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Reports Europe

European stock market, economy and companies update (December 04, 2012)

December 4, 2012, Tuesday, 11:00 GMT | 07:00 EST | 16:30 IST | 19:00 SGT
Contributed by Trade The News


- Indices: FTSE 100 +0.20% at 5,880, DAX +0.10% at 7,444, CAC-40 +0.60% at 3,588, IBEX-35 +0.50% at 7,928, FTSE MIB +0.90% at 16,019, SMI +0.30% at 6,860, S&P 500 flat 1,407
- Following the mixed open, European equity indices are broadly higher led by the Italian FTSE MIB, as Italy's 10 yr yield has fallen to 2-year lows. European banks are mostly higher, led by shares of Credit Agricole and Unicredit. Greek banks are slightly lower, following the gains seen on yesterday's session. Resource-related companies are trading mixed, in line with what has been seen with commodity prices. Looking ahead, markets are expected to focus on comments related to the US budget talks and the euro zone finance ministers meeting.

- UK movers [Tui Travel +2.5% (FY results), UK Coal +10% (restructuring update)]
- France movers [EADS +2.5% (continues speculation related to shareholder structure),Gemalto, CGG Veritas +1 (index change speculation); Neopost -5% (reported Q3 results), EDF -1.5% (cost inflation concerns)]
- Germany movers [United Internet -7% (share placement), Man SE -1% (announces shorter working hours)]
- Switzerland movers [Richemont +1% (index change speculation)]

- ECB's Nowotny: Euro zone growth prognoses revised downward with Southern Europe contracting in 2012 and 2013
- There were several comments ahead of EU-27 Fin Min meeting
- France Fin Min Moscovici stated that France sought ECB oversight of all banks with discussion on banking union was well advanced but nothing was guaranteed. He stressed that a banking supervisor was fundamental for Europe's future
- German Fin Min Schaeuble stated that he expects solution on banking supervisory; could find an interim solution. Chinese wall between supervisory and monetary policy necessary. Cannot leave banking supervision to independence of central bank and Germans don't believe ECB can oversee all banks
- Sweden Fin Min Borg believed that a treaty change for bank supervision should be on the table and find a compromise on banking supervisor. ECB should not pick either supervisory Chairman or vice chairman. ECB should not pick either supervisiory Chairman or vice chairma
- Spain Fin Min De Guindos stated that banking Union was key in removing doubt on Euro's futures, He added that the Eurogroup recognized Spain's efforts on budget and reforms- Austria Fin Min Fekter: Govt leaders to decide on Eurogroup Pres Juncker succession
- ECB's Constancio stated that all banks should be supervised under the same rule with the ECB should having the right to intervene in any bank. Reiterates that ECB cannot directly to supervise all banks
- EU's Barnier: Hope to reach an important point in completing the design of the bank supervisor by year end and approaching a very good compromise. Opposed to 2-teir supervisory system; ECB should be able to supervise any bank with threshold for ECB oversight should be low. ECB should pick supervisory Chairman. EU open to treaty revision on ECB supervision.
- German FDP (coalition) official Bruederle commented in the German press that the Greece rescue would cost Germany money as it would have to pay real money on top of loans and guarantees but added it would be more expensive to let Greece fail. He noted that there was a good chance that Greece could solve its problems. The FDP wanted to continue the Merkel coalition after the Sept 2013 elections
- BoE: Outlook for financial stability has improved; uncertain outlook on EU area continues - FPC record. There are some signs of improvement in UK credit growth
- Sweden Central Bank (Riksbank) Gov Ingves cautioned that its household indebtedness was at a high leve lbut the country's economic performance had helped to avoid crash in housing market. Households were vulnerable to a decline in housing prices; must discuss new measures to manage household debt. Household debt must be part of rate decision
- China vice Fin Min Zhu: Global economy full of uncertainty in 2013; Risks of Euro Zone and Japan recession may linger

- Quiet European data calendar provided the background aimlessly dull session. EU Finance Ministers meet to try and finalize banking union plans. The USD was softer against the major European pairs with Euro hitting a fresh 6-week high and Cable at 1-month highs. Italy 10-year gov't yield hit a two year low below 4.40%
- A credit Suisse Exec stated that negative interest rates on cash clearing accounts above a certain threshold would be set individually per client

Political/ In the Papers:
-(IT) Italy PM Monti: Greek accord has helped push down the Italy spreads; Current bond spreads are still not justified, but the trend is improving; Goal is a Italy/German bond spread of 287bps
- (PT) EU's Juncker: Portugal's next aid tranche payment will be 2.5B in January; EU will support Portugal until it regains full market access.
- (US) House Speaker Boehner offers counter-proposal to White House fiscal plan to include $800B in new tax revenues and $300B in discretionary spending cuts . Would cut mandatory spending by $900B
- (US) White House Dismisses Republican fiscal cliff offer: did not meet Obama's pledge to raise taxes on the wealthy and does not meet the test of balance
-Washington Post: Deal to avoid fiscal cliff appears to be out of reach

