• European stock market, economy and companies update (August 11, 2015)

    ***Notes/Observations***
    - China PBoC wakes up sleepy summer markets; announces one-off 2% CNY currency devaluation to boost the struggling exporters; New CNY fixing mechanism move seen to converge onshore and offshore pricing and appease IMF for Yuan to be part of SDR basket
    - Greece and creditors said to reach an agreement on framework for a 3rd bailout package
    - Mixed German ZEW Survey for Aug; Current Situation Survey registered its 2nd straight MoM improvement while Expectations Survey registered its fifth straight decline


    *** SPEAKERS/FIXED INCOME/FX/COMMODITIES/ERRATUM ***
    **Equities**
    Indices [Stoxx50 -1.0%, FTSE 100 -0.6% at 6,698, DAX -1.3% at 11,457, CAC-40 -1.1% at 5,138, IBEX-35 -0.5% at 11,244, FTSE MIB -0.6% at 23,896, SMI -0.5% at 9,467, S&P 500 Futures -0.2 at 2,091]

    - Market Focal Points/Key Themes: European equities track lower in the session; China Yuan devaluation impacts markets overshadowing Prelim agreement betwen Greek and creditors; China data pull down automotive stocks and luxury brands; Greek equity index up 7.3%; resource stocks mixed reaction to China

    By Sector:
    - Consumer discretionary [Pandorea PNDORA.DK +1.3% (results), Adecco ADEN.CH -2.9% (results)]
    - Financials [Serco SRP.UK +3.8% (results), GAM Holding GAM.CH -3.7% (results, cuts jobs), Delta Lloyd DL.NL -7.6%(results disappoint)]
    - Industrials [Konecranes KCR1V.FI +24% (merger), Leoni LEO.DE +0.3% results)

    **Speakers**
    - Greece Finance Ministry official stated that bailout talks had been concluded; Govt and creditors reach an agreement on 3rd bailout memorandum but some small details remain. Agree on function of privatization fund and administration of bank non-performing loans. Technical teams to discuss details on prior actions for bailout
    - Greece bailout agreement to be submitted to Parliament on Tuesday
    - German Finance Ministry official Spahn: Greece aid agreement must be convincing
    - Slovakia PM Fico stated that he would not forgive a cent of Greek debt and that negotiations to extend Greece debt repayment schedule also had limits. Reiterated view that inflation risks were on the upside
    - Spain PM Rajoy might set limits to regional powers
    - South Africa Central Bank (SARB) Gov Kganyago: Rate decisions to be more data dependent than usual
    - PBoC Ma: CNY depreciation should not be seen as a trend; move was a one-off measure . China was fundamentally stronger then weak FX economies
    - Indonesia Planning official: China offers $100M of investments and provide $20B in investment for steel facility in Kalimantan
    - India Fin Min Jaitley presents Goods and Services Tax (GST) bill in upper house of Parliament
    - China Association of Automobile Manufacturers (CAAM): CNY currency (Yuan) has to weaken against the Korean Won and Japanese Yen to help auto exports
    - Bank of Korea (BOK) official: Devaluing the CNY currency to be part of PBoC effort to move to a more market-oriented FX regime
    - Thailand Fin Min Sommai: See little impact from China PBoC devaluation of yuan
    - Philippines Central Bank Gov Tetangco: PHP currency (Peso) affected by China's Yuan devaluation
    - India Finance Ministry official: To gauge China CNY currency devaluation impact on trade. Would not prefer any knee-jerk reaction to weaken INR currency (Rupee). Decision on exchange rate rests with India Central bank (RBI)
    - Iran Oil Min said to give orders to increase both production and exports

    **Currencies**
    - Global currencies were impacted by the PBoC's devaluation of the yuan. The PBoC lowered the yuan's daily fix to the USD by 1.9% to 6.228, the largest devaluation since the central bank dropped its peg against the greenback back in 2005
    - Some analyst feared that China 1.9% CNY devaluation might not be enough to increase the country's export competitiveness and continue to sputter on the growth front.
    - The USD saw its initial gains against the major pairs evaporate with dealers noting the yield differential as the basis. US Treasuries 10-year yield fell by almost 5bps in Europe with the moving attributed to several factors 1) China move to weaken Yuan would require buying US treasuries; 2) China devaluation move seen as admission of slower growth and prompting safe haven flows; 3) Stronger USD might have Fed hold off on a Sept hike
    - EUR/USD back above the 1.10 level while EUR/JPY cross hit a 2-month high near 138
    - Spot gold hit a 3-week high at $1,116/oz as the USD softened in the session.

