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Reports Europe

European stock market, economy and companies update (December 05, 2012)

December 5, 2012, Wednesday, 11:44 GMT | 06:44 EST | 17:14 IST | 19:44 SGT
Contributed by Trade The News


-Indices: FTSE 100 +0.25% at 5,884, DAX +0.20% at 7,449, CAC-40 +0.30% at 3,592, IBEX-35 +0.30% at 7,924, FTSE MIB +0.50% at 16,127, SMI flat at 6,850, S&P 500 Futures +0.30% at 1,410

- European equity indices are broadly higher, but off of the best levels for the session, following the more than 2.5% gains seen in the Chinese equity markets. Today's gains have been led by the Italian FTSE MIB. Germany's DAX continues to trade below fresh 2012 highs. In terms of macro events, the European PMI services data was mixed (Germany and Spain above expectations, while Italy, France, and the UK missed expectations). GDP data out of Finland showed that the country's economy moved into a technical recession in Q3. In terms of European banks, outperformers have included Commerzbank, Credit Agricole and Unicredit. Spanish banks have lagged, as bond yields have risen following Spain's debt auction. UK banks have also underperformed, ahead of the release of the OBR's autumn statement. Resources related shares are mostly higher, tracking the gains in Chinese equities and commodity prices.

- UK movers [Tesco +3% (better than expected Q3 sales, disclosed strategic review for US unit), Stagecoach +2% (FY results); Numis -2% (FY results)]
- France movers [EADS +1.8% (share buyback speculation), France Telecom +1% (CEO commentary)]
- Finland movers [Nokia +6% (confirmed Lumia agreement with China Mobile)]
- Spain movers [Bankia +3% (broad strength in European banks)]

- ESM bailout facility announced it would bonds via private placement of around 39.5B for Spain banking sector recapitalization. It stated 2 bills and 3 floating rate notes issued for Spanish banks with proceeds to be transferred to FROB in coming days (**Reminder: Spain made a formal request on Dec 3rd for a banking sector bailout)
- RBA Deputy Gov Lowe: Monetary policy is still effective; lending rates may remain low for a period; Closely watching business confidence and conditions. A$ response to rate cuts are smaller than usual. Rate cuts are proving effective in boosting overall economy. Threshold of low interest rates is around 1% and will not rule out Fx intervention, but would be a big step
- Greece Bank Stability fund head Thomopoulos: Greek banks have huge capital, liquidity shortfall. Would like to get private investors into banks
- Finland PM Katainen: Economy in a challenging situation; significant structural weaknesses in Finland, downturn is not just cyclical. Govt is committed to stopping debt growth. Borrowing costs would rise without austerity
- Czech Central Bank Singer: Reiterates that bank's forecast implies fx interventions may be needed in 2013
- Czech Central Bank quarterly stress tests showed banking sector capital adequacy falling to 11% in adverse scenario v 16.4% end of Sept. Under the adverse scenario, several banks would have to raise capital by a total of CZK18.7B in order to meet requirement for a capital adequacy threshold of 8%.
- Brazil Govt announced changed to the IOF as it cut the maturity of foreign loan subject to 6% IOF to one-year from the prior two-year
- Outgoing China Premier Wen: Global economic recovery is weakening; global crisis spreads to central Asia. New Communist Party Leader Xi Jingping said to have met with foreign exports

- The risk appetite sentiment had the upper hand going into the session aided by a surge in the Chinese Shanghai Composite and steady European stocks. The new China govt began its first session of with suggestions that the new standing committee of the politburo would turn its focus to urbanization, potentially demanding more simulative measures such as infrastructure spending.
- The EUR/USD did eek out a fresh 6-week high at 1.3126 but dealers were eyeing the 1.3170 as the pivotal resistance (**Note: Corresponds to Sept/Oct intra-day highs). The PMI Services data was more than offset by the weaker European Retail Sales data and unimpressive Spanish auction results. The EUR/USD moved back below the 1.31 just ahead of the NY morning.
- GBP/USD was steady ahead of the U.K. government's mid-fiscal review to be presented later today with both growth and fiscal targets likely being missed. The pair was just off one-month highs and hovering around the 1.61 handle just ahead of the NY session.

