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TradeTheNews.com EU Market Update: Deflation concerns persist in Europe; OPEC meeting underway
Thu, 27 Nov 2014 5:27 AM EST
***Notes/Observations***
- China Oct Industrial Profits register biggest decline since Aug 2012 (YoY:
-2.1% vs. +0.4% prior)
- Oil at 4-year lows as participants
await OPEC decision on production quota but consensus seems to be resisting
supply cuts
- European inflation data released in
session fails to alleviate deflation concerns; UK 30-year Gilt and
German 10-year Bunds at record lows
- German net unemployment improves for the 2nd straight month with rate at
record low
- US market closed for Thanksgiving holiday
**Economic Data***
- (ES) Spain Q3 Final GDP Q/Q: 0.5% v 0.5%e; Y/Y: 1.6% v 1.6%e
- (DE) Germany Nov CPI Saxony M/M:
-0.1% v -0.2% prior; Y/Y: 0.7% v 1.0% prior (**Note: lowest MoM reading since
Feb 2010)
- (ES) Spain Nov Preliminary CPI Y/Y:
-0.4% v -0.3%e; CPI EU Harmonized Y/Y: % v -0.3%e
- (SE) Sweden Oct Household Lending Y/Y: 5.9% V 5.7%e
- (DE) Germany Nov Net Unemployment
Change: -14K v -1Ke; Unemployment Rate: 6.6% (record low) v 6.7%e
- (EU) Euro Zone Oct M3 Money Supply Y/Y: 2.5% v 2.6%e; M3 3-month average:
2.3% v 2.4%e
- (IT) Italy Nov Business Confidence: 96.3 v 95.9e; Economic Sentiment: 87.7 v
89.3 prior
- (DE) Germany Nov CPI Brandenburg M/M: 0.0% v -0.3% prior; Y/Y: 0.7% v 0.9%
prior
- (DE) Germany Nov CPI Hesse M/M: -0.1% v -0.2% prior; Y/Y: 0.5% v 0.8% prior
- (DE) Germany Nov CPI Bavaria M/M: 0.0% v -0.3% prior; Y/Y: 0.8% v 0.8% prior
- (PT) Portugal Nov Consumer Confidence Index: -22.3 v -24.0 prior; Economic
Climate Indicator: 0.5 v 0.7 prior
- (DE) Germany Nov CPI North Rhine
Westphalia M/M: -0.1 v -0.2% prior; Y/Y: 0.7 v 1.0% prior (lowest annual
reading since June 2010)
- (EU) Euro Zone Nov Business Climate
Indicator: 0.18 v 0.02e; Consumer Confidence: -11.6 v -11.6e; Economic
Confidence: 100.8 v 100.3e; Industrial Confidence: -4.3 v -5.5e; Services
Confidence: 4.4 v 4.0e
Fixed Income:
- (IT) Italy Debt Agency (Tesoro) sold total €5.5B vs. €4.5-5.5B indicated
range in 2020 and 2024 BTP Bonds
- Sold €3.5B v €3.0-3.5B new 1.05% 2019 BTP Bond; Avg Yield: 0.94% v 1.23%
prior; Bid-to-cover: 1.46x v 1.45x prior
- Sold €2.0B v €1.5-2.0B indicated 2.50% 2024 BTP Bonds; avg yield 2.08% v
2.44% prior; bid-to-cover 1.58x v 1.48x prior
*** SPEAKERS/FIXED INCOME/FX/COMMODITIES/ERRATUM ***
**Equities**
Indices [Stoxx50 +0.5%, FTSE 100 +0.1% at 6,738, DAX +0.6% at 9,984,
IBEX-35 +0.5% at 10,704, FTSE MIB +0.5% at 20,050, SMI +0.4% at 9,090, S&P
500 Futures flat at 2,071]
- Market Focal Points/Key Themes:
Equity markets open generally higher amid weaker CPI data from Germany and
Spain and ahead of possible comments from Draghi, DAX trades higher for 11th
straight session, FTSE 100 lags amid ex-dividends, Energy firms decline ahead
of OPEC meeting, Remy Cointreau gains on better than expected H1 profits,
Infineon weighed down by Q4 profits and outlook
By Sector
- Financials [Barclays BARC.UK +1% (broker commentary); HSBC HSBA.UK
-0.5% (broker commentary)]
- Industrials [Stage Coach
SGC.UK +7.5% (contract award); Royal Mail RMG.UK -1% (ex-dividend)]
- Technology [Monitise MONI.UK
+15% (investment agreement); Infineon IFX.DE -1% (Q4 EBIT below ests)]
- Healthcare [Elekta EKTAB.SE
-11% (cut outlook) ]
- Consumer Discretionary [Remy
Cointreau RCO.FR +6% (H1 profits above ests), Mulberry MUL.FR +6% (new creative
director)]
- Stoxx50 Sectors [Technology
+1%, Financials +0.8%, Consumer Non-Cyclical +0.7%, Telecom +0.5%, Basic
Materials +0.5%, Consumer Cyclical +0.4%, Utilities +0.3%, Industrials +0.2%;
Energy -0.7%]
***Speakers***
OPEC ministers comment as session begins in meeting in Vienna
- Kuwait Oil Min oil market was
over supplied by 1.8M bpd nut unsure it there was support for a cut
- Iraq Oil Min wanted oil market
stability, fair prices and targeting 3.2M bpd production in 2015 (3.8M
including Kuridstan). Iraq would follow unity of OPEC but saw aprice floor of
around $65-70/bbl
- Venezuela Foreign Min and OPEC Rep
Ramirex: Oil market is oversupplied by 2.0M bpd and would propose a
formal oil output cut at today's OPEC meeting
- Saudi Oil Min: decline to
comment
- Angola Oil Min: Oversupply exists in market; budget based on $81/barrel but
would remain silent at today's meeting
- Algeria Oil Min: Willing to cut oil output
- Qatar Oil Min: Looking at the interests of consumers and producers in talks
Other commentary:
- ECB's Draghi text of speech to Finland Parliament (in line with recent
rhetoric) but did note that time was needed for effects of stimulus to
materialize; won't elaborate on further measures
- Greece Dep PM Venizelos:
Bailout extension likely for technical reasons
- Russia Central Bank: Money
market rates have been elevated due to tax payments (**Note: On Wed, the
Russian overnight rate hit the highest level since 2009)
- Turkey Central Bank Financial
Stability Report: Banks have enough buffers against potential FX
liquidity shocks
- Renewed reports circulating that India govt reiterates its wants the RBI to
cut interest rate at its next policy meeting on Dec 2nd
***Currencies***
- The USD recovered some territory following some retracement on Wed after some
disappointing economic data.
- European inflation data released in session failed to alleviate deflation
concerns and continued to put some downward pressure on the Euro currency and
European bond yield back to record lows. The EUR/USD pair was off approx. 0.25%
at 1.2472. The session ignored some better data. German net unemployment
improve for the 2nd straight month with rate at record low
**Political/In the Papers:
- (CN) PBoC won't conduct open market operations (OMO) in Thursday session (1st
halt after 33 consecutive drains); Injecteds net CNY35B this week v injected
CNY10B prior (2nd week of injection; Biggest injection in 3 months)
- (SA) Saudi Arabia Oil Min: the Gulf countries had reached a consensus on oil
output; OPEC must sit together on its output limits
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