Reports » Europe

European stock market, economy and companies update (April 23, 2010)

Contributed by Trade The News

By Trade The News

*** SPEAKERS/FIXED INCOME/FX/COMMODITIES/ERRATUM ***
- Equities: European markets are reacting to divergent pulls throughout the morning session. Pre-market trading was bid to the positive side mainly as a rebound from yesterday's equity losses. Trading in Asia and after market NY was downside dominated, pushed lower on negative earnings sentiment (Amazon [AMZN] and Microsoft [MSFT] lower post reports). Earnings figures for European firms were, however, broadly supportive and led an accelerating positive trend through first trades. Key earnings figures were seen from truck manufacturer Volvo [VOLVB.SW]. Volvo reported better than expected top line, bottom line, and margin figures while maintaining its growth outlook. Volvo's positive Q1 net was the first positive figure in that category for six consecutive quarters. European heavy vehicle manufacturers' responded sharply positive to the results. Earnings from consumer discretionary firms Adidas [ADS.GE] and L'Oreal [OR.FR] came in positive and supported sector rotation. Trading ranges were pushed to the upside by 2-year highs in the German April IFO read. IFO comments on export and utilization levels led the DAX to outperform to the upside. Not to be outdone, Greek news once again hijacked trading flows post 4:30EST. With building speculation that Greece would ask for activation of a bailout fund, markets have responded positively to potential finality in the Greek sovereign debt crisis. Turnover levels have been significantly ahead of moving averages throughout the session, baked by earnings flows and interest in financials related to Greece.

- Individual equities: Volvo [VOLVB.SW]: Reports Q1 Net SEK1.68B v loss SEK96Me, Rev SEK58.6B v SEK55.6Be. || Ericsson [ERICB.SW]: Reports Q1 Net SEK1.26B v SEK1.8Be, Rev SEK 45.1B v SEK48Be. || Prudential [PRU.UK]: Provides update on Hong Kong listing time. || STMicroelectronics [STM.FR]: Reports Q1 $0.07 v $0.08e, R$2.33B v $2.4Be; Raises dividend 16.7% to $0.28 from $0.24. || L'oreal [OR.FR]: Reports Q1 Rev ?4.72B v ?4.69Be. || Saint-Gobain [SGO.FR]: Reports Q1 Rev ?8.74B v ?8.5Be; LFL -2.4% y/y. || MAN Ag [MAN.GE]: Platow sees group reporting approx Q1 op prof ?120M v ?120Me, Rev ?3B v ?3.1Be. || Adidas [ADS.GE]: Reports Q1 op profit ?260M v ?60M y/y; Rev ?2.7B v ?2.6Be; Boosts FY10 outlook. || Yara [YAR.NO]: Reports Q1 Net NOK1.52B v NOK1.5Be, Rev NOK15.6B v NOK17.1Be. ||

- Speakers: Germany's Econ Min Bruederle reiterated the view that Greece did not need aid at this time nor had the country requested aid at this time. He added that should try everything necessary to avoid Greece from needing assistance. He also stated that Germany had returned to a sustainable growth path but at a below potential rate. Much of 2010 growth was due to govt stimulus measures. ***Germany's IFO's economist commented that the German economy had shifted one gear higher in its recovery and that f ewer German companies were cutting jobs *** IFO's Sinn: stated that the manufacturing sector more optimistic than before and that export operations have show an upward move. Capacity utilization was also rising but noted the current utilization levels remained below multi-year averages *** IFO's Abberger commented that a lower euro currency had improved export expectations and that the current ECB interest rate levels remained acceptable. Disruption from air service to have short-term impact only. He stated that the Greek debt crisis was not generally a large weight upon German companies ***

- Currencies/Fixed Income: The market managed to find ways to curb recent Euro currency weakness with a combination of data and rumors highlighting the session. Better-than-expected German IFO data took the EUR/USD above the 1.3250 level and chatter that Greece might activate its EU rescue package later this morning sent the pair to approach the 1.3350 area ahead of the NY morning. The sovereign credit default swaps for Greece did hits fresh all-time highs while the spread between the 10-year Greek/German bonds rose to almost 600bps. However, a sharp reversal in CDS levels from 645bps to 550bps ensued once the potential activation rumors circulated. Reportedly the Greece PM to make official statement regarding EU/IMF aid in the early NY morning (Press conference slated to take place at 7:00EST/11:00GMT). *** The UK Q1 Advanced GDP data was a bit light and was a headwind for further pound upward momentum. The weaker-than-expected reading provided political fuel regarding the sustainability of the UK economic recovery ahead of the May 6th election. GBP/USD tried to move above 1.5400 ahead of the GDP data but dipped to 1.5350 in the aftermath.

