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Tuesday June 19, 2012 - 10:21:26 GMT
Trade the News Staff - www.global-view.com/forex-services/TTN/

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TradeTheNews.com EU Market Update: Markets shrug off sharply weaker German ZEW Survey; Spain Bill auction results viewed as decent despite higher yields

Tuesday, June 19, 2012 5:46:22 AM

 TradeTheNews.com EU Market Update: Markets shrug off sharply weaker German ZEW Survey; Spain Bill auction results viewed as decent despite higher yields

***Economic Data***
- (EU) ECB: €4.4B borrowed in overnight loan facility vs. €3.0B prior; €763.6B parked in deposit facility vs. €741.2B prior
- (FR) France Jun Business Confidence Indicator: 92 v 92e; Production Outlook Indicator: -30 v -28 prior; Own-Company Production Outlook: -4 v -4 prior
- (HU) Hungary Apr Avg Gross Wages Y/Y: % v 4.0%e
- (ES) Spain Apr Service Sector Employment Y/Y: -2.9% v -2.3% prior
- (ES) Spain Apr Industrial Orders Y/Y: -4.5% v -6.5% prior
- (SE) Sweden May Unemployment Rate: 8.1% v 7.8%e
- (IS) Israel Jun Inflation Forecast: 2.0% v 2.4% prior
- (IS) Israel May Money Supply Y/Y: 3.0% v 4.5% prior
- (UK) May CPI M/M: -0.1% v 0.1%e; Y/Y: 2.8% v 3.0%e; CPI Core Y/Y: 2.2% v 2.3%e </
>- (UK) May RPI M/M: 0.0% v 0.2%e; Y/Y: 3.1% v 3.3%e; RPI-Ex Mortgage Payments Y/Y: 3.1% v 3.3%e; Retail Price Index: 242.4 v 243.0e
- (UK) Apr ONS House Price Y/Y: +1.4% v -0.4% prior
- (DE) Germany Jun ZEW Economic Sentiment: -16.9 v +2.3e; Current Situation: 33.2 v 39.0e
- (EU) Euro Zone Jun ZEW Economic Sentiment: -20.1 v -2.4 prior
- (EU) Euro Zone Apr Construction Output M/M: -2.7 v 11.4% prior; Y/Y: -5.0% v -2.6% prior
- (ZA) South Africa Q1 Non-Farm Payrolls Q/Q: 0.1% v 0.3% prior; Y/Y: 1.1% v 1.6% prior
- (PO) Portugal May Producer Prices M/M: -0.5% v +0.6% prior; Y/Y: 3.2% v 3.6% prior

Fixed Income:
- (DK) Denmark sold total DKK4.625B in 2014 and 2021 in Bonds
- Sold DKK1.550B in 2% 2014 Bonds; avg yields -0.08% v 0.31% prior
- Sold DKK3.075B in 3% 2021 Bonds; avg yields 1.22% v 1.04% prior
- (ES) Spain Debt Agency (Tesoro) sold total €3.04Bvs. €2.0-3.0B indicated range in 12-Month and 18-Month Bills
- Sold €2.4B in 12-month Bills; Avg Yield 5.074% v 2.985% prior; Bid-to-cover: 2.16x v 1.84x prior; Max Yield 5.200% v 3.099% prior
- Sold €639M in 18-month Bills; Avg Yield 5.107% v 3.302% prior; Bid-to-cover: 4.42x v 3.23x prior; Max Yield 5.350% v 3.404% prior
- (GR) Greece Debt Agency (PDMA) sold €1.3B vs. €1.0B indiacted in 13-week Treasury Bills; Avg Yield 4.31% v 4.34% prior; Bid-to-cover: 2.19x v 2.32x prior
- (ZA) South Africa sold total ZAR2.1B vs.ZAR2.1B indicated in 2017, 2021 and 2023 bonds
- (EU) ECB allotted €167.3B in 7-Day Main Refinancing Tender vs. €125Be
- (HU) Hungary Debt Agency (AKK) sold total HUF50B vs. HUF45B indicated in 3-Month Bills; Avg Yield 7.14% v 7.17% prior; Bid-to-cover: 1.89x v 2.06x prior

