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Back to The Headlines

Monday August 20, 2012 - 10:30:08 GMT
Trade the News Staff - www.global-view.com/forex-services/TTN/

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TradeTheNews.com EU Market Update: Hopes of ECB action to cap bond spread aids risk appetite; Spain 10-year yield at 3-month lows approaching the 6.00% level

Monday, August 20, 2012 5:49:20 AM

 TradeTheNews.com EU Market Update: Hopes of ECB action to cap bond spread aids risk appetite; Spain 10-year yield at 3-month lows approaching the 6.00% level

***Economic Data***
- (RU) Russia July Real Retail Sales M/M: 1.6% v 2.6%e; Y/Y: 5.1% v 6.2%e
- (RU) Russia July Unemployment Rate: 5.4% v 5.5%e
- (JP) Japan July Convenience Store Sales Y/Y: -3.3% v -2.6% prior
- (NL) Netherlands Aug Consumer Confidence: -32 v -33e
- (IS) Israel Aug Inflation Forecast: 2.6 v 1.9% prior
- (IS) Israel July Money Supply Y/Y: 6.3% v 1.8% prior
- (TW) Taiwan July Export Orders Y/Y: -4.4% v -3.0%e (5th straight month of declines)
- (TW) Taiwan Q2 Current Account Balance: $10.9B prior
- (GR) Greece Jun Current Account: -€0.3B v -1.2B prior
- (EU) Euro Zone Jun Construction Output M/M: -0.5% v -0.2% prior; Y/Y: -2.8% v -8.1% prior

Fixed Income
- (SK) Slovakia Debt Agency (ARDAL) sold €63.3M in 2025 Bonds; yield 3.85%; bid-to-cover 2.03x
- (NO) Norway sold NOK3,0B vs. NOK3.0B indicate3d in 10-month Bills; Yield 1.62%
- (NL) Netherlands Debt Agency (DSTA) sold total €2.07B vs. €4.0B indicated in 3-month and 6-month Bills
- Sold €1.06B vs. €2.0B indicated in 3-month Bills; Yield: -0.043% v -0.051% prior; Bid-to-cover: 3.13x v 2.89x
- Sold €1.01B vs. €2.0B indicated in 6-month Bills; Avg Yield: -0.021% v -0.020% prior; Bid-to-cover: 2.59x v 2.05x

*** SPEAKERS/FIXED INCOME/FX/COMMODITIES/ERRATUM ***
***Notes/Observations***
- ECB considering establishing interest rate ceiling levels for troubled states as part of its future bond purchase program
- Spain Econ Min de Guindos: Would like to see the ECB commit to massive, open-ended sovereign-debt purchases before it asks for help
- ECB's Asmussen: Greek exit would be manageable but not preferred

***Equities*** </
>Indices: FTSE 100 +0.05% at 5854, DAX +0.50% at 7075, CAC-40 +0.40% at 3501, IBEX-35 +0.90% at 7626, FTSE MIB +1.1% at 15,290, SMI flat at 6529, S&P 500 Futures +0.10% at 1417

- European equity indices are trading mixed. The Spanish IBEX-35 and Italian FTSE MIB have outperformed, amid the sharp decline being seen in Spain bond yields (over the weekend a German press report said that the ECB was mulling a plan to cap peripheral bond yields). The FTSE 100 has underperformed on declines in resource and energy related companies. Copper prices are lower, as concerns that Chinese officials will be less aggressive with regard to easing measures drove the Shanghai Composite to lows not seen since 2009. In the banking sector, outperformers include Italian banks, while banks in Germany and Bankia have lagged.
- Shares of Norwegian food company Rieber & Son [RIE.NO] have risen by over 75%, after the company received a NOK6.1B bid from Orkla [ORK.NO]. UK builder Bovis Homes [BVS.UK] is higher by over 2%, following the release of H1 earnings. Platinum miner Lomnin [LMI.UK] has traded lower by a further 4% on the session on continued concerns related to the firm's Marikana mine in South Africa. Over the weekend, it was speculated that the firm could undertake a $1B rights offering in order to cover losses related to the mine. Additionally, Lonmin issued an ultimatum to the mine's ~3,000 workers. Shares of Deutsche Bank [DBK.DE] have underperformed, following a weekend press report which said the firm was among the banks which are being probed by US prosecutors in relation to alleged transactions with Iran.

