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Thursday October 16, 2014 - 10:11:48 GMT
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| | Email EU Market Update: Peripheral spreads continue to widen; Spain auction results failed to sell the full indicated amount

Thu, 16 Oct 2014 5:22 AM EST

- Chinese economic data mix but New Yuan Loans hit a 3-month high (CNY857B vs. CNY745Be)
- Darkening growth outlook and dis-inflation continued to weigh upon global markets; peripheral spreads continue to widen
- Spain auction results saw it fail to sell the upper end at its upper end of its indicated range (first time in many quarters)

***Key Economic Data in session***
- (IT) Italy Aug Total Trade Balance: 2.1B v 6.9B prior; Trade Balance EU: 0.4B v 3.4B prior
- (EU) Euro Zone Aug Trade Balance SA: 15.8B v 13.3Be; Trade Balance NSA: 9.2B v 21.6B prior
- (EU) Euro Zone Sept CPI M/M: 04% v 0.4%e; Y/Y: 0.3% v 0.3%e; CPI Core Y/Y: 0.8% v 0.7%e

Fixed Income:
- (ES) Spain Debt Agency (Tesoro) failed to sell the upper end at its upper end of its indicated range (first time in many quarters); sold total 3.2B vs. 2.5-3.5B indicated range in 2024 and 2028 Bonds
- Sold 2.15B in 2.75% 2024 bono; Avg Yield 2.196% v 2.075% prior; Bid-to-cover 1.64x v 1.51 prior; Maximum Yield: 2.227% v 2.086% prior
- Sold 1.05B in 5.15% Oct 2028 Bono; Avg Yield 2.842% v 3.514% prior; Bid-to-cover: 1.33x v 2.51x prior; Max Yield 2.909% v 3.524% prior; Tail: bps 1.0bps prior
- (FR) France Debt Agency (AFT) sold total 7.497B vs. 6.5-7.5B indicated range in 2017, 2018 and 2019 Oats
- Sold 3.142B in 4.25% 2017 Oat; Avg Yield 0.05% v 0.57% prior; Bid-to-cover:1.59 x v 3.32x prior
- Sold 1.47B in 1.0% Nov 2018 Oat; Avg Yield 0.17% v 0.94% prior; Bid-to-cover: 2.38x v 2.23x prior
- Sold 2.885B in 0.50% 2019 Oat; Avg Yield: 0.34% (record low) v 0.39% prior; Bid-to-cover: 1.88x v 1.59x prior

Indices [Stoxx50 -0.7%
, FTSE 100 -0.2% at 6,197, DAX -0.3% at 8,542, CAC-40 -0.7% at 3,913, IBEX-35 -1.7% at 9,670, FTSE MIB -1.4% at 18,047, SMI -0.9% at 8,066, S&P 500 Futures -0.2% at 1,842]

- Market Focal Points/Key Themes: Equity markets open slightly higher following the sharp losses on Wed and mixed corporate reports, Markets later pare gains as peripheral equity markets underperform amid wider debt spreads (Greek concerns), Greek equities decline over 1.5% (follow-through selling), Earnings in focus (Nestle sales below ests, Roche sales above ests, Syngenta sales in line, Remy Cointreau sales in line, Carrefour reaffirms outlook, Diageo Q1 sales below ests), AbbVie news continues to weigh on Shire, US morning earnings (United Health, Goldman, Baker Hughes, Philip Morris, Delta)

By Sector
- Consumer Discretionary
[NESN.CH -2% (9-month sales below ests); Carrefour CA.FR flat (reaffirmed outlook), Remy Cointreau RCO.FR +1% (Q2 organic sales inline)]
- Industrials [Jenoptik JEN.DE -2% (cut outlook)]
- Utilities [EDF EDF.FR -2% (share placement speculation)]
- Healthcare [Shire SHP.UK -10% (AbbVie's board recommends shareholders reject merger); Roche ROG.CH +1% (Q3 sales above ests, reaffirmed outlook) ]
- Stoxx50 sectors [Utilities -0.9%, Industrials -0.3%, Consumer Cyclical -0.1%, Financials -0.1%; Technology +1% (supported by ASML), Consumer Non-Cyclical +0.6%, Telecom +0.4%, Basic Materials +0.4%, Energy +0.3%]

- German Chancellor Merkel reiterated her view that the Euro area crisis was not fully overcome
and stressed that EU Member States must adhere fiscal rules
- ECB's Coene (Belgium): Signs of recovery remain faint
- ECB official stated that it had not decided on new Greek collateral rule but was discussed recently (refutes earlier press reports)
- Swiss SECO Oct Economic Forecasts cut both 2014 and 2015 GDP growth outlook citing Euro Zone weakness. It now saw 2014 GDP at 1.8% and 2015 growth at 2.4% (both 0.2% lower than its June forecasts). It maintained its inflation views.