*** SPEAKERS/FIXED INCOME/FX/COMMODITIES/ERRATUM ***
***Notes/Observations***
- BRICS and Emerging markets announced IMF pledges for IMF global firewall; IMF now has $456B in funding pledges from 37 countries
- RBA minutes: Rates need to be a little more supportive; Inflation expected at the lower end of 2-3% range over the next year
- Denmark sells 2-year Notes at a negative yield for the first time ever
- Germany Constitutional Court ruling on ESM and Fiscal Pact: Lawmakers win bid over gov't information on ESM; ruling does NOT prevent ESM from taking effect </
>- EU aide: Maintains July 9th target for ESM startup
- Bank of Spain (BOS): Confirmed delay of full bank audit reports until September
- UK inflation comes in lower than expected
- German ZEW registers strongest decline since Oct 1998
- UK inflation continues to move lower
- Spain sells indiacted amount in Bills at sharply higher rates and solid bid-cover ratios
- Second day of G20 Summit in Mexico

***Equities*** </
>Indices: FTSE 100 +0.80% at 5534, DAX +0.40% at 6272. CAC-40 flat at 3067, IBEX-35 +1.3% at 6602, FTSE MIB +0.70% at 13,100, SMI +0.50% at 5966, S&P 500 Futures 1342, +0.10%

- European equity indices opened the session broadly higher, despite mixed trading in the banking sector and disappointing German ZEW data, as markets have rebounded from the losses seen in the prior session. The IBEX-35 has outperformed, as Spain's 10-yr bond yield has moved off of the record highs (above 7.25%), as the country's government auctioned short-term bills. Dealers appear to be move focused on Thursday's auction in which Spain is expected to sell 2014, 2015 and 2017 bonds. Additionally, there continues to be hopes that global central banks could announce additional easing measures, amid Wed's US Fed decision. The German ZEW Economists noted that in their most recent survey, more participants expect the ECB to cut rates than before, but a majority still sees rates being left unchanged. In terms of upcoming equity market events, US shipping name Fedex is due to report its quarterly results and outlook later during the US morning.
- French name Danone [BN.FR] has declined by more than 6%, after cutting its forecast for FY12 operating margins. French banks are trading mixed, amid cautious commentary out of Morgan Stanley. Additionally, a French press report said that the government is considering a 3% tax on dividends, which could be implemented during the summer.
Shares of Home Retail [HOME.UK] have moved higher by over 14%, as the company reported better than expected Q1 results. In other UK movers, Whitbread [WTB.UK] is higher by approx. 7% (issued Q1 sales figures), Chemring [CHG.UK] has lost over 6% (reported H1 sales) and Weir Group has gained over 5% (reaffirmed FY guidance and issued long-term targets). In Italy, Banca Monte Paschi [BMPS.IT is lower by over 3%, underperforming other Italian, as the company is said to have reached an agreement with certain creditor banks. Additionally, following yesterday's close, S&P placed the company's BBB rating on watch negative. Telecom Italia [TIT.IT] has risen by over 4% on press speculation that the firm could seek to spin off its fixed line unit. Spanish banks are mixed as the Bank of Spain confirmed that it asked for the full audit of the country's banks to be delayed, as there is a need to gather additional information. The purpose of the audit is for Spain to determine how much of the €100B in funds will be needed for its banks. In Germany Fraport [FRA.DE] is higher by over 1% (broker upgrade), while SAP [SAP.DE] has gained over 1%, after competitor Oracle preannounced its quarterly results.

