Reports » Europe

European stock market, economy and companies update (June 07, 2010)

Contributed by Trade The News

By Trade The News

*** SPEAKERS/FIXED INCOME/FX/COMMODITIES/ERRATUM ***
- Equities: Coupled with the sharp losses in Friday's US session and today's Asian session, European equities opened down by more than 1%. The decline are being linked to debt concerns in Hungary and disappointing US payrolls data. The equity losses in Europe are being led by the resource and financial sectors. As of 5:34 AM EST, equities are still lower by have moved off of the session's worth levels, as the Hungarian Forint has turned positive, as some market players have downplayed Friday's comments regarding a possible debt default by Hungary. Additionally, supportive comments out of Russia's central bank regarding Spanish bonds were noted. Euro Stoxx 50 -1.1% at 2,525; DAX Index -0.8% at 5,891; CAC-40 Index -1.35 at 3,409 and FTSE 100 Index -1.1% at 5,071

- In Individual Stocks: British Petroleum [BP.UK]: Provided daily update on Gulf of Mexico and noted that the toal cost to date of the cleanup was $1.25B. On June 5, it confirmed a total of 10.5K barrels of oil was collected and 22M standard cubic feet of natural gas were flared. From June 3 through June 5, the volume of oil collected was 16.6K barrels and 32.7M standard cubic feet of natural gas was flared. ||Prudential [PRU.UK]: Reported 5-month Revenues of ?1.35B better than year-ago amount of ?1.067B. Asian revenues also increased 33% y/y to ?435M ||Lufthansa [LHA.GE]: CEO reaffirmed 2010 guidance of increasing revenues and op profits y/y. CEO expected a slight increase in demand and an increase in freight prices. Stated company is not affected by EUR/USD weakness which was good for German exports.||E2V Technologies [E2V.UK]: Reported FY10 Net loss of ?2.3M better than estimates of loss of ?4.0M, operating profit of ?15M below year ago figures of ?27.4M and Revenues of ?201.2M slightly below estimates of ?200M. Expects FY10/11 to be broadly flat to FY09/10 || Cell Therapeutics [CTIC]: Reported results from Phase II study of Opaxio with advanced esophageal cancer . Results confirmed high rate of response. || Merck and Eli Lilly [MRK and LLY]: Reported that study of Erbitux failed to stop cancer spread ||

- Speakers: ECB's Constancio commented that the Euro exchange rate was not a monetary policy goal ***ECB's Nowotny commented that he saw lower economic growth fir the Central and Eastern European region compared to its past***Hungary PM Orban to unveil new economic plan on Tuesday Jun 8th according to State media outlet MTI. The Econ Min Matolcsy is reported to affirm that the country's 2010 budget deficit to GDP ratio cannot exceed 3.8% target. Hungary might launch a 'radical' three-year tax cut plan and might introduce flat tax in 2011***UK PM Cameron stated that the massive deficitt and growing debt were the most urgent issues. He noted that a framework for upcoming budget would be released on Jun 8th. The decision on the fiscal front would affect everyone and be felt for decades to come. The scale of budget issues was worse than previously thought and that the plan for deficit reduction deficit was backed by Treasury and BOE. He noted that the steps to cuts the deficit were necessary to avoid higher interest rates *** IATA forcatsed that 2010 airline Passenger traffic up 7.1% y/y compared to prior view of a rise of 5.6% prior. It now saw the airline industry achieving a 2010 profit of $2.5b compared to its prior estimate of a loss $2.8B *** IMF commented that Sweden central bank (Riksbank) decisive policy actions were 'feasible'. The IMF did note that the country's economic growth prospects for 2010/11 remained uncertain and that the SEK currency gains would hurt prospects for net exports. It saw core inflation likely to continue with decline *** Portugal's Central Bank Gov Costa stated that the Euro zone was challenged by market concerns and financing needs. He labeled the financial system as remaining 'solid' ***Russia Central Bank (CBR) commented that some of reserves were invested in Spanish bonds but did not see any possibility of default . The CBR added that the key interest rate under the current conditions was the overnight deposit rate

- Currencies/Fixed Income: The risk aversion sentiment remained intact but did not envelop the European bourses as bad in initially feared. The EUR/USD remained below the 1.20 level ahead of the NY morning but off its fresh 4-year lows of 1.1878 seen in thin Asian trading. Overall sentiment remained vulnerable following the tepid private US payroll report last week. For the moment dealers question how much faith does one put in new Asian market on a Monday. On a technical front the EUR/USD appears to be 'oversold' and over 15% from its 200-day moving average. The JPY saw its Asian gains reverse and was marginally softer against other major pairs. USD/JPY trading at 91.70 while EUR/JPY moved back towards the 110 handle after testing just above 108 in Asia.

