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Reports Europe

European stock market, economy and companies update (December 27, 2013)

December 27, 2013, Friday, 10:32 GMT | 05:32 EST | 15:02 IST | 17:32 SGT
Contributed by Trade The News

- Japan's core CPI lifted above 1% for first time since 2008; Nikkei225 Index eeks out fresh 6-year high while USD/JPY tested 105
- Japan Dec Manufacturing PMI registers its10th straight month of expansion and highest reading since July 2006
- Italy year-end auction sees borrowing costs rise to multi-month highs
- US and UK 10-year govt bond yields test above 3.00%
- Geopolitical developments worth noting into year-end. Situations continue to simmer in both Thailand and Turkey. Army chiefs in both countries vow to stay on sidelines

Indices [Stoxx50 +0.8%, FTSE 100 +0.5% at 6,728, DAX +0.8% at 9,562, CAC-40 +0.9% at 4,256, IBEX-35 +0.5% at 9,868, FTSE MIB +0.6% at 18,802, SMI +1% at 8,184, S&P 500 Futures -0.1% at 1,835]

- Market Focal Points: European equities open higher in catch up rally following holiday-related closures, DAX hits another fresh record high, French consumer company EDENRED warns on outlook due to devaluation in Venezuela, Political concerns continue to weigh on Turkey, George Soros acquires stake in Spanish company, UK retailers rise amid speculation related to Boxing Day sales

By Sector:
- Industrials [Fomento FCC.ES +4.5% (Soros took stake)]
- Healthcare [Thrombogenics THR.BE +2% (regulatory decision in Canada)]
- Consumer Discretionary [Edenred EDEN.FR -2% (profit warning)]
- Stoxx 50 sectors [Basic Materials +1.2%, Consumer Non-Cyclical +1.1%, Utilities +1%, Telecom +0.9%, Consumer Cyclical +0.9%, Industrials +0.8%, Technology +0.7%, Financials +0.6%, Energy +0.6%

- Bank of Spain (BoS) Monthly Economic Bulletin reiterated that it saw continued improving economic trend into end of 2013. Nov employment data showed continuation of improving trend.
- Czech Central Bank Dec Minutes noted that the majority of Board wanted CZK currency floor maintained at 27 against the Euro until beginning of 2015. Forex intervention had certainly been necessary response to domestic and economic developments. Early termination of FX intervention would be counter-productive and risked sudden CZK currency (Koruna) appreciation. Czech economy was near its bottom but performing well below its potential. Underperforming economy and labor market keep causing deflationary trends
- Turkey Army Statement: Not willing to take part in political debate
- Thailand Central Bank: 2014 GDP growth might be below 4%
- Norway Central Bank (Norges) Gov Olsen reiterated the perception that at some future poin interest rates would eventually rise
- S&P affirmed sovereign rating on Thailand at BBB+; Outlook Stable. It cited strong external profile and low level of gov't debt.
- Japan Dep Econ Min Nishimura commented that revised growth strategy was planned in Jun 2014 and noted that it might be hard to declare end to deflation in 2014. He wanted to quickly cut corporate tax rate to below 30% and sought bolder corporate tax cuts in special zones. He hoped the BoJ would deal appropriately with impact of sales tax increase, Kuroda and PM Abe to hold talks. Lastly he reiterated that a weak yen was positive for Japan's macroeconomy.
- Japan Bankers Assoc to set up separate administrator for interbank benchmark rates with more independent monitoring of the rate-setting process
- Thailand Army chief Chan-ocha: Army cannot take sides in the ongoing political dispute and is at a difficult crossroad. On possible coup he noted that it would not whether door was open or closed

Currencies/Fixed Income:
- Year-end illiquid markets saw the USD softer against European pairs. The EUR/USD was testing the 1.38 handle with participants trying to gun for stops layered away above. Lots of talk of option barriers towards 1.40 level (happens to also correspond to the 5-year downtrend line. All-in-all dealers are noting that January could be quite volatile in the FX arena (a month that typical set the foundations for the year-long trend).
- USD/JPY lifted above 105.00 for the first time since 2008. Japan's core CPI lifted above 1% for first time since 2008 but the rise has been more cost-push rather than the more desirable demand-pull type of inflation. The weaker yen currency has been a big factor in driving CPI higher

