Reports » Europe

European stock market, economy and companies update (January 27, 2012)

Contributed by Trade The News

By Trade The News

*** SPEAKERS/FIXED INCOME/FX/COMMODITIES/ERRATUM ***
***Notes/Observations***
-Greece to continue debt discussions with creditors Friday
- Concerns that Greece's funding needs might be bigger than originally thought
- Fitch end of month review deadline looms for 6 European sovereigns
- China to return from week-long Lunar New Year holiday

Equities:
FTSE 100 -0.13% at 5787, DAX +0.37% at 6563, CAC-40 -0.6% at 3361, IBEX-35 +0.12% at 8723, FTSE MIB -0.6% at 16,099, SMI -0.4% at 6098

- European equity indices opened the session lower, but have since pared losses on renewed hopes that a Greek debt agreement might be reached in the next few days. European banks are currently trading mixed, with French banks underperforming. Greek banks have risen by over 10%, amid the ongoing talks between Greece's government and its private sector creditors. Additionally, a Greek press report said that the Troika officials were said to have lowered their capital demands for Greek banks.
- In individual movers, Finland-based Wartsila [WRT1V.FH] has declined after reporting weaker than expected quarterly results. Shares of the London Stock Exchange [LSE.UK] are slightly higher after the company issued its Q3 sales report. In Switzerland, Transocean [RIGN.CH] has gained over 7% after receiving a favorable court ruling in relation to the 2010 Deepwater Horizion oil spill. Also, following the court ruling, shares of BP [BP.UK] are lower by close to 2%. In France, Carrefour [CA.FR] is higher by over 2%, following reports that the company is expected to name a new CEO.

Speakers:
- Renewed reports circulated that Greece's creditors were nearing a deal on PSI related to a lower coupon. Greece PM and IIF head Dallara to meet again today at 16:30 GMT in relation to PSI talks
- EU Commissioner Rehn stated that he expected a Greek PSI either today or at some pojnt over the weekend
- ECB's Gonzalez-Paramo reiterated the view that ECB had not said that interest rates were at a minimum level as rates would be as high or low in order to ensure price stability
- Spain Econ Min de Guindos commented that the Euro zone could withstand Greek default in comments from a press interview in Davos, Switzerland. He noted that unemployment was the main source of vulnerability for Spain and the country must increase banking consolidation. He reiterates that Spain would not use taxpayer funds for banks. Banks could absorb €50B provision on their own and that Spanish banks had already began increasing provisions.
- German Finance Ministry reports its 2011 tax revenues which saw total revenues rising 7.9% y/y and Federal taxes rising by 9.8% y/y. The Ministry noted that Germany must continue on path of budget consolidation and reiterated the view that economic growth to regain momentum during 2012 year
- German Econ Min Roesler commented that there was no need to discuss greater Euro Zone contribution for Greece or size of ESM at this time and stressed that must put in place the EU's December agreement. He clarified that could talk about more Greek measures if current plan wais not enough and that Greece must take steps to boost its competitiveness
- Euro Zone panel (World Economic Forum) comprised of German Fin Min Schaeuble, France Fin Min Baroin, Spain's Econ Min De Guindos and EU Commissioner Rehn reiterated numerous themes addressed in recent weeks on the Eurpean debt crisis, Greece debt swap discussions, Fiscal pact and growth.
- ECB's Gonzalez-Paramo commented that Spanish labor reform was necessary for employment growth
- Sweden Fin Min Borg commented at Davos that Greece was destroying its credibility with investors because it was not carrying out fiscal reform quickly enough. He noted that the ECB should not be forced to accept losses on its holdings of Greek debt, but should instead be given more breathing room to take action to help resolve the euro zone's debt crisis
- Poland Central Bank Gov Belka commented that he anticipated core inflation to ease in 2012 with 2012 GDP growth possible above 3.0%. The weaker PLN currency would shield exporters from EU slowdown. Polish banking sector was well capitalized
- Poland Central Bank's Winiecki commented that the central bank was more likely to raise interest rates rather than cut them and needed o watch economy closely in coming months
- Iran parliament to discuss Emergency Bill Sunday which will halt oil exports to Europe from next week

Currencies:
- The European session focus remained on Greece's debt deal negotiations with optimism continuing to have an upper hand in sentiment. The EUR/USD probed towards 1.3150 on renewed reports Greece's creditors were nearing a deal on PSI related to a lower coupon. EU Commissioner Rehn fanned the optimism when he stated the he expected a Greek PSI either today or at some pojnt over the weekend
- ECB's Gonzalez

