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TradeTheNews.com EU Market Update: Major European Manufacturing PMI data at fresh 3-year lows
Tuesday, July 24, 2012 5:35:23 AM
TradeTheNews.com EU Market Update: Major European Manufacturing PMI data at fresh 3-year lows
***Economic Data***
- (FI) Finland Jun PPI M/M: -0.7% v -0.3% prior; Y/Y: 0.5 v 0.9% prior
- (FI) Finland Jun Unemployment Rate: 7.9 v 9.5% prior
- (FR) France July Business Confidence: 90 v 92e; Production Outlook Indicator: -45 v -35e; Own-Company Production Outlook: -8 v -6e
- (FR) France July Preliminary PMI Manufacturing: 43.6 v 45.5e (3-year low); PMI Services: 50.2 v 47.5e (6-month high)
- (HU) Hungary May Retail Trade Y/Y: -2.5% v -2.0%e
- (CZ) Czech July Business Confidence: 2.3 v 4.6 prior; Consumer Confidence: -28.3 v -29.3 prior; Composite: -3.8 v -2.2 prior
- (ZA) South Africa May Leading Indicator: 130.8 v 131.9 prior
- (ES) Spain Jun Producer Prices M/M: -0.5% v -0.1%e; Y/Y: 2.5% v 3.2% prior
- (DE) Germany July Advanced PMI Manufacturing: 43.3 v 45.1e (three-year low); PMI Services: 49.7 v 50.0e - (EU) Euro Zone July Advanced PMI Manufacturing: 44.1 v 45.2e (three-year low); PMI Services: 47.6 v 47.1e; PMI Composite: 46.4 v 46.4e
- (IT) Italy Jun Non-EU Trade Balance: +€1.5B v +€306M prior month
- (UK) Jun BBA Loans for House Purchase: 26.3K v 31.2Ke v 30.2K prior; lowest since Jan 2009
- (HK) Hong Kong Jun Trade Balance (HKD): -44.7B v -39.5Be; Exports Y/Y: -4.8% v +1.8%e; Imports Y/Y: -2.9% v +1.5%e
- (IE) Ireland Jun Property Prices M/M: -1.1% v +0.2% prior; Y/Y: -14.4% v -15.3% prior
Fixed Income:
- (NL) Netherlands Debt Agency (DSTA) sold €1.76B vs. €1.5-2.5B indicated range in 2014 and 2028 bonds
- Sold €875Min 3.75% July 2014 DSL Bond; Avg Yield 0.003% v 0.523% prior
- Sold €885M in 5.5% Jan 2028 DSL; Avg Yield 2.181% v 3.554% prior
- (ES) Spain Debt Agency (Tesoro) sold total €3.05B vs. €2.0-3.0B indicated range in 3-Month and 6-Month Bills
- Sold €1.63B in 3-month Bills; Avg Yield 2.434% v 2.362% prior; Bid-to-cover: 2.94x v 2.60x prior; Max Yield 2.650% v 2.500% prior
- Sold €1.42B in 6-month Bills; Avg Yield 3.691% v 3.237% prior; Bid-to-cover: 3.02x v 2.82x prior; Max Yield 3.950% v 3.369% prior
- (ZA)) South Africa sold total ZAR2.1B vs. ZAR2.1B indicated in 2023, 2041 and 2048 bonds
- (CH) Switzerland sold CHF688.5M in 3-Month Bills; Avg Yield -0.600% vs. -0.699% prior
- (EU) ECB allotted €130.7B vs €153Be in 7-Day Main Refinancing Tenderat fixed 0.75%
- (HU) Hungary Debt Agency (AKK) sold HUF45B vs. HUF45B indicated in 3-Month Bills; Avg Yield 6.86% v 6.89% prior; Bid-to-cover: 1.79x v 2.95x prior
*** SPEAKERS/FIXED INCOME/FX/COMMODITIES/ERRATUM ***
***Notes/Observations***
- China July HSBC PMI Manufacturing at 5-month high but still registers its 9th month of contraction
- Moody's cuts core EMU AAA-rated outlook including Germany to negative; change is due to increased likelihood of a Greek Euro exit and need for greater financial support for the weaker nations
- Fed's Raskin: Expects to talk about QE3 at the next FOMC meeting
- The big picture ideas for saving the Euro currency will take years, not months, to come to fruition - but the threat of collapse is immediate
- Spain Bill auction results relatively smooth
- Major European PMI data mixed with Manufacturing at 3-year lows
***Equities*** Indices: +0.10% at 5540, DAX -0.10% at 6412, CAC-40 -0.10% at 3099, IBEX035 -1.8% at 6066, FTSE MIB -0.90% at 12,594, SMI flat at 6180
- European equity markets opened the session higher, following the sharp losses seen on Monday's session. However, equity indices have since pared gains amid losses in the Spanish and Italian equity markets. Banks are trading broadly lower and underperformers in the sector include BBVA [BBVA.ES], Santander [SAN.ES], Credit Agricole [ACA.FR] and BNP [BNP.FR]. Spanish and Italian banks are trading in negative territory amid higher peripheral bond yields, despite actions taken by regulators to deter short selling in the two countries. Resources-related companies are mostly higher, despite mixed commodity prices. As for corporate earnings, companies due to report during the US morning include Altria, AT&T, Dupont, Lockheed Martin, Peabody Energy, UPS and Whirlpool.
