Reports » Europe

European stock market, economy and companies update (May 31, 2010)

Contributed by Trade The News

By Trade The News

*** SPEAKERS/FIXED INCOME/FX/COMMODITIES/ERRATUM ***
- Equities: European markets expressed a degree of calmness following the Spanish sovereign downgrade on Friday by Fitch. The US and UK closed were closed for holidays. France official kept the austerity theme on the front burner after stating that France must either cut its spending or lose its "AAA" sovereign rating. The bourses that are open were in the lower portion of the session range and putting in a mixed performance ahead of the NY morning. France's CAC40 was lower -0.25% at 3,506.28 compared to Friday's close of 3,516. DAX was firmer at 5,963, up around 0.3%.

- In Individual Stocks: Strabag [STR.AS]: Reported Q1 Net loss of ?128.7M slightly worse than estimates of a loss of ?126M. EBIT loss at ?149.9M was better than estimates of a loss of ?160M. Revenue was ?1.79B, also lower than estimates of ?1.9B. Company reaffirmed outlook of of stable output and margins. Attributed the revenue decline to harsh winter. // Seadrill [SDRL.NO]: Will make a mandatory offer of NOK40.50/shr for Scorpion. This represents an increase of the original price of NOK36/shr. Company increased its stake to 50.1% by buying an additional 9.07Mshares

- Speakers: ECB's Trichet stated that the central bank's bond purchasing was strictly targeted at correcting malfunctioning of markets and should not be used to circumvent budgetary policy. Fiscal retrenchments are crucial for improvement of current market troubles and that the bond purchasing program must not be confused with quantitative easing. Trichet added that he did not see a debt restructuring in Greece and noted that there was no plan B for country. On the Euro currency he stated that the currency's value was essential for investor confidence and it was keeping its value in 'remarkable fashion'. EMU countries have collegial responsibility for Euro but some countries have set a bad example for fiscal discipline. He supported EU plan to strengthen fiscal rules ***ECB's Draghi commented that the Euro Area budget adjustments needed to be implemented more quickly and the EU needed a stronger Maastricht Stability Pact. He stated that ECB interest rate policy had been 'strongly expansionary' and that the ECB must halt the bond purchase scheme 'as quickly as possible'. The attacks on Euro currency was targeted at its weakest members and called for the EU to implemenbt more political and budgetary union ***BoJ Gov Shirakawa reiterated the view that Bank of Japan to maintain an extremely accommodative policy . he noted that expanding bank balance sheet would not solve deflation or help push prices up. He added that excessive public support might hurt productivity and would set upper limit on new lending facility. Lastly he noted that Greece might become a fiscal threat if situation worsened *** ECB's Nowotny commented that the ECB bond purchase program did not break 'taboo' and reiterated that he saw no threat of inflation nor anticipatipated deflation *** Moody's reaffirmed South Korea's "A1" sovereign ratings and stated the country was in a strong position in face of rising challenges. It noted that South Korea's geopolitical defenses and economic fundamentals should prove strong enough to withstand a period of heightened tensions. Overall, recent shocks -- including the sinking and the deaths of 46 South Korean sailors near the maritime border between both countries had no adverse effects for South Korea on the issues of debt affordability or finance-ability***India's Fin Sec Chawla stated that Inflation remained a concern and did not see change in the government's borrowing policy. ***China's PBoC stated that it would tighten lending to industries with excess capacity . Bank branches cannot approve expansion to companies with excess capacity and would restrict lending to the energy-intensive industry and provide support for energy-efficient companies ***Bank of Spain (BOS) commented in a monthly bulletin that consumer confidence to recover in Q2 but noted that impact of market tension and budget cuts remained unclear ***Moody's commented on China and noted that the country's challenges was to manage trade friction. It noted China's fiscal performance had improved in recent years and its Gov't debt was comparatively low *** Sweden NEIR stated that the European austerity measurewould likely to weigh upon economic growth in region at some point. The think tank affirmed its 2010 GDP growth estimate at over 3% but stated it might revise down GDP for later periods due to EU austerity measures ***

- Currencies/Fixed income: Thin liquidity conditions prevailed and the major pairs were little changed from their opening levels seen in Asia. The European impact of its austerity measures remain the dominant theme highlighted by the French budget minister weekend comments that it would be a "stretch" for France to keep its "AAA" sovereign rating without some tough budget decisions. The EUR/US hovering around the 1.23 area. The JPY was a touch weaker over the fragile political union of the ruling coalition. The USD/JPY at 91.50, up about 25 pips from the Tokyo open.

- Geo-Political: Two people died and 30 were wounded as Israeli Navy raided an international convoy of ships carrying humanitarian supplies to Gaza strip. Three of the "Free Gaza" flotilla were flying under the Turkish flag which prompted harsh comments from Turkish officials stating Israel may suffer irreparable consequences Israeli minister also stated that this may further strain the relationship between the two countries. *** Out of South Korea the military reported that thousands of troops were holding war games near the border.*** Japan's Social Democratic Party may pull out of the coalition with ruling party; a decision which was considered as "regrettable" by PM Hatoyama. Meanwhile, over 60% of Japanese voters would like the PM to resign and 19% of voters would prefer the opposition party LDP to return to power.

