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TradeTheNews.com EU Market Update: BOE quarterly inflation report not as dovish as speculated
Wednesday, August 08, 2012 5:50:21 AM
TradeTheNews.com EU Market Update: BOE quarterly inflation report not as dovish as speculated
- (JP) Japan July Eco Watchers Current Survey: 44.2 v 43.2e; Outlook Survey: 44.9 v 44.0e
- (CH) Swiss July SECO Consumer Confidence: -17 v -4e
- (FI) Finland May GDP Indicator: 0.3 v 0.4% prior
- (DE) Germany Jun Current Account: €16.5B v €€11.9Be; Trade Balance: €17.9B v €14.6Be; Exports M/M: -1.5% v -1.3%e; Imports M/M: -3.0% v -2.0%e
- (AU) Australia July Foreign Reserves: A$46.8B v A$47.2B prior
- (FR) Bank of France July Business Sentiment: 90 v 90e </
>- (FR) France Jun Trade Balance: -6.0B v -€5.0Be
- (CZ) Czech July Unemployment Rate: 8,3% v 8.3%e
- (HU) Hungary Jun Preliminary Trade Balance: €761.7M v €580.0Me
- (ES) Spain Jun Industrial Output WDA Y/Y: -6.3% v -6.2%e; Industrial Output NSA Y/Y: -6.9% v -5.7% prior
- (TR) Turkey Jun Industrial Production WDA M/M: -2.0% v 0.9% prior; Y/Y: 2.7% v 5.9% prior; Industrial Production NSA Y/Y: 2.7% v 2.8%e
- (ZA) South Africa Jun Gold Production Y/Y: -4.0% v -2.9% prior; Mining Production Y/Y: 4.2% v 0.8% prior
- (DE) Germany Jun Industrial Production M/M: -0.9% v -0.8%e; Y/Y: -0.3% v +0.3%e
- (IN) India sold total INR120B vs. INR120B indicated in 3-month and 6-month Bills
- (EU) ECB allotted $7.0B in 7-Day USD liquidity Tender at fixed 0.64% vs. $7.0B prior
- (DE) Germany sold €3.4B in 1.75% Jun 2022 Bunds; Avg Yield 1.42% v 1.31% prior; Bid-to-cover: 1.8x v 1.5x prior
*** SPEAKERS/FIXED INCOME/FX/COMMODITIES/ERRATUM ***
- S&P cuts Greece's sovereign outlook to negative
- Spain said it would not seek aid beyond current banking sector agreements if it came with further conditions attached
- BOE inflation report not as dovish as financial press made it out to be
- Germany 10-year Bund auction results seen as solid
>FTSE 100 -0.40% at 5818, DAX -0.50% at 6934, CAC-40 -0.60% at 3431, IBEX-35 -2% at 7069, FTSE MIB -0.70% at 14,548, SMI -0.40% at 6434, S&P 500 Futures -0.30% at 1393
- European equity indices are trading lower, led by weakness in the Spanish IBEX-35, which has tracked the decline in Spanish 2-year note prices. Banks are mostly in negative territory and underperformers include Spanish financials, Credit Agricole, ING and Deutsche Bank. Mining firms are trading higher, supported by better than expected earnings from Rio Tinto.
- Dutch bank ING [INGA.NL] is lower by over 1% on weaker than expected Q2 results. The company noted that its earnings were hurt by its banking unit, which had y/y declines in its ROE and net interest margins. Additionally, the banking unit had a y/y increase in loss provisions. Swisscom [SCMN.CH] has declined by ~1%, as the company's cut its FY sales forecast citing the strength in the Swiss Franc. In London, Rio Tinto is trading higher, after the company reported better than expected H1 net profits, driven by the iron ore unit. Standard Chartered [STAN.UK] has rebounded by over 3%, following the sharp losses seen on yesterday session, amid reports that NY regulators are investigating alleged transaction related to Iran. Small cap pharmaceutical company BTG [BTG.UK] is lower by over 7%, after announcing disappointing Phase II data on its sepsis treatment (partner AstraZeneca has lost over 1%). Shares of Aquarius Platinum [AQP.UK] are lower by more than 3% on weaker than expected FY results. In other UK movers, Old Mutual [OML.UK] is trading slightly lower (issued H1 results), while Cobham [COB.UK] is lower by over 4% (reported H1 results). UK companies being weighed down by ex-dividend factors include Barclays, BP and Royal Dutch Shell. German steelmaker Kloeckner [KCO.DE] is lower by more than 3%, as the company cut its FY outlook. Shares of Fraport [FRA.DE] have declined by over 1.5% after the company reported a weaker than expected H1 operating profit. Axel Springer [SPR.DE] is lower by over 3%, as the firm issued Q2 sales which missed market expectations.