- In London, BP [BP.UK] opened slightly higher after Russia's Rosneft confirmed that it was interested in the UK firm's stake in the TNK-BP joint venture. Fund manager Man Group [EMG.UK] has gained over 8% after the company announced H1 results and additional cost cuts. Imperial Tobacco [IMT.UK] has lost ~1%, following the release of its trading update. In other UK movers, shares of digital receiver maker Pace Plc [PIC.UK] have advanced by over 12% on the company's H1 results and outlook commentary. In Germany, automakers have underperformed the DAX, amid speculation that Daimler [DAI.DE] could report weaker than expected results for Q2. The company is due to report earnings on Wed, July 25th. Among technology companies, SAP [SAP.DE] has traded slightly higher after reaffirming its FY outlook, while Software AG [SOW.DE] has gained over 5% following the release of its Q2 earnings report. Computer board maker Kontron AG [KBC.DE] has lost over 9% after issuing a profit warning. Dialog Semiconductor [DLG.DE] has declined by over 5%, after reporting weaker than expected Q2 sales. French auto parts manufacturer Faurecia [EO.FR] is lower by more than 1%, as the company cut its FY operating profit forecast. STMicroelectronics [STM.FR] is lower by more than 2.5%, after the company reported weaker than expected Q2 earnings and Q3 guidance. In Switzerland, Swatch [UHR.CH] has gained over 1% after reporting better than expected H1 sales. Dutch telecom KPN [KPN.NL] is lower by ~1%, as the lowered its FY dividend. TomTom [TOM2.NL] has moved higher by over 10%, following the release of better than expected quarterly results. Belgian telecom services firm Mobistar [MOBB.BE] has lost over 7%, after the release of disappointing earnings.
Speakers: - EU's Juncker commented on Moody's sovereign outlook changes noting that the EMU has solid fundamentals and that Moody's decision confirmed strong sovereign ratings of some Euro members. Lastly he stressed that EU had strong commitment to ensure stability of Euro Area
- Spain Debt Agency commented that it had covered approx 68.6% of its medium and long-term issuance needs for 2012 and could continue its prudent issuance strategy
- EU's Wieser commented that it would be problematic if Greece did not meet the EU/IMF conditions. The Spanish situation was unpleasant and that financial markets were extremely nervous. Spain was funded until the autumn and hopes the bond spread tighten as heightened spreads were not manageable in the long run
- Austria Fin Min Fekter stated that she expected the troika report on Greece in September and added that a Greek exit currently was not being discussed. Until the Troika report was received have to assume that Greece would stand on its own feet by 2020. She reiterated that Greece must fulfill program conditions for more aid
- Greece PM Samaras commented that thecountry's recession could be deeper then the projected contraction of 7% with the aim is to curb the decline. He forecasted that the country could return to economic growth in 2014 and that its unemployment rate could be brought down to 10% from 24% in 4 years
- Spain region of Catalonia Econ Min commented that the European policing was harming Spain
- Goldman Sachs strategist Jim O'Neill noted that the best case for Spain was more actions from ECB to stabilize the markets and he stressed the ECB needed to do a lot more
- Poland Central Bank's Bratkowski (dovish) commented that he did not see inflation threat in the next quarters
- New BoJ board member Kiuchi (dove) commented that the BoJ should consider additional monetary easing to tackle deflation. Inflation target of 1% would be adequate, unclear if it could be attained by FY14.
- New BoJ Board Member Sato commented that buying of foreign bonds was possible as an easing measure and BoJ could also purchase more risk assets. Direct buying of government debts was monetization, which should be avoided. Not clear how current BoJ easing could lead to inflation. Accepted the 1% inflation target, but says 2% was ideal
- Japan MoF official: Interventions did halt last year's rise in the JPY currency
- Bank of Korea June Minutes noted that inflationary pressures continued to remain high
And needed to maintain rate normalization stance. Current interest rates remained accommodative but needed to secure room to cope with further worsening of economic conditions
Currencies:
- The Euro remained on steady footing around 1.21 handle despite real fears that Spain would need a full bailout and Italy could follow as contagion once again threatened to engulf the whole euro project. The weaker German PMI data did prompt a test of 1.2100 but the Euro remained composed given the prospects of contagion but near the lower end of its range ahead of the NY morning.
