its late Asian session lows of 1.3030 to test above the 1.3130 level ahead of the NY morning. The PMI data help to sooth off the initial mood in Europe of caution with lingering concerns over the Greek PSI negotiations and a pending test of Portugal's ability to raise short-term funds after a recent surge in its long-term bond rates. There have been concerns that the country might be forced to follow Athens and seek a new bailout. Nonetheless the risk-on sentiment was prevalent throughout the session. - USD/JPY continued to test the BoJ resolve as it tested three-month lows in the session at 76.05 where rumored bids were said to be lurking. - The EUR/CHF cross tested its lowest level since the 1.2000 floor was imposed last September. A financial blog commented on retail positions in cross and noted that the ratio of longs to shorts was roughly at 24 to 1. The recent lows had been 1.2020 as names continue to bet that the SNB would defend the floor in the cross - Peripheral yields were tighter in the session. The Spanish outright 10-year Govt bond yield was at levels not seen since Nov 2010 as it approached 4.70% in the session.
Political/ In the Papers: - Germany was said to be continuing to push for budgetary controls over Greece. During yesterday's session, EU official Juncker said the issue of a Greek budget commission was 'off the table'. - Telegraph's Evans-Pritchard noted the resilience of the German labor market, which illustrated the divide between the Northern and Southern European economies. His comments on a FT Deutschland article suggested that Berlin is discussing plans for a â‚¬1.5 trillion 'mega fund' in conjunction with the IMF, although details were not disclosed. Markets are divided on whether Merkel is playing hardball to get Greece to increase its fiscal discipline or if she is willing to have Greece default and exit the EU. - German Bundesbank board member Boehmler said a Greek default or EU exit would cause significant turbulence in financial markets. The official was positive on the reforms being made by Ireland and Portugal, but said Greece is the biggest question mark. The German press article concluded with Boehmler stating that the Bundesbank is 'firmly convinced' that the euro will outlast the debt crisis. - An article in the times reported that Portugal's pension decision to invade its pension funds to meet austerity goals has cost F&C Asset Management Â£2.3B in lost assets. As a result of transferring the pension schemes to the nation's social security fund means that F&C lost mandates to manage bank retirement schemes. F&C's trading update revealed that it no longer managed Â£1.3B on behalf of the BCP Pension Scheme. Portugal withdrew an additional Â£1B of scheme assets in January. Please note that approximately half the assets F&C manages is denominated in euro; against the pound this translates to a reduction in AUM value by Â£1.6B.
***Looking Ahead*** - (PT) Portugal Debt Agency (IGCP) to sell â‚¬1.25-1.50B in 3-month and 6-month Bills - (CZ) Czech Jan Budget Balance (CZK): No est v -142.8B prior - (PE) Peru Jan Consumer Price Index M/M: No est v 0.3% prior; Y/Y: No est v 4.7% prior; Wholesale Prices M/M: No est v 0.4% prior - (RO) Romania Jan Total International Reserves: no est v $37.3B prior - (RU) Russia Jan Reserve Fund: No est v $25.2B prior; Wellbeing Fund: No est v $86.8B prior - (PT) Bank of Portugal publishes Bank Survey on Credit - 6:00 (CZ) Czech Republic to sell up to CZK8.0B in 3.40% 2015 Bonds - 6:30 (PL) Poland to hold exchange offer auction - 8:00 (RU) Russia to sell RUB35B in OFZ 2021 Bond - 7:00 (BR) Brazil Jan PMI Manufacturing: No est v 49.1 prior - 7:00 (US) MBA Mortgage Applications w/e jan 27th: No est v -5.0% prior - 8:00 (US) Jan NAPM Milwaukee: 57.5e v 57.5e - 8:15 (US) Jan ADP Employment Change: 182Ke v 325K prior - 8:30 (SG) Singapore Jan Purchasing Managers Index: 49.4e v 49.5 prior; Electronics Sector Index: 50.1e v 49.7 prior - 8:30 (US) Fed's Plosser speaks on economy in Gladwyne, Pa. - 9:10 (EU) EU President Van Rompuy and EU's Barroso - 9:30 (BR) Brazil Central Bank weekly Currency Flows - 9:45 (UK) BOE to buy Â£1.7B in 2022-2036 Gilts in reverse auction - 10:00 (US) Treasury quarterly refunding statement - 10:00 (MX) Mexico Central Bank Economist Survey - 10:00 (US) Dec Construction Spending M/M: 0.5%e v 1.2% prior - 10:00 (US) Jan ISM Manufacturing: 54.5e v 53.9 prior; Prices Paid: 50.0e v 47.5 prior - 10:00 (MX) Mexico Dec Remittances: $1.9Be v 1.8B prior - 10:30 (US) Weekly DOE Energy Inventories - 11:00 (US) President Obama speaks on economy -11:10 (IR) EU Ashton address EU Parliament on Iran's nuclear program - 11:20 (EU) ECB's Weidmann speaks in Dusseldorf - 12:00 (BR) Brazil Jan Trade Balance: -$1.4Be v $3.8B - 12:00 (IT) Italy Jan New Car Registrations Y/Y: No est v -15.3% prior - 12:00 (EU) EU's Reding speaks in Brussels - 12:30 (PT) Portugal Fin Min Gaspar - 13:00 (IT) Italy Jan Budget Balance: no est v â‚¬8.0B prior; Budget Balance YTD: no est v -â‚¬61.5B prior - 17:00 (US) Jan Domestic Vehicle Sales: 10.50Me v 10.45M prior; Total Vehicle Sales: 13.60Me v 13.48M prior (revised) - 17:30 (IT) Italy PM Monti 01-04 FEB (DE) German Chancellor Angela Merkel travels to China for Official Visit
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WEEKLY Forex Economic Calendar: 24 Feb Fri
13:30 CA- CPI
15:00 US- New Homes Sales
15:00 US- final Univ of Mich Survey
13 Feb Mon
No Major Data 27 Feb Mon
13:30 US- Durable Goods 28 Feb Tues
07:00 DE- Retail Sales
10:00 EZ- flash HICP
13:30 US- GDP
15:00 US- CB Consumer Confidence
15:30 US- EIA Crude 1 Mar Wed
All Day- final Mfg PMIs
08:55 DE- Jobless
13:30 US- PCE Deflator
15:00 CA- Bank of Canada Decision
15:30 US- EIA Crude
19:00 US- Beige Book 2 Mar Thu
13:30 US- Weekly Jobless
23:30 JP- CPI 3 Mar Fri
All-Day SVC PMIs
In response to the latest Fed policy Minutes yesterday, some are pushing the date for the next rate hike back to May. I don't see this sentiment shift in Fed Funds futures. In respnse to this chatter, the EURUSD is trading well of its Tuesday lows. I still feel the Fed hikes in March barring a significantly weaker than expected February jobs report on March 10. The FOMC Minutes left open the door to the RISK of a Rate hike as early as the March 15 FOMC ("very soon"). However, no clear signal was sent.
The Fed appears to want to embark on a policy "normalization" soon. Traders have trouble believing the Fed has the courage to go through with a rate hike. For Yellen build any market credibility, she should hike rates soon.
Fed Funds futures odds for a March Fed rate hike are only 38% (34%), suggesting they are skeptical. Markets now place the odds for rate hikes by June at 112% (116%). That is 100% for one hike (March?) plus 12% for a second move, or possibly something in-between.
On top of the Fed muddle, investors have begun to worry about the risk from key leadership elections in Europe over the rest of the year. Many worry about the possibility of a swing to right as has been seen in the U.K. (Brexit) and U.S. (Trump). Such could be a challenge to the status quo in the EU.
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