- Geo-Political: The German Constitutional Court considered an interim order barring German participation in ?750B EU/IMF plan for Europe according to an article in Der Spiegel. The report cited a case filed against the rescue package by Peter Gauweiler, a lawmaker from Chancellor Angela Merkel's center-right CDU/CSU bloc.. ***The German government was in discussions Sunday on methods to save ?10B per annum in Germany's budget from 2011-2016. The government was drawing close to agreement on spending cuts through changes in welfare provisions and armed forces reduction ***The UK's financial regulatory body (FSA) requested that UK banks conduct stress tests one exposure to the Euro zone fiscal crisis. *** In a newspaper article in the Australian, BHP CEO Kloppers stated that the Mining tax is 'greatest threat I've seen in 17 years'. He further stated that he had been through two Brazilian crises and the Asian crisis and this is by far the biggest issue I have seen by an order of magnitude. ***Australia Prime Minister Rudd is reportedly to continue discussions with mining companies on super-profits tax; Believes the structure and rate of the mining tax are appropriate. *** The G20 meeting in South Korea ended with mixed results with the final communiqusupporting the idea of fiscal tightening due to the sovereign debt issues in Europe. Note the prior G20 communiquin April supported government stimulus to assist with the economic recovery. US Treasury Secretary Geithner commented that Europe and Japan need to boost domestic demand and balance fiscal consolidation with growth, and that fiscal tightening could affect demand. With regards to a proposal on a global bank tax, there was little agreement as countries with banks that required no government assistance objected to the idea. It ended with his discussions temporarily abandoned until a later time.

In The papers: El Mundo reported that Spain was considering tax amnesty to help finance debt and stated that anyone with undeclared funds who took part in the program would escape sanctions, but would have to buy debt at below market price. The article noted that any such plan would face opposition from Spain's tax agency and indicated that Spaniards might have as much as ?40B in undeclared funds outside the country ***Telegraph reported that the UK government coalition government budget plan would emulate Canada's fiscal tightening of the 1990s, which turned a 9% of GDP budget deficit into surplus in just a few years.

***Notes/Observations:
- Risk aversion sentiment eases in European morning but Asian stocks were down between 1.5% to almost 4%.
- German constitutional court weighs possibility of blocking Germany's participation in ?750B EU/IMF rescue package.
- ECB: A record high of ?350.9B parked in deposit facility v ?299.5B prior

***Looking Ahead***
- 8:00 (US) Fed's Potter
- 8:30 (CL) Chile Apr Economic Activity Y/Y: 2.2%e v -2.9% prior
- 8:30 (CL) Chile May Trade Balance: $145Be v $1.4B prior; Total Exports: No est v $5.6B prior; Mo est v $4.2B prior
- 9:00 (EU) Euro Area Fin Min meeting in Luxembourg
- 9:30 (BR) Brazil May Vehicle Production: No est v 290K prior; Vehicle Sales: No est v 277.8K prior; Vehicle Exports: No est v 47.1K prior
- 11:00 (GE) German Chancellor Merkel hosts French President Sarkozy for talks
- 13:50 (CA) Canada's Fin Min Flaherty and BOC's Carney
- 14:30 (US) Fed's Yellen
- 15:00 (US) Apr Consumer Credit: -$2.0Be v $2.0B prior

***Economic Data***
- (CZ) Czech Apr Trade Balance (CZK): 15.4Bv 12.0Be
- (CZ) Czech Apr Industrial Output Y/Y: 10.9% v 10.2%e; Construction Output Y/Y: -15.3% v -18.3% prior
- (CZ) Czech Apr Retail Sales Y/Y: -4.5% v -1.0%e
- (CZ) Czech Q1 Avg Real Wages Y/Y: 1.5% v 7.6% prior
- (SW) Sweden May Budget Balance (SEK): 20.0B v 29.8B prior
- (AS) Austria May Wholesale Price Index M/M: 0.4% v 1.8% prior; Y/Y: 4.9% v 4.8% prior
- (DE) Denmark Apr Industrial Production M/M: -0.8% v 0.1% prior; Industrial Orders M/M: -11.2% v 20.6% prior
- (TT) Taiwan May Total Trade Balance: $3.3 v $3.0Be; Total Exports Y/Y: 57.9% v 40.0%e; Total Import Y/Y: 71.4% v 49.6%e
- (TT) Taiwan May CPI Y/Y: 0.7% v 1.0%e; WPI Y/Y: 9.4% v 8.4%e
- (NO) Norway Apr Industrial Production M/M: -0.8% v -1.8% prior; Industrial Production Y/Y: -4.6% v -5.0% prior
- (NO) Norway Apr Industrial Manufacturing Production M/M: 0.2% v 0.2%e; Industrial Production Y/Y: 3.0% v 2.7%e
- (EU) Euro Zone Jun Sentix Investor Confidence: -4.1 v -7.0e
- (RU) Russia May Official Reserve Assets: $456.4B v $461.2B prior