>- Bank of England (BOE) Quarterly Inflation Report did cut the growth and inflation outlook (as expected). The BOE forecasted 2012 GDP under 1% v 1.25% prior, 2013 over 2%. On inflation the BOE forecasted inflation would likely below 2% from late 2013. Decline in construction was at odds with survey data and could not be certain how long productivity weakness would persist. Underlying demand growth to remain muted in near term, but real income growth, QE, FLS should spur modest recovery. Overall picture was one of further decline in the CPI.
- BOE Gov King: MPC will do all it can to secure an economic recover but still a long way to go. Inflation forecast did not suggest urgent need for action and more time was needed to assess where the economy was at
- Germany Economic Adviser Bofinger (Wisemen) stated that there was no justification for current peripheral bond yields and that the ECB should act. He added that the risk of the EMU breaking apart was increasing
- German CDU (coalition) Dep leader Meister commented that ECB bond buying should warn speculators off Euro. CB's Draghi plan was not problematic and noted that German Chancellor Merkel and ECB's Weidman had different roles. He added that Germany had certain flexibility on Greek targets but would be reluctant to agree on further aid to Greece
- Japan PM Noda stated that he could not set a definitive date for dissolution of Parliament and still hoped to win tax hike approval through 3 party agreement
- S&P sovereign analyst Ogawa commented t6hat political risk is the biggest negative for Japan's sovereign rating
- India Fin Min Chidambaram commented that a weakening of the INR currency (rupee) would add to inflationary pressure and hurt corporate performance
- FX markets were in consolidation and take-profit mode in a very quiet European morning. The European currencies were mildly softer led by the GBP ahead of the BOE's quarterly inflation report.
- The EUR/USD retraced its price movement after several attempts to break above the 1.2450 option barrier failed on Tuesday. The pair was at 1.2360 as the NY morning approached
- The GBP was off session lows as the BOE quarterly inflation report was not as dovish as expected. It did cut the 2012 growth to 1.0% from 1.25% prior but above the speculation it could be revised to 0.0% (flat). The GBP/USD was at 1.5580 ahead of the report and tried to move above the 1.56 handle but was apring some of the gains as the NY morning approached. Update: GBP firmed above 1.5640 as the NY morning began after BOE Gov King noted that a rate cut would harm some institutions and not change the economic outlook significantly
- Italian and Spanish bond yields were steady, with markets so far showing little reaction to reports that Spain would not seek aid beyond current banking sector agreements if it came with further conditions attached.
Political/ In the Papers:
- Ratings agency S&P revised Greece's sovereign outlook to negative, affirming its rating a CCC. Following delays in implementing budgetary consolidation measures and a worsening Greek economy, S&P believed Greece is likely to require additional financing for 2012 under the EU/International Monetary Fund (IMF) program (EU/IMF Program).
- The Telegraph's Evans-Pritchard noted that the rebound in a key global money supply indicator could be a positive sign for industrial production. According to data from Henderson Global Investors, a gauge of global M1 has rebounded and this could be significant because M1 is seen as a leading indicator for industrial output in the 6 months ahead.
***All times listed for economic events are denominated in Eastern Standard Time (Add 4 hours for GMT equivalent)
- (EU) ECB maintenance period ended Aug 7th
- (CA) Bank of Canada's and FSB's Carney to Speak in the U.K.
- 07:00 (US) MBA Mortgage Applications w/e Aug 3rd: No est v 0.2% prior
- 07:00 (ZA) South Africa Jun Manufacturing Production M/M: 0.4%e v 2.7% prior; Y/Y: 3.0%e v 4.2% prior
- 08:00 (HU) Hungary Central Bank Minutes
- 08:00 (BR) Brazil July IBGE Inflation IPCA M/M: 0.4%e v 0.1% prior; Y/Y: 5.1%e v 4.9% prior
- 08:00 (CL) Chile July CPI M/M: -0.1%e v -0.3% prior; Y/Y: 2.5%e v 2.7% prior; CPI Ex Perishables & Fuel M/M: 0.1%e v 0.0% prior
- 08:30 (CL) Chile Central Bank's Traders Survey
- 08:30 (US) Q2 Preliminary Nonfarm Productivity: +1.4%e v -0.9% prior; Unit Labor Costs: 0.5%e v 1.3% prior
- 09:00 (MX) Mexico May Gross Fixed Investment: 7.1%e v 8.5% prior
- 09:45 (UK) BOE to buy £1.0B in 2019-2025 in reverse auction
- 10:30 (US) Weekly DOE Crude Oil Inventories:
- 11:00 (US) Fed to buy $1.50-2.00B in bonds
- 11:30 (BR) Brazil Central Bank weekly currency flow
- 11:30 (BR) Brazil Jun Commodity Price Index M/M: No est v -1.4% prior; Y/Y: No est v 2.6% prior
- 13:00 (US) Treasury to sell $24.0B in 10-Year Notes
- 17:00 (CO) Colombia Jun Exports: No est v $5.2B prior
- 20:30 (CN) China July CPI Y/Y: 1.7%e v 2.2% prior </
>- 20:30 (AU) Australia July Employment Change: +10.0Ke v -27.0K prior; Unemployment Rate: 5.3%e v 5.2% prior
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