    **Fixed Income:
    - Bund futures trade at 154.39 up 45 ticks on the day as PBOCs decision to revalue the Yuan has put a bid into the market. To the upside a break of today's high at 154.54 would signal a move back up towards 155.09 the months highs, with strength beyond seeing a 155.44 the top of the channel. To the downside analysts see 153.67 as support with a break of this targeting the 38.2% retracement level at 152.91.
    - UK Gilt futures trades 117.43 up 50 ticks being lead up by the overall risk off theme after the PBOC actions. A break of today's highs at 117.49 have analysts look for upside resistance at 118.15 the July high with a break targeting 118.83. To the downside a break of the lows could target 116.70, from here sees gap support at 116.24.
    We will see the UK DMO issue 650M in its 43y Gilt Linker today, which is the equivalent of around 23K Gilt futures.
    -Tuesday's liquidity report showed Monday's excess liquidity fall to 464.0B a fall of 4.7B from 468.7B prior. This was due primarily a rise of 4.7B in AFs and MonPol portfolios to negative 42.2B. AFs are negative when the MonPol portfolios exceeds the liquidity absorbing effect of AFs. Use of the marginal lending facility fell to 180M from 204M prior.
    -Corporate Issuance saw a flurry of IG deals amounting to approximately $13.5B on Monday, with around $11B in swapped financial deals from HSBC, ING, Lloyds and HSBC.
    In Europe the pipeline for High Yield primary issuance stands at 2.1 billion, as the market quietens down for the summer. The year-to-date volume now stands at 54.4 billion from 128 deals, according to LCD this is lower compared to the 62.8B issued at this time last year through 172 deals.
    Analysts estimate some $20-25B issuance coming to market this week.

    **Political/In the Papers:
    - (UK) BoE's Miles: Voted for no change in rates was the result of a weaker near term CPI expectations. He added that there was a reasonable case for rate increase but the increases did not need to start immediately

    **Looking Ahead***
    All times listed for economic events are denominated in Eastern Standard Time (Add 4 hours for GMT equivalent)
    - (RU) Russia Jun Trade Balance: $14.0Be v $15.3B prior; Exports: $30.3Be v $30.9B; Imports: $16.4Be v $15.6B prior
    - (EU) ECB allotment in 7-Day Main Refinancing Tender
    - 05:30 (HU) Hungary Debt Agency (AKK) to sell 3-month Bills
    - 05:30 (BE) Belgium Debt Agency to sell combined 1.9-2.1B in 3-month and 12-month Bills
    - 05:30 (UK) DMO to sell 650M in 0.125% Mar 2058 I/L Gilts
    - 06:00 (IL) Israel July Trade Balance: No est v -$1.0B prior
    - 06:00 (US) July NFIB Small Business Optimism: 95.4e v 94.1 prior
    - 06:30 (PT) ECB July Portuguese Bank financing
    - 06:45 (US) Daily Libor Fixing
    - 07:00 (ZA) South Africa Jun Manufacturing Production M/M: +0.6%e v -0.4% prior; Y/Y: -0.9%e v -1.4% prior
    - 07:00 (BR) Brazil Aug IGP-M Inflation (1st Preview): 0.5%e v 0.7% prior
    - 07:00 (RU) Russia announces weekly OFZ bond auction
    - 07:30 (CL) Chile Central Bank's Economist Survey
    - 07:45 (US) Chain Store Sales
    - 08:15 (CA) Canada July Annualized Housing Starts: 195.0Ke v 203.1K prior (revised from 202.8K)
    - 08:15 Baltic Dry Bulk Index
    - 08:30 (US) Q2 Preliminary Nonfarm Productivity: +1.6%e v -3.1% prior; Unit Labor Costs: 0.0%e v 6.7% prior
    - 08:55 (US) Weekly Redbook Sales
    - 09:00 (EU) Weekly ECB Forex Reserves
    - 09:00 (MX) Mexico Jun Industrial Production M/M: +0.4%e v -0.4% prior; Y/Y: 1.1%e v -0.9% prior; Manufacturing Production Y/Y: 3.1%e v 0.8% prior
    - 10:00 (US) Jun Wholesale Inventories M/M: 0.3%e v 0.8% prior; Wholesale Trade Sales M/M: 0.5%e v 0.3% prior
    - 10:00 (MX) Mexico Weekly International Reserves
    - 11:30 (US) Treasury to sell 4-Week Bills
    - 12:00 (US) DOE Short-Term Crude Outlook
    - 13:00 (US) Treasury to sell $24B in 3-Year Notes
    - 16:30 (US) Weekly API Oil Inventories
    - 19:00 (KR) South Korea July Unemployment Rate: 3.8%e v 3.9% prior
    - 19:50 (JP) BOJ Minutes for July 14-15 Meeting
    - 19:50 (JP) Japan July PPI M/M: -0.1%e v -0.2% prior; Y/Y: -2.9%e v -2.4% prior
    - 23:00 (CN) China to sell 5-Year Bonds
    - (MX) Mexico July ANTAD Same-Store Sales Y/Y: No est v 5.0% prior


    **Economic data***
    - (DE) Germany July Wholesale Price Index M/M: +0.1 v -0.2% prior; Y/Y: -0.5 v -0.5% prior
    - (JP) Japan July Preliminary Machine Tools Orders Y/Y: 1.6% v 6.6% prior
    - (HU) Hungary July CPI M/M: 0.0% v 0.1%e; Y/Y: 0.4% v 0.5%e
    - (IT) Italy July Final CPI M/M: -0.1% v -0.1% prelim; Y/Y: 0.2% v 0.2% prelim; CPI Ex Tobacco Index: 107.2 v 107.3 prior
    - (IT) Bank of Italy (BOI) Jun Bad Loan Ratio 14.7% v 14.7% m/m
    - (DE) Germany Aug ZEW Current Situation Survey (beat): 65.7 v 64.2e; Expectations Survey (miss): 25.0 v 31.9e
    - (EU) Euro Zone Aug ZEW Expectations Survey: 47.6 v 42.7 prior

    Fixed Income Issuance:
    - (ZA) South Africa sold total ZAR3.25B in 2031, 2035, 2037 and 2044 bond

    Contributed by Trade The News
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