Political/ In the Papers:
- The financial press reported that the Troika was said to have lowered capital demands for Greek banks, and asked the country to re-capitalize its banks using instruments without voting rights. The banks may be required to have a core tier 1 capital ratio of 10% from 2013, instead of this year, as was demanded as a condition for the May 2010 loan accord.
- Former ECB Board member Bini Smaghi has concerns about the IMF's special creditor status, adding that the special creditor status could lead to negative consequences that would offset benefits, such as delaying the return of program countries to market financing.
- The FT summarized yesterday's comments from EU official Rehn regarding the size of Greece's second rescue package. The article quoted Rehn as saying that there was likely to be a need for some increase in official sector funding on the basis of revised debt sustainability. Rehn declined to say how big the funding shortfall would be, although he said that increased taxpayer support for Greece would be "not anything dramatic."
- The Telegraph's Evans-Pritchard looked at concerns related to the sustainability of Portugal's debt levels. According to the Kiel Institute, Portugal needs to have a primary budget surplus of more than 11% of GDP per year in order to control its debt levels. It suggested that Portugal is in the same position that Greece was one year ago. The Kiel Institute also believes that Portugal's needs a debt haircut of 46-56% in order to return its debt to sustainable levels.
- The British government is expected to launch a public and private investment fund for green energy on Friday. The fund will provide seed finance for a minimum of £3 billion for green energy projects in emerging, and developing countries.

***Looking Ahead***
- 6:00 (EU) ECB member Gonzalez-Paramo
- 6:00 (IE) Ireland Dec Retail Sales Volume M/M: No est v 1.6% prior; Y/Y: No est v -0.8% prior
- 6:10 (UK) DMO to sell Bills
- 6:30 (CL) Chile Central Bank Minutes
- 6:30 (BR) Brazil Dec Tax Collections (BRL): 98.0Be v 800B prior
- 7:30 (BR) Brazil Dec Private Bank Lending (BRL): No est v 1.131T prior; Total Outstanding Loans: No est v 1.984T prior
- 8:15 (EU) ECB chief Draghi at Davos, Switzerland
- 8:30 (EU) EU's Barroso with Belgium PM Di Rupo
- 8:30 (US) Q4 Advanced GDP Q/Q Annualized: 3.0%e v 1.8% prior; Personal Consumption: 2.4%e v 1.7% prior
- 8:30 (US) Q4 Advanced GDP Price Index: 1.9%e v 2.6% prior; Core PCE Q/Q: 0.9%e v 2.1% prior
- 8:30 (CA) Revisions to Canada Employment data
- 9:55 (US) Jan Final University of Michigan Confidence: 74.0e v 74.0 prelim
- 10:00 (US) Fed's Dudley
-12:00 (CA) Minister of State (Finance) Menzies at CD Howe in Toronto

***Economic Data***
- (EU) ECB: € borrowed in overnight loan facility v €3.5B prior; € parked in deposit facility vs. €484.1B prior
- (RU) Russia Narrow Money Supply w/e Jan 23rd (RUB) 6.80T v 6.83T prior
- (IN) India Primary Articles WPI e/d Jan 14th: Y/Y: 1.9% v 2.5% prior; Food Articles WPI Y/Y: -1.0% v -0.4% prior
- (FI) Finland Jan Business Confidence: -10e v -10 prior; Consumer Confidence: 1.7e v 0.4 prior
- (DE) Germany Dec Import Price Index M/M: 0.3% v 0.3%e; Y/Y: 3.9% v 3.8%e
- (FI) Finland Q3 House Prices Q/Q: -1.4% v -0.2%e; Y/Y: 1.0% v 2.2%e
- (ES) Spain Dec Adjusted Real Retail Sales Y/Y: -5.4% v -5.9%e; Real Retail Sales Y/Y: -6.2% v -5.5%e
- (ES) Spain Q4 Unemployment Rate: 22.9% v 22.2%e
- (CH) Swiss Jan KOF Leading Indicator: -0.17 v -0.10e
- (SE) Sweden Dec Household Lending Y/Y: 5.2% v 5.1%e
- (SE) Sweden Dec Retail Sales M/M: +0.1% v -0.5%e; Y/Y: 1.5% v 0.8%e
- (EU) Euro Zone Dec`M3 Money Supply Y/Y: 1.6% v 2.1%e; M3 Money Supply 3-month Avg: 2.1% v 2.3%e
- (DE) Germany Jan CPI Hesse M/M: -0.3% v +0.5% prior; Y/Y: 1.9% v 1.7% prior
- (IC) Iceland Jan CPI M/M: 0.3 v 0.4% prior; Y/Y: 6.5% v 5.3% prior
- (PL) Poland 2011 Annual GDP: 4.3% v 4.2%e
- (PL) Poland Dec Retail Sales M/M: 20.8% v 22.6%e; Y/Y: 8.6% v 10.1%e
- (PL) Poland Dec Unemployment Rate: 12.5% v 12.5%e
- (GR) Greece Dec PPI Y/Y: 5.7% v 7.4% prior
- (BE) Belgium Jan CPI M/M: 0.7% v 0.0% prior; Y/Y: 3.7% v 3.5% prior

Fixed Income:
- (IT) Italy Debt Agency (Tesoro) sold €11.0B vs. €11.0B indicated in 6-month and 11-month Bills
- Sold €8B v €8Be in 6 month bills; Avg Yield 1.969% v 3.251% prior; Bid-to-cover: 1.35x v 1.69x prior
- Sold €3B v €3Be in flexible 11-month bills; Avg Yield 2.214% v 2.725% prior; Bid-to-cover: 1.821x v 1.47x prior
- (IN) India sold total INR130B vs. INR130B indicated in 2020, 2024 and 2030 bonds