Currencies/Fixed Income:
- FX encountered a liquidation theme on Wed after poor US economic data. It had seemed that hope was pinned that rebounding US economy would help to bail out the rest of the world. The Sept Retail Sales data seemed to underpin the recent FOMC concerns that a strong USD was a headwind . The greenback had difficulties rebounding throughout today's session
- The stronger JPY currency was weighing upon the Nikkei. The USD/JPY could not muster to stay above the 106 handle
- Darkening growth outlook and dis-inflation continued to weigh upon global markets; peripheral spreads continue to widen. Greece 10-year gov't yield was above the 8.0% level for its highest reading since Feb and headed into the US morning up almost 80bps at 8.40%
- The Spanish bond auction result saw a rare miss for the debt agency in getting its upper end of the indicated range. The Spanish 10-year gov't yield surged to test 2.29%, higher by 9bps immediately following its auction results and higher by almost 20bps in session

Political/In the Papers:
- (GR) Greece now said to be reconsidering financing itself entirely using the market next year; may seek some sort of EMU financing as a replacement to IMF aid
- (IT) Italy PM Renzi: Cabinet approves 2015 budget draft which includes 18B in tax cuts
- (PT) Portugal Govt released more 2015 budget plan details: Reaffirms 2015 GDP growth outlook at +1.5% with budget Deficit to GDP at 2.7%
- (UK) BoE's Weale: Delaying a rate increase may lead to faster rate increases in the future
- (US) Reportedly at a closed door meeting last weekend Fed Chair Yellen expressed confidence in the resilience of the US economic recovery despite recent turbulence and slower growth - press
-(US) Treasury Semiannual currency report: Labels no major trading partner as a currency manipulator; admonishes South Korea for its currency interventions earlier this year

**Looking Ahead***
All times listed for economic events are denominated in Eastern Standard Time (Add 4 hours for GMT equivalent) d its
- (IT) EU-Asia ASEM Summit in Milan
- (DE) ECB's Weidmann at OMFIF meeting in Frankfurt
- EU health ministers meet on Ebola in Brussels
- 05:30 (HU) Hungary Debt Agency (AKK) to sell Bonds
- 05:30 (UK) DMO to sell 1.4B in 0.125% I/L 2024 Gilts
- 05:50 (FR) France Debt Agency (AFT) to sell combined 1.5B in Inflation-Linked 2023, 2027 and 2030 bonds (Oatei)
- 06:00 (CZ) Czech Republic to sell bills
- 06:45 (US) Daily Libor Fixing
- 07:00 (RU) Russia Gold and Forex Reserve w/e Oct 10th: No est v $454.7B prior
- 07:00 (BR) Brazil Oct FGV Inflation IGP-10 M/M: 0.0%e v 0.3% prior
- 07:30 (BR) Brazil Aug Economic Activity Index M/M: 0.3%e v 1.5% prior; Y/Y: -1.1%e v -0.2% prior
- 08:00 (US) Fed's Plosser speaks on the Economic Outlook in Pennsylvania
- 08:00 (PL) Poland Sept CPI Core M/M: 0.1%e v 0.0% prior; Y/Y: 0.7%e v 0.5% prior
- 08:00 (PL) Poland Sept Average Gross Wages M/M: +0.3%e v -1.8% prior; Y/Y: 3.5%e v 3.5% prior
(RU) Russia Sept PPI M/M: 0.0%e v 0.0% prior; Y/Y: 4.5%e
- 08:15 (US) Baltic Dry Bulk Index
- 08:30 (US) Initial Jobless Claims: 290Ke v 287K prior; Continuing Claims: 2.38Me v 2.381M prior
- 08:30 (CA) Canada Aug Int'l Securities Transactions: C$7.0Be v C$5.3B prior
- 08:30 (CA) Canada Aug Manufacturing Sales M/M: -2.0%e v +2.5% prior
- 09:00 (US) Fed's Lockhart to speak on Workforce Development at Rutgers
- 09:00 (IT) ECB's Visco (Italy) at OMFIF meeting
- 09:15 (US) Sept Industrial Production M/M: +0.4%e v -0.1% prior; Capacity Utilization: 79.0%e v 78.8% prior; Manufacturing Production: +0.3%e v -0.4% prior
- 10:00 (US) Oct Philadelphia Fed Business Outlook: 19.8e v 22.5 prior
- 10:00 (US) Oct NAHB Housing Market Index: 59e v 59 prior

- 10:00 (US) Fed's Kocherlakota speaks on Monetary Policy in Montana
- 10:00 (DE) German Bundesbank Dep Buch in Halle
- 10:30 (US) Weekly EIA Natural Gas Inventories
- 11:00 (US) Weekly DOE Crude Oil Inventories
- 11:00 (US) Fed to purchase $0.15-0.25B in bonds
- 11:00 (US) Treasury to announce size of upcoming 30-year TIPS auction
- 12:45 (US) Fed Chair Yellen in MA
- 13:00 (US) Fed's Bullard in Washington
- 16:00 (US) Aug Net Long-term TIC Flows: No est v -$18.6B prior; Total Net TIC Flows: No est v $57.7B prior
- 17:00 (CO) Colombia Aug Retail Sales Y/Y: No est v 5.2% prior
- 17:00 (CO) Colombia Aug Industrial Production Y/Y: No est v 1.6% prior
- 17:00 (CL) Chile Central Bank Interest Rate Decision: Expected to cut Overnight Rate Target by 25bps to 3.00%


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