Speakers: </
>- Germany Constitutional Court ruling on ESM and Fiscal Pact noted that German lawmakers won bid over gov't information on ESM but the ruling did NOT prevent ESM from taking effect . The court noted that Govt did not inform Parliament sufficiently about the configuration of the ESM
- Bank of Spain (BOS) asked auditors to delay their reports in order to conduct a more thorough study. The central bank asked the four auditors to delay their reports until after the summer instead of by July 31st
- Greece Democratic Left leader Kouvelis commented that Greece would have a coalition govt but might not occur today as there were some outstanding issues to be hammered out
- EU official commented that it expected to revise MOU with Greece and that the upcoming EU meeting on June 21st would only to kick off Greece discussions. He expected Greece to make first steps by proposing "adaptations" (NOTE: Reports have circulated New Greek govt would seek 2-year extension in meeting fiscal target to 2016 (in line with ND pledge)
- Germany ZEW Economists commented that a worsening in Spain banking sector and insecurity over Greek elections contributed to sharp decline in its June Survey. Results were mainly before the Jun 17th Greek election but results afterwards are not significantly better. Risks of pronounced decline in trading partners were very clear with diminishing exports and global growth and Euro Zone rescue package being the main reasons for decline in June survey. Euro Zone situation remained precarious but did not believe Germany would go back into recession/ However nearly all German sectors had a negative outlook for the next six months. The ZEW noted that more participants expected ECB rate cut than before, but majority still saw no change
- Austria Fin Min Fekter reiterated that there was no indication that Italy would seek aid and believed Spain to formally apply for aid soon. She also reiterated the view that fiscal discipline was important and that some countries could lose the right to determine their own budget
- EU's Wieser commented that it was more likely Greece remained in EMU following election results
- Ireland Fin Min Noonan: There is no indication of loan extension at official level
- Ireland Public Expenditure Min Howlin commented that it was unhelpful to speculate on second bailout and he expressed optimism that Ireland to return to markets in 2013
- Cyprus Fin Min reiterated that options remained open on funding from either Russia or vis the EFSF/ESM facilities but have yet to submit applications
- German Savings Banks Association (DSGV) said to have rejected the European deposit insurance
- EU official commented that it had strong preference for ESM to used for bank aid in Spain and believed a fFormal Spanish aid application likely following bank audit. He noted that a number of minister opposed longer Greek times but had yet to discuss the deadlines
- BoJ Gov Shirakawa commented that European debt concerns were severely affecting the Japanese economy via fx, trade and financial system. He reiterated that Japan was closely working with other central banks for liquidity support to protect the financial system.
- Poland Central Bank (NBP) Gov Belka commented that softer May CPI data was a positive surprise but the relative weakness of PLN currency (Zloty) did hurt Polish inflation. He also noted that the currency was vulnerable to financial market volatility. The NBP would not fight CPI via PLN currency intervention
- Czech Central Bank issued its financial stability report which noted that its banking sector remained highly resilient to adverse shocks. Its financial sector remained well capitalized and was able to absorb potential credit and market losses. The Main risk was potential drop in economic activity due to any escalation in the Euro debt crisis. The capital adequacy ratio of the banking sector remained above the 8% regulatory minimum in both main forecast and its more pessimistic forecasts
- Thailand Central Bank cuts 2012 export growth forecast to 8% from 9% prior

Currencies:
- The USD was initially softer against the major currencies during the early part of the European session ahead of the Spanish Bill auction and German ZEW survey. However, price action became quite choppy as headline roulette and numerous events battled for dominance. Germany Constitutional Court ruling on ESM in which lawmakers won bid over gov't information on ESM coupled with Bank of Spain (BOS) confirming a delay of full bank audit reports until September helped to fan the risk aversion sentiment.
- The EUR/USD managed to hold onto slight gains against the USD heading into the NY morning despite a sharply weaker German ZEW survey and must higher yields in the Spain Bill auction results. Its resilience attributed to comments from S&P analyst Kraemer's view that the recent Greek election lowered the chance the nation would exit the Euro and statements from the EU that the July 9th target for ESM startup remained intact
- The GBP weakened after its inflation data came in below expectations with dealer noting that the readings kept BOE Monetary accommodation on the table. The GBP/USD tested 1.5616 before steadying towards 1.5650 area.
- the JPY remained intact in recent ranges with USD/JPY hovering around the 79 handle and EUR/JPY staying below the 100 mark.