- Spain's five-year yield rose above the 10-year for the first time as the inverted yield curve underscored the stress in the euro zone.
- The German Bund contract was broadly lower following the German sovereign rating outlook revision by Moody's. Dealers noted that price action saw a switching out of Bunds into Treasury's by real money accounts
- The JPY currency was steady to slightly stronger against the major pairs as various Japanese officials continue to provide verbal barbs to contain the yen's strength. The USD/JPY hovered around the 78.20 leve throughout the session.
Political/ In the Papers:
- Spain's El Economista reported that according to sources within the finance ministry, the region of Andalusia was said to have spent months in discussions for an €800M loan. The negotiation is with a bank pool which would be the first privately funded operation so far this year.
- According to unnamed sources close to the government, Spain may consider requesting a full bailout if the European Central Bank does not resume its government bond purchase program (SMP). The Spanish Economic Minister de Guindos will travel to Germany to meet with the German Finance Minister later today.
- The need for collateral has driven certain Italian and Spanish banks to repurchase debt securities. Banks in Italy and Spain have been large borrowers from the ECB. Therefore these banks have to give collateral to the ECB (such as covered bonds and mortgage-backed securities) in exchange for funds.
- The Telegraph's Ambrose Evans-Pritchard noted that the recent spike in Spain's short-term yields has led to concerns about the sustainability of the country's debt costs. Catalonia was said to be preparing bail-out request - Telegraph's Ambrose Evans-Pritchard. In term of Catalonia, Spain's most indebted region, a related FT article noted that the region has about €42B in debt. Approximately €13.5B of this debt is due to mature in 2012 (€5.7B in H2).
- Threadneedle Investments' Toby Nangle commented in the Times that the British government's deficit was said to be excluding over £20B. The cash is accumulating in the Asset Purchase Facility Fund instead of being paid into the Treasury's coffers. The UK approach differs from that of the US, where in the US the Fed pays regular quarterly dividends of earnings from QE to the Treasury.
***Looking Ahead***
***All times listed for economic events are denominated in Eastern Standard Time (Add 4 hours for GMT equivalent)
- (ES) Spain Fin Min de Guindos to meet with Germany Fin Min Schaeuble (evening) in Berlin
- (GR) EU/IMF/ECB Troika returns to Greece
- (RO) Romania Jun Money Supply Y/Y: No est v 12.3% prior
- (UK) DMO to sell £4.0B in 0.125% Index-Linked Mar 2044 Gilt via syndication at +3bps over 2042 I/L Gilt
- 07:00 (EU) ECB to drain €211.5B in 7-Day Term Deposits to offer Govt Bond Purchase Program (SMP)
- 07:45 (US) Weekly ICSC Chain Store Sales
- 08:00 (HU) Hungary Central Bank Interest Rate Decision: Expected to leave the Base Rate unchanged at 7.00%
- 08:30 (CA) Canada May Retail Sales M/M: +0.5%e v -0.5% prior; Retail Sales Less Autos M/M: +0.1%e v -0.3% prior
- 08:45 (US) Fed Chairman Bernanke
- 08:55 (US) Weekly Redbook Retail Sales
- 8:58 (US) July Preliminary Markit PMI Manufacturing: 52.0e v 52.5 prior
- 09:00 (EU) ECB Forex Reserves
- 09:30 (BR) Brazil Jun Current Account: -$4.6Be v -$3.5B prior; Foreign Direct Investment (FDI): $5.8Be v $3.7B prior
- 09:30 (EU) ECB calls for bids in 3-Month Tender
- 09:45 (UK) BOE to buy £1.0B in 2027-2060 in reverse auction
- 10:00 (US) July Richmond Fed Manufacturing Index: -1e v -3 prior - 10:00 (US) May House Price Index M/M: 0.4%e v 0.8% prior
- 11:00 (BR) Brazil to sell I/L 2016, 2018 and 2022 Bonds
- 11:00 (US) Fed to Purchase $1.50-2.00B in Notes
- 11:30 (US) Treasury to sell 52-Week Bills
- 11:30 (US Treasury to sell $30B in 4-Week and $25B in 52-week Bills
- 13:00 (US) Treasury to sell $35B in 2-Year Notes
- 16:30 (US) Weekly API U.S. Crude Oil Inventories
- 19:50 (JP) Japan Jun Merchandise Trade Balance: -¥140.0Be v -¥907.3B prior; Adj Merchandise Trade Balance: -¥402.0Be v -¥657.2B prior - 21:30 (AU) Australia Q2 CPI Q/Q: 0.6%e v 0.1% prior; Y/Y: 1.3%e v 1.6% prior
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