- Geo-Political: South Korean President Kim has put forward the clearest signal yet that he does not plan to make a unilateral military response against North Korea. Leaked documents from the South Korean military, stating that the sinking of the Cheonan was almost certainly the due to a North Korean torpedo attack has dramatically raised military tension between the two states. Analysts have noted that Kim is in a difficult position; military action against the North would certainly frighten financial markets and jeopardize a developing economic recovery. The issue will also sit heavy on local/regional elections that are set for June. *** US President Obama has given further go-ahead for the development of the 'Prompt Global Strike' weapons system. The non-nuclear, ICBM/supersonic glider delivery system is expected to be based in California and will allow for satellite guided precision strikes against any point on earth within one hour. Provisions for the system are buried in the New Start treaty, meaning that for every deployed weapon, the US will be required to withdraw a nuclear warhead. *** In round two of the UK televised electoral debate, Conservative candidate Cameron and Labour candidate Brown scored better than in the debut showing. Opinion polls following the event are mixed, scoring LibDem candidate Clegg high once again, giving wins to both the Conservatives and LibDem's. Brown upped the attack on both candidates, but specifically against Clegg, seeking to highlight differences between the left leaning parties.

- In The Papers: Pimco's El-Erian wrote an op-ed piece in the FT Alphavillve and noted that the problems related to Greece were becoming worse and spreading and viewed Greece as a credit risk play. He wrote that the European equity markets were under pressure, risk spreads on other European peripheral countries were widening (particularly Italy, Portugal and Spain) and the Euro was selling off. He noted that there was no immediate solution to the mounting difficulties facing Greece. The country had limited policy flexibility, creditors were hesitant to provide additional financing, and coordination problems were immense. Absent a meaningful change, this technical factor would gain both traction and momentum. There are still too many investors out there with industrial country government holdings (such as Greece) that they deemed (wrongly) to be interest rate risk exposure rather than credit risk exposure

***Notes/Observations:
- Chatter that Greece might activate its EU rescue package later this morning
- Germany Apr IFO Business Climate hits highest level since May 2008
- UK GDP data fails to meet expectations and provides topic for political debate
- G7, G20, IMF and World Bank meetings in Washington DC Apr this weekend

***Looking Ahead***
- 7:00 (IC) Iceland to sell Inflation-Linked bonds
- 7:00 (CA) Canada Mar Consumer Price Index M/M: 0.2%e v 0.4% prior; Y/Y: 1.6%e v 1.6% prior
- 7:00 (CA) Canada Mar Core CPI M/M: 0.1%e v 0.7% prior; Y/Y: 2.0%e v 2.1% prior
- 8:30 (CA) Canada Feb Retail Sales M/M: 1.0%e v 0.7% prior; Ex Autos M/M: 0.5%e v 1.8% prior
- 8:30 (US) Mar Durable Goods Orders: 0.2%e v 0.9% prior; Durables Ex Transportation: 0.7%e v 1.4% prior
- 9:00 (BE) Belgium Apr Business Confidence: -2.6e v -3.6 prior
-10:00 (MX) Mexico Mar Preliminary Trade Balance: $590.0Me v $243.9M prior
- 10:00 (MX) Mexico Mar Unemployment Rate: 5.2%e v 5.4% prior
- 10:00 (US) Mar New Home Sales M/M: 325Ke v 308K prior
- 15:00 (AR) Argentina Mar Trade Balance: $850Me v $604M prior
- 15:00 (AR) Argentina Mar Industrial Production M/M: No est v 3.4% prior; Y/Y: 8.0%e v 11.0% prior
- 18:00 (US) US Tsy Sec Geithner pre-G20 press conference
- G7, G20, IMF and World Bank meetings in Washington DC Apr 24th-25th

*** ECONOMIC DATA ***
- (FR) France Apr Business Survey: 8 v 14 prior
- (FR) France Mar Consumer Spending M/M: 1.2% v 0.8%e; Y/Y: 2.5% v 2.1%e
- (HU) Hungary Feb Retail Trade Y/Y: -4.3% v -5.3%e v -5.6% prior
- (SP) Spain Mar Producer Prices M/M: 0.8% v 0.4%e; Y/Y:2.4% v 2.1%e
- (AS) Austria Feb Industrial Production M/M: -2.5% v 5.8% prior; Y/Y: 0.3% v 4.5% prior
- (PD) Poland Mar Retail Sales M/M: 21.9% v 17.0%e; Y/Y: 8.7% v 4.3%e
- (PD) Poland Mar Unemployment Rate: 12.9% v 12.9%e
- (IT) Italy Feb Retail Sales M/M: 0.1% v 0.2%e; Y/Y: -0.4% v -0.2%e
- (GE) Germany Apr IFO Business Climate: 101.6v 98.7e (highest reading since May 2008); Current Assessment: 99.3 v 95.3e; Expectations Survey: 104.0 v 102.1e
- (TT) Taiwan Mar Industrial Production Y/Y: 39.2% v 39.4%e; Commercial Sales Y/Y: 13.9% v 11.5%e
- (UK) Feb Index of Services Q/Q: 0.4% v 0.6%e
- (UK) Q1 Advanced GDP Q/Q: 0.2% v 0.4%e; Y/Y: -0.3% v -0.1%e
- (EU) Euro Zone Feb Industrial New Orders M/M: 1.5% v 1.0%e; Y/Y: 12.2% v 11.2%e
- (MA) Malaysia Mar CPI Y/Y: 1.3% v 1.5%e