Speakers: </
>- ECB had no comment on financial press reports that the central bank planned to cap peripheral sovereign yields
- German Fin Min spokesperson stated that he was not aware of any ECB plans to target bond spreads
- German govt spokesperson Seibert reiterated the view that should not expect big decisions on Greece this week at the Merkel-Samaras meeting. He also reiterated that Germany was doing what is best for the Euro
- German Finance Ministry's Kotthaus stated that the Greece framework was fixed in terms of time and amounts
- Germany's IW Institute Heuther commented that the ESM banking license would 'bust thedam
- German Bundesbank Monthly Report: Remain critical of ECB bond buying as it comes with considerable risks to stability
- Spain People's Party official Pon reiterated the view that ECB had to defend Euro from speculators' attacks. He also noted that the EU was aware on what Spain was prepared to do on its budget
- Finland European Affairs Min Stubb commented that there would be no new package for Greece without reforms
- Japan Chief Cabinet Secy Fujimura commented that ministers to discuss debate measures against South Korea on Tuesday, Aug 21st
- China official commented that no new property curbs were required and reiterated the need to enforce existing curbs
- China Commerce Ministry asked US to cancel some renewable energy probe noting that renewable energy subsidies by US States violated international trade rules

Currencies:
- The EUR/USD was firmer in the session but remained contained within its Aug trading range with last week's price volatility the lowest in five years. The pair was at 1.2360 area as the NY morning approached.
- The JPY was only a tad softer against the major pairs despite the pick up in risk sentiment. The USD was off its 1-month highs as it hovered around the 79.50 araea throughout the European morning. The EUR/JPY cross was at 98.30.
- Peripheral were lower aided by press speculation that the ECB was considering establishing interest rate ceiling levels for troubled states as part of its future bond purchase program. The Spanish 10-year bond was at 3-month lows and nearing the 6.00% level.

Political/ In the Papers:
- The Spanish government may consider additional austerity to meet its 2012 deficit target if the tax revenue outcome turns out to be inadequate. The 2012 deficit-to-GDP target is at 5.3% (and is 3.0% for 2013).
- According to Citigroup, liquidity conditions for Spanish government bonds have improved. Citing pledges by the ECB, the bid-offer spread of Spain's 10-yr bonds has declined to 0.62 percentage points from an average of 0.85 in July.
- The former Bank of England inflation hawk Andrew Sentance said additional quantitative easing measures are unlikely to have a large impact on growth. He offered support to supply-side policies to boost growth.
- The FT reported that economists expect Q2 UK GDP data to be revised higher, as subsequent economic data indicated some improvement in industrial production, construction numbers, and it is anticipated that the service sector will also show better data.

***Looking Ahead***
***All times listed for economic events are denominated in Eastern Standard Time (Add 4 hours for GMT equivalent)
- (GR) Greece €3.2B bond redemption (**Reminder: debt agency sold €4.0B in bills last week to cover maturity)
- 06:00 (PT) Portugal July Producer Prices M/M: No est v -0.7% prior; Y/Y: No est v 2.7% prior
- 07:30 (BR) Brazil Central Bank Weekly Economists Survey
- 08:00 (PL) Poland July Sold Industrial Output M/M: -3.0%e v -2.0% prior; Y/Y: 4.0%e v 4.4% prior
- 08:00 (PL) Poland July Producer Prices M/M: -0.2%e v -0.5% prior; Y/Y: 3.8%e v 4.4% prior
- 08:00 (RO) Romania to sell RON500M in Bills
- 08:30 (US) July Chicago Fed National Activity Index: No est v -0.15 prior
- 08:30 (CL) Chile Q2 Current Account: -$900Me v -$346M prior
- 08:30 (CL) Chile Q2 GDP Q/Q: 1.6%e v 1.4% prior; Y/Y: 5.4%e v 5.6% prior
- 09:00 (FR) France Debt Agency to sell combined €7.0B in 3-month, 6-month and 12-month bills
- 09:30 (EU) ECB calls for bids in 7-Day Main Refinancing Tender
- 09:30 (EU) ECB announces weekly settlements in Govt Bond Purchase program (SMP)
- 09:45 (UK) BOE to buy £1.0B in 2015-2019 in reverse auction
- 11:00 (US) Fed to purchase $4.25-5.00B in Notes
- 11:30 (US) Treasury to sell combined $60B in 3-Month and 6-Month Bills
- (AU) RBA Board August Minutes

 

 

 

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