Political/ In the Papers:
- The BBC reported British banks anticipate a downgrade by credit agency Moody's. All banks expect to apply for new six month BoE loan tomorrow.
- In the Spanish press, the Spanish Prime Minister stated that the priority is to sever the link between bank bailout and sovereign debt. From the G20 Summit, the PM Rajoy made clear his dissatisfaction with the support mechanism of Spanish banks, which is considered very harmful to link the credit exposure to sovereign risk. The G20 to support the plan to recapitalize Spanish banks, per agreements by the Eurogroup, would be established by a credit line to the Spanish rescue fund (FROB).
- Bank of Spain (BOS) was said to have asked auditors to delay their reports in order to conduct a more thorough study. Press reported the central bank asked the four auditors (Deloitte, KPMG, PwC and Ernst & Young) to delay their reports until after the summer instead of by July 31st. The auditors are conducting the second phase of an external overview of Spain's financial sector.
- The Telegraph's Ambrose Evans-Pritchard believed the Greek parliament is "completely unworkable. He reiterated that it will be nearly impossible for Greece to meet the terms of its aid package.
- The Irish ISME quarterly survey indicated high loan refusals are hindering the domestic economic recovery. Bank credit demand was steady at 37%, while refusal rate increased to 54%, following slight improvements in the previous two quarters. Approximately 80% of businesses that applied for funding noted the difficulty in accessing bank financing. Nearly 100% said the government had negative or no impact on SME lending. Note the responses included different SME sectors excluding agriculture.

***Looking Ahead***
***All times listed for economic events are denominated in Eastern Standard Time (Add 4 hours for GMT equivalent)
- (MX) G20 Leaders Summit in Los Cabos, Mexico
- (IS) Israel May Leading 'S' Indicator M/M: No est v 0.2% prior
- 6:00 (TR) Turkey to sell 9% 2014 Bonds
- 6:00 (EU) EFSF to sell €1.5B in 6-month Bills; Avg Yield % v 0.2033% prior; Bid-to-cover: x v 2.5x prior
- 7:00 (EU) ECB to drain €210.5B targeted in 7-Day Term Deposits to offset Govt Bond Purchases (SMP)
- 7:00 (FI) Finland Parliament votes on the European Stability Mechanism (ESM)
- 7:45 (US) Weekly ICSC Chain Store Sales
- 8:00 (PL) Poland May Employment M/M: 0.0%e v -0.1% prior; Y/Y: 0.3%e v 0.3% prior
- 8:00 (PL) Poland May Avg Gross Wages M/M: -2.5%e v -1.3% prior; Y/Y: 4.0%e v 3.4% prior
- 8:30 (EU) ECB member Kranjec
- 8:30 (CA) Canada Apr Wholesale Sales M/M: No est v 0.4% prior
- 8:30 (US) May Housing Starts: 722Ke v 717K prior; Building Permits: 730K v 723K prior (revised from 715K)
- 8:55 (US) Weekly Redbook Retail Sales
- 9:00 (EU) EU's Almunia speaks at European Parliament Panel in Brussels
- 9:00 (EU) ECB weekly Forex data
- 10:00 (US) Apr JOLTs Job Openings: 3.685Me v 3.737M prior
- 10:00 (MX) Mexico weekly International Reserves data
- 10:30 (UK) DMO to announce size of 0.125% 2029 Gilts for Jun 26th auction
- 11:00 (US) Fed to purchase $1.50-2.00B in Notes
- 11:00 (UK) BOE to announce size of ECTR auction for Wed, Jun 20th
- 11:30 (US) Treasury to sell $30B in 4-Week Bills
- 16:30 (US) Weekly API Crude Oil Inventories
- 17:00 (CO) Colombia Apr Trade Balance: No est v $1.0B prior; Imports CIF: No est v $4.9B prior
- 18:50 (JP) Japan May Merchandise Trade Balance: -¥544.4Be v -¥522.0B prior; Adj -¥347.7Be v -¥480.2Be </
>- 18:50 (JP) BOJ minutes

 

 

 

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