***Notes/Observations:
- US and UK markets holidays
- Currency dealers watching the JPY price action following the coalition split within the ruling party
- France Budget Min: maintaining AAA credit rating might be a stretch without tough budget decisions.
- ECB members out in force on need for fiscal disipline
- British Chamber of Commerce: UK at risk of double dip. Fiscal cuts should wait.
- China PM Wen: Second global downturn possible but China's growth remains on track.

***Looking Ahead***
- (PO) Portugal Apr Industrial Production M/M: % v 7.2% prior; Y/Y: % v 5.8% prior
- (PO) Portugal Apr Retail Sales M/M: % v -2.8% prior; Y/Y: 5 v 0.7% prior
- 8:00 (HU) Hungary Central Bank Interest Rate Decision: Consensus expectations for the Base Rate to remain at 5.25% (roughly 33% chance for a 25bps rate cut)
- 8:30 (CL) Chile Q1 Quarterly GDP Annualized: 5.9%e v 5.0% prior
- 8:30 (CL) Chile Central Bank Minutes
- 8:30 (CA) Canada Mar Gross Domestic Product M/M: 0.5%e v 0.3% prior
- 8:30 (CA) Canada Apr Industrial Product Price M/M: -0.2%e v -0.4% prior; Raw Material Price Index M/M: 1.4%e v 0.8% prior
- 9:00 (CL) Chile Apr unemployment Rate: 9.2%e v 9.0% prior
- 9:00 (BE) Belgium Apr Budget Balance YTD: No est v -?11.2B prior
- 12:00 (CO) Colombia Apr Unemployment Rate: 12.5%e v 12.3% prior
- 15:00 (AR) Argentina Apr Construction Activity Y/Y: No est v 18.1% prior

***Economic Data***
- (IN) India Q1 GDP Y/Y: 8.6% v 8.6%e
- (JP) Japan Apr Housing Starts Y/Y: 0.6% v 6.6%e (first positive YoY reading since Nov 2008); Annualized Housing Starts: 793K840Ke v 854K prior
- (SA) South Africa Apr Private Sector Credit Y/Y: -0.9% v -0.4%e
- (FI) Finland Mar Final Trade Balance: -?266M v -?285M prior
- (HU) Hungary Apr Producer Prices M/M: 1.6% v -0.2% prior; Y/Y: -0.1% v -2.0%e
- (TU) Turkey Apr Trade Balance (TRY): -5.5B v -5.6B
- (SW) Sweden May Consumer Confidence: 18.8 v 18.3e; Economic Tendency: 110.0 v 104.6 prior; Manufacturer Confidence: 3 v 0e
- (DE) Denmark Q1 Preliminary GDP Q/Q: 0.6% v 0.4%e; Y/Y: -0.4% v -1.0%e
- (TH) Thailand Apr Current Account: -$423M v -$355Me; Overall Trade Balance: $3.7B v $3.1B prior; Total Trade Balance: -$190M v $1.1B prior
- (TH) Thailand Apr Manufacturing Production Y/Y: 21.3% v 23.9%e; Total Capacity Utilization: 62.3% v 75.0% prior
- (TH) Thailand Apr Business Sentiment: 46.0 v 55.7 prior
- (GE) German VDMA: Apr Plant & Equipment Orders Y/Y: +36%
- (SP) Spain Mar Current Account: -?4.3B v -?6.6B prior
- (EU) Euro Zone Apr M3 Y/Y: -0.1% v -0.3%e; M3 Three-month Avg: -0.2% v -0.2%e
- (NO) Norway Apr Retail Sales Volume M/M: 0.2% v 0.4%e; Y/Y: -5.1% v 13.3% prior
- (NO) Norway Apr Credit Indicator Growth Y/Y: 4.0% v 3.9%e
- (PD) Poland Q1 GDP Y/Y: 3.0% v 3.1%e
- (HK) Hong Kong Apr M3 Money Supply Y/Y: 12.8% v 9.7% prior
- (HK) Hong Kong Apr Gov't Budget (HKD): -0.2B v -21.1B prior
- (EU) Euro Zone May Business Climate: 0.34 v 0.20; Consumer Confidence: -18 v -18e; Industrial Confidence: -6 v -7e; Economic Confidence: 98.4 v 101.6e; Services Confidence: 3 v 6e
- (EU) Euro Zone May Preliminary CPI Estimate Y/Y: 1.6% v 1.7%e
- (IT) Italy May Preliminary CPI (NIC Incl Tobacco) M/M: 0.1% v 0.3%e; Y/Y: 1.4% v 1.6%e
- (IT) Italy May Preliminary CPI EU Harmonized M/M: 0.1% v 0.2%e; Y/Y: 1.6% v 1.7%e
- (IC) Iceland Apr Final Trade Balance (ISK): 6.3B v 6.3B prior
- (GR) Greece Mar Retail Sales Y/Y: 14.9% v 4.5% prior