Political/In the Papers:
- (DE) According to DIHK, 2014 German exports seen at a record €1.45T, +4% y/y - German Press
- (ES) Spain cabinet reportedly preparing to implement a minimum wage freeze in 2014; plan has come under criticism by unions - Spain press
- (UK) According to Springboard, the number of Boxing Day shoppers rose by 0.5% y/y - financial press
- (JP) Japan civil service fund reduces JGB allocation, raises allocation for stocks and foreign bonds

**Looking Ahead***
All times listed for economic events are denominated in Eastern Standard Time (Add 5 hours for GMT equivalent)
- 06:30 (IN) India Forex Reserves w/e Dec 20th: No est v $295.5B prior
- 06:45 (US) Daily Libor Fixing
- 07:30 (BR) Brazil Nov Nominal Budget Balance (BRL): +12.1Be v -11.5B prior; Primary Budget Balance: 32.0Be v 6.2B prior; Net Debt % GDP: No est v 35.1% prior
- 08:30 (US) USDA weekly Net Export Sales
- 10:30 (US) Weekly EIA Natural Gas Inventories
- 14:00 (AR) Argentina Oct Economic Activity Index M/M: No est v 0.0% prior; Y/Y: 3.2%e v 4.7% prior
- 14:00 (AR) Argentina Construction Activity M/M: No est v -0.6% prior; Y/Y: No est v 6.2% prior
- 14:00 (AR) Argentina Nov Supermarket Sales Y/Y: No est v 18.4% prior; Shop Center Sales Y/Y: No est v 20.4% prior

***Economic Data***
- (RU) Russia Narrow Money Supply w/e Dec 23rd (RUB): 8.22T v 8.12T prior
- (FI) Finland Dec Consumer Confidence Index: 7.2 v 6.4 prior; Business Confidence: -9.0 v -9.0
- (FI) Finland Nov House Price Index M/M: 0.0% v -0.4% prior; Y/Y: 1.0% v 1.0% prior
- (TH) Thailand Nov Current Account Balance: $2.3B v $1.0Be; Trade Account Balance: $1.5B v $0.3B prior; Overall Trade Balance: -$2.4B v -$0.6B prior; Exports Y/Y: -4.0% v -0.5% prior; Imports Y/Y: -9.3% v -4.7% prior
- (FR) France Nov PPI M/M: +0.5% v -0.1%e; Y/Y: -0.6% v -1.2%e
- (CN) Shanghai Futures Exchange (SHFE) Weekly Copper Stockpiles: 125.8K v 131.1K prior
- (TW) Taiwan Nov Leading Index M/M: 0.3% v 0.3% prior; Coincident Index M/M: 0.2% v 0.2% prior
- (EU) ECB €440M borrowed in overnight loan facility vs. €750M prior; €54.5B parked in deposit facility vs. €50.6B prior - Daily Eurosystem Liquidity Conditions
- (PH) Philippines Nov M3 Money Supply Y/Y: 36.5% v 32.5% prior
- (PH) Philippines Nov Bank Lending Y/Y: 13.8% v 13.5%; Bank Lending Net of RRPs Y/Y: 14.8% v 13.6% prior
- (ES) Spain Oct Current Account: €1.2B v €0.1B prior
- (BR) Brazil Dec FGV Inflation IGPM M/M: 0.6% v 0.6%e; Y/Y: 5.5% v 5.6%e

Fixed Income:
- (IN) India sold total INR150B vs. INR150B indicated in 2019, 2023, 2032 and 2043 bonds
- (IT) Italy Debt Agency (Tesoro) sold €8.0B vs. €8.0B indicated in 6-month Bills; avg yield 0.827% (highest since Aug) v 0.539% prior; Bid-to-cover: 1.32x v 1.77x prior
- (IT) Italy Debt Agency (Tesoso) sold €2.63B vs. €3.0B indicted in Zero Coupon Jun 2015 CTZ; avg yield 1.346% (HIGHEST SINCE Oct) v 1.163% prior; Bid-to-cover: 1.48x v 1.68x prior