***Looking Ahead***
***All times listed for economic events are denominated in Eastern Standard Time (Add 5 hours for GMT equivalent)
04-06 DEC (DE) Germany's Main Opposition SPD Holds Federal Party Conference
04-05 DEC (EU) NATO Foreign Ministers Meet in Brussels
- (US) Fed's Tarullo at Brooking Institute
- 06:00 (EU) ESM's Regling speaks at Brussels Think Tank
- 06:00 (BR) Brazil Oct Industrial Production M/M: +1.1%e v -1.0% prior; Y/Y: +2.4%e v -3.8% prior
- 06:00 (IE) Ireland Oct Industrial Production M/M: No est v -12.7% prior; Y/Y: No est v -12.7% prior
- 06:00 (EU) OECD Oct Inflation Y/Y: No est v 2.2% prior
- 06:00 (EU) EFSF to sell up to 1.5B in 3-month bills; Avg Yield % v -0.029% prior; Bid-to-cover: x v 3.0x prior
- 06:30 (US) Daily Libor Fixings
- 07:00 (EU) ECB announces allotment in 7-Day Term Deposits; to drain 208.5B
- 07:45 (US) Weekly ICSC Chain Store Sales
- 08:30 (SG) Singapore Nov Purchasing Managers Index: 48.7e v 48.3 prior; Electronics Sector Index: 48.0e v 47.5 prior
- 08:55 (US) Weekly Redbook Retail Sales
- 09:00 (CA) Canada Central Bank (BOC) Interest Rate Decision: Expected to leave Interest Rates unchanged at 1.00%
- 09:00 (MX) Mexico Nov Consumer Confidence: 95.0e v 94.9 prior
- 09:00 (EU) Weekly ECB Forex Reserves
- 09:45 (US) Nov ISM New York: No est v 45.9 prior
- 10:00 (DK) Denmark Nov Foreign Currency Reserves (DKK): No est v 513.4 prior
- 11:30 (US) Treasury to sell 4-Week Bills
- 16:00 (KR) South Korea Nov Foreign Exchange Reserves: No est v $323.5B prior
- 16:00 (CO) Colombia Nov Producer Price Index M/M: No est v -0.2% prior; Y/Y: No est v -1.1% prior
- 16:30 (US) Weekly API Crude Oil Inventories
- 20:45 (CN) China Nov HSBC Services PMI: No est v 53.5 prior

- Fiscal stalemate continues in Washington
-ECB's Asmussen stated that Portugal needed more bond issuance for OMT eligibility and did not see a default in Euro zone
-ESM's Regling: downgrade by Moody's of ESM did not take into account the ESM's paid in capital
-RBA cuts Cash Target Rate by 2bps to 3.00% (as expected, record low) citing concerns about a weaker global growth outlook; remains scope for further cuts, impetus for cuts will largely depend on incoming data
- EU-27 Finance Ministers meeting in Brussels with some speculation that the EU ministers might reach deal on ECB oversight at today's meeting but will not reach one for Basel III agreement
- Peripheral yield continue to move lower; Italy 10-year gov't yield hits two year low below 4.40%
- ECB allotments at a six month low for main 7-day refi tender
- Belgium Bill auction results solid with negative yields and strong bid-cover ratios

***Economic Data***
- (BR) Brazil Nov FIPE CPI: 0.7% v 0.6%e
- (CZ) Czech Q3 Avg Real Wage Y/Y: -1.8% v -1.1%e
- (ES) Spain Nov Unemployment change M/M: +74.3K v +90.0Ke
- (EU) ECB: 1.7B borrowed in overnight loan facility 1.9B prior; 239.4B parked in deposit facility vs. 237.8B prior
- (ZA) South Africa Q4 BER Consumer Confidence: -3 v -1 prior
- (ZA) South Africa Nov Naamsa Vehicle Sales Y/Y: 7.3% v 10.5% prior
- (UK) Nov PMI Construction: 49.3 v 50.5e
- (EU) Euro Zone Oct PPI M/M: 0.1% v 0.0%e; Y/Y: 2.6% v 2.5%e

Fixed Income:
- (ZA) South Africa sold total ZAR2.1V vs. ZAR2.1B indicated in 2023, 2041 and 2048 bonds
- (CH) Switzerland sold CHF1.175B in 3-Month Bills; Avg Yield -0.300% v -0.198% prior
- (EU) ECB allotted 70.8B vs. 75B indicated (6-month low) in 7-Day Main Refinancing Tender at fixed 0.75%
- (HU) Hungary Debt Agency (AKK) sold HUF50B vs. HUF50B indicated 3-Month Bills; Avg Yield 5.96% v 6.05% prior; bid-to-cover: 1.82x
- (BE) Belgium Debt Agency sold total 922M vs. 0.8-1.2B indicated range in 3-month and 6-month Bills
- Sold 368M in 3-month Bills; Avg Yield -0.029% v -0.004% prior; Bid-to-cover: 10.96x v 4.30x prior
- Sold 554M in 6-month Bills; Avg yield -0.010% v +0.021% prior; Bid-to-cover: 5.46x v 2.66x prior