Political/ In the Papers:
- (EU) EU's Rehn: Deal on the 'two pack' legislation is near; good progress was made on banking supervision; continuing to work with Troika on Cypus debt sustainability
- (FR) France govt to raise capital gains tax from 3% to 5% on any amount over 100K starting 2014 - Les Echos
- (FR) France PM Ayrault: Wants laws to limit hostile takeovers
- (DE) Germany Chancellor Merkel has been re-elected as CDU chief with 97% of vote- press
- (GR) EMU finance ministers approve the 2 years deficit extension for Greece; as expected
- (GR) Greece Fin Min Stournaras: Critical that debt buyback is successful; Eurogroup meeting of Dec 13th to evaluate the buyback
- GR) Greece PM Samaras to meet with Fin Min Stournaras to finish draft of tax code; Was leaked that the plan called for 45% tax on all income over 25K (later denied) which caused an outrage - ekathimerini
- (ES) Spain Fin Min de Guindos: Q4 has been the most difficult quarter of the economic relapse, hopes economy will improve after Q4
- (ES) Spain Budget Min Montoro: The regions are making a good effort to deal with their budget deficits; Notes that it is possible to meet the region's 1.5% deficit target though that has not yet been reached
- (ES) Spain autonomous regional deficit for first 9m of 2012: -0.93%- El Mundo; Catalonia, Andalusia, Murcia, Extremadura and Navarra have already exceed the 1.5% central govt deficit target

***Looking Ahead***
***All times listed for economic events are denominated in Eastern Standard Time (Add 5 hours for GMT equivalent)
- (PL) Poland Central Bank Interest Rate Decision: Expected to cut the Base Rate by 25bps to 4.25%
- 06:00 (IE) Ireland Nov Live Register Monthly Change: No est v -1.0K prior; Unemployment Rate: No est v 14.8% prior; Live Register Level: No est v 434.2 prior
- 06:30 (CL) Chile Oct Economic Activity Index M/M: 0.1%e v 1.0% prior; Y/Y: 6.1%e v 4.6% prior
- 06:30 (US) Daily Libor Fixings
- 07:00 (PM) Prime Minister's Question Time in House of Commons
- 07:00 (US) MBA Mortgage Applications w/e Nov 30th: No est v -0.9% prior
- 07:00 (BR) Brazil Nov PMI Services: No est v 50.4 prior
- 07:30 (UK) Chancellor Osborne Autumn Statement in Commons
- 08:00 (HU) Hungary Central Bank Minutes
- 08:15 (US) Nov ADP Employment Change: +125Ke v +158K prior
- 08:30 (US) Q3 Final Nonfarm Productivity: 2.8%e v 1.9% prelim; Unit Labor Costs: -1.0%e v -0.1% prior
- 09:00 (EU) ECB member Asmussen (Germany) in Brussels
- 09:00 (BE) Belgium Q3 Final GDP Q/Q: No est v 0.0% prelim; Y/Y: No est v -0.3% prelim
- 09:30 (BR) Brazil Central Bank weekly currency flow
- 10:00 (US) Oct Factory Orders: 0.0%e v 4.8% prior
- 10:00 (US) Nov ISM Non-Manufacturing Composite: 53.5e v 54.2 prior
- 10:00 (DE) Durable Goods Revisions
- 10:30 (US) Weekly DOE Crude Oil Inventories
- 11:00 (US) Fed to buy $4.25-5.25B in bonds
- 13:30 (EU) ECB member Asmussen (Germany) in Brussels
- 15:00 (NZ) New Zealand Central Bank (RBNZ) Interest Rate Decision: Expected to leave the Official Cash Rate unchanged at 2.50%
- 16:00 (CO) Colombia Oct Exports FOB: No est v $4.8B prior
- 19:30 (AU) Australia Nov Employment Change: 0.0Ke v 10.7K prior; Unemployment Rate: 5.5%e v 5.4% prior

- Shanghai Composite surges higher almost 3% on speculation of urbanization plans by new govt coupled with banking sector investment for China insurers
- Australia Q3 GDP growth hits 3-quarter low and slightly below estimates with its +0.5% reading
- BoJ Dep Gov: Reiterates will continue with powerful easing
- China HSBC PMI Services hits 3-month low of 52.1
- Euro zone's economic slump was a little less pronounced with PMI Services data but France, Spain and Italy were the biggest drags
- Euro Zone Retail Sales come in far below expectations with back month lower revisions
- Spain auction results fails to impress markets; 10-year yield rise over 5bps in the aftermath

***Economic Data***
- (IE) Ireland Nov NCB Services PMI: 56.1 v 56.1 prior
- (FI) Finland Q3 GDP Q/Q: -0.1% v +0.3%e; Y/Y: -1.2% v -0.8%e
- (SE) Sweden Nov PMI Services: 46.4 v 50.2 prior
- (CZ) Czech Oct Retail Sales Y/Y: 2.2% v 2.5%e
- (ES) Spain Oct Industrial Output WDA Y/Y: -3.3% v -6.4%e; Industrial Output NSA Y/Y: +0.6% v -12.1% prior
- (EU) ECB: 1.7B borrowed in overnight loan facility 1.7B prior; 234.8B parked in deposit facility vs. 239.4B prior
- (ES) Spain Nov Services PMI: 42.4 v 41.0e (highest since Aug)
- (TW) Taiwan Nov Foreign Exchange Reserves: $401.0B v $399.2B prior
- (SE) Sweden Oct Service Production M/M: -1.1% v -0.5%e; Y/Y: -2.0% v -0.1%e
- (IT) Italy Nov PMI Services: 44.6 v 46.0e (18th straight month of contraction)
- (FR) France Nov Final PMI Services: 45.8 v 46.1e (3-month high)
- (DE) Germany Nov Final PMI Services: 49.7 v 48.0e (7th straight contraction)
- (EU) Euro Zone Nov Final PMI Services: 46.7 v 45.7e; PMI Composite: 46.5 v 45.8e
- (IC) Iceland Nov Preliminary Trade Balance (ISK): 12.3B v 15.2B prior
- (NO) Norway Q3 Current Account (NOK): 96B v 90B prior
- (UK) Nov PMI Services: 50.2 v 51.0e (2-year low)
- (EU) Euro Zone Oct Retail Sales M/M: % v -0.8%e; Y/Y: % v -0.2%e

Fixed Income:
- (IN) India sold total INR100B vs. INR100B indicated in 3-month and 6-month Bills
- (ES) Spain Debt Agency (Tesoro) sold total 4.25B vs.3.5-4.5B indicated range in 2015, 2019 and 2022 bonds
- Sold 2.124B in 3.75% Oct 2015 Bono Bond; Avg Yield 3.417% v 3.617% prior; Bid-to-cover: 1.99x v 2.09x prior; Maximum Yield % v 3.663% prior; Tail 8.1bps v 4.6bps prior
- Sold 1.004B in 4.60% July 2019 Bono; Avg Yield 4.669% v 4.541% prior; Bid-to-cover: 2.47x v 2.0x prior; Max Yield 4.729% v 4.643% prior; Tail 6.0bps
- Sold 1.123B in Jan 5.85% Jan 2022 Bono Bonds; Avg Yield 5.290% v 5.458% prior; Bid-to-cover: 2.29x v 1.88x; Max Yield 5.322% v 5.468%; Tails 3.2bps v 1.0bps prior
- (EU) ECB allotted $4.1B in 7-Day USD Liquidity Tender at fixed 0.66% vs. $3.2B prior
- (EU) ECB allotted $3.0B in 3-Month USD Tender at fixed 0.64% vs. $4.1B prior
- (SE) Sweden sold total SEK15B in 3 and 6 month Bills
- (DE) Germany sold 3.3B in 0.0% Dec 2014 Schatz; Avg Yield -0.01% v -0.02% prior; Bid-to-cover: 1